Satya Nadella, CEO, Microsoft Photo by Alex Wong/Getty Images
Microsoft CEO Satya Nadella, 2014

How Microsoft Plans to Win in Enterprise Hybrid Cloud

Next year will see major capabilities for seamless Azure experience between on-prem and public cloud

While Microsoft is behind Amazon in public cloud, it has no need to play catch-up inside the enterprise data center. That combined with the second-largest public cloud business puts it in a good position to dominate in hybrid cloud, which is touted overwhelmingly as the cloud strategy of choice among enterprises.

The only other players with existing presence in enterprise data centers similar in scope are VMware and IBM. Of the two, IBM may be the harder one for Microsoft to compete with in hybrid cloud, since it also has made massive investments in public cloud, while the scale of VMware’s public cloud infrastructure is quite small in comparison to the other players.

The hybrid cloud opportunity is enormous. Cloud was the number-three 2016 investment priority for CIOs who participated in Gartner’s latest global survey, following business intelligence and analytics (their first priority) and infrastructure and data center (their second).

The survey included nearly 3,000 CIOs from 84 countries, together representing $11 trillion in revenue and $250 billion in IT spend. A quarter of them said cloud was third on their list of top investment plans for next year.

According to Microsoft and many others, hybrid cloud is the approach most enterprises choose, blending on-premise infrastructure with cloud services so they can get both control and performance of on-prem and flexibility and scale of public cloud. “They’ve got existing investments in their on-premises environments, but they’re all wanting to have a public cloud strategy, and many of them are already using it,” Mike Schutz, general manager of cloud platform product marketing at Microsoft, said in an interview.

Thousands of applications and services running on-prem at large enterprise data centers need to be bridged to the cloud, and Microsoft’s strategy is to help them do it, he said. Microsoft has invested heavily in building a consistent platform for both internal environments and Azure, its infrastructure services cloud, and invested more than $15 billion in the global data center infrastructure that supports those public cloud services.

Much of the company’s hybrid cloud strategy will start to come together next year, when it releases Windows Server 2016 and new capabilities in Azure Stack, its infrastructure offering for on-prem deployments.

Its server virtualization platform Hyper-V already runs in customers’ private clouds and in Azure so VMs can be moved between the two types of infrastructure if needed. Upcoming Windows Server 2016 will have software defined networking capabilities – an SDN controller and virtual network functions – “cut from the same cloth as the Microsoft Azure SDN capabilities,” Schutz said.

The next release of Windows Server will also support distributed object storage – a type of storage common for applications running in the cloud. It will have robust set of capabilities around application containers, including Docker-compatible containers.

The next wave of on-premise Azure products, called Azure Stack, will have VM orchestration capabilities that are similar to public Azure. These capabilities will be in preview next quarter.

With consistency across private and public cloud on the back end, there will be the same self-service portal for both public Azure and private Azure Stack.

Realizing that users may want to use non-Microsoft clouds, the company has built into its operations management suite capabilities that work with AWS and other public clouds, as well as with VMware and OpenStack private clouds for both Windows Server and Linux.

The idea is not to try to force users to lock themselves into an all-Microsoft environment or replace entire systems they have already built. “We’re trying to meet them where they are,” Schutz said.

Once the new hybrid cloud capabilities are out, Microsoft will have to prove that it can deliver on that promise of seamless compatibility between on-prem and public cloud. With IBM, VMware, and the multitude of OpenStack offerings, there are many ways to set up private cloud, and extensibility to public cloud is something all vendors have invested in.

Microsoft’s vision of the future of enterprise cloud is different from the vision of its main public-cloud rival Amazon, to whom the role of hybrid cloud is to help companies eventually transition from on-premise infrastructure to AWS completely. Amazon has been investing a lot in being able to give enterprises the same capabilities they have in-house as cloud services.

Another contender is Google. While its enterprise cloud play hasn’t been on par with those of its rivals, Google’s VP of technical infrastructure Urs Hölzle recently said a lot of changes were coming that would change the perception of Google as a not entirely serious enterprise cloud player. He stopped short of sharing what those changes would be, but said Google Cloud Platform would replicate the success the company had with Android, which came to the mobile market much later than Apple’s iOS but eventually became the number-one operating system.

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