InsightaaS perspective: Cloud is having a major impact at all points in the IT delivery ecosystem: on end-users, on IT management and staff members, on the channel, and on the vendors that develop products for use in the cloud, or in hybrid traditional/cloud environments. The rate of adoption of cloud in Canada (in absolute terms, and relative to other countries) is a function of comfort and trust across these multiple points; every member of the system understands the allure of cloud, but is reliant on vision, cooperation and leadership within and across the ecosystem to translate this potential into real-world business success.
Max Long has a unique perspective on how cloud is evolving. As the president of Microsoft Canada, he is at the helm of the supplier with the broadest portfolio of cloud products in the industry — and as a veteran of postings in Europe and the U.S. in addition to Canada, he has context for understanding the ways in which Canada echoes and diverges from other markets.
In this interview, Long discussed the different ways in which cloud affects customers, Microsoft, and its channel, and the ways in which cloud is used to extend the efficiency of IT and business activities. At the end, he offers ‘words of wisdom’ for Canadian IT and business managers who are contemplating their own journeys to the cloud.
Michael O’Neil: By my count, 2013 is at least the third ‘year of the cloud’ — and now that we’ve gotten to this point, we’re starting to see the replacement of physical infrastructure with virtual, service-based alternatives. This causes changes everywhere in the IT supply chain: with buyers of technology, with your channel, and within Microsoft itself. I’m interested in what you’re seeing as major changes, starting within your customers. How have you seen their budgeting and management or usage patterns change?
Max Long: We’ve had several services in the cloud [Long mentioned email cleaning, Hotmail/Outlook and Xbox Live] for many years, but let’s talk about what’s happening with business customers today. Budgeting is interesting. It’s not the case that every CIO I talk to says, "That’s great news, Max, I have a much-increased budget over last year." I don’t hear that today. It doesn’t seem to be the case. There might be a few out there, but I don’t see them very often. What I generally hear is, "Hey, Max, I’m being asked to do more with less from what I have in IT." Budgets are — if they're not expanding, they're generally contracting just slightly, but IT is still being asked to drive innovation for the company. So from a budgeting point of view, I think that with cloud, what our customers are seeing is an opportunity to do two things. One is to reduce some of their core costs and enable funds from that core cost reduction to go towards new innovative projects. That’s one area I see which is really interesting. The second thing I see is that the customers are saying, "Hey, I’ve got this innovative idea, and I need to spin it up, I need to get it going really quickly." Before they would say, "now let’s go out and buy a server, we’ve got to buy the software that’s going to go on that server, we’ve got to get the services around that — and it would take them quite a long time and a large capital cost to get going." What they now say is, "Hey, I can spin up a collaboration system using Office 365, and I can do it very quickly and I can ramp it up and I can ramp it down and I can look at it as an operating cost rather than a capital cost." That from a budgeting point of view is what we’re seeing, and certainly what I’ve heard from customers.
Michael O’Neil: So you're seeing both a reduction in expenditures through core cost reduction, and innovation in the cloud with respect to reduced CAPEX and improved time to benefit?
Max Long: Yes. We have a lot of customers who have a need to ramp up for a certain period of the year. For example - say I’m a pizza company and I’ve got a huge sporting event like the Stanley Cup coming up. When do people order lots of pizza? They're going to do it during the Stanley Cup. How do I ramp up my systems to accommodate that requirement for a few days and then ramp it back down again without building a huge data center? With cloud, customers can really be more agile than they ever were before.
Michael O’Neil: That leads neatly into the second perspective I wanted to cover, the channel perspective. Do you see the channels working effectively with your customers to help them reduce core cost, to help them to innovate in the cloud and to help them to burst out to manage peak demand periods?
Max Long: Let me be slightly contradictory — I’d say that basically, the answer is no. I would look at it today and we’re seeing a much broader adoption of cloud in business across Canada than we’ve seen before, but I think it’s been a transition period for a lot of our partners.
The core of Microsoft has always been partnering and that continues to be the case we move towards cloud. Now I’ve seen that a lot of partners have adopted cloud and been very successful, but the dynamic of cloud means that the services provided and the support provided by partners has changed. Some have adapted really well to that, others are just taking a bit more time. I don’t think it’s any lack of intent to do so. It’s a question of understanding what the market opportunity is and what it looks like as we go into this cloud world. And certainly from our point of view, look, we still want to do everything with partners. There’s a huge services opportunity around integration and other things they can provide. Support is still going to be a requirement and they can play a part in licensing in some of the instances as well.
Michael O’Neil: Well, tying those two points together, have you seen discreet needs from the customers who are moving to cloud that you think the partners need to and can and can profitably step in to meeting?
Max Long: Yeah, it’s, you know, one of the things I think that has been really interesting to watch, and I was with an organization just this week talking about this with a group of CIOs from across Canada is if you went back, if you’ve been in IT for a while, we used to talk about client/server. And everyone said everything’s client/server now. And we’ve got that phenomenon now with cloud, but I wanted to step back to say it’s not the only answer to every problem you’ve got. And I expect, for many years to come we’re going to see a lot of hybrid solutions. So they may have some of their workloads in the cloud, some applications in the cloud, but some on premise. And what I would say is there’s a huge service opportunity for partners to help manage that portfolio, to think about being an aggregator of the right cloud services for a customer and then integrating them into their key applications that are going to reside on premise. So I think that’s something that’s a new dynamic and something I see a huge opportunity for our partners to get to. And the second thing I would say is that when you talk to customers, as I do on a regular basis every day, you’ll hear from them, "Cloud is part of our strategy moving forward." So if you are a partner, it would be unwise to not think about how you can play in this cloud world, regardless of whether you're a hardware supplier or a software supplier or services, there’s an opportunity for it.
