Tag Archives: azure

Strong financial results from Microsoft as it aims for breadth of services

Microsoft reported a big quarter (in terms of revenue) for the three months ending December 31st, with revenue of $28,918 million.

What’s notable? Mainly the big jump in Microsoft’s recent success stories: year on year Office 365 up by 41%, Azure up by 98%, Dynamics 365 up by 67%.

Windows is flat/weak as you would expect, and Surface hardware is standing still. Xbox grew a bit following the launch of Xbox One X.

LinkedIn is growing: revenue of $1.3 billion and “sessions growth of over 20%” in the quarter. In the earnings webcast, Microsoft’s Amy Hood said that the LinkedIn acquisition has both performed better, and seems more strategic, now than it did at the time.

Hood also made reference to the company’s ability to up-sell cloud users to higher-margin services. “Office 365 commercial revenue increased 41 percent from installed base growth across all customer segments, and ARPU [Average Revenue per User] expansion from continued customer migration to higher value offers in the E3 and E5 workloads.”

This point is key and is the answer (from the provider’s point of view) to the lower margins implicit in moving from software to services. When Microsoft sells a licence for you to use Windows or Office, the margin is huge because reproducing the software, or providing it for download, costs almost nothing; whereas with a subscription there is significant cost to providing the service. However the subscription has advantages which offset this, in particular the continuing interaction with the customer that both provides data, which the customer as well as the provider can mine (subject to appropriate privacy controls), and gives opportunity for the provider to extend the relationship into new or upgraded services.

CEO Satya Nadella fielded a good question about Microsoft losing out to Sony in gaming and to Alexa and Google Home in voice devices. On gaming, Nadella referred to the PC alongside Xbox as a strategic asset. “PC gaming is a growth market,” he said, as well as software such as Minecraft now on mobile devices, giving the company a broad reach. He also remarked on Azure as a gaming back end.

As for Cortana in the home (or absence from), Nadella said that the focus is on the server-side cognitive services. He also talked about voice input and control of Office 365. The key point though was that Microsoft wants to work both with its own and other voice assistant devices so it can win on services even when competitor devices are in use. “One-turn dialogs on one speaker in one home, that’s just not our vision,” he said.

Nadella made another key point in the webcast, in answer to a question about how Azure Stack (a packaged version of Azure for installation on-premises) will impact Azure. “Computing is becoming more distributed, not less distributed,” he said. IoT and sensors play a large part in this. Everything goes to the cloud but computing on the edge (the new buzzword for local processing) is important for efficiency.

It is easy to see ways in which Microsoft could stumble. The PC will decline as the number of users who need a desktop or laptop computer diminishes. Microsoft’s failure in mobile could prove costly as competitors use synergy with their own applications and cloud services to steer customers away. There are opportunities such as home automation and payments which seem closed to the company now.

Then again, strong results such as these show how the company can succeed by continuing to migrate its business users to cloud services. It remains deeply embedded in business computing.

Here is my chart summarising Microsoft’s performance:   

Quarter ending December 31st 2017 vs quarter ending December 31st 2016, $millions

Segment Revenue Change Operating income Change
Productivity and Business Processes 8953 +1774 3337 +284
Intelligent Cloud 7795 +1037 2832 +541
More Personal Computing 12170 +281 2510 -51

The segments break down as:

Productivity and Business Processes: Office, Office 365, Dynamics 365 and on-premises Dynamics, LinkedIn

Intelligent Cloud: Server products, Azure cloud services

More Personal Computing: Consumer including Windows, Xbox; Bing search; Surface hardware

Which Azure Stack is right for you?

I went in search of Azure Stack at Microsoft’s Ignite event. I found a few  in the Expo. It is now shipping and the Lenovo guy said they had sold a dozen or so already.

Why Azure Stack? Microsoft’s point is that it lets you run exactly the same application on premises or in its public cloud. The other thing is that although you have some maintenance burden – power, cooling, replacing bits if they break – it is pretty minimal; the configuration is done for you.

I talked to one of the vendors about the impact on VMware, which dominates the market for virtualisation in the datacentre. My sense in the VMware vs Hyper-V debate is that VMware still has an edge, particularly in its management tools but Hyper-V is solid (aside from a few issues with Cluster Shared Volumes) and a lot less expensive. Azure Stack is Hyper-V of course; and the point the vendor made was that configuring an equivalent private cloud with VMware would be possible but hugely more expensive, not only in license cost but also in the skill needed to set it all up correctly.

So I think this is a smart move from Microsoft.

Why no Dell? They told me it was damaged in transit. Shame.

