Trust us, Microsoft Azure is worth understanding. We’ve been in this business for a long time and certain technologies are essential to understand whether you sell them or services around them, use them or even if you use a competitive technology it’s good to know the field.
We’ll be creating many more blog posts about Microsoft Azure (formerly Windows Azure) over the coming months and we’re creating some training courses specifically for it. For now though, read our blog post on how to buy Microsoft Azure and trust us. Let’s examine some clues here:
It’s no coincidence that Satya Nadella was the choice for replacing Steve Ballmer as Microsoft’s CEO; the fact he headed up the cloud and services division played a large part in that.
Microsoft Azure keeps company with several other Microsoft divisions, including Windows, Xbox and Office, that bring in more than $1 billion of revenue per year
Microsoft Azure revenue more than doubled (150% growth) between FY13 Q3 (Jan-Mar 2013) and FY14 Q3 (Jan-Mar 2014) according to Microsoft’s earning release
Over 50% of Fortune 500 companies were on Azure as of July 2013
Analysts such as Morgan Stanley are predicting enormous growth; exceeding that of Amazon Web Services (Morgan Stanley CIO Survey, 2013. “Percentage of Enterprise CIOs Greater than $1B/$10B expecting to use IaaS by YE2014”)
Microsoft’s investment in its data centres provides the foundation for Azure; the new Azure Brazil South region, located in Sao Paulo state, is available for public preview and this is a huge step in cloud trust as it offers customers the ability to keep their data in-country. Data sovereignty in Europe is sure to follow.
Update August 2014 – Azure is now also available through the Open licensing programs in blocks of $100 monetary commitments. Think of it like a mobile phone top-up. The customer buys as many $100 blocks as they want and then have 12 months to use that balance across any Azure service that is available on the pay-as-you-go rates.
Windows Azure is a bit of an unsung hero in my opinion; it’s a $1 billion business for Microsoft and yet I’m still greeted by a lot of blank faces and frowns of uncertainty when I ask if people are selling or using Azure services.
As this is a licensing blog, I’m not going to describe Windows Azure but I will point you to the blog of Steve Plank, an Azure technology evangelist at Microsoft. His words of wisdom can be found on blogs.msdn.com/b/plankytronixx and he has a great cartoon-style way of explaining things. One of his explanations I reference a lot is how Azure virtual machines can be beneficial to customers with legacy applications.
Virtual machines, storage (great for disaster recovery solutions) and compute are three of the easiest services or commodities to understand and to licence and I’ll come back to these a little later.
How do I buy/licence Windows Azure?
Windows Azure is an ever-growing bundle of distinct cloud services, over 60 currently, which customers can use across Microsoft’s network of global datacentres. Each one of those services has its own cost and each one has its own usage-metre so typically you pay for consumption. Any solution you deploy on Azure is going to consume a mix of these services, each charged at their own price and unit. For example storage is pence per gigabyte per month; compute power is per compute size per minute and so on. This model is very similar to a mobile phone bill where you have a number of different charges accruing to your total monthly bill such as landline calls, premium rates, roaming services, data and texts. Luckily the idea of different usage meters and pricing does not affect the licensing.
Figure 1: (right) Windows Azure comprises over 60 services, each with its own usage-metre & price. (Left) Any solution you deploy utilises a combination of these services.
Customers purchase Azure services through two primary licensing vehicles; Microsoft Online Subscription Program (MOSP) or through an Enterprise VL Program.
MOSP is buying directly from Microsoft. Anyone can visit azure.com and sign up for the services. There’s a choice of pay-as-you-go (PAYG), also known as consumption, or to sign up and purchase a commitment offer.
With the consumption model you are typically paying the highest prices for Windows Azure services (I say typically because there are rare exceptions). High-volume discounts (graduated pricing) do apply though (an example is shown below in the table).
With the commitment model, you commit to pay a set, monthly amount and Microsoft reflect your commitment by offering a discount of 20-32% off the published PAYG consumption rates. The commitment plans do not have graduated pricing; they are based on a discount according to the level of commitment made (the minimum is currently £300 per month). Monetary Commitment is used like a debit card; you add in the same amount each month and your Azure usage draws down on the balance. Customers have a choice of making a 6 or 12 month commitment with the 12 month attracting a further 2.5% discount over a 6 month commitment. If you pay up front for the whole 6 or 12 months you’ll attract an additional 2.5% discount.
Should you exceed your monthly commitment amount, the overage (yes that is a real word) is charged at the published consumption rates. Overage is also not eligible for graduated pricing discounts (that is, it will be billed at base price tier regardless of volume). Again, this is a similar model to mobile phones, just in this case you’re purchase database, storage or compute.
