As covered by Gigaom’s Derrick Harris, “At a press event in San Francisco on Monday, Microsoft Executive Vice President of Cloud and Enterprise Scott Guthrie announced a new family of Azure products that the company hopes will drive home the message it’s trying (really hard) to send about its ability to run hyperscale, enterprise-grade and hybrid cloud computing environments. Among those products are a new Azure appliance that companies or service providers can deploy in their own data centers, and a new family of very beefy Azure cloud instances.”

These products are not surprising. Microsoft has talked about Azure appliances since Azure was just a baby. Microsoft tapped HP to sell them, and continues to promote the idea that Microsoft is good with private and hybrid clouds. However, not much has happened, and, for the most, part Azure remains a public cloud…PaaS and now PaaS and IaaS.

“Called the Cloud Platform System, Guthrie said the new appliance will run the same Azure APIs, services, hypervisor, and everything as the Azure public cloud and will be able to connect easily to the Azure public cloud. Dell is building the appliances for Microsoft.”

Okay, we’ve seen this show before. It’s clear to me that this move propels Microsoft in the wrong direction, at least at this time. However, there is more goodness than badness at Microsoft these days.

The largest concern for those in the Microsoft cloud camp is that Microsoft seems to be plodding toward the public cloud. There are lots of side steps, but the vision for Microsoft should be clear at this point.

What Microsoft is doing wrong

In these types of analysis reports, I normally focus first on what a technology provider is doing right. However, for this one, I think it’s more interesting to focus on what is wrong, and then on what is right.

First of all, I’m sure Microsoft customers are screaming for an Azure private cloud, and perhaps an Azure private cloud appliance. However, this approach to leveraging a cloud won’t do either Microsoft or Microsoft customers much good in the long run. The reasons are obvious.

The whole private cloud thing seems to be falling out of favor with many enterprises these days. While enterprise customers want the option, the destination of cloud-based technology is really in the public cloud. Public clouds have improved a great deal, in terms of features and security, and they are a fraction of the price when considering that private clouds are really just owned hardware and software that you must buy and maintain.

Perhaps a driving force here is the partner network that Microsoft is trying to keep happy as it shifts over to a public cloud offering. Those companies that make a good living selling and integrating Microsoft technology are now facing a world where public cloud providers can deliver the same value. Given that we can provision these resources in a few hours, not days or weeks, their world will be changing soon. However, now that these companies have an appliance to sell, they may feel a bit better…at least for now.

Most of these private cloud servers, and appliances, will become so much modern art by 2017, and it looks like a few of them will say Microsoft Azure on the front of the box. Both Google and AWS won’t provide traditional private cloud options, albeit AWS comes close with its Virtual Private Cloud (VPC) offering. Among the Big Three public cloud providers, Microsoft will be the only one to focus on private clouds, and that won’t work out too well.

While Azure has improved a great deal in the last few years, what’s key to Microsoft is focus. If the company focuses on hardware and software as part of their cloud strategy, then there is less focus on the public cloud offering. Microsoft won’t catch up to AWS with that approach, and Google could likely pass up Microsoft by the end of next year.

What Microsoft is doing right

There are basically three areas where Microsoft’s cloud strategy shines:

• Microsoft’s advantage in commercial software
• Consistent improvement, and shifting the model
• Existing customers and talent base

Microsoft’s advantage in commercial software is really where Microsoft shines. The ability to provide solutions as well as infrastructure and development capabilities seems to add quick value to the Azure story. Microsoft has the world’s most used office automation software package, key SQL, and, now, no-SQL database offerings, as well as true multi-tenant enterprise-grade software that can be obtained right out of the Azure cloud.

Commercial software has not been the focus of either AWS or Google, and as Microsoft is finding, the ability to provide these solutions drives sales of PaaS and IaaS services as well. Microsoft may be successful due to the value of its software solutions that exist in the cloud rather than due to their IaaS and PaaS offerings.

Salesforce.com might even be on their shopping list to drive this strategy even farther. Certainly the deeper partnership, as revealed at the latest Dreamforce conference, raised some eyebrows.

Consistent improvement, and shifting the model refers to Microsoft being the Tortoise to the Google and AWS Hares. Microsoft entered the market late, without a good vision, and also turned from a PaaS to a IaaS focus. However, Microsoft has consistently improved their public cloud offering, perhaps at a rate that went unnoticed by their customers and the press.

While the big bang theory, in terms of a public cloud offering, seems to be the strategy for most of the larger providers, Microsoft has been slowly putting the resources in place to build and deploy the best public cloud possible. While Microsoft is shy of the features of an AWS, and even perhaps a Google, the Microsoft Tortoise just keeps adding things in as it goes. Slowly but surely, Microsoft is catching up, and not falling farther behind.

Existing customers and talent base are Microsoft’s biggest assets for the move to the cloud. There are Microsoft shops that will always be Microsoft shops, and thus these shops will become Azure shops as these enterprises move to the public cloud.

While many consider this to be product lock-in, it’s no different than enterprises that pledge allegiance to HP, IBM, or Oracle. However, Microsoft is different because it has a pretty sound public cloud offering.

Those who have accepted .NET as their personal path to application development and deployment are clearly in the Azure camp these days. While Microsoft has done a fair job in opening up the architecture, it’s still the .NET loyal who will send money to Redmond.

What the future holds

The future is both bright and questionable for Microsoft in the public cloud. While the company performed beyond my expectations, it still seems limited by…well…Microsoft. The old ways of doing things, waiting for the market to emerge and then jump in front of the parade (can you say Windows phone?) won’t work for Microsoft anymore. If Microsoft wants to lead, it needs to drive the market by using innovation and creativity to take its rightful place.

If Microsoft can become more innovative and creative, it stands a chance. Clearly, the company is doing many things right, while still doing a few things wrong. That’s so Microsoft.