Many independent software vendors (ISVs) view Windows Azure and other Platform as a Service (PaaS) products as a direct threat to their revenue stream, often with good cause.
Microsoft, for example, is pushing customers to develop applications using Windows Azure, and then run those applications in the cloud rather than on premise. This is obviously bad news for anyone who sells servers, but it is possible for VARs who plan ahead to profit from the transition to PaaS.
Why do VARs view Windows Azure as a threat?
Windows Azure is a threat in the eyes of some ISVs because of the perception that Microsoft is cutting into their business. But it’s important to realize that this is nothing new and Microsoft has always competed with ISVs to some degree. For example, customers have always been capable of purchasing a copy of Microsoft Windows or Office directly from Microsoft without going through a reseller. Even so, the vast majority of Microsoft licenses have been sold through ISVs and VARs.
What differentiates Windows Azure from other Microsoft products is that it’s designed to be used only in a hosted environment. As such, customers can’t just call a VAR and purchase a copy of Windows Azure. This can be perceived as a big problem for VARs and ISVs because it looks like Microsoft istrying to do away with on-premise deployments in favor of having customers run everything in the cloud. But, it’s not all bad, as there are several ways to resell Windows Azure.
Build your own PaaS cloud
So what opportunities do ISVs and VARs have with Azure? One option might be to build your own Windows Azure-based PaaS cloud. Even though Microsoft had a monopoly selling access to Azure for a while, they finally cracked the door open to others by announcing a turnkey Windows Azure appliance last July.
This may not excite many VARs because even though Microsoft refers to this offering as an appliance, it is an appliance in name only. Unlike a traditional network appliance that generally has a small form factor, the Windows Azure appliance consists of hundreds of racks of servers and storage devices. Needless to say, the complexities of this ”appliance” will financially be out of reach for smaller ISVs, but larger ISVs will be able to use the appliance to offer Windows Azure-based development and hosting services directly to their customers.
After initially offering the Azure appliance to a small number of partners, Microsoft has said it will make Azure available on Fujitsu hardware in the company’s Tokyo data centers starting in August 2011.
Alternative Azure services for VARs
Even if the Windows Azure appliance is cost prohibitive, you can still run customer’s workloads on Windows Azure. One option is to use the “embedded Windows Azure platform” model. The basic idea behind the embedded plan is that you can open an account with Microsoft and then use the Windows Azure platform to host software that you want to offer to your customers. What’s important about the embedded plan is that your customers never have to know that Microsoft is involved and you become the single point of contact. Of course, this means that you'll have to maintain the proper usage metrics to know how to bill your customers.
The other option is to use what Microsoft refers to as the “built for Windows Azure” model. The concept behind this model is that once you have begun hosting one or more applications, you direct your customers to open an account with Microsoft. Microsoft takes care of the usage metering and bills for your customers directly.
You can still make money from the “built for Windows Azure” model because Microsoft allows you to charge customers a premium above what Microsoft charges for the basic Windows Azure access.
Another way that VARs can profit from Windows Azure is to create hosted applications that customers will need. For example, you may use Windows Azure to create your own hosted backup service. When a customer purchases a new server, you can offer to back the server up to the cloud for a monthly fee.
Because PaaS clouds are gaining popularity, ISVs and resellers will likely have to make some changes to their business models. For flexible VARs willing to offer services at monthly billing rates, many opportunities exist for using PaaS clouds to generate revenues.
About the expert
Brien M. Posey, MCSE, is a six-time recipient of Microsoft's Most Valuable Professional award for his work with Exchange Server, Windows Server, Internet Information Services, file systems and storage. Posey has served as CIO for a nationwide chain of hospitals and was once responsible for the Department of Information Management at Fort Knox. As a freelance technical writer, he has written for TechTarget, Microsoft, MSD2D, Relevant Technologies and other technology companies. You can visit his website at www.brienposey.com.
This was first published in July 2011