Azure Stack Technical Preview 3 is the latest edition of Microsoft’s private cloud software, which will be launching later this year to the public.

The concept itself is mind-blowing. Microsoft is offering Azure Stack as a solution for enterprise companies to create a private or hybrid cloud using their own infrastructure. That gives them the benefit of immense compute power, while allowing them to retain much of their existing infrastructure.

In a conversation with IBM’s CTO for Cloud, Dr. James Comfort, last year, I asked him about the company’s plans to pursue hybrid cloud as a feasible option for IBM clients. This is what he said:

Shudeep Chandrasekhar:

So that’s from an enterprise perspective. How would you relate that to small and mid-sized businesses? Can they see significant cost savings if they move completely?

Jim Comfort:

They can, but they have to be clear where the savings is. Just to be clear, if you take a 24/7 application that’s well run on an enterprise or even an individual (level) and run it in cloud, it will be more expensive, not less. Amazon’s pricing declines – thirty, forty per year – are less than Moore’s Law. So, that is cheaper because you are able to move more quickly. What took you a year, if it can be done in three months, you save tremendously. It’s not at the infrastructure level but at the agility level.

To the degree that in a small business, the overhead – they don’t need people to do procurement and buying. They’re not experts in that, so it’s easier for the infrastructure to cross the threshold and be cheaper externally. But the real value is in “what is it about their business that needs to move at speed and how can they focus more on that?”

When we acquired SoftLayer, we had a substantial number of small and medium businesses and startups that would never have engaged with IBM. We’ve grown that in every country that we’ve opened in, and that market continues to be a great reach for us.

There’s no question in my mind that we are moving cloud aggressively, and that was my point. Businesses that are timid fail relative to businesses that are aggressive. The issue isn’t whether they should or shouldn’t move: they should move the things that can be transformed – not necessarily spend the energy making a new version of something that already works perfectly well.

Shudeep Chandrasekhar:

So, do you see that as an essential difference in paradigm between how IBM looks at its clients and how Microsoft or Amazon look at their clients?

Jim Comfort:

I don’t think Microsoft sees it any differently. That’s why they’re doing Azure Stack. They recognize the need to integrate to the on-prem (on-premises) piece. I think that Amazon says everything should move to Amazon. I don’t think that all enterprises will agree – I think some will and some won’t. You see them making announcements with Ericsson on the local thing – they have partnerships with HP for integration to on-premise. I think they’ve chosen to focus only on the piece that they’re very, very good at, which makes sense. That’s not to say that that’s enough for enterprises. Again, how does the $1 to $10 billion become $800 to a trillion?”

So, Dr. Comfort understands Microsoft’s positioning not only as a public cloud provider, but also a hybrid and on-prem solutions provider for larger enterprise companies.

And that’s exactly what Azure Stack is intended for. The company knows that not all enterprises will be comfortable moving to public cloud, so they’re in there with a hybrid/on-prem solution that fits the needs of the business.

In a way, that works well for Microsoft, just as public cloud works well for Amazon, as Dr. Comfort noted. Microsoft already has a strong presence in the enterprise segment, just like IBM, on the strength of its OS and productivity tools – Windows and Office, in all their forms.

Azure Stack provides an ideal middle ground for enterprises to consider cloud as a viable solution to self-owned datacenters. It brings the best of Microsoft Azure into the hybrid space with tools like Azure Functions, a stab at serverless computing that is similar to AWS Lambda.

Azure customers who use the datacenter orchestration system, Apache Mesos will also be able to run it on Azure Stack on the TP3 edition.

The final version will eventually be priced similar to Azure, but will be cheaper considering the fact that most of the hardware will be owned by the client rather than by Microsoft. In addition, Microsoft has quite a few OEM partners like Dell, Lenovo and HP Enterprise that are willing to provide on-premise hardware with Azure Stack preinstalled, effectively giving the user a private cloud experience with the benefit of Azure’s compute power and scalability.

According to Microsoft’s Mike Neil, corporate VP, Microsoft customers are looking for a seamless experience between Microsoft Azure and Azure Stack, including APIs, services and so on.

The one major hurdle now is that the full version of Azure Stack can only run on pre-certified hardware, which is where the OEMs come in. That means some of the on-prem hardware will necessarily have to come with Azure Stack preinstalled.

But in spite of such hurdles, Microsoft is pushing hard to bring Azure Stack to the market, and that’s purely based on customer demand for a hybrid solution. Some clients, for example, need a cloud environment to do development and testing, but are constrained by regulatory restrictions. In such situations, Azure Stack would be the perfect solution even though the client would have to invest in additional hardware.

One of the objectives of Azure Stack, according to Neil, is to have a relatively simple alternative to private cloud:

“We really wanted to have a solution that didn’t require Ph.D-level effort to deploy and have the customer be successful out of the gate.”

But it’s clear that Azure Stack is not yet the dream solution that Microsoft had in mind: an environment where everything is open-source and runs with open standards on any hardware the client chooses to install. We’re still far from that, but Microsoft hopes that Azure Stack’s benefits will lowlight the fact that clients will be missing a truly open hybrid solution.

It’s definitely a bold move by Microsoft, but if it pays off, the company has a very good chance of closing the gap with Amazon on the Infrastructure as a Service (IaaS) front.

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