Being a finance executive in the IT department for an enterprise gives me a unique perspective of the real business value of having a modern infrastructure. When people ask, I tell them that our vision for IT at Microsoft is like our vision for our customers: run everything in the cloud. That includes software-as-a-service (SaaS) as well as infrastructure-as-a-service (IAS), and the first stop for us was the private cloud, then onto the hybrid cloud (a combination of public and private cloud), and eventually: everything in the public cloud. Imagine when no one even mentions "cloud"—it's just where everything sits. In the meantime, of course, we've got a ways to go.
For Microsoft, our directive is aggressive by some standards: by July 2017, we'll put more than 40% of our computer operating systems (OS's) in the public cloud, on Windows Azure. Less than 5% will be on discrete servers—and half of our computing needs will be taken care of in the private cloud. In fact, by Fiscal Year 2020, we expect to pay nothing (that's $0) for capital equipment servers. Think that's ambitious? Our COO would like to move even faster—and for good reasons: cost and agility.
Cost savings in the cloud
When it comes to datacenters: just a few years ago, the thinking was that every group needed to have a dedicated server. But now we know that based on efficiency alone, discrete servers can't compete with even the private cloud option—and the numbers improve even more when you compare to a hybrid situation. Higher efficiency generally equates to lower cost—and as finance people, we find that to be a compelling message. To put this in perspective, the hosting cost related to private cloud infrastructure is 90% more efficient than discrete servers.
Let me walk you through our experience. Back in FY13, we were spending about $100 million annually running the datacenter—that was about $3,400 per OS instance. These servers were taking care of our worldwide business app needs, from finance to commerce systems, billing, SAP, HR systems—you name it. I'm sure there are CFOs who look at similar budgets and start realizing that the cost for all this—as the company continues to grow and become more complex—becomes exponentially more expensive had we chosen to continue with dedicated servers. At the same time, the IT department faces budget constraints and headcount ceilings.
And that's when we started moving to the cloud. We estimate that our requirements in this area will grow from 29,000 OS instances to 44,000 by FY18. In the cloud, the cost per instance will be $2500; that's a 26% savings from FY13. And, we're making a switch to Office 365, gradually shifting over as previous investments are fully amortized.
The point is, the pressure is on IT to deliver more and the only way to pay for that in a cost-conscious manner is to go to the hybrid model.
IT steps out of the way
We're going to radically change the landscape of enterprise IT. We're in an environment where IT headcount isn't going to grow and cost structure and budgets aren't growing, but the demand for services is. As we move towards the end-goal of 100% cloud, we're restructuring how we work. Of course, this can be disruptive. But as we press on people in IT will have new opportunities to learn how to fill very strategic roles. We'll shift our focus from operations to strategy, and that ultimately has a positive impact and budgets the organization as a whole.
IT will move from being sort of "in the way"—where people in the company have to wait for you to do things like create an environment for development & testing or UAT—to being architecture strategists. Tomorrow, it'll be self-service IT, getting and paying for what you need, when you need it. The perfect way to deliver both healthy ROI and business agility.