Realigning Microsoft Azure unit may boost innovation, squabbling

Unifying Windows Azure with its on-premises counterpart Windows Server should hasten the rollout of new features in Microsoft Corp.'s enterprise cloud platform, but it also will pit Azure against Microsoft's other cloud services for the loyalty of a key customer base, says one independent Microsoft analyst.

Microsoft announced on Tuesday that it is creating a new group called the Server and Cloud Division (SCD). The group will include the Windows Azure development team and the Windows Server and Solutions group, and be housed in the Server and Tools Business (STB), run by STB president Bob Muglia.

Windows Azure development was led by senior vice-president Amitabh Srivastava, who formerly reported to chief software architect Ray Ozzie, and will now report to Muglia. Corporate vice-president Bill Laing, who ran Windows Server under Muglia, will report to Srivastava.

The cloud gets real

The realignment, while major, was not a surprise. Muglia had said a year ago that Windows Azure would be moved into STB before Microsoft begins selling it on January 1, 2010.

"This is a natural development. Azure is becoming a real business, and thus it's moving into a real business group," said Rob Helm, an analyst with the independent firm Directions on Microsoft.

Unifying Azure with Windows Server should help the former catch up feature-wise with its older sibling, Helm said, and eventually lead to features being released first on Azure.

That online-first release is already starting to happen in Microsoft's other major cloud effort, Microsoft Online Services.

Run by corporate vice-president Dave Thompson, Online Services includes the Dynamics CRM Online service, as well as the Business Productivity Online Suite (BPOS) that includes SharePoint Online and Exchange Online.

Despite its name, Microsoft Online Services is not a part of Microsoft's Online Services Division, which runs the MSN portal and the Bing search engine.

Rather, Microsoft Online Services is part of the STB, run by Muglia, who is Thompson's boss, a Microsoft spokeswoman confirmed. But, confusingly, Online Services' flagship product, BPOS, is marketed through the Microsoft Business Division (MBD), which builds the offline versions of Exchange and SharePoint.

MBD's marketing chief, senior vice-president Chris Capossela, is in charge of marketing for the on and off-line versions of Exchange, Sharepoint, as well as Microsoft Office and its cloud sibling, Office Web. The latter is developed inside MBD, not STB.

Revenue for Microsoft Online is owned by MBD, a spokeswoman said. That may make sense business-wise, because otherwise MBD would have no incentive to push BPOS and potentially cannibalize sales of its on-premise Exchange and SharePoint. But it doesn't exactly give STB an incentive to invest heavily in BPOS development.

Rivalries brewing already?

A conflict between STB and MBD may be brewing as both divisions begin to compete over the large but finite pool of .Net developers.

Microsoft has tried to push Office, SharePoint and Dynamics CRM as development platforms for enterprises, not just applications.

Enabling customers to build custom apps and extensions to these apps not only helps demonstrate greater value, it also helps lock those companies into the Microsoft upgrade path, Directions on Microsoft's Helm said.

Developers have yet to embrace these apps as platforms, with the possible exception of SharePoint, Helm said.

With the coming release of Office, SharePoint and Dynamics CRM, Microsoft plans to "relaunch this whole idea," Helm said. Microsoft will also tout SharePoint Online and Dynamics CRM Online as programmable cloud platforms.

With wooing developers becoming more and more key to the financial success of Microsoft's STB and MBD divisions, "there's a danger that the Microsoft developer base will be subdivided too finely, with none gaining critical mass," Helm said.

A question marks hangs over which way developers will drift. The more bare-bones Azure will be familiar to most .Net developers. But SharePoint Online is still ".Net under the hood," Helm said. And its built-in features could help time-pressed developers "get to the goal line faster" than starting with Azure's blank slate, he said.

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