In a recent blog post, Brad Smith, President and Chief Legal Officer of Microsoft, announced details of Microsoft’s plans to “protect innovation and investments as it applies to the cloud.” Citing research by the Boston Consulting Group that noted an increase in cloud-related intellectual property litigation over the last five years, Smith elaborated on Microsoft’s recognition of the risks associated with doing business in the cloud in the form of The Microsoft Azure IP Advantage program. The Microsoft Azure IP Advantage program gives customers unlimited indemnification coverage that now includes open source technologies such as Hadoop. In addition, the program allows customers to make use of roughly 10,000 Microsoft patents in order to protect themselves against charges of the infringement of intellectual property. The 10,000 patents draw upon Microsoft’s vast portfolio of its own patents and promises to give customers an unprecedented degree of legal protection for Azure-based applications. Moreover, Microsoft will offer continued legal protection to customers using one of its patents in the event that Microsoft decides to transfer one of its patents to another entity. Customers are eligible for Microsoft Azure IP Advantage if they spend at least $1000/month on Azure and have not filed patent-related lawsuits against other Azure customers.
The Microsoft IP Advantage program represents a key differentiator for Microsoft Azure against Amazon Web Services and the Google Cloud Platform given that it draws upon Microsoft’s extraordinary tenure in the tech industry and the slew of patents it has accumulated over the course of decades as one of the world’s premier technology companies. The program, which bears no parallel in the cloud industry at represent, underscores some of the out of the box thinking from the Azure team as Azure strives to bolster its differentiation from AWS and Google by tapping into Microsoft’s tenure as a software company as well as its deep relationships with enterprise customers. Microsoft’s Satya Nadella and Scott Guthrie will need to keep up the gas pedal on innovation, however, as Amazon Web Services and Google both continue to roll out new features and functionality at a breathtaking pace. For now, however, the Microsoft IP Advantage program demonstrates an extraordinary attentiveness to customer needs and marks another feather in Azure’s cap that allows it to stand out from other players within the cloud jungle.
On Friday, Microsoft Azure announced it became the first commercial cloud vendor to achieve Level 5 Provisional Authority for the “the DOD regions of Microsoft Azure Government and Office 365 U.S. Government Defense” as noted on Microsoft’s website. Azure’s achievement of Level 5 accreditation from the DOD empowers it to handle controlled unclassified information (CUI) and subsequently build and host applications that require a higher level of security than Level 4 accreditation. In conjunction with the news of its Level 5 DOD accreditation, Microsoft Azure announced the general availability of DOD regions of Microsoft Azure Government and Office 365 U.S. Government Defense with Level 5 authorization marked by dedicated infrastructure for the DOD spanning a multitude of U.S.-based data centers. Azure’s achievement of Level 5 Provisional Authority adds to its FedRAMP certification and bolsters its leadership in the government and defense-related cloud computing space. The announcement of its Level 5 Provisional Authority as granted by the Department of Defense represents a significant differentiator for Microsoft Azure given a contemporary political climate marked by increased sensitivity to U.S. government hacking and security breaches. With its enhanced security credentials for the DOD, Azure stands poised to continue spearheading Microsoft’s renaissance under CEO Satya Nadella by giving investors increased confidence in the company’s ability to serve defense-related contracts that are likely to increase in quantity and scope given President-elect Trump’s avowed interest in expanding the U.S. military.
TomTom and Microsoft have announced a partnership that allows Azure to integrate TomTom’s location-based services into the Microsoft Azure platform. As a result of the partnership, developers using the Microsoft Azure platform enjoy enhanced access to location-based services that allow their applications to take advantage of TomTom’s mapping and navigation software. The partnership represents a coup for TomTom because it brings its technology to an expanded universe of developers via the Azure platform. Azure, meanwhile, benefits from the enrichment to its platform delivered by TomTom’s technologies for facilitating enhanced navigation, delivering geo-spatial business intelligence and tracking the location of objects or its devices. Microsoft’s collaborations with TomTom underscores the depth of its interest in geo-spatial technologies as further evinced by the extension of its partnership with HERE and its relationship with Esri, a geographic information systems technology vendor that runs on the Azure platform. As such, Microsoft’s partnership with TomTom indicates its interest in continuing its courtship of the enterprise by bolstering the location-based technology and services available on Azure and subsequently creating an infrastructure for internet of things analytics from data delivered by sensors traversing the globe.
