Microsoft's expanding cloud platform shines brightly

At a small gathering in San Francisco for reporters and analysts earlier this week, Microsoft announced a number of new cloud products and services.

But it wasn't so much the offerings themselves that grabbed attention as some of the figures that Microsoft executives threw out.

For instance:

Eighty percent of Fortune 500 companies use Microsoft's cloud, said Scott Guthrie, executive vice president of Microsoft's Cloud and Enterprise division.

The company is adding 10,000 customers a week to Azure, Microsoft's cloud platform. Revenue from Microsoft's cloud offerings more than doubled last fiscal year, with an annual revenue run rate now up to $4.4 billion.

And next week the company is planning to make Azure generally available in the Australia region, tallying up 19 regions where Azure is operational, as the company expands the platform worldwide.

"The thing that took me by surprise a little was just the level of investment they're making. It's huge," said Al Hilwa, an analyst with research firm IDC. "It appears that Microsoft is investing in Azure at a scale that few others are able to match. It is definitely early days, but 19 regions made up of the type of building templates that Azure uses is a blowout metric for the cloud industry at this time."

Indeed, Microsoft CEO Satya Nadella has placed the cloud at the center of his vision for the company. His repeated refrain of a "mobile first, cloud first" strategy for the company centers on individuals who are able to be mobile because of devices that can connect to from anywhere.

After arriving late to the cloud game several years ago, Redmond, Wash.-based Microsoft has since been investing heavily, now offering products in all three major categories of cloud services. Those are: Software as a Service (or "SaaS" in tech parlance), in which software services such as Office 365 or those from are accessed online; Platform as a Service (PaaS), in which the provider offers cloud-based tools for developers to create apps, and storage and computing power to host and run those apps; and Infrastructure as a Service (IaaS), in which the provider offers , servers, storage and other computing infrastructure via the Internet.

So aggressive has Microsoft been in its cloud aspirations that financial analyst Rick Sherlund with investment bank Nomura said in a note to investors last month that, taking SaaS, PaaS and IaaS altogether, "Microsoft is likely to be the largest cloud vendor by the December quarter and growing the fastest of the leading players."

Microsoft, with its successful Office 365 subscription service, is already a force in SaaS. Its Azure cloud platform has helped Microsoft become No. 2 to market leader in PaaS, said Larry Carvalho, an IDC analyst who estimates Microsoft is about 15 to 20 percent behind Seattle-based Amazon in revenue. In IaaS, where Amazon is also the market leader, "Microsoft ranks well but, honestly, they are behind," Carvalho said. "But they're catching up."

Research firm Gartner estimates the market size for public cloud IaaS computing globally will reach $10.8 billion by the end of 2014.

The event held earlier this week featured developments designed to help Microsoft catch up.

Among the announcements:

-Microsoft, working with Dell, will launch on Nov. 3 the Microsoft Cloud Platform System, a "cloud in a box" with pre-integrated hardware from Dell and software from Microsoft, including Azure, Windows Server and System Center.

-Microsoft is creating the G-series of virtual machines, which the company touts as "the largest virtual machines available in the public cloud to date," and premium storage for Azure, which it says will provide "incredible performance per virtual machine."

-There will be a new Azure Marketplace, where customers can search for and deploy operating systems, services or applications. Cloudera, an enterprise analytics and data-management company, and CoreOS, a container-based Linux operating system, have also signed on as Microsoft partners - ranks that already include Docker and Oracle.

Since Nadella took over as CEO, there's been a new openness at Microsoft to partnering with previously bitter rivals or offering Microsoft's services on rival platforms. Nadella emphasized that spirit at Monday's event when he said: "We are not building our hyperscale cloud on Azure in isolation," but rather, are building Azure to work with Salesforce's, Amazon's and other competitors' offerings.

"What's amazing, I think, is the breadth and the depth of their announcements," said Drue Reeves, chief of research for cloud computing at research firm Gartner.

"It demonstrates a significant investment to become an enterprise-grade cloud," Reeves said. "From a competitive standpoint, it means they're trying to reach feature parity with Amazon in IaaS, but surpass them in PaaS and SaaS."

The market for services generated $45.7 billion in revenue last year, according to IDC, as reported by Bloomberg. By 2020, the market could be worth $191 billion, the Bloomberg report said, citing research firm Forrester.

"The cloud market is obviously red hot right now," Guthrie said.

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