Why Azure’s cloud chief believes Microsoft is in prime position

Jason Zander is corporate VP at Microsoft overseeing Azure sales and engineering

In Satya Nadella’s first press conference as CEO of Microsoft in 2014, he laid out a vision for the company to be a mobile-first, cloud-first company.

On the cloud side, Microsoft has a broad portfolio of products that includes market-leading SaaS productivity applications, highlighted by Office 365. On the IaaS and PaaS side, Microsoft has Azure, a public cloud that has turned into one of the most prominent cloud platforms in the market and is considered the chief rival to market-leading Amazon Web Services’ public IaaS cloud.

Jason Zander Microsoft

Jason Zander, Corporate Vice President of Microsoft Azure

Jason Zander is Microsoft Azure’s corporate vice president, which means he oversees thousands of engineers who develop Microsoft’s IaaS and PaaS platform, operate its global data centers and manage its customer support group. Zander’s been at the company since 1992 and previously held positions developing Windows, Microsoft databases and more recently the Visual Studio and .NET teams. In this conversation, Network World Senior Editor Brandon Butler speaks to Zander about the state of the cloud market and Azure’s future direction.

Amazon created the public Infrastructure-as-a-Service cloud market in the mid-2000s and for years they seemed to be the only real vendor. To this day most analysts believe that AWS has a multiyear lead in terms of features and scale of its cloud compared to competitors like Microsoft, Google and IBM. Do you think Amazon’s head start on this market complicated Microsoft’s ability to compete in the public cloud?

What I would say is that we’ve been an enterprise player basically for 20 years now. We are a company that has been very involved in the data center and the software used to run data centers historically. We’re also a company that offers technology at multiple levels. For example, if you think about it we have not only the infrastructure components but we were also a very early leader in Platform-as-a-Service and then up through the SaaS layer for things like Office 365 and Dynamics 365. I would say that our longstanding enterprise strength and the comprehensive nature of the solution that we’re offering is actually super important to us and we think that it’s been resonating really well with our customers.

You mentioned operating at different layers of the stack, including IaaS, SaaS and PaaS. How much do Microsoft Enterprise applications like Office and Office 365 drive Azure sales? I’ve heard reports that Microsoft gives away free Azure credits with Office 365 Enterprise agreements. Is that true and does that still happen today?

Having Office 365 out there and pioneering in that space, that certainly paves the way for additional wins. A great example of this is that when you’re using Office 365, you’re also using Azure Active Directory to track all your user IDs. It turns out that Azure Active Directory is also a great way to integrate the rest of your enterprise applications. Once I get going, it becomes easier and easier to start taking some of my new line of business work and now I’ve got that comprehensive solution.

Another good example is SharePoint: It's very popular and works very well if I have SharePoint Online. I can also augment it with my own business applications and the identity works, so it’s all in the same cloud with low latency on data access. The way we help customers is if you decide to start on your cloud journey with one of these components it’s easy to adopt the next because they really are designed to integrate very well together.

Can you provide insight on how large of a business Azure IaaS is? Microsoft breaks out revenue for the Intelligent Cloud but I believe that also includes on-premise software. Why doesn’t Microsoft just break out IaaS public cloud revenue?

Our Azure revenue grew 116 percent in the most recent quarter, which is up 121 percent in constant currency year-over-year. If you think about the Microsoft Cloud, which combines infrastructure, PaaS and SaaS offerings like Office 365, Azure and Dynamics, those components are growing super healthy. From an accounting perspective, we haven’t broken out the specific revenue for IaaS and I’ll defer to our business and finance folks that manage those components, but I’ll tell you the thing I do, especially in engineering, is look at what the demand is and it’s crazy off the hook. I’m building out stuff as fast as I possibly can. We deploy more servers in a day now than we did in an entire year in 2011 and that just continues to compound. I’ve got the team cranking 24/7/365 just to keep up with the demand.

How would you classify the most common workloads that are hosted in Azure now? Are the majority still test and development?

I’d say that in this public cloud space in general, the journey that many will start off on is from a SaaS layer they’re going to use Office 365. Then when you get into Azure, then it’s very common to start off with your websites that you’re trying to make public for B2C engagement. DevTest is certainly another big one. There’s also a lot of work around hybrid scenarios, even starting off with simple things like doing backup, disaster recovery and being able to failover from your own data center into our data center. Those all make sense for a lot of companies.