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Lenovo

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Cisco

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HP Enterprise

Microsoft Ignite: where next for Microsoft’s cloud? The Facebook of business?

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Microsoft has futuristic domes as part of its Envision event, running alongside Ignite here in Orlando. Ignite is the company’s main technical event of the year, focusing mainly on IT Pros but embracing pretty much the whole spectrum of Microsoft’s products and services (maybe not much Xbox!). With the decline of the PC and retreat from mobile, and a server guy at the helm, the company’s focus has shifted towards cloud and enterprise, making Ignite all the more important.

This year sees around 25-30,000 attendees according to a quick estimate from one of the PRs here; a little bigger than last year’s event in Atlanta.

Microsoft will present itself as an innovative company doing great things in the cloud but the truth is more complex, much though I respect the extent to which the business has been transformed. This is a company with a huge amount of legacy technology, designed for a previous era, and its challenge has been, and still is, how to make that a springboard for moving to a new way of working as opposed to a selling opportunity for cloud-born competitors, primarily Amazon Web Services (AWS) and Google, but also the likes of Salesforce and Dropbox.

If there is one product that has saved Microsoft, it is probably Exchange, always a solid email server and basic collaboration tool. Hosted Exchange is the heart of Office 365 (and BPOS before it), making it an easy sell to numerous businesses already equipped with Office and Outlook. Email servers are horrible things to manage, so hosted has great appeal, and it has driven huge uptake. A side-effect is that it has kept customers using Office and to some extent Windows. A further side-effect is that it has migrated businesses onto Azure Active Directory, the directory behind Exchange Online.

Alongside Office 365, the Azure cloud has matured into a credible competitor to AWS. There are still shortcomings (a few of which you can expect to be addressed by announcements here at Ignite), but it works, providing the company with the opportunity to upsell customers from users of cloud infrastructure to consumers of cloud services, such as Azure IoT, a suite of tools for gathering and analysing data.

The weakness of Microsoft’s cloud efforts has been the moving parts between hosted services and Windows PCs, and legacy pieces that do not work as you would expect.  OneDrive has been a persistent annoyance, with issues over reliable document sync and limitations over things like the number of documents in a folder and the total length of a path. And where are my Exchange Public Folders, or any shared folders, in Outlook for IoS and Android? And why does a PC installation of Office now and again collapse with activation or other issues, so that the only solution is removal and reinstall?

At Ignite we will not hear of such things. Instead, Microsoft will be presenting its vision of AI-informed business collaboration. Think “Facebook of business”, powered by the “Microsoft graph”, the sum of data held on each user and their files and activity, now combined with LinkedIn. The possibilities for better-informed business activity, and systems that know what you need before you ask, are enticing. Open questions are how well it will work, and old issues of privacy and surveillance.

Such things also can only work if businesses do in fact commit more of their data to Microsoft’s cloud. The business case for this is by no means as simple as the company would have us think.

From Windows Embedded to cloud: Microsoft announces the Connected Vehicle Platform

Microsoft has announced the Connected Vehicle Platform, at the CES event under way in Las Vegas.

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The company is not new to in-car systems, but its track record is disappointing. It used to be all about Windows Embedded, using Windows CE to make a vehicle into a smart device.

Ford was Microsoft’s biggest partner. It built Ford SYNC on the platform and in 2012 announced five years of partnership and 5 million SYNC-enabled vehicles.

However in 2014 Ford announced SYNC 3 with no mention of Microsoft – because SYNC 3 uses Blackberry’s QNX.

What went wrong? There’s a 2014 analysis from Bill Howard that offers a few clues. The bit that chimes with me is that Microsoft was too slow in updating the system. The overall Windows story over the last 10 years is convoluted to say the least, with many changes to the platform and disruptive (in a bad way) strategy shifts. The same factor is a large part of why Windows Phone failed.

It is not clear at this stage whether or not Microsoft’s Connected Vehicle Platform partners (which include Renault-Nissan and BMW) will use Windows Embedded in their solutions; but what is notable is that Microsoft’s release makes no mention of it. The company has shifted to a cloud strategy, and is primarily offering Azure services rather than mandating how manufacturers choose to consume them. The detail of the announcement identifies five key areas:

  • Telematics and Predictive services
  • Marketing (“Customer insights and engagement”)
  • Productivity (Office 365, Skype)
  • Connected ADAS (Advanced Driver Assistance Systems), ie. the car helping you to drive
  • Advanced Navigation

Cortana also gets a mention. We may think of Cortana as a virtual assistant, but what this means is a user interface to intelligent services.

