Six years after Microsoft launched its cloud computing platform, Azure, analysts say the company is betting its future on the cloud. We hear from leaders at Microsoft’s Azure Enterprise division on how things have changed, and the latest developments in artificial intelligence and machine learning.
Speaking at a recent conference about Microsoft’s cloud computing platform, Azure, the company’s executive vice-president of cloud and enterprise, Scott Guthrie, said the world is currently “in the midst of a generational shift in computing”, defined by three separate components.
“[Companies] are going to look to adopt software as a service [SaaS]-based solutions that achieve faster time to value; they are going to extend their infrastructure to use the public cloud to take advantage of better agility and cost savings; and, increasingly, they are going to take advantage of higher-level services like machine learning [where computers can learn new things without programming],” he said. “Every organisation over the next few years is going to need a strategy for how to move from where they are today to take advantage of what the cloud offers.”
Look at the figures and it is hard to disagree with Guthrie’s view. According to a recent report by technology research company Gartner, IT spending on cloud services will reach $114 billion by the end of 2016 and $216 billion by 2020, representing roughly 24% of an average company’s IT budget. Instead of running complex programs on expensive on-site servers, today’s businesses are choosing to get their data, processing power and software over the internet. And they are doing it on mass.
It is a shift Microsoft certainly noticed early on. “One of the big decisions I had to make even before I became CEO,” the company’s CEO Satya Nadella said in an interview with Bloomberg in August, “was to prioritise Azure as the future of our server business when it was a cumulative $5-million business and to say, ‘oh, this is going to be the future of the $20-billion server business’. That is what companies like ours that have had success need to be able to do.”
So far, the decision seems to have paid off. While some parts of Microsoft’s business are in decline – mobile revenues have plummeted while sales of PC software remain sluggish – revenue for its Intelligent Cloud division, which includes Azure, jumped by 7% in Q1, with Azure growing by 120% on the previous quarter. For many, the company’s $26.2-billion acquisition of LinkedIn in June was yet another sign that it is betting its future on the cloud.
A competitive field
As Microsoft’s cloud business grows, competition with the other main providers – Google and Amazon – is steadily heating up. According to James Matthews, Azure Enterprise business manager, Microsoft UK, one of Azure’s key differentiators in an increasingly competitive market is its scope. Over the years, he says Microsoft has invested billions in building new data centres and can now offer more than 24 Azure regions around the world – more than Amazon Web Services (AWS) and Google Cloud combined.
“The cloud market is a very competitive, fast-growing area,” he says. “I think where you see unique investment from us is just in the sheer scale of what we are trying to do. The UK opened up its data centres recently and we have had Germany come online as well. Of course, we have been investing in data centres for many decades, going back to the Hotmail and MSN messenger days, so this is nothing new for us. But we want to make sure that we can deliver the kind of cloud scale that gives our customers a certain degree of sovereignty. We want them to be as close to their data and content as they can be.”
For Gutherie, the range of services Azure offers is another key differentiator. “Microsoft now offers the most comprehensive suite of SaaS solutions out there,” he said at the same conference. “Between Office 365, Microsoft Dynamics and Power BI, we really have a wide spectrum of capabilities that is deployed and used by more business users than any other business SaaS solutions. With our enterprise mobility suite, we now have the ability for IT to deliver and securely manage these solutions as well as more than 2,600 SaaS-based applications from non-Microsoft companies across any device.”
Anyone that has browsed the Azure blog will know just how wide this range of services is. “Several things a day are getting released,” says Matthews. “There are constant announcements. We don’t have these big-bang investments and every three years release a new version of the product. It is a kind of continuous push and it comes from pressure from our customers. The vast majority of CIOs now have a cloud-first strategy, and we need to be able to be there to support that.”
While the standard infrastructure as a service continues to be improved and developed, Matthews says some of the biggest announcements Microsoft has made over the past few months have been around artificial intelligence (AI). The company currently offers more than 20 different ‘cognitive services’, which it defines “as a collection of intelligence and knowledge application program interfaces [APIs] that enable developers to make their applications more intelligent, engaging and discoverable”. They include a language comprehension tool that allows apps to communicate with people in different languages and computer vision algorithms with APIs for real-time individual image analysis.
“We now have a whole selection of these highly engineered, fully managed services such as the internet of things (IoT) and cognitive services that allow people to develop applications on top of those usual services,” Matthews says. “We really want to push this element and allow people to build their own machine learning models. For example, imagine an insurance company that wants to put a little device in people’s cars to work out how they are actually driving. The latest IoT innovations allow them to scale that out very, very quickly. Then they can take that data stream, run it through a machine learning model, store it all within a data lake, and push data insights later on to understand where their margins are, where their best customers are and how they can be serviced better.”
Matthews’ enthusiasm for Microsoft’s cognitive services certainly runs throughout the company. According to Microsoft CEO Satya Nadelle, in the coming years, Azure will evolve into the world’s very first AI supercomputer. “Ultimately, the cloud is about powering the next generation of applications,” he said at a recent event in Dublin. “It is always the next-generation applications that have driven infrastructure, and when we look at this current generation of applications that people are building, the thing that is going to define these applications, that characterises these applications, is machine learning and AI.”
The race begins
Of course, Microsoft isn’t the only provider investing in AI as a cloud-based service. Last year, AWS introduced machine learning to the cloud and IBM now also has a cognitive-computing division that uses machine learning to make sense of large, unstructured data sets. According to Matthews, AI is set to become one of the most competitive areas for cloud providers going forward.
“I think this is where things are really starting to heat up, and where we can see huge amounts of research and developments,” he says. “If you had asked us five or ten years ago where we saw cloud computing moving, this whole idea of enabling machine learning and enabling advanced artificial intelligence techniques or the internet of things – that scale of growth was very hard to predict when Azure first came to the market. Being able to provide those kinds of services at scale to mass businesses, and enabling them to take advantage of neural network and cognitive services, and other elements like that was probably the biggest shift that we have seen. Traditionally, this was relegated to the academia side of things but not anymore.”For CEOs not used to IT, let alone AI, this might sound complicated, but, for Matthews, as technology continues to evolve, it is crucial that they pay as much attention as possible. “It is one of the first times the direction technology is moving in is having a highly disruptive effect within the wide business community,” he says. “That means it is increasingly important that C-level executives who sit outside of the more traditional IT environment understand what is going on and act accordingly.”