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Microsoft Corporation (MSFT)

Nomura Software Conference Call

March 12, 2015 12:00 PM ET


Mike Schutz – General Manager, Cloud Platform Product Marketing

Zack Moxcey – Investor Relations


Rick Sherlund – Nomura


Rick Sherlund

Okay, I think we are ready to get started. It's a pleasure to have Mike Schutz from Microsoft here today. We’re going to talk about the cloud and Azure. And we also have Zack Moxcey from IR here with us today, and he has asked me to just mention to you that, before we begin, Microsoft may make some forward-looking statements during this presentation. You should refer to their SEC filings for the risk factors related to their business, and that's true whether you are here in person or listening to the web.

Okay, so – Mike, I was hoping that we could get kind of a 101 tutorial from you on Azure. We don't know a lot about Azure. I think it's around a $900 million run rate business, two-thirds of that being Infrastructure-as-a-Service, the other one-third being Platform-as-a-Service. Of course, your cloud business more broadly, if we counted Office 365, I think it's a little over a $5 billion run rate business, which would put you as the world's largest cloud vendor because of the Office 365 kind of SaaS business.

But Amazon is much bigger in Infrastructure-as-a-Service. In Platform-as-a-Service, there is not kind of as much competition, but there is a lot more value add I think we can get from Microsoft because you have some incumbency advantage. You got millions of people that write for .NET. If you got all of that infrastructure, and the fact that you have a hybrid cloud strategy, so I as a user can say, well, maybe I will put some of that in your cloud, some of it in my cloud. It all works together.

So if we could maybe just get you to talk a little bit about Azure, what is Microsoft doing in the cloud, and give us a bit of a competitive assessment and differentiation, that would be a good place to start.

Mike Schutz

Absolutely, well, first I want to thank you first for having us. This is an exciting first event, and so we want to really thank you for letting us participate. There was a lot of detail built into that lead-up that you said, so I think it would be good for us to parse that out as we go through the conversation. But by way of introductions, I run product marketing for what we call the Cloud Platform solutions at Microsoft, and so that includes our private cloud solutions around Windows Server, Hyper-V, and System Center on virtualization and management; our public cloud platform and Microsoft Azure; and then our Enterprise Mobility solutions.

And so, we'd love to touch on – base on some of those because they are all interrelated in the eyes of our customers, and so we will talk about some of the things we are doing there. To answer your question in terms of the rough 101 with respect to Azure, Azure is our public cloud platform. It provides Infrastructure-as-a-Service, Platform-as-a-Service, as well as a number of other high-value services that are around it, and so customers will look to us to run their applications and workloads, but also to connect to their existing infrastructure that is on premises up to the cloud, and I will be able to talk little bit more about that. So, it’s a very high level, focusing on helping customers embrace the public with – integrating with their existing investments on premises.

And so you asked about kind of how – from a differentiation perspective how we look at it. You really have to zoom back a little bit because our focus is to provide the most complete Cloud Platform, and so what that means is we want to have the broadest set of solutions for our customers to use on premises and off by providing a consistent set of technologies so that customers can build and run their applications in the cloud on premises in any combination, whether that's Infrastructure-as-a-Service or Platform-as-a-Service.

And then we try to connect those clouds. We provide a set of services that provides the connective tissue between the on-premises data center and the public cloud datacenter. And so within that lies our fundamental differentiation, and that's kind of on three dimensions. The first is around what we refer to as hyperscale. We have the broadest set of regions world-wide from any public cloud provider at 19 regions, by way comparison that’s twice as many as AWS, and for a Google's Cloud Platform, it's about 3 times that of Google.

And so what that does is it puts Azure as close as we can to our customers. Customers care about that. They want to have their cloud provider in their geography, in their region, for multiple reasons, from a data sovereignty standpoint, geopolitical reasons, but also just from a practicality of an end-user experience standpoint. You can't really change the speed of light, and so you want to have the proximity of the cloud service close to your customers and ultimately their customers.

In order to do that, we've invested significantly in building out this global infrastructure to power our cloud service, and so you have seen us do that over the last several years, increasing our footprint into regions like Australia, into China. We have announced that we will be going into India this year, and so continuing to grow that global footprint so that we can be where our customers are and provide the global reach, but the local touch. And so that's one element.

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