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Summary:

According to a post on Bloomberg this morning, Microsoft plans to spend 90 percent, or $8.64 billion, of its $9.6 billion annual R&D budget on cloud computing, which begs the question of where that money will land within Microsoft’s very broad definition of cloud.

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According to a post on Bloomberg this morning, Microsoft plans to spend 90 percent, or $8.64 billion, of its $9.6 billion annual R&D budget on cloud computing, which begs the question of where that money will land within Microsoft’s very broad definition of cloud. When announcing his departure late last year, Chief Software Architect Ray Ozzie made clear in a letter to his Microsoft co-workers how critical it is that Microsoft make the transition to the cloud elegantly, that it not get bogged down clinging to the on-premise software model that built the company up to this point. How the company invests those billions could help determine whether Microsoft is taking Ozzie’s words to heart, so where should it look to innovate?

Microsoft declined to provide further information beyond the statement by Microsoft International President Jean-Philippe Courtois that Bloomberg quoted, but there are options aplenty. Microsoft’s cloud businesses ranges from its Windows Azure cloud computing platform to its suite of cloud-based Office and email applications to connectivity among its various consumer devices. Perhaps it’s because infrastructure is my beat, but I think there’s a strong case to be made for investing a goodly amount of that $8.6 billion into Windows Azure as both a customer-facing cloud platform and the hub of Microsoft’s cloud services strategy.

Presently, it’s an ideal space for Microsoft to host applications (sub req’d) — such as those it plans to launch with Toyota — that require a degree of scalability and that need to deliver data to a variety of devices. This actually could be key for all of Microsoft’s business lines, as the cloud services it will have to deliver to mobile, gaming, IT and general consumer customers will have to run somewhere. It seems downright foolish to have a cloud platform around and not make it home base for new applications that don’t have legacy requirements. Users also seem very impressed with experience of working within Windows Azure and the level of development they are able to do.

However, Windows Azure priced is higher than many of its cloud competitors, and it isn’t as fully-featured as a platform like Amazon Web Services in terms of services beyond computing, storage and a database. Further, Windows Azure, and Microsoft, in general, has to keep on its toes against VMware in both the data center and the cloud, as VMware is still the leader in terms of virtualization and, now, hybrid cloud deployments with its vCloud program. IT is big business for Microsoft, so as CIOs get increasingly comfortable with cloud computing — be it private, public or hybrid — Microsoft has a lot to lose by not being a big player.

What Microsoft absolutely cannot afford to do is to get Windows Azure to a place where it’s “good enough” — in terms of software or hardware — and then grind innovation to a slow crawl. Cloud computing is about constant innovation — take a look at AWS’s rate of feature rollouts — and it’s possible Microsoft could get complacent as its service provider partners like Dell, Fujitsu and, possibly, Rackspace start offering Windows Azure as a service and do the brunt of the work of attracting customers. If the data center is the new box, then the cloud platform is the new OS, and we all know how many people feel about Windows.

Wherever the money goes, no one can fault Microsoft for not living up to CEO Steve Ballmer’s now-infamous statement that Microsoft is “all in” for the cloud. In fact, the proposed funding aligns with statements from Ballmer that 90 percent of Microsoft’s software developers will be working on cloud projects by the year’s end. Of course, with such a broad cloud target, it’s hard to miss — but hitting the bulls-eye is a bit more difficult.

Image courtesy of Peter Jordan.

  1. Derrick Harris, It’s an appreciation deserving topic discussion you have got. It’s was really an informative one. Thank you.

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  2. Great observation. “Good Enough” seems to be the emerging de facto standard, not only for services provided but for user expectations, as well.

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