There is big competition for all this of course, with Google, Amazon and Apple also in this space. There is also politics involved. If you read Howard’s analysis linked above, note that he mentions how the auto companies dislike restrictions such as Google insisting that you can’t have Google Search unless you also use Google Maps (I have no idea if this is still the case). There is a tension here. In-car systems are an important value-add for customers and critical to marketing vehicles, but the auto companies do not want their vehicles to become just another channel for big data-gathering companies like Google and Amazon.

Another point of interest is how smartphones interact with your car. If you want a simple and integrated experience, you can just dock your phone and use it for navigation, communication and entertainment – three key areas for in-car systems. On the other hand, a docked phone will not have the built-in screen and control of vehicle features that an embedded system can offer.

UK South or UK West? Microsoft opens new data centres for Azure and Office 365

Microsoft has opened “multiple data centre locations in the UK” to run Azure and Office 365 cloud services.

I went to the Azure portal to create a new VM, to see the new options. It looks like you have to use the new portal. Here is what I got in the old portal:

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In the new one though, I can choose between UK South and UK West.

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An Azure region is composed of multiple data centres so this looks like a substantial investment. According to this document, the new regions are located in Cardiff and London.

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The new infrastructure supports Azure and Office 365 today, with Dynamics CRM Online promised for the “first half of 2017”, according to the announcement.

Early customers are the Ministry of Defence, South London and Maudsley NHS Foundation Trust, Aston Martin, Capita and Rosslyn Analytics.

The announcement will help Microsoft and its partners sell these services to UK businesses concerned about compliance issues; there may also be some latency benefit. That said, Microsoft is a US corporation and the US government has argued that it can access this data with only a US search warrant. Microsoft has resisted this and won an appeal in July 2016; however there could always be new legislation. There is no simple answer.

Amazon Web Services has also announced plans for UK data centres; in fact, AWS was the first to reveal plans, but Microsoft has been quicker with implementation.

Microsoft financials April-June 2016: on track but continued drift away from consumers

Microsoft has announced its latest financials, and I have made a quick table summarising the year-on-year comparison for the quarter. See the end of this post for what the confusing segment categories represent.

Quarter ending  June 30th 2016 vs quarter ending June 30th 2015, $millions

Segment Revenue Change Operating income Change
Productivity and Business Processes 6969 +308 3000 -167
Intelligent Cloud 6711 +415 2190 -443
More Personal Computing 8897 -346 964 +359
Corporate and Other -1963 -1943 -3074 +5384

A few observations.

Office 365 is Microsoft’s current big success. According to the company’s press release, Office 365 revenue grew 54%, which is huge. However, on-premise sales declined which meant that overall revenue growth in “Office commercial products and cloud services” was only 5%. Still, that’s a successful transition.

The picture was similar in consumer Office, with Office 365 consumer increasing by 23.1% while overall revenue grew by only 19%.

Dynamics CRM is moving to the cloud. Microsoft says that Dynamics CRM online grew by more than 2.5 times, while overall revenue grew only 6%. The maths may be deceptive, if CRM online grew from a small base, but it is a clear trend. Not to be confused with Dynamics 365, which is ERP/Business process management, though Nadella is also bullish on the latter.

Azure revenue grew 102%.  Microsoft’s cloud results are not quite as sparkling as those from Amazon Web Services, but still impressive.

Enterprise Mobility is growing. This is a suite of tools built around InTune, Microsoft’s Mobile Device Management solution.

Surface is doing OK. Revenue up 9% thanks to Surface Pro 4 and Surface Book.

Windows news is mixed. “Windows OEM non-Pro revenue grew 27% and OEM Pro 2%” says the release, which given the weak PC market is decent. Windows 10 is at 350 million active devices, which Nadella said in the earnings webcast is the fastest ever adoption rate for a new version Windows; hardly surprising given the free upgrade offer and high-pressure upgrade marketing.

Xbox news is mixed. Gaming revenue is down 9%. Xbox Live revenue grew 4% but Xbox console revenue is down.

Windows Phone dives towards oblivion. Revenue is down 71%, from a base that was already tiny.

Microsoft cares less and less about consumers. “We will deliver more value and innovation” in Windows, says Nadella, “particularly for enterprise customers.” I also note the remark in the press release that “Search advertising revenue excluding traffic acquisition costs grew 16% (up 17% in constant currency) with continued benefit from Windows 10 usage,” suggesting that part of the Windows 10 consumer strategy is to use it as a vehicle for advertising; this is known in the business as “adware” and does not encourage me; it will push canny users towards Mac or Linux. In the earnings call, Nadella said that 40% of search advertising revenue is from Windows 10 devices. “The Cortana search box has over 100 million monthly active users with 8 billion questions asked to date,” said Nadella.