Michael O’Neil: So that shift in demand is the stick that goes along with the carrot of new ways to help customers.
Max Long: We do see the partners that have adopted cloud and are thinking about this deeply and have been at the forefront have been very successful. And you can see them already growing their businesses at a rate faster than partners that haven’t really got into the cloud so far. So I think it’s not a question of if you're going to get in the cloud as a partner, it’s just a question about when you're going to be fully committed.
Michael O’Neil: That leads to the third point in the supply chain. What has the cloud changed within Microsoft? How has it changed the way that you work with customers or the skills that you need on the staff?
Max Long: It’s been an interesting transition for us as well as our customers. I often go in to customers and say, "Hey, this is a journey we’re on together," because we’re going through a transition at the same time. One of the things we had to do is really get our teams across the world and here in Microsoft Canada in particular to start talking about cloud and helping our customers understand what the benefits could be to them. It’s a very different mindset. If you're been a CIO that’s come up through the ranks and you’ve been used to running a data center and running service, to suddenly have this new cloud opportunity which takes that away from you can be a bit threatening if it’s not explained in the right way. So we’ve had to go through a massive exercise of readiness with all of our teams to make sure they can have the right conversations. The second thing I would say for us is that in the past we’ve been very much focused on going out and talking to our customers about buying software. The customer would buy the software and then we would get into a conversation about deployment. And sometimes there was a lag between the two and, from our point of view, we never want to see software purchased, but not deployed — or adopted, as I like to call it instead. With cloud, the first order you get from a customer to actually adopt cloud, that’s when you need to start the conversation. So it’s quite a different mindset because if you can’t deliver great customer service and great performance from the service you're providing, they're not going to continue to buy. So it’s been a mindset change for us in that respect as well and it’s a good thing and we’re very positive about it. So it’s something we’re going through a change on, nonetheless.
Michael O’Neil: It will make your customer service people much more immediately accessible to your customers, will it not?
Max Long: Yes, absolutely. When you're running a service which has got to be very available, the first person they're going to talk to if it goes wrong is going to be Microsoft. And obviously we don’t want the systems to go wrong, and we’re working in the best way possible to make sure that doesn’t happen. But if it does, we’ve got to be there for our customers and make sure we deal with it in the right way. So yeah, it’s different for us, it definitely is.
Michael O’Neil: That’s a nice segue into the idea that Microsoft participates in many different areas of the cloud. You sell SaaS versions of both your Office and your advanced ERP and CRM applications and with Azure, you're active in both platform as a service and infrastructure as a service. What do you see driving customers towards these various cloud offerings? Let’s start with O365.
Max Long: O-365…if I take a step back for a minute, earlier on I talked about the requirement for our customers to drive more innovation and technology than they’ve ever done before, and quite often to do so at a reduced cost or reduced budget. If you take a step back and ask, "Look, as a CIO, what am I really accountable for to my company? Is it just running the best technology infrastructure?" [The answer is] Yes, but now the second question is, beyond running the best technology infrastructure, what’s the best way to make the company more successful? How can we drive better customer satisfaction, more profit, reduced cost, and respond to all these other business requirements as well? If you think about those, and then say, "If I run Exchange the best way possible, is that going to differentiate my company from the company we’re competing with directly?" And the answer is, probably not. If they’ve got a terrible email structure, maybe, because you're driving better communications. But if I have a robust email structure and my competitor has one, is that going to enable me to compete more effectively? Probably not. Do I want to spend my time on things that are going to differentiate me? Yes. So how can I do that? Well, I can take these workloads and get them run for me by a company like Microsoft who could do it at a reduced cost, at a higher level of availability, and, by the way, make sure I’m current on my software as well.
So that’s what I’m seeing, and we see that dynamic going on as well Office 365 with SharePoint. Our customers want to drive collaboration — they want to deliver applications as soon as possible — but they want to do that in a way where they don’t have to put huge infrastructure costs in place. They can do that with Office 365.
Michael O’Neil: Do you find the availability of better supported collaboration technologies like SharePoint in the cloud or Lync in the cloud gives customers new options with Office 365 that maybe they didn’t have with the traditional Office?
Max Long: Yes, it’s interesting. I was thinking about organizations and why they adopt the technology for Office 365 and there was a great one I saw from a company here in Canada called Chapman’s Ice Cream. Chapman’s is very proud of their location in Markham. It’s a relatively small town, and they're thinking, "Hey, we may be in a small town, but we want to be on the leading edge of collaboration and providing the right employee services. We may not be able to get the IT staff to come out here, so why don’t we address that? Well, great, Office 365 enables us to have a world-class, enterprise class application delivered to all our users without us having to go and spin it up in the back end." That’s a new dynamic I think we haven’t seen before. That’s just one example. Or you look at Indigo, the booksellers and the online presence here in Canada and again, it’s a great story which says, "Hey, we want to provide collaboration environments, but we’ve also got other focuses within our businesses. How do we drive both?" And Office 365 enabled them to drive the collaboration environment while also doing what business needed as well. So it’s a positive story from them as well.
Michael O’Neil: One of the really interesting areas in collaborative technology is CRM