Microsoft faces specter of shelfware in the cloud era

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The notion that pay-as-you-go cloud computing will eliminate shelfware — paid-for but unused computing resources — has always been suspect. Last year I wrote that the proliferation of unused compute instances resulting in zombie resources that are allegedly active but not doing productive work, could be a big problem for cloud vendors as customers smarten up.

Another type of shelfware is a cloud service that is purchased but never actually deployed, and that’s something [company]Microsoft[/company] is facing with Azure.

Business Insider report this week noted that Microsoft sales teams are under pressure not just to sell Azure — usually in conjunction with a broader enterprise license — but to make sure customers actually use it. To be fair, Microsoft has been aware of this issue for some time and last summer ended an Azure discount program that exacerbated the shelfware problem.

A long-time Microsoft partner told me at the time that the company was pushing its sales force hard “to drive utilization, not just revenue.”

The problem was that once Microsoft field sales sold a pre-paid Azure contract, there was zero incentive for them to make sure the customer put those resources to work. And that’s a problem as companies start scrutinizing what they have rights to and what they’ve actually deployed. Eventually the bean counters will start wondering about the value of those license agreements.

Another long-time Microsoft partner told me this week that he knows of lots of customers who have tens of thousands of dollars worth of Azure licenses who are not running Azure at all. And that brings us back to the BI report, which shows that little progress has been made in the past six months. According to BI:

Microsoft has been structuring deals that give away access to Azure, its cloud competitor to [company]Amazon[/company] Web Services, for little to no extra cost to some customers who have no plans to use it. It has been counting some revenue from those deals for its cloud, but if they don’t actually use the cloud, that revenue won’t continue.

A Microsoft spokesman said the company sees  “strong usage of Microsoft Cloud services by businesses of all sizes” and that more than 60 percent of all Azure companies use at least one premium service, say, media streaming. And, he noted that more than 80 percent of Office 365 enterprise customers run two workloads or more.

I’m not sure that really resolves the question but in any case, shelfware is an issue for all cloud providers as customers get more savvy about what they’re actually paying for and using. Or not using.

Last week, a Wall Street Journal report on the “hidden waste and expense of cloud computing”  (paywall) pointed out that C-level execs are increasingly worried about idle cloud resources and are looking to what cloud pioneers like [company]Netflix[/company] have done to optimize their cloud computing resources. Netflix, for example, has technology that shuts off resources automatically when they’re not needed.

Others turn to third-party tools from Cloudyn, Cloudability and Krystallize Technologies to minimize waste.

As one commenter to the Journal story pointed out, the secret to minimizing waste is to keep tabs on what you spin up.  “The minute you turn on a process it’s going to cost money,” he noted. Other AWS shops have said that Amazon’s own Trusted Advisor and Cost Explorer dashboards have gotten much better over time, eliminating much of the need to keep spreadsheets to track usage.

This story was updated at 10:30 a.m. PST with additional Microsoft partner comment and again at 12:30 p.m. PST with Microsoft comment.

3 Comments

ewalsh5

I think enterprise cloud developers don’t always pay for ‘what they use’ but actually are sold on what they can call upon as reserves in times of critical spikes or needs. Only time it becomes relevant as a resource is when you’re doing development for intranet or internal resources rather than a public facing deployment. But that might be my experience with mostly rapid and high spikes in specific service categories. – commenting on behalf of IDG and Red Hat. Of course, an open hybrid architecture (bit. ly/ 1F5Ubnu ) is always a welcome option to reduce unused shelfware overhead

Frank Gearhart

We’re developing a private cloud for our internal customers (departments and sections that have differing requirements). I hadn’t considered the idea of paid for but unused cloud resources, but we’ll incorporate it into our design and implementation strategies. Thank you for the useful information.

Aaron Suzuki

There seems to be a lingering public misperception that cloud computing works like a utility where you pay for what you use. None of the leading cloud service providers work this way. Rather, you pay for reserved capacity and continue to pay for it until you turn it off. The notion of “elasticity” requires the user of the service to build automation, exactly the way Netflix is described in the article, to decommission services or reduce capacity. Make no mistake, cloud services providers have structured these services to be highly advantageous to their business. It is, however, realistic to expect that consumers of cloud services will be increasingly savvy and vendors will meet these evolved expectations with services tailored to make more efficient use of resources, just as Netflix has done.

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