Author(s): Nicholas McQuire
Over 30,000 IT pros, business leaders and partners gathered in Orlando last week to attend Microsoft Ignite and Envision, the company's annual business and technology customer events. The gathering revealed a wide range of developments in cloud computing, security, edge computing, artificial intelligence (AI) and the modern workplace.
But with these advancements comes a challenge for Microsoft in its battle for cloud supremacy against Amazon and Google: how to bridge the gap in pace between itself and many of its customers and partners that need help deploying all of its services on offer.
Let's take a look at the major themes and assess what they mean for Microsoft and the market.
In August 2018, Satya Nadella famously declared, "You join Microsoft not to be cool, but to make others cool". The keynote presentation at Ignite 2018 reinforced the company's belief that, unlike other cloud service providers that compete with their clients, Microsoft's role is to help its customers become tech companies themselves.
Mr Nadella introduced the concept of "tech intensity" — an ethos driving companies to adopt technology, break down silos, change culture and build up their digital capabilities. Microsoft customers Shell, Walmart, BMW and others were held up as examples of tech intensity in practice.
Mr Nadella was also joined on stage by Adobe CEO Shantanu Narayen and SAP CEO Bill McDermott to announce the Open Data Initiative. This open alliance between cloud service suppliers hopes to open up customer data locked in separate applications to AI systems and improve the customer experience.
Although details are light at this stage, implementing standards to make data more extensible is a move in the right direction for customers and will certainly put pressure on Google and Salesforce, currently missing from the project.
Doubling Down on Security and Trust
Mr Nadella's keynote was also his strongest in over three years on the areas of security and trust — and these topics became the lead themes of Ignite 2018. Following a big year in security, Microsoft announced a host of largely iterative improvements in the areas of password-less logins, cybersecurity report cards, confidential computing and administration. It also announced AccountGuard, which aims to protect political campaigns from hacking, improve security and defend against disinformation.
The fact that Ignite concentrated on the themes of security and trust underlines Microsoft's growing leadership in these areas. After a year of cyberattacks, the Cambridge Analytica scandal and an increase in negative public sentiment toward large technology companies, Microsoft is starting to set itself apart in this area.
Mr Nadella stated that Microsoft's 3,500 security employees analyse more than 6.5 trillion signals a day using the company's machine learning tools; its Cyber Defense Operations Center blocks more than 5 billion malware threats a month; and its digital crimes unit, working with law enforcement agencies around the globe, has taken down 18 criminal botnets in 2018.
In our view, trust has become the new battleground of the technology industry in 2018, as important a differentiator as product innovation and developer ecosystems have been in the past. Microsoft has been among the first to acknowledge this, and its efforts are paying off. According to our 2018 employee technology survey, fielded this summer, Microsoft is the brand that employees trust most with their company data. It also received the highest net increase in trust among employees, beating other brands like Google, Amazon, Apple and IBM in our survey.
Focussing on Artificial Intelligence and Data
AI was a big focus at Ignite 2017, and 2018 was no different. Several announcements focussed on democratizing the technology, on products for developers and AI-infused experiences in Microsoft 365, as well as a host of improvements to its data tools in its SQL Server and Azure products.
The lead announcement was Microsoft's AI for Humanitarian Action, a $40 million, five-year programme that will see Microsoft offering grants and technology tools to nongovernment organizations performing disaster recovery and protecting children, refugees and displaced people.
Another important development was in Microsoft's Cognitive Services portfolio, a set of 15 standard machine learning models and APIs for speech, vision, language and search functions for developers building AI applications. Microsoft reported that 1.2 million developers now use its cognitive services, including more than 340,000 developers using its Bot Framework.
AI is at the heart of an arms race taking place among the cloud suppliers, and Microsoft's strong standing with its developer community gives it unique advantages. But it will need to turn its focus beyond general-purpose AI technologies to place more effort on applied AI and applications for businesses. Offering more ways to deploy its AI services will also help, such as with encrypted data, or in offline, hybrid or container scenarios. Microsoft has opportunities to exploit emerging areas of AI such as security for machine learning models and data as well.
