What new CEO Nadella's promotion means for Microsoft's cloud

Satya Nadella has grown Microsoft into a relevant cloud company, now the company has to take the next step forward

Microsoft just appointed its cloud guy to be the company's next CEO. Satya Nadella has impressively grown Microsoft into being one of the relevant members of the cloud computing industry, but industry watchers say there is a lot more the company must do to grow into one of the dominant companies in the market.

The promotion of Nadella to be the third-ever CEO of the famed technology company is a commitment by the company to its cloud computing platform. Microsoft’s cloud strategy began ambiguously, but has developed into a complete vision even though it sits in the shadows behind some of the behemoths of the industry. Cloud watchers believe Microsoft has an opportunity to be an important and leading cloud computing company, especially for the enterprise market, and it may have selected just the right leader to get itself there.

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Nadella - a former Sun employee who later headed R&D, Online Services and most recently served as executive vice president of cloud and enterprise - has been behind’s Microsoft’s transition into becoming a major cloud computing company during the past few years. During its first years Microsoft’s strategy focused on being an application development platform as a service (PaaS) for Windows environments. It wasn’t until a few years into this journey that the company pivoted and announced an infrastructure as a service (IaaS) component to Azure to provide on-demand virtual machine and storage service.

“The initial push into PaaS, and then the sharp turn into IaaS, has left Microsoft cloud users wondering about the thought leadership within the company, including the new CEO,” says cloud watcher David Linthicum.

Since the announcement of its IaaS service in mid-2012, Microsoft has slowly and steadily grown into a legitimate alternative to the heavyweight of the IaaS industry:

Amazon Web Services. Throughout 2013, Microsoft invested heavily in building up its cloud offering, adding dozens of features, from smaller niche enhancements like geo-redundant storage, load balancing and auto scaling, to core mission-critical features like building up its partner network, expanding internationally and committing to match any price cut of core services from AWS.

This growth and development has given Microsoft one of the most complete arrays of cloud offerings. In addition to the PaaS and IaaS, it is a leading platform for hosted and SaaS versions of Office 365 tools. On the private cloud side, Microsoft’s Hyper-V virtualization software has slowly and surely been picking up steam in the market against VMware’s dominant stance in the market. Microsoft says the ability for customers to run private clouds based on Windows Server and Systems Center, along with the same management platform running the company’s public cloud, give users a seamless hybrid cloud.  

This combination of PaaS, IaaS and SaaS, along with both public, private and hybrid clouds, makes Microsoft one of the few companies with a broad portfolio, plus the scale and enterprise credibility to be a major cloud computing provider. “In (Nadella’s) tenure we have seen a significant shift among the group to Azure and SaaS first, much more agile release processes and significant improvements in cohesion,” says Forrester cloud analyst James Staten. Nadela’s promotion is a validation of that work and a continued commitment to the cloud computing model.

Despite all these advancements, the company is still seen as second fiddle to AWS though, says Michael Cote, who tracks the IaaS market for the 451 Research Group. The biggest challenge for Microsoft and Nadella in the cloud computing market moving forward is to attract and retain developers on the Microsoft platform, says Michael Cote, “It’s one thing to have software to run cloud and mobile, it’s another thing to attract the developers,” he says.

Linthicum, the consultant for Cloud Technology Partners, says he’d like to see Microsoft make some bold moves in the industry, which thus far has been left for AWS to do. “What needs to be on the Microsoft to-do list right now is to figure out how to be innovative around the emerging use of cloud computing, beyond just being a fast follower,” he says. “The days of Microsoft pushing into a space after it’s emerged, and beating the hell out of the competitors there are long gone. You get market share through innovation and execution; Microsoft has not shown me much there since cloud began to emerge.”

Just how much of a focus will cloud be for Nadella as he is promoted? In his first video interview as part of the announcement, he made it clear cloud and mobile are two major focuses for the company moving forward. “Going forward, it’s a mobile first, cloud-first world,” Nadella said in the interview. “In other words, everything is becoming digital and software driven. And so I think of the opportunities being unbounded and we need to be able to pick the unique contribution that we want to bring.”

Nadella recognizes the importance of the cloud for Microsoft because he helped build it and his promotion is a validation of that work. But with so many other priorities now as CEO, from mobile to search, gaming and hardware, the question is how that strategy will continue to evolve under Nadella’s leadership at the helm of the broader company.

Senior Writer Brandon Butler covers cloud computing for Network World and NetworkWorld.com. He can be reached at BButler@nww.com and found on Twitter at @BButlerNWW. Read his Cloud Chronicles here.  

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