A reminder of Microsoft’s segments:

Productivity and Business Processes: Office, both commercial and consumer, including retail sales, volume licenses, Office 365, Exchange, SharePoint, Skype for Business, Skype consumer, OneDrive, Outlook.com. Microsoft Dynamics including Dynamics CRM, Dynamics ERP, both online and on-premises sales.

Intelligent Cloud: Server products not mentioned above, including Windows server, SQL Server, Visual Studio, System Center, as well as Microsoft Azure.

More Personal Computing: What a daft name, more than what? Still, this includes Windows in all its non-server forms, Windows Phone both hardware and licenses, Surface hardware, gaming including Xbox, Xbox Live, and search advertising.

The case of the disappearing Azure AD application registration

Some time ago I wrote a simple web application which runs on Microsoft Azure and uses Azure Active Directory for authentication. The application is used constantly and has proved reliable; however yesterday it stopped working. A quick debug session showed that the problem was an Azure AD permissions error.

In order to use Azure AD, applications have to be registered in the Azure management portal. I use the old portal for this; I am not sure that the functionality exists in the new portal yet. There is a nice how-to here.

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One of the elements in the registration is a key which has a maximum lifetime of 2 years:

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My application was deployed about two years ago so I went to the portal to see if it had expired.

What I found surprised me. The application was not listed at all. It had disappeared.

Instead of simply obtaining a new key and updating my application config, I had to create a new application registration and update several keys in the config, which was an annoyance.

There is a wider point here, in the whole category of dealing with “things that expire”. Some time ago, Microsoft suffered an extended Azure outage because of an expired certificate. It is a shame that Microsoft insists on a maximum 2 year lifetime for this key but does not provide a check box for “alert me when this key is about to expire”, how difficult would that be?

Problems like this also mean that things which “just work” may not continue to do so. Of course a well organised enterprise setup can deal with this type of problem, but imagine, for example, the case of a small business with an application running on Azure where the developers have gone out of business, perhaps, or are no longer available. In fact the only code I needed to change was in web.config, but I can imagine it could take some time to figure out what to do and what to change.

Microsoft’s story continues: Windows down, cloud up in financials Oct-Dec 2015

Microsoft has reported its latest financial results, for the quarter ending December 31st 2015.

Here are the latest figures (see end of post for what is in the segments):

Quarter ending  December 31st 2015 vs quarter ending December 31st 2014, $millions

Segment Revenue Change Operating income Change
Productivity and Business Processes 6690 -132 6460 -528
Intelligent Cloud 6343 +302 4977 +272
More Personal Computing 12660 -622 3542 +528
Corporate and Other -1897 -2222 -1897 -1980

A few points to note.

Revenue is down: Revenue overall was $million 23.8, $million 2.67 down on the same quarter in 2014. This is because cloud revenue has increased by less than personal computing has declined. The segments are rather opaque. We have to look at Microsoft’s comments on its results to get a better picture of how the company’s business is changing.

Windows: Revenue down 5% “due primarily to lower phone and Windows revenue and negative impact from foreign currency”.

Windows 10: Not much said about this specifically, except that search revenue grew 21% overall, and “nearly 30% of search revenue in the month of December was driven by Windows 10 devices.” That enforced Cortana/Bing search integration is beginning to pay off.

Surface: Revenue up 29%, but not enough to offset a 49% decline in phone revenue.

Azure: Azure revenue grew 140%, compute usage doubled year on year, Azure SQL database usage increased by 5 times year on year.

Office 365: 59% growth in commercial seats.

Server products: Revenue is up 5% after allowing for currency movements.

Xbox: Xbox Live revenue is growing (up 30% year on year) but hardware revenue declined, by how much is undisclosed. Microsoft attributes this to “lower volumes of Xbox 360” which is lame considering that the shiny Xbox One is also available.

Further observations

This is a continuing story of cloud growth and consumer decline, with Microsoft’s traditional business market somewhere in between. The slow, or not so slow, death of Windows Phone is sad to see; Microsoft’s dismal handling of its Nokia acquisition is among its biggest mis-steps and hugely costly.

CEO Satya Nadella came from the server side of the business and seems to be shaping the company in that direction, if he had any choice.

Azure and Office 365 are its big success stories. Nadella said in the earnings call that “the enterprise cloud opportunity is massive, larger than any market we’ve ever participated in.”

A reminder of Microsoft’s segments:

Productivity and Business Processes: Office, both commercial and consumer, including retail sales, volume licenses, Office 365, Exchange, SharePoint, Skype for Business, Skype consumer, OneDrive, Outlook.com. Microsoft Dynamics including Dynamics CRM, Dynamics ERP, both online and on-premises sales.

