'Take that Amazon!': Microsoft arms service providers with brandable clouds

In its battle to displace Amazon as the world's cloud of choice, Microsoft has adopted a strategy of arming service providers with the tools they need to build their own Azure-flavoured clouds. 

The move was announced at the company's worldwide partner conference in Toronto on Tuesday. It sees three key Azure features — Sites, Virtual Machines and the Service Management Portal and API — come to Windows Server 2012 and Windows Server 2008 R2. 

This will let businesses create infrastructure-as-a-service clouds, provide simple web hosting and design custom dashboards, all while being able to brand the offering as their own, rather than Microsoft's. 

Though Microsoft is committed to running its own huge Azure cloud, the announcement sees it target the types of companies that have felt shut out by Amazon's rise: Amazon Web Services does not allow people to install its cloud technology on their own servers, rebrand it with their logo and offer services on top leaving service providers, like telecommunications companies, out in the cold. 

For such businesses, building their own clouds is not a sensible option. "It's really expensive to do this kind of thing," Ditlev Bredahl, chief executive of OnApp, a provider of cloud software to service providers, says. "Making it work deploying virtual machines on a hypervisor is really easy but making it scale is really hard. The difference between running 500 servers and 5,000 servers is huge."

Developing technology roughly equivalent to Azure, App Engine or Amazon Web Services is a risky strategy for hosting companies and probably represents "a year and a half of pain", Bredahl said. 

Ammunition against Amazon

If Microsoft can get enough service providers using its technology, it will get the twin benefits of a massive R&D bonus from the ensuing feedback, and the chance to supply ammunition to those keen to use their datacentres, fibre networks and good company relations to take on Amazon.

"There is a tremendous pressure on the value proposition of the channel," Andy Burton, chairman of the Cloud Industry Forum and chief exec of UK service provider Fasthosts, says. "I think [the Azure] update is effective in winning the confidence and commitment of the partner community." 

And it's not just Microsoft attempting to cosy up to the channel: OnApp has offered software equivalent to the Azure update for several years and Bredahl claims it has installations in 500 datacentres around the world. 

Meanwhile, on Wednesday morning ElasticHosts announced plans for a similar service. The White-label Reseller Program lets service providers do something similar to Microsoft's Azure update, though they will base their own products on top of hardware operated by ElasticHosts and living in one of its five datacentres spread across North America and the UK. 

And ElasticHosts has identified the same market as Microsoft, with its product targeting "an intermediate community of people who would like to get out there and sell some cloud products," chief executive Richard Davies says. "Maybe they're a system integrator or a managed service provider of some sort." 

Ultimately, Microsoft is capitalising on the seething resentment most likely felt by telecommunications companies at the rise of Amazon Web Services. After all, big telecommunications companies like Cable & Wireless Worldwide, AT&T and Verizon all have major cloud offerings, vast datacentres and great globe-spanning connectivity. It must be galling to see an online bookseller from Seattle overtake you in a market that, if one thinks about this objectively, you should own. 

"These people do not want to sell someone else's cloud," Davies says. Enter Microsoft. It will be fascinating to see how this plays out.