Delving into the Internet of Things and Edge Computing
Microsoft's main corporate vision over the past year has focussed on the "intelligent cloud and intelligent edge." At the heart of this is the acceleration of computational processing and the proliferation of smart devices in homes, factories and businesses that can see, listen, reason and predict without needing constant connections to the cloud.
Mr Nadella declared at Build earlier this year that thanks to the intelligent cloud and intelligent edge, "the world is becoming a computer", with a ubiquitous computing fabric from the cloud to on-premises data centres to connected "things" at the network edge. AI spans these environments to analyse the data that devices generate.
Ignite revealed more than 15 announcements relating to the Internet of things and edge computing, further proof of Microsoft's massive commitment to the fields following its announcement in April of a $5 billion increase in investment over the next four years. Many of the announcements are progressive developments of existing features, but others, like Azure Digital Twins, which enables customers to create a comprehensive digital model of any physical environment and the connected things operating in it, are genuine innovations and provide a broader view than most suppliers offer.
Looking at the Modern Workplace
Microsoft's modern workplace was also a major focus. Microsoft 365 is now a multibillion-dollar business, with more than 135 million commercial monthly Office 365 users, 200 million commercial Windows 10 devices in use and 82 million Enterprise Mobility + Security customers.
The showcase was Teams, which saw a host of improvements. Teams is now the hub of employee collaboration and productivity in the Microsoft portfolio as well as the fastest-growing business application in the company's history. Microsoft reported 329,000 organizations now use the product and in the past six months it has added almost 130,000 new customers, largely thanks to the release of a free version earlier this year.
Another interesting move was the further steps the company has taken to integrate LinkedIn by connecting Office 365 and LinkedIn accounts. This will allow users to send e-mails and share documents in Office 365 with first-degree LinkedIn connections, as well as enable people to see LinkedIn information on attendees directly in meeting invitations.
Finally, Microsoft also improved upon some recent announcements in its Windows 10 and "modern desktop" strategy to align with its vision of the modern workplace. It unveiled Windows Virtual Desktop, a public cloud-based service that runs in Azure and competes with Amazon Workspaces, VMware and Citrix products.
Microsoft is bolstering its impressive dominance of the enterprise end-user computing market. The announcements relating to its Windows 10 and desktop strategy in particular will not only raise the pulses of competitors Amazon Web Services, Google and VMware, but could also disrupt the industry.
Summing Up Ignite
Above all, Ignite revealed Microsoft's rapid ascent as a leading enterprise cloud platform. No other player has such an enviable "flywheel" effect, both financially and strategically, of a tightly aligned and accelerating cloud infrastructure, security and applications businesses.
An innovative culture has emerged in Redmond, the fruits of which were on show at Ignite but which date back to the critical organizational decisions Mr Nadella took when he became CEO in 2014. It is this culture that companies like Buhler, Shell and Walmart trust, and that is moving Microsoft at a rapid pace — perhaps faster than any other firm of its size.
Although this pace has generated real progress in cloud and edge computing, AI, security and the modern workplace, Microsoft will have to work harder to bring many of its customers up to the same speed. Talk of "tech intensity" may encourage customers to move faster, but the company needs to do more to help customers adopt and gain value from all the Microsoft services on offer. We believe its customer experience division and investment in its FastTrack program across the portfolio — along similar lines to Salesforce's Trailhead initiative — will become crucial.
Microsoft will also need to train partners and elevate the role they play in its strategy. Both Amazon and Google have been more communicative in this area, in our view.
Lastly, Microsoft will need to remove the complexities in its "multisense multidevice" vision to better attract enterprise developers to Microsoft 365 and Azure. For instance, an improvement in how the market understands both the value and limitations of Microsoft Graph will be essential to this endeavour.
The cloud wars are by no means over, but Ignite was an impressive showcase of Microsoft's progress. However, Redmond will need to improve on several of these critical areas as it vies for supremacy.