Intelligent Cloud: Server products not mentioned above, including Windows server, SQL Server, Visual Studio, System Center, as well as Microsoft Azure.

More Personal Computing: What a daft name, more than what? Still, this includes Windows in all its non-server forms, Windows Phone both hardware and licenses, Surface hardware, gaming including Xbox, Xbox Live, and search advertising.

Microsoft financials July-Sept 2015: decline of Windows hits home, cloud rises

Microsoft has reported its financials for its first quarter. Making sense of these is harder than usual because the company has changed its segment breakdown (and the names are misleading). The new segments are as follows:

Productivity and Business Processes: Office, both commercial and consumer, including retail sales, volume licenses, Office 365, Exchange, SharePoint, Skype for Business, Skype consumer, OneDrive, Outlook.com. Microsoft Dynamics including Dynamics CRM, Dynamics ERP, both online and on-premises sales.

Intelligent Cloud: Server products not mentioned above, including Windows server, SQL Server, Visual Studio, System Center, as well as Microsoft Azure.

More Personal Computing: What a daft name, more than what? Still, this includes Windows in all its non-server forms, Windows Phone both hardware and licenses, Surface hardware, gaming including Xbox, Xbox Live, and search advertising.

Here are the latest figures:

Quarter ending  Sept 30th 2015 vs quarter ending Sept 30th 2014, $millions

Segment Revenue Change Operating income Change
Productivity and Business Processes 6306 -184 3105 -233
Intelligent Cloud 5892 +417 2400 +294
More Personal Computing 9381 -1855 1562 -57
Corporate and Other -1200 -1200 -1274 -55

A few points to note.

Death of Windows Phone: Microsoft acquired Nokia’s Devices and Services business in April 2014. In fiscal year 2015, according to Microsoft’s 10-Q report, the company “eliminated approximately 19,000 positions in fiscal year 2015, including approximately 13,000 professional and factory positions related to the Nokia Devices and Services business.” This was rationalisation following the acquisition; the real blow came a year later. “In June 2015, management approved a plan to restructure our phone business to better focus and align resources (the “Phone Hardware Restructuring Plan”), under which we will eliminate up to 7,800 positions in fiscal year 2016.”

Windows Phone is not quite dead, but Microsoft seems to have given up on the idea of competing with Android and iOS in the mainstream. Year on year, phone revenue is down 58%, Lumia units down from 9.3 million to 5.8 million, non-Lumia phones down from 42.9 million to 25.5 million. This is what happens when you tell the world you are giving up.

Windows: Revenue down 7% “driven by declines in the business and consumer PC markets”.

Surface: Revenue down by 26% because Surface Pro 3 launched in June 2014; this should pick up following the launch of new Surface hardware recently.

Cloud: Microsoft’s “Commercial cloud” comprises Office 365 Commercial, Azure and Dynamics CRM online. All are booming. Azure revenue and usage more than doubled year on year, with 121% revenue growth. In addition, Office 365 consumer subscribers increased by 3 million in the quarter, to 18.2 million, an increase of nearly 20%.

Server products: Revenue is up 6% thanks to “higher revenue from premium versions of Microsoft SQL Server, Windows Server, and System Center”

Xbox: Steady, with Live revenue up 17%, Minecraft adding 17% to game revenue, and hardware revenue down 17% because of Xbox 360 declining (and by implication, not being replaced by Xbox One, a worrying trend).

Further observations

Is Microsoft now facing permanent long (but slow) decline in Windows as a client or standalone operating system? It certainly looks that way. The last hope is that Windows 10 in laptop, tablet and hybrid forms wins some users over from Mac computers and iPad/Android tablets. Despite some progress, Microsoft still has work to do before Windows delivers the smooth appliance-like experience of competing tablets, so I do not regard this as likely. The app ecosystem is also a problem. Tablets need Universal Windows Platform (UWP) apps but developers can still target more Windows users with desktop apps, discouraging UWP development.

Microsoft is also busy removing the advantage of Windows by stepping up its first-party Mac, iOS and Android application development, though this makes sense as a way of promoting Office 365.

That leads on to the next question. If Windows continues to decline, can Microsoft still grow with Office 365 and Azure? Of course it is possible, and on these figures that strategy looks to be going reasonably well. That said, you can expect both Google to continue integrating Android and of course Chromebook with its rival cloud services. Apple today does not compete so much in the cloud, but may do in future. If the future Microsoft has to relying on third-party operating systems for user interaction it will be a long-term weakness.