Realigning Microsoft’s Azure unit could boost innovation, squabbling

Unifying Windows Azure with its on-premises counterpart Windows Server should hasten the rollout of new features in Microsoft Corp.'s enterprise cloud platform, but it also will pit Azure against Microsoft's other cloud services for the loyalty of a key customer base, says one independent Microsoft analyst.

Microsoft announced on Tuesday that it is creating a new group called the Server and Cloud Division (SCD). The group will include the Windows Azure development team and the Windows Server and Solutions group, and be housed in the Server and Tools Business (STB), run by STB president Bob Muglia.

Windows Azure development was led by senior vice-president Amitabh Srivastava, who formerly reported to chief software architect Ray Ozzie, and will now report to Muglia. Corporate vice-president Bill Laing, who ran Windows Server under Muglia, will report to Srivastava.

The cloud gets real

The realignment, while major, was not a surprise. Muglia had said a year ago that Windows Azure would be moved into STB before Microsoft begins selling it on January 1, 2010.

“This is a natural development. Azure is becoming a real business, and thus it's moving into a real business group,” said Rob Helm, an analyst with the independent firm Directions on Microsoft.

Unifying Azure with Windows Server should help the former catch up feature-wise with its older sibling, Helm said, and eventually lead to features being released first on Azure.

That online-first release is already starting to happen in Microsoft's other major cloud effort, Microsoft Online Services.

Run by corporate vice-president Dave Thompson, Online Services includes the Dynamics CRM Online service, as well as the Business Productivity Online Suite (BPOS) that includes SharePoint Online and Exchange Online.

Despite its name, Microsoft Online Services is not a part of Microsoft's Online Services Division, which runs the MSN portal and the Bing search engine.

Rather, Microsoft Online Services is part of the STB, run by Muglia, who is Thompson's boss, a Microsoft spokeswoman confirmed. But, confusingly, Online Services' flagship product, BPOS, is marketed through the Microsoft Business Division (MBD), which builds the offline versions of Exchange and SharePoint.

MBD's marketing chief, senior vice-president Chris Capossela, is in charge of marketing for the on and off-line versions of Exchange, Sharepoint, as well as Microsoft Office and its cloud sibling, Office Web. The latter is developed inside MBD, not STB.

Revenue for Microsoft Online is owned by MBD, a spokeswoman said. That may make sense business-wise, because otherwise MBD would have no incentive to push BPOS and potentially cannibalize sales of its on-premise Exchange and SharePoint. But it doesn't exactly give STB an incentive to invest heavily in BPOS development.