What we’ve started to see mature in many markets is they’re now looking at all their mission-critical workloads. Recently we’ve done more things like SAP deployments, which are basically the anchor store of your IT mall. These types of big enterprise apps are now starting to move into the cloud as well because you can get the same cloud advantages as some of those lower tier apps that have made the move.

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I know hybrid cloud has been a big area of focus for Microsoft. Why has that been such an important part of the strategy?

Part of this is just our experience we’ve built over the last couple of decades of being an enterprise company. We expect that we will have a hybrid landscape for the foreseeable future. Clearly a lot is going to move into public cloud, we’re definitely seeing that. At the same time there are scenarios that people just need to be able to meet. Imagine your factory floor: If someone cuts the fiber cable between you and your cloud you’re going to be losing $15,000 a second if your production line is down. You can’t have that.

Hybrid, to us, is a first-class part of the solution that you’re going to need to have, so we’ve invested in that from day one. The best example of this is our work in Azure Stack, the ability to have a consistent cloud environment for on-premises as well as the public cloud and the ability to figure out how do I leverage both and create the best possible combination of the two. We’ve also put product truth into things like SQL Server and other environments. It’s not so much that we’re just tacking things together as much as we’ve actually made very deep R&D investments to make sure that that the hybrid world is something you can actually materialize and get a lot of value out of on day one.

Let’s talk about Azure Stack, Microsoft’s private cloud appliance. It was recently announced that the product is going to be delayed. So when will it be available? Also, what will Azure Stack look like on a customer premise? Is it going to require specialized hardware that customers need to buy?

We’ve got great relationships with three close partners, Dell, HPE and Lenovo in the preview phase right now. Basically they’re all working on a converged appliance, which will include the hardware plus our software that will go together. What we’ve tried to do is figure out what are the things that make private cloud implementations fail. If people have tried using other software solutions or building their own, why have they failed?

We found there were two key elements to it: One was the software. We try to make sure you have software that can really deliver a cloud pattern, not just VM automation, but an actual cloud pattern with containers and PaaS and all the rest of the things you expect in a cloud. The other piece is hardware and getting that right, making sure it can handle the new cloud patterns. We put those two things together and that is what Azure Stack represents. You’ve also seen from us Project Olympus and some of the work we’ve done with the Open Compute Project. Those are also part of that same strategy to make sure that that kind of converged hardware/software solution that we’re making is something that we can both share with the industry and also drive to scale.

What’s the timing on Azure Stack? Is it delayed from when you initially were hoping to get it to market?

We’ve pushed what we call Technical Preview 2, which we announced at our Ignite Conference a few months ago. That’s out there right now. The hardware along with that is also out there being tested and we have a lot of early adopters that are giving us the beta feedback on top of that. Basically our goal is to get those things in place, take that feedback and continue on the Technical Preview track to make sure we’re meeting all those requirements. We’re targeting this upcoming calendar year.

It seems that some companies are coming to a realization that the public cloud is not a good fit for the workloads they have migrated there. I wrote a story recently about GitLab, which announced it is exiting the public cloud because they feel like they can run their database application more efficiently on infrastructure that they control. Is this a trend? Have you seen customers go to the public cloud then pull the plug on it for cost or performance reasons in favor of running apps in their own data center?

I would say historically for people looking at that, if they’re getting to a very, very large volume then I’m certainly aware of companies that like to really do the customization. What I would say is we doubled the number of compute configurations or VM types that we’ve had just in 2016 alone and that was in direct response to requests – people say ‘Hey, I’d like to have something with more CPU and less RAM, that would be great for gaming.’ Some workloads just can’t use a generic VM.

The N-series with GPUs (Graphic Processing Units) is the most recent example that we’ve brought out. The FPGA work that we’ve announced is another. You’re starting to see more and more types of workloads that need something specialized and I think the public cloud will definitely handle it. That’s not to say that there won’t always be somebody who’s really just hyper-optimizing.

I think the thing you typically look at is: what percentage of my overall portfolio is running infrastructure and is that really the thing that I actually want to be doing? Am I getting the kind of scale wins that come out of a supply chain where I’m spending billions of dollars and buying millions of things at a time? Are you really going to be able to compete in that kind of environment? Are there cases of that? Sure, I’ve seen it, but I do think that as the public cloud evolves it will handle those scenarios. I think the number of companies that are in a position to run their own is pretty small.

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What is Microsoft’s container strategy? I know there are Windows containers but Azure has also embraced Docker and Kubernetes. Is Microsoft at somewhat of a disadvantage here because containers are primarily a Linux-focused technology?

