4 Azure milestones Microsoft must hit — and soon

Next year could be a very big year for Windows Azure, Microsoft’s (s MSFT) nearly two-year-old Platform-as-a-Service (PaaS). And, it better be, given the investment in manpower and dollars Microsoft poured into the effort, which has not been as widely adopted as the company must have hoped. (Publicly, company execs are very happy with Azure’s traction, of course.)

The ambitious Azure platform launched in Feb. 2010 with a lot of fanfare and expectations. A year later, Microsoft claimed 31,000 subscribers, although it was unclear how many of them paid.  But since then, Azure lost steam and unlike Amazon(s AMZN), Heroku(s CRM), VMware (s VMW) and other big names in the cloud, it just doesn’t get much love from the web developers it needs to woo.

All that can change if Microsoft delivers on promises to open up deployment options for Azure and to offer more bite-sized chunks of Azure services in Infrastructure-as-a-Service (IaaS) form. If it does that well and in a reasonable amount of time, Microsoft — which has always been chronically late  — will be tardy to the party but will get there in time to make an impression. After all, we are still relatively early in the cloud era. Here’s what Microsoft needs to do for Azure in the next few months:

Azure must run outside Microsoft data centers.

The company has to make Azure available outside its own four walls. Right now, if you want to run apps on Windows Azure, they run in Microsoft data centers (or, since August, in Fujitsu data centers). Fujitsu also recently launched a hybrid option that allows it to run brand-new apps in Azure and connect them to legacy apps on its other cloud platform. We’re still waiting for Hewlett-Packard (s HPQ) and Dell (s Dell) Azure implementations. (HP could announce this at its HP Discover show this week.)  Down the road, all this work by hardware makers should result in an “Azure Appliance” architecture that would enable other data centers to run the PaaS.

Microsoft must offer VM Roles and Server AppV for IaaS fans.

Microsoft needs to offer  more bare-bones chunks of Azure services — akin to Amazon’s EC2.  That’s why Microsoft needs to get VM Roles in production mode as soon as possible.  VM Roles, in beta for a year, allows organizations to host their own virtual machines in the Azure cloud. Also coming is Microsoft Server AppV which should make it easier for businesses to move server-side applications from on-premises servers to Azure. “VM roles and Server AppV are the two IaaS components that Microsoft has not yet pushed into production. It still seems Microsoft hasn’t really focused on the IaaS aspect of Azure,” said Rob Sanfilippo, research VP with Directions on Microsoft. As Microsoft adds IaaS capabilities to Azure, Amazon is also adding PaaS perks like Elastic Beanstalk to its portfolio, so these companies are on a collision course.

System Center 2012 has to ease app migration and management.

Microsoft needs to make it easier for customers wanting to run private and public cloud implementations to manage both centrally. That’s the promise of Microsoft System Center 2012, due in the first half of 2012. With this release, customers that now must use System Center Virtual Machine Manager for private cloud and the Windows Azure interface for Azure will be able to manage both from the proverbial  “one pane of glass.”  That’s a good thing, but not good enough. “It’s nice that System Center will be able to monitor stuff in both places, but what we need to be able to run stuff in either place,” said a .NET developer who tried Azure but moved to AWS.

 Microsoft must eat its own Azure “dog food.”

Right now, precious few Microsoft applications run on Azure. There even seems to be confusion at Microsoft about this. One executive said Xbox Live,  parts of CRM Online and Office 365 run on Azure, only to be contradicted by a spokesperson who came back to say none of them actually do. Bing Games, however, do run on Azure. No matter: This is a schedule issue, as almost all these applications predate Azure.  The next release of Dynamics NAV ERP application  will be the first Microsoft business application to run fully on Azure. There is no official due date, but Dynamics partners expect it next year. Three other Dynamics ERP products will follow. Directionally, Azure is where all Microsoft apps are going. “Our goal, of course, is that everything will be running on Azure,” said Amy Barzdukas, general manager of Microsoft’s server and tools unit.

In summary: It’s not too late for Azure, but …

Microsoft has to get these things done — and soon — to counter AWS momentum and also that of rival PaaS offerings like’s Heroku  and Red Hat’s (s RHT) OpenShift which draw new-age, non-.NET oriented Web developers. Recent Gartner (s it) research shows PaaS will be a hot segment going forward. The researcher expects PaaS revenue to hit the $707 million by the end of this year, up from $512 million for 2010.  And it expects PaaS revenue to reach $1.8 billion in 2015. That’s good growth, but here will be more of the aforementioned players fighting for that pie. This is going to get good as younger cloud-era rivals are fighting to make Microsoft — the on-premises software giant —  irrelevant in this new arena. But one thing rivals in other eras have learned: It’s idiotic to underestimate this company.

Photo courtesy of Flickr user ToddABishop