When I say discount, I refer to the discount on the service price when compared to the PAYG base rates. You could think of it as a bonus; you’re getting more service for your money. For example, under the standard PAYG rates, the geo-redundant storage price for 5TB / month with graduated pricing would be £0.061 per GB for the first TB and £0.051 per GB for the next 4TB. However, under the commitment model, all 5TB of storage would be billed at the base rate of £0.061 /GB per month prior to the application of the volume discount.
Unlike Amazon Web Services (AWS), this discount is across the board so you could commit £10,000 on compute and you’ll get at least 23% discount on storage services. Unused commitment funds can roll over between months but can’t role over to another term so it’s often wise to choose a 12 months commitment term as it gives more time to use the funds.
Purchasing through an Enterprise program (EA) will usually deliver the best prices; significantly lower than the PAYG rates. Microsoft also recently committed to match the AWS published price for three key commodities: compute, storage and bandwidth and from March 2014 prices will drop for Block Blobs Storage and Disks/Page Blobs Storage to match AWS prices. And EA customers will gain an additional 27-36% discount off those matched prices. So that’s a huge benefit and you can be confident about your workloads being cheaper to run than on AWS.
Similar to how an EA allows you to commit upfront for expected units of Windows Server and then grow throughout the year, you can also commit upfront for expected use of Windows Azure and then grow throughout the year without paying a penalty. If you use more services than your commitment, you’ll get the same discount rates on that overuse; no extra paperwork to sign and no penalties for going over (other than the possibility of being billed quarterly rather than at the end of the year for the overuse if it exceeds 150% of your commitment amount). There are some great offers you can utilize too including funded engagement days to help you deploy but these need to be addressed through your reseller.
Scenarios are always good to illustrate points so let’s go through an example and for the mathematically challenged like myself, we’ll have a nice neat customer who commits $100,000 per year for the three year EA term. So they pay Microsoft $100,000 at the start of year 1 but the customer only spends $75,000 in year one. Because this customer signed up for a three-year deal at $100,000 per year they’ll automatically be billed for year 2 at $100,000. They can change their commitment level at each anniversary either up or down by contacting their reseller but if they do nothing their commitment stays the same.
Importantly, and this is why Microsoft offer those engagements, if the customer doesn’t consume their entire commitment in a year, the remainder is lost. This isn’t a penalty or a way of earning more money; it becomes very difficult for Microsoft to pay partners or talk to Wall Street if there’s uncertainty about having to refund money. It’s called a commitment because it is a commitment. So the customer forfeits the unused $25,000.
Let’s say the customer goes over their commitment and spends $140,000. They will have received several notifications by this point to keep them aware and the customer will simply get a bill at the end of the period for $40K and the commitment would be renewed for next year at the $100K level unless they contacted their reseller to change it.
So if a customer had committed £100,000 but went on to spend £1,000,000 in a quarter, Microsoft would happily say yes. And the only penalties are that they might be billed quarterly for the overuse and they may have obtained a better discount level by increasing their commitment prior to the overuse.
A customer with an existing EA could add as little as 1 x Azure Monetary Commitment SKU which is $100 per month, resulting in $1200 per year. While this is not recommended, it is programmatically possible.
An alternative way of purchasing Azure Services through an Enterprise program is through the Server and Cloud Enrolment (SCE). SCE came into being in late 2013 and makes it easy to combine your on-premises server and cloud commitments to Microsoft. If you want to learn about SCE in more depth please view the previous blog or Microsoft’s September 2013 recorded spotlight call.
In the SCE agreement, you make an install base commitment to one or more on-premises products such as Windows Server or SQL Server and this provides your EA discount level. If you make an on-premises commitment you can start using Azure services without needing to make an upfront monetary commitment in Azure. The prices you’ll pay are determined by your EA level discount and because you’ve made an on-premises agreement, Microsoft will add another 5% discount on top. So it’s possible to gain a maximum of around 41% off the Azure published PAYG prices through SCE.
If you only want Azure through an Enterprise program and don’t wish to make one of the on-premises commitments you can sign up for an Azure-only SCE. So perhaps this is ideal for an ecommerce organisation who are going to utilize a great deal of cloud services but don’t have the on-premises minimums for the other components of the SCE. In this situation you do make an upfront monetary commitment and working with your reseller, you can gain the equivalent of an EA price level based on your yearly Azure spend.
In terms of an example, a customer might commit to $200,000 so they get an EA on just Azure and also fall into level B pricing (attracting a 30% discount) because of that commitment. They do not however gain the additional 5% discount that a customer would get if they’d signed up for one or more of the other SCE pools; core infrastructure, app plat or developer.