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Say what? Microsoft Azure’s a $1 billion business?

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Microsoft’s(s msft) claim that it’s sold $1 billion worth of Azure cloud infrastructure services over the past 12 months has got to be raising eyebrows, and not just across Lake Washington at Amazon(s amzn) Web Services headquarters.

The sales figure was made by Curt Anderson, who heads up finances for Microsoft Server & Tools business unit, in a Bloomberg report.

The gist, with my emphasis added:

“Microsoft’s $1 billion sales figure includes Azure, as well as software provided to partners to create related Windows cloud services, Anderson said in an interview. Azure customers use the services to run corporate programs, websites and applications from Microsoft’s data centers, rather than spending on their own servers, storage machines and workers to maintain them.”

Update:  Interestingly, in a response emailed Monday night, a Microsoft spokewoman said the $1 billion sales figure includes “Windows Azure and revenue from service providers such as Amazon, Rackspace and others. (Again, the emphasis is mine.) Since neither Microsoft nor Amazon has responded to a request for comment, let’s examine the possibilities. That phrase “software provided to partners” probably means Microsoft is lumping in sales of on-premises software. It could also include Office 365 sales. Office 365 provides functionality that used to be relegated to shrink-wrap software via a software-as-a-service model.

An executive with a company that works with both Amazon and Microsoft said the latter is moving personnel from Office to its SaaS platform. “It’s a great thing but it’s hardly net new revenue or anything like what Amazon is doing with IaaS,” he said. I have followed up with the spokeswoman to see if Office 365 is part of the overall sales number. Amazon had no comment.

Microsoft launched its Infrastructure-as-a-Service competitor to AWS two weeks ago. Up until now Azure was pretty much a platform-as-a-service game and thus not directly competitive with AWS. That’s all changing now, which is probably why Microsoft is beating the drum about Azure momentum.

It’s not surprising that vendors play games with their sales numbers. What would be a shocker is if Microsoft — or any big cloud services provider — explicitly broke out what those sales numbers really include. That includes Amazon, which buries its cloud services sales number in a broader category that includes promotional and marketing activities. For its most recent quarter, that group logged $750 million in sales.

AWS is the uncontested leader in public cloud infrastructure — by its own and everyone else’s account. It recently claimed that its S3 storage service is home to  2 trillion objects. Last July, Azure said it stores 4 trillion objects. And, given Microsoft’s investment in Azure, you’d be foolish to rule it out.

Of course, another competitor, Google Compute Engine (GCE) looms. I’d expect Google to announce public availability of the service — introduced last June — at Google I/O next month.

To hear more about Microsoft’s cloud plans, be sure to check out GigaOM’s Structure Conference in June where Microsoft cloud chief Satya Nadella will speak.

This story was updated at 4:21 a.m. PST with Microsoft comment and Amazon’s non-comment.

10 Responses to “Say what? Microsoft Azure’s a $1 billion business?”

  1. Roger Jennings

    It’s possible that sales to Amazon, Rackspace and others are license fees for Windows Server and SQL Server that these IaaS providers remit to Microsoft for Windows instance charges. If so, it’s a stretch to call this “Windows Azure” revenue.

    Note that Windows Azure IaaS services have been in preview (beta) mode since June 7, 2012. They became generally available (i.e., were released for production use) on April 22, 2013.

  2. Roger Jennings

    I wonder if “software provided to partners” includes the erstwhile Windows Azure Platform Appliance (WAPA), which Fujitsu uses to provide cloud services in Japan. HP, Dell and others committed to the program when announced at the Microsoft Worldwide Partners Conference 2010, but didn’t follow through.

  3. I’m seeing in Fortune 1000 Microsoft “giving away” five and six figure Azure allowances with EA purchases, and SA entitlements that bundle 365 at ridiculous rates ($1-2 per mailbox). Their sales staff is offering pretty crazy incentives to try to get people to use it. They are giving away storsimple SAN’s as long as you use them for cloud vaulting/replication/retention.

    • Doubters are hilarious. FTA:

      “About 20 percent of companies tapping the cloud use Azure, compared with 71 percent usage for Amazon”
      – Based on that stat, MS $250M quarterly annual revenue makes sense considering Amazon is at $750M. Both the market shares and revenues differ by a similar factor. Azure is succeeding on some level, like it or not.

  4. Scary thought here: what if, strictly defined, the cloud concept isn’t actually highly profitable? If it were, why would the market leader bury its numbers under a broad heading? What if providers are heading over a precipice because Wall Street expects them to be competitive in a field in which fundamentally makes very little business sense for them?

  5. The Gnome

    We’re dipping our toes into Azure at the tune of $120k initially. (we already give tons more to 365) This is because Amazon dosen’t seem to want to work to get the enterprises business, and I suspect Google will want customers to come to them as well (just like they were when we considered them for gmail)

    P.S. we’re a Fortune 200 15 billion $ company. Guess Amazon and Google are too big for us.