Microsoft graduated from its rebellious, '90s, teenage years to become an enterprise leader across some of the hottest computing domains, from software and cloud to analytics and AI.
It was a journey not without bumps, but one that has solidified Microsoft at the top of a market largely dominated by consumer-focused tech companies. Smart is the new sexy, and Microsoft has expertly played the market.
Moving forward, the company is all-in on hybrid cloud and opening data and artificial intelligence up for its clients. After embracing open source and technology-agnostic shifts, the enterprise provider is well positioned to compete against market leaders like Amazon and aspirants like IBM.
But its journey is far from complete.
A different company
Big tech companies like Microsoft operate with a budget and customer base larger than many countries. Microsoft, with more than $110 billion in revenue in 2018, brought in more money last year than the nations of Ecuador and Morocco.
Research indicates that entire ecosystems are coming together around mega providers, according to Reetika Fleming, Research Director at HFS Research, in an interview with CIO Dive. Like the heyday of ERP under Workday and SAP, where entire service firms such as Accenture and EY banded around the providers, the cloud market is witnessing explosive growth.
With a massive enterprise customer base already in place from its Windows and Office days, Microsoft came armed with many advantages in the ecosystem space.
It is often viewed as the most enterprise friendly ecosystem, with strong and established clients who are comfortable working with the company and expanding that relationship to new fields such as cloud and AI, Fleming said.
That cloud-based success is still relatively fresh.
With a massive enterprise customer base already in place from its Windows and Office days, Microsoft came to the cloud race armed with advantages from its large ecosystem.
Six years ago, Abhishek Singh, vice president at the Everest Group, would not have expected Microsoft to hold the position of power it does today, he said in an interview with CIO Dive. But the company has pivoted from trying to be a dominant platform player to establishing a presence across platforms, reacting to a cloud market where customers can tap into new sources of storage, compute and platforms.
Microsoft broke down the constraints it built around itself and became more agile to the needs of enterprises, Singh said, allowing it to emerge as AWS' greatest competitor in the cloud market.
Part of breaking down those barriers was leaving its harshly competitive and proprietary roots behind and embracing shifts to open source and technology agnosticism.
The open cloud and platform strategy has positioned Microsoft with the most open, tool-agnostic developer approach the company has ever had, Fleming said. Customers want open architectures, connectors and enablers to avoid future vendor lock-in and interoperability of systems and products for more pragmatic solutions.
Microsoft is in good company with other technology icons that have been forced to change their ways. IBM recently made a massive open source acquisition, joining the hybrid cloud market, and made its signature AI platform available across clouds.
The importance of hybrid
While many industries are moving to a larger cloud footprint, most organizations will not be fully in the cloud, especially in regulated industries with high data governance needs. This is where Microsoft sees opportunity.
Microsoft is focusing on meeting customers where they are with its hybrid offerings. "The predominant and the most differentiated proposition that Microsoft has in the space is … particularly with Azure, that we are hybrid," said John Chirapurath, general manager of Azure Data, Blockchain and Artificial Intelligence at Microsoft, in an interview with CIO Dive.
"A big part of industry tends to think of hybrid as a transition point, so something between private data centers and public. Microsoft thinks of it differently: It thinks of it as an end in itself."
VP, Everest Group
Companies can experience the computing power of Azure on-premise with Azure Stack, which allows them to manage data in their data centers as if they were on Azure's public cloud, he said. This extension of the company's value proposition across public and private cloud is one of the company's greatest selling points for customers.
"A big part of industry tends to think of hybrid as a transition point, so something between private data centers and public," Singh said. "Microsoft thinks of it differently: It thinks of it as an end in itself."
A new class of enterprise workloads is necessitating a hybrid approach for many businesses.
IoT, AI and edge computing are moving closer to people and devices and demanding more intelligence and compute. Companies need a mix-and-match approach as they define this next generational tech strategy and figure out if the cloud is ready to handle those complex workloads, according to Singh.
Competition from all sides
Microsoft is racing to catch up with Amazon, with Google eyeing the two leaders from afar, but the race isn't confined to just the big three providers.
CIOs should still watch out for Oracle and IBM, Singh said. Oracle is known for an aggressive pricing strategy to undercut competition, which can help the company get its foot in the door in the short term; but it is still working against the same challenge as IBM in that it is "not considered a platform of the future choice" in the long run.
Google Cloud recently brought on Thomas Kurian from Oracle to boost its sales team and strategy. Kurian was a key player in scaling up Oracle's enterprise sales, and Google is looking to pull from that experience to replicate enterprise success in its own cloud, Singh said.
IBM recently acquired Red Hat for $34 billion, a big move for its hybrid cloud strategy. The company also extended its AI platform, Watson, across other cloud platforms — a big change in how it has operated in the past, Singh said.
The move is likely to push Microsoft to follow suit, Fleming said. Based on actions the company has taken acquisitions like GitHub, in the next year the company will likely have more comparable capabilities.
Microsoft is a strong leader in cloud and can use that advantage to leverage new clients for its AI services.
Microsoft is still clearly behind its Google in the AI space, both from a technology and perception angle, Fleming said.
Yet Microsoft is far stronger in cloud and can use that advantage to leverage new clients. Most organizations are not using the most cutting edge of AI techniques, and a steady provider with the most robust offerings can edge out a competitor with more advanced offerings in a smaller area.
Microsoft is focusing innovation in two key AI areas, according to Chirapurath: Casting a more unifying framework across industry and making it easier to use AI capabilities in Microsoft products.
The former is a nod to keeping the conversation of the benefits AI can bring amid fears of what the technology could take away, and Microsoft is working with governments and organizations to deploy AI for good. The latter is an effort to extend the power of AI and ML beyond data scientists and developers and to allow a business analyst to effectively become a data scientist, opening up insights for all.
Clients have also been encouraged. Microsoft has directly funded AI development and also invests with their partners in education, getting pilots and POCs off the ground and providing support in training, Fleming said.