Amazon reported earnings per share of 52 cents on Thursday, missing the earnings target of 78 eps predicted by analysts by a margin that, in combination with other data points from the earnings report, subsequently sent the stock plummeting by 5% in trading on Friday. For the quarter ending September 30, 2016, the company reported revenue of $32.71 billion that slightly exceeded Wall Street estimates of $32.69 billion. Meanwhile, Amazon’s revenue guidance for the fourth quarter between $42 billion and $45.5 billion leaned toward the lower side of the spectrum of Wall Street’s expectation of $44.58 billion. To make matters even more worrisome for investors, Amazon projected operating income of between zero and $1.25 billion for the fourth quarter, whereas Wall Street had projected $1.62 billion. On a positive note, the company’s cloud services business unit, Amazon Web Services, claimed revenue of $3.23 billion, an increase of 55% in comparison to the $2.08 billion from the third quarter of last year that surpassed Wall Street’s expectation of $3.17 billion. Amazon explained its less than stellar earnings report by noting its heavy investments in original video content for Amazon Prime as well as fulfillment centers. Nevertheless, Amazon’s earnings per share miss and third quarter results more generally raised eyebrows in both the technology and investor community after a year of impressive growth and the preservation of its lead in the cloud computing space despite intensified competition. Axcient CEO Justin Moore remarked on Amazon’s recent earnings miss as follows:
Despite the Q3 EPS miss, over the longer-term, Amazon will continue to be a dominant force in both e-commerce and enterprise infrastructure – an incredible feat given that the customer sets are on the opposite ends of the spectrum. Amazon has been very clear that it will continue to focus on growth and not profitability. Investors have signed up for this approach for years so the blip in the stock will be tempered. Bezos has Amazon ‘primed’ for a dominant push to 2020 – and beyond. AWS and Prime continue to be Amazon’s primary growth and revenue drivers as the Seattle company broadens its lead in online commerce and cloud-computing services. The only real question for Amazon comes down to two factors: 1) its ability to appease investors appetite for ongoing record growth and 2) can it continue to maintain its lead over Microsoft, Google and Oracle who are equally committed to winning the cloud and have the benefit of being second mover which can be a benefit in these situation as infrastructure ages out and size and scale become inhibitors to innovation and performance. Expect to see all leverage M&A to acquire their way to technical leadership and hold an edge over the competition. That said, while there is plenty of startup talent to be bought at a premium, I don’t see Amazon losing this race anytime soon.
Here, Moore opines that Amazon’s ability to manage investor expectations and shake off the “second mover” advantage had by competitors such as Microsoft, Google and Oracle will determine whether it can continue the dominance in “e-commerce and enterprise infrastructure” that it has delivered, to date. Moore also notes that second movers stand to benefit from their ability to outpace the “size and scale” of their competitors with enhanced agility and innovation. Herein lies the stakes of Bezos’s gamble on innovation and investment in Amazon’s infrastructure: if Amazon can, indeed, afford to innovate on the rapidly expanding scale of its business and cloud operations with the agility of its competitors by re-investing resources acquired through its meteoric growth to date, Amazon stands poised to radically reconfigure the technology landscape over the next ten years in ways analogous to the disruption that Amazon Web Services brought to the cloud computing landscape. But in the event that the size and complexity of Amazon’s infrastructure mitigates against its ability to continue to deliver innovation, the chances of competitors such as Oracle and Google catching up to it, at least on the cloud services front, increase dramatically. According to Amazon’s CFO, Brian Olsavsky, Amazon built 18 new fulfillment centers in the third quarter while investing heavily in video content to enable Amazon Prime’s video services offerings to compete with Netflix. With respect to Amazon Web Services, however, one obvious question investors may have following last week’s earnings report concerns how Amazon intends to invest in AWS in response to Google’s rebranding of its cloud-based products and services coupled with Google’s aggressive emphasis on professional services for the enterprise.
Pivotal and the Google Cloud Platform have announced a collaboration whereby Pivotal Cloud Foundry, the platform as a service based on the open source Cloud Foundry project, will now be generally available on the Google Cloud Platform. Pivotal’s collaboration with Google builds upon existing partnerships with Amazon Web Services and Microsoft Azure and gives it expanded access to developers building applications on cloud-based platforms. Key perks of using the Google Cloud Platform for Pivotal Cloud Foundry applications include access to Google Cloud’s load balancing technology as well as Google’s data and machine learning services such as Google BigQuery, Google Cloud SQL and Google Cloud Natural Language API. The availability of Google’s data and machine learning services testifies to an impressive depth of integration between Pivotal Cloud Foundry and the Google Cloud Platform, one that was made available by custom-built service brokers created by Google’s engineering team. The ability to create Pivotal Cloud Foundry-based apps on the Google Cloud Platform, with full access to Google’s enviable roster of data and machine learning products, gives developers a rich portfolio of battle-tested building blocks from which to build and iteratively enhance their applications. Stay tuned to the cadences of the integration between Pivotal Cloud Foundry and the Google Cloud Platform to understand whether the integration of the two platforms renders Google Cloud Platform a more promising partner for Pivotal Cloud Foundry developers and its customers than Amazon Web Services and Microsoft Azure. In the here and now, however, Pivotal—which is part of Dell Technologies—stands positioned to expand its availability to enterprise customers via a partnership that differentiates by way of access to Google’s renowned Big Data and machine learning technologies.
Microsoft reported adjusted quarterly revenue of $22.33 billion and earnings per share of 76 cents, exceeding analyst expectations of 68 cents per share for $21.71 billion in revenue for the first quarter of the 2017 fiscal year, namely, the quarter ending September 30, 2016. The 76 cents earnings per share announcement amounts to $6 billion in non-GAAP net income for Microsoft, or an increase of 9 percent in comparison to the $5.4 billion in net income for the first quarter of the 2016 fiscal year. Meanwhile, Microsoft Azure experienced 116 percent in revenue growth with its intelligent cloud offering bringing in $6.38 billion in revenue for the most recent quarter. Moreover, Azure compute usage more than doubled based on a year over year comparison. Microsoft’s impressive earnings report led to stock gains that surpassed the high of $59.97 reached in 1999 with share prices surpassing $60 per share in after hours trading. Thursday’s earnings announcement underscores the importance of Azure as one of the key drivers of Microsoft’s growth and illustrates the vitality of Microsoft’s “cloud first” transformation under Satya Nadella. Microsoft has yet to grapple with the implications of the recently announced Amazon-VMware partnership although Nadella’s emphasis on the company’s commitment to machine learning and artificial intelligence throughout all of its offerings may offer a clue as to one of its prospective differentiators in the cloud computing space.
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