News

Microsoft Exec Nadella Bullish on Cloud Prospects

• By Kurt Mackie
• 06/22/2011

Microsoft's new president of the Server and Tools Business Division answered some cloud questions today at the GigaOM Structure event, which is happening today and tomorrow in San Francisco.

Satya Nadella, who took over as president of the division from Bob Muglia in February, had a little more than 15 minutes of stage time in a Q&A. The questions tended to focus on Microsoft's business model for its Windows Azure cloud computing platform, as well as on Office 365, Microsoft's forthcoming software-as-a-service business (now in beta) that will get a "preview" rollout on Thursday. General availability of Office 365 is planned for June 28.

Nadella noted generally that the IT industry is in the midst of a "sea change" from the client-server world to a connected world of mobile devices and connected services. It's early in the process, but the operating system on the back end now no longer focuses on a single machine. Instead, the focus is on a datacenter with 250,000 machines and a million cores. Mean time to failure is no longer the approach to build for since the guiding principle has shifted to building for mean time to recovery. The OS has to be resilient, he added.

Nadella was asked about any stumbling blocks that might exist in businesses moving to widespread cloud adoption. He cited reliability/availability, security and compliance as the top three concerns, but those concerns aren't universal since organizations use mixed environments, such as public clouds, private clouds and a hybrid approach. Next, Nadella was asked pointedly whether security might be the largest concern for organizations considering cloud services.

"It's really the soft core vs. the hard shell [traditional approach to security], which is as much of an issue wherever you are -- it can be in the enterprise, it can be in the hybrid, or it can be in the public cloud," Nadella said. "So I would claim that it all comes down to having a lot of compliance that enterprises are putting in place or the public cloud folks are putting in place. And then having great encryption technology for anything that's moving over the wire. The extreme management is a big issue because that's sort of the thing that can easily be compromised. So I think security will remain a big topic for the industry at large, but it's not just primarily a cloud issue. It's an issue today for anyone with any kind of network."

The cloud is being used in a hybrid manner by businesses to support Web site transactions, while still calling back home for things like identity, data and synchronization, Nadella said. He cited the example of Ticketmaster in New Zealand, which used Windows Azure to spin up databases for some of the more popular ticketed events.

In terms of Microsoft's SaaS offerings (both its Business Productivity Online Services and Office 365), Nadella said that "over 50 percent of the Fortune 500 businesses that have used us, are now using our online offerings." He added that "tens of thousands of customers are playing with [Windows] Azure."

Nadella was asked whether the cloud represents an opportunity for Microsoft, or is it more of a threat. He said that Microsoft has always sought out the low-price, high-volume market, so that the cloud is structurally beneficial for the company and not a threat. He saw some overlap with the various cloud providers, as with Amazon Web Services, which is a Microsoft partner. To the extent that people might use multiple clouds, that would be the kind of case where Microsoft's approach would be to form partnerships, he explained.

The commoditization that may occur with cloud computing, with its value proposition of reducing costs for enterprises, will not necessarily lower Microsoft's revenues, Nadella contended. He expects cloud computing to increase the appetite of organizations for the consumption of data.

Nadella's talk was just a small part of the GigaOM Structure event. A live stream of the event can be accessed here.