'Who's going to be the Microsoft of the cloud?' Uh, Microsoft?

Analysis of Microsoft cloud strategy at IDC conference

IDC analyst Frank Gens asked a provocative question at the IDC Directions 2010 conference today in Santa Clara, Calif.: "Who's going to be the Microsoft of the cloud?"

Had Steve Ballmer been in the audience, he would have likely jumped up and yelled, "Yo, Frank. Microsoft is going to be the Microsoft of the cloud! Didn't you see my speech?"

It's certainly going to be one of the major providers of cloud computing services but not the only one and maybe not as dominant a player as its been in the operating system and software applications business over the last three decades or so, said Gens, who's a senior vice president and chief analyst at the research firm.

Ballmer unveiled Microsoft's latest bet-the-company strategy around cloud computing March 4 in an address at the University of Washington's Seattle campus. Microsoft introduced its Windows Azure Platform in January that is the cloud equivalent of Windows Server.

But Gens says everybody and his brother in the IT industry has a cloud strategy of one form or another. "Of course Microsoft would like to be one of those [cloud leaders] but there are others," Gens said, predicting a "battle royal" starting in 2010 as IT companies build cloud platforms through partnerships, acquisitions or internal development.

He defines the cloud platform as a collection of product and service offerings that together help develop, deploy and manage information technology in the cloud. Gens ticked off the names of Salesforce.com, Google and Amazon as key players in cloud computing. Business software maker Oracle, now that it owns hardware maker Sun Microsystems, is touting its cloud prowess. But he also mentioned service providers like Accenture and Capgemini as players. HP and IBM are in the process of rolling out a cloud strategy, too. After an inevitable shakeout, there may be only five to 10 significant cloud platform providers in the future.

"This is without a doubt the most strategic real estate in the cloud that we'll see for the next 20 years," Gens said of the cloud platform. "The supplier who wins this battle is going to be in a very powerful position."

Microsoft's rolling out of its cloud strategy is a recognition of where the market is going but also a defensive move, said Stephen Minton, vice president of worldwide IT markets and strategies for IDC.

"They need to hedge their bets a little bit," said Minton, "but they see where the wind is blowing."

Ideally, he continued, Microsoft would like to preserve its original business model where customers pay for software licenses on every PC or server they want to use, but it knows that their competition for cloud computing includes companies like Google, Salesforce.com and Amazon that only follow the new business model and Microsoft has to keep up with them.

But letting go of the license business model will be hard, Minton said.

"What they're trying to do is to make it as gradual as possible ... to slow down the transition as much as they can," he said. Microsoft will argue, quite reasonably I think, that you don't want to shut your data center one day and plug into a cloud the next. It's more likely that customers will continue to operate their own data centers while moving some computing into a cloud environment. That means, they'll still need to update the Windows software on their own hardware, providing Microsoft a continued stream of license revenue.

"They'll keep pounding that argument for a number of years," said Minton. "They can see these trends coming but they want to be in control."

Full disclosure: IDC's parent company is IDG, which also publishes Network World.

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