Microsoft faces specter of shelfware in the cloud era

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.