... the cost benefit is still ultimately something that customers have to make up their mind about. But what's interesting is the way the service is being used in ways that we didn't expect.
Can you give an example?
RiskMetrics, a customer of ours, is a business doing financial simulations using a big grid of computers. It has a hefty investment in hardware. Even though their grid is utilised 24 hours a day, they are limited by the number of nodes.
So they've come up with a routine that turns Azure instances into nodes. They obviously only pay for those nodes while the simulation is happening. Putting parallel processing or grid computing into a cloud has always been a scenario, but never one we'd thought we'd lead with.
But, in fact, they instantiated 2,000 compute units in Azure to form a grid. There're not many grids of that scale in the country or certainly in the world.
And to come back to my question about lock-in...
Perhaps if you are a startup or in the web 2.0 business, then the concept of lock-in might not be so important than if you are a PLC with a number of divisions. So what we're beginning to see that cloud services becoming appropriate for different kinds of businesses.
How have you seen interest in private clouds evolve?
There is a great deal of interest in this. But blogger David Chappell said recently that if you're running a private cloud and it's running on your hardware and your network and your datacentre, you are actually leaving on the table all the cost-benefits of cloud computing. Obviously the great thing about the cloud is that stuff is paid for by someone else, and you just buy it when you need it.
Conceptually, private clouds are a strong idea, but financially you have to be very smart about it. But I do think that one thing that is emerging is the higher degree of self-service that cloud computing within an organisation can enable.
So some of our customers that are taking a cloud-type approach will offer something like an app store so that you will be able to instantiate, install and run applications within that environment, delivered through that cloud service. You cut down on some of the traditional ways you've done IT and you can realise cost savings with private clouds.
Another angle is having a hybrid, which would be a dedicated cloud service but still within a public-cloud environment. So in other words you could potentially partition off electronically and physically a number of resources and dedicate that to a particular customer.
So what we'll probably see is that out of the purist view of private cloud there will be a move to this hybrid model where you will have some private clouds and then you'll have these dedicated areas within public cloud services.
If you are trying to encourage organisations to use Azure, are you working on making your licences more compatible with cloud computing?
You will see cloud computing and Azure services begin to be an integral part of an enterprise agreement or other licensing vehicles from Microsoft. So customers will get similar economies of scale to the ones they currently enjoy.
It will be as part of your menu of options that you take when it comes to an enterprise agreement, you'll be able to take Azure units and storage units and message units as part of the deal and there would be similar volume discounts available as if you were buying physical copies of the software.
But do you recognise that that might look very complicated to a customer?
Well, yes. One of the challenges we've always got is to make sure licensing is as simple as possible. But one of the things that we also want to make sure is that we recognise that from an application perspective one size doesn't fit all.
At Microsoft, if you're not talking about the cloud, you're very much behind the times.
If you are using an application that is very database-intensive, then we don't want to charge the same to people who have an application is perhaps more media-intensive. There should be the opportunity for them to pay different prices. That's why we've separated components within the Azure environment, which again means paying for what you use.
You shouldn't have to pay for a whacking big database if that is something that you don't need. On the other hand if you've got something that is relatively trivial from a compute unit perspective, then you don't need to pay for 10,000 servers sitting there.
Has the cloud affected the way Microsoft operates?
I've been around a long time and I remember the famous Bill Gates memo about the internet — I think it was about 1995. He said that every single product group needed to show how they would embrace or complement the internet. So everybody went away to work on this.
Now of the 40,000-odd people in Microsoft who work on development, about 70 percent are working on how the software we're building interoperates or works in the cloud. But what we'll find is that it's like the internet: we're surging at the moment to get everything to what will then become the normal way of operating.
It's remarkable how quickly the company is orienting itself towards this. Inside the company, certainly if you're not talking about the cloud, you're very much behind the times.
Now we use 'cloud' as the collective word that takes in everything from the 23 million Xbox Live subscribers through to some of these major organisations, such as Coca Cola, which are putting line-of-business applications up into the cloud.