Equinix Cloud Exchange Delivers Direct Access To Microsoft Office 365 Via Azure ExpressRoute

Equinix recently announced that its Equinix Cloud Exchange platform will support private, managed connectivity to Microsoft Office 365 by way of Azure ExpressRoute, the infrastructure that provides a direct connection to Microsoft Azure that bypasses the public internet. As of Q3 of this year, Equinix will become one of the first vendors to deliver a private, reliable, low latency, high performance connection to Microsoft Office 365 via its Equinix Cloud Exchange. Equinix’s support of a direct connection to Microsoft Office 365 gives enterprises the valuable option of ensuring that their employees have access to the Office 365 productivity suite of applications with minimal downtime, latency-related interruptions or performance issues. By providing access to Microsoft Office 365 via Azure ExpressRoute, Equinix enhances the cloud security of data leveraged by Office 365 because of its private, non-public internet connection. Equinix’s direct access to Office 365 will be available in 15 markets worldwide including Amsterdam, Atlanta, Chicago, Dallas, Hong Kong, London, Los Angeles, New York, Osaka, Seattle, Silicon Valley, Singapore, Sydney, Tokyo, and Washington, D.C. One of the additional benefits of the Equinix Cloud Exchange’s direct access offering to Office 365 via Azure ExpressRoute is the ability of customers to modulate network performance to ensure high speed, secure access to Office 365 while concomitantly taking advantage of recent security upgrades to the Azure ExpressRoute infrastructure.


Microsoft Cloud Revenue Grows 147% To Annualized Run Rate Of $4.4B

On Tuesday, Microsoft released its Q4 2014 earnings report, the second such report since Satya Nadella took over as CEO in February. Key features of the report include the following:

•Revenue for the quarter ending June 30, 2014 amounted to $23.38B, up 18% year over year from $19.89B.
•Net income was $4.61B, down from $4.97B for the same quarter during the preceding year.
•Earnings per share calculated to $0.55/share or $0.05/share below the $0.60/share earnings target anticipated by Wall Street. For the same quarter in 2013, Microsoft posted earnings of $0.59/share.
•Commercial cloud revenue grew 147% to an annualized run-rate of over $4.4B. Over the course of the quarter, cloud revenue grew $564M, largely due to triple digit growth in enterprise sales of Office 365 and Azure.
•Windows licensing revenue grew 11% to $13.48B.
•Office 365 subscribers grew to 5.6 million and added a million users this quarter.
•Bing advertising revenue grew 40% and now consumes 19.2% of the U.S. search engine market.
•Revenue from server products grew 16%, including Azure, SQL Server and System Center.

Despite missing its earnings per share target, cloud revenue represents the shining star in this quarter’s earnings report as Microsoft pivots toward Nadella’s “mobile first and cloud first” strategy and away from a business model based on PCs. Nadella himself commented on the Q4 2014 earnings results by highlighting the figures related to cloud revenue as follows:

We are galvanized around our core as a productivity and platform company for the mobile-first and cloud-first world, and we are driving growth with disciplined decisions, bold innovation, and focused execution. I’m proud that our aggressive move to the cloud is paying off – our commercial cloud revenue doubled again this year to a $4.4 billion annual run rate.

The bottom line here is that Microsoft’s aggressive move to focus on Azure and a cloud-based version of Office 365 has paid dividends in an impressively short period of time. Investors can feel confident in the cloud-component of Microsoft’s new strategy, although they are likely to feel less certain about its ability to deliver with respect to mobile devices and applications, particularly given the challenges specific to the $7.2B Nokia acquisition, which itself claims responsibility for 12,500 of the 18,000 employees that are slated to be laid off by the Redmond, WA tech behemoth. That said, 147% growth in its cloud business bodes well for the Azure platform, particularly given that it is fueled in part by Microsoft’s booming Office 365 cloud-based subscription offering, which operates on Azure infrastructure. Expect growth in Microsoft’s cloud revenue to continue although the company will wrestle with the $1.1 to $1.6 billion cost of integrating Nokia Devices and Services (NDS) through fiscal year 2015, and the first half of the 2015 fiscal year in particular.

Microsoft Cuts Azure IaaS and Storage Prices While Emphasizing Quality And Innovation

At its Build Conference in San Francisco, Microsoft joined Google and Amazon Web Services in slashing IaaS and storage prices by announcing price cuts of up to 27-35% on compute services, and 44-65% on storage. Additionally, Microsoft revealed details of “Basic” VM instances that lack the load balancing and auto-scaling functionality that comes with the Standard instances. Price cuts were deepest for “Memory-Intensive” virtual machines and ranged from 35% for select Linux machines, and 27% for Windows-based machines. Microsoft also announced a new redundancy storage option branded Zone Redundant Storage (ZRS) that allows customers to store three copies of their data across “multiple facilities” which may be located either within the same region or across different regions. Zone Redundant Storage provides customers with an alternative redundancy option to the currently available Geo Redundant Storage (GRS) choice which enables customers to store data in regions “hundreds of miles apart” marked by 3 copies of their data in each region. Zone Redundant Storage will be 37.5% lower than Geo Redundant Storage in price. Notable about Microsoft’s announcements of Azure price reductions was its concomitant emphasis on quality and innovation in the cloud computing space:

While price is important, and something that will continue to grab headlines, there are three key factors at play in cloud computing: innovation, price, and quality. Innovation and quality will prove far more important than commoditization of compute and storage. Vendors will ultimately extol their track records for building and running services far more than their prices and SLAs.

Microsoft will continue to focus on bringing our customers a world-class service with an unrivaled user experience. This means best-in-class value while still providing the most complete cloud experience on the market. It means massive investments in cutting-edge infrastructure and world-class R&D. It means continuing to grow our developer and partner ecosystems. Simply put, it means devoting the bulk of our efforts to delivering innovation and a quality experience for our customers, developers, and partners.

With cloud guru Satya Nadella now at the helm of Microsoft, the industry should expect Microsoft to hold good on the promise made by Steve Martin, General Manager of Windows Azure, in his blog post regarding the devotion of “the bulk of our [Microsoft’s] efforts to delivering innovation and a quality experience for our customers.” All this suggests that, what had previously been a two horse race between Amazon Web Services and Google has now, within a matter of days, morphed into a three horse race that prominently features Microsoft and its renewed commitment to cloud and mobile technologies under Nadella as evinced by Microsoft’s release of Office on the iPad. Without question, Microsoft’s experience serving enterprise customers exceeds that of Google by far, but its ability to innovate in the cloud space with the frequency and depth of Amazon Web Services and Google remains to be seen.