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As the official release of Azure looms, and the initial pricing model is understood, a lot of technical people are crunching numbers to see how much it will cost to host a solution on Azure.  It seems that most of the people doing the comparisons are doing them against smaller solutions to be hosted, not in some corporate on-premise data centre, but on any one of hundreds of public .net hosting providers out there.

This is not surprising since the type of person that is looking at the pre-release version of Azure is also the kind of person that has hundreds of ideas for the next killer website, if only they could find the time and find someone who is a good designer to help them (disclaimer:  I am probably one of those people).  So they look at the pricing model from the perspective of someone who has virtually no experience in running a business and is so technically capable that they have misconceptions about how a small business would operate and maintain a website.

Unsurprisingly they find that Azure works out more expensive than the cost of (perceived) equivalent traditional hosting. So you get statements like this:

“If you add all these up, that’s a Total of $98.04! And that looks like the very minimum cost of hosting an average "small" app/website on Azure. That surely doesn’t make me want to switch my DiscountASP.NET and GoDaddy.com hosting accounts over to Windows Azure.” Chris Pietschmann

Everyone seems shocked and surprised.

Windows Azure is different from traditional hosting, which means that Microsoft’s own financial models and those of their prospective customers are different.  You don’t have to think for very long to come up with some reasons why Microsoft does not price Azure to compete with traditional hosting…

  • Microsoft is a trusted brand.  Regardless of well publicised vulnerabilities (in the technical community) and a growing open source movement, in the mind of business Microsoft is considered low risk, feature rich and affordable.
  • Microsoft has invested in new datacentres and the divisions that own them need to have a financial model that demonstrates a worthwhile investment.  I doubt that in the current economic climate Wall Street is ready for another XBox-like loss leader. (This is also probably the reason why Microsoft is reluctant to package an on-premise Azure)
  • Azure is a premium product that offers parts of the overall solution that are lacking in your average cut-rate hosting environment.

Back to the alpha geeks that are making observations about the pricing of Azure.  Most of them have made the time to look at the technology outside their day job.  They either have ambitions to do something ‘on their own’, are doing it on the side in a large enterprise or, in a few cases, are dedicated to assessing it as an offering for their ISV.

They are not the target market.  Yet.

Azure seems to be marketed at the small to medium businesses that do not have, want or need much in the way of internal, or even contracted, IT services and skills.  Maybe they’ll have an underpaid desktop support type of person who can run around the office getting the owner/manager’s email working – but that is about it. (Another market is the rogue enterprise departments that, for tactical reasons, specifically want to bypass enterprise IT – but they behave similar to smaller businesses.)

Enterprise cloud vendors, commentators and analysts endlessly debate the potential cost savings of the cloud versus established on-premise data centres.  Meanwhile, smaller businesses, whose data centre consists of little more than a broadband wireless router and a cupboard, don’t care much about enterprise cloud discussions.  In addressing the needs of the smaller business, Windows Azure comes with some crucial components that are generally lacking in traditional hosting offerings:

  • As a Platform as a Service (PaaS), there are no low level technical operations that you can do on Azure – which also means that they are taken care of for you.  There is no need to download, test and install patches.  No network configuration and firewall administration.  No need to perform maintenance tasks like clearing up temporary files, logs and general clutter.  In a single tenant co-location hosting scenario this costs extra money as it is not automated and requires a skilled person to perform the tasks.
  • The architecture of Azure, where data is copied across multiple nodes, provides a form of automated backup.  Whether or not this is sufficient (we would like a .bak file of our database on a local disk), the idea and message that it is ‘always backup up’ is reassuring to the small business.
  • The cost/benefit model of Azure’s high availability (HA) offering is compelling.  I challenge anybody to build a 99.95% available web and database server for a couple of hundred dollars a month at a traditional hosting facility or even in a corporate datacentre (this is from the Azure web SLA and works out to 21 minutes of downtime a month).  The degree of availability of a solution needs to be backed up by a business case and often, once the costs are tabled, business will put up with a day or two of downtime in order to save money.  Azure promises significant availability in the box and at the price could be easily justified against the loss of a handful of orders or even a single customer.
  • Much is made of the scalability of Azure and it is a good feature to have in hand for any ambitious small business and financially meaningful for a business that has expected peaks in load.  Related to the scalability is the speed at which you can provision a solution on Azure (scaling from 0 to 1 instances).  Being able to do this within a few minutes, together with all the other features, such as availability, is a big deal because the small business can delay the commitment of budget to the platform until the last responsible moment.

So there are a whole lot of features that need to be communicated to the market – almost like ‘you qualify for free shipping’ when buying a book online, where the consumer is directed to the added value that they understand.

The catch is that the target market does not understand high availability the same way that everyone understands free shipping.  The target market for Azure doesn’t even know that Azure exists, or care – they have a business to run and a website to launch.  Those technical details need to be sorted out by technical people who need to produce the convincing proposal.

The obvious strength that Microsoft has over other cloud vendors is their channel.  Amazon and Google barely have a channel for sales, training and development of cloud solutions – besides, that is not even their core business.  Microsoft has thousands of partners, ISV’s, trainers and a huge loyal following of developers. 

In targeting the small to medium business, Microsoft is pitching Azure at the ISV’s.  The smaller business without internal development capabilities will turn to external expertise, often in the shape of a reputable organization (as opposed to contractors), for solutions – and the ISV’s fulfil that role.  So to get significant traction on Azure, Microsoft needs to convince the ISV’s of the benefits of Azure and, as this post tries to illustrate, some of the details of the financial considerations of the small business and their related technology choices.

Microsoft needs to convince the geeks out there that there is a whole lot more that comes with Azure, that is very important to smaller businesses, that are not available from traditional hosting. So Microsoft needs to help us understand the costs, and not just the technology, in order for us to convince our customers that although Azure is not cheap, it makes good financial sense.

Simon Munro

@simonmunro

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