Actually, from a computer science perspective, containers have been around for two decades. It goes all the way back to operating systems and isolation levels. As a technology, containers have been a mechanism for a very long time and we started supporting containers on the Azure platform along with our deep learning stuff over two years ago.

We’ve been a deep investor in Docker projects to help make that even easier and we’re one of the biggest contributors on the open source side of Docker. Internally, we’ve been using container technology for Microsoft products for probably the better part of five years. What we’ve done most recently is take that same technology and made it a first-class part of the Windows Operating System. That is something we’re bringing to market with Windows Server 2016.

From that perspective, Azure has provided containers for Linux for two years. We’ve given container support for Windows itself and the orchestrators. The other thing I’d say is we’re basically an open platform and so from that perspective we’re supporting all workloads whether they’re Linux or Windows, open source or not, take your pick, it doesn’t really matter. At this point I feel like we’re uniquely positioned to bridge those Linux and Windows ecosystems.

You mentioned some higher-level technology services like machine learning and artificial intelligence. There is also talk of technology like serverless computing, which I know you address with Azure Functions. What would you say to customers who may struggle with rolling out these new technologies? Do you see a lot of demand at this point?

Yes, absolutely. Think about this in a larger context: We believe going forward that every company is a software company, even if you’re in a more traditional environment, such as manufacturing for example. Even if I’m not a traditional software company, I will be going forward because the best way to get the most out of my business, to optimize it, to save costs and to open new markets is to leverage data and software to help with that next run of innovation.

We’re seeing a lot of that kind of work happening. The top-level thing we’re trying to do is democratize that technology and make it more accessible not only to developers who build software but also those customers that want to get insights. We’ve got a very comprehensive solution that starts all the way down with developers and APIs in hardware and goes all the way up into things like Power BI and Excel. We offer ways to leverage that same kind of technology but you don’t have to be a software or data scientist to be able to do it. If you think about it in those terms then I absolutely expect broad adoption. This is also part of other things that we see, like Bots-as-a-Service and intelligent agents like Cortana. All those things are elements that we’re going to experience in our day-to-day lives.

A lot of the code that underpins these new technologies are open-source. I know open source is something that has been a priority for Microsoft in recent years. Has that been a directive from Satya Nadella to focus and embrace open source?

I worked in developer tools for a long time and the first open-source license I did for Microsoft was 10 years ago. I shipped open source with Visual Studio and we did an open-source license for IronPython, which is Python on .NET. So from my perspective, I’ve actually been involved with the company in open source for a long time. The way I would put it is we really want to make sure that we’re meeting our customers where they are and we’re giving them first-class solutions.

That means first-class solutions for Linux as well as Windows. On the open source side, a couple of the things we’ve done is try to make sure that our platforms are a great place to run open-source software. Azure in particular, we’ve had a big focus on that. The other thing is we’ve tried to take our technology and engage more deeply with the open-source community. We opened up the .NET Framework, for example and now we’ve had Google join the .NET Foundation recently. I would say that we’re definitely doing even more to engage the open source community. It’s a first-class thing for us, which might surprise some people, but I think it’s important because it's what our customers want.

I wanted to ask you about another story I wrote recently from the Open Networking User Group or ONUG. A group of large companies like GE, Bank of America, JPMorgan Chase and others put together a white paper with a wish list of items that they wish that they could see cloud providers implement. It talked a lot about making it easier to move workloads among cloud providers, like between Azure and AWS for example. Or having a common northbound API for major public clouds or common encryption platform between clouds. It seems like cloud vendors don’t have any inherent incentive to allow this sort of portability among cloud vendors. Are these things that Azure would ever enable?

I think usually when somebody asks for the kind of functionality, what they’re really looking for is understanding about vendor lock-in. We want to make sure that we’ve got a good solution to help with that. We’re definitely embracing an open environment like we just talked about. There are lots of open-source solutions that people typically target for running their PaaS layers and we have full support for that.

We think that’s a great way for you to build your software, so we give you that kind of openness. I also think there is an advantage of having a competitive environment where vendors are not just shooting for a least common denominator approach to something. While that may give you some of the portability aspects, I think it also can have the potential to slow down your innovation, which is a big part of what the cloud is providing. Having vendors compete and do a good job innovating is still going to be very important. I think you can get a great combination: You can leverage open-source technology, you can target workloads to run where you want them to run and at the same time, we have the ability to provide new technology and you don’t have to wait for something else to come through. Beyond that, we’ll continue to support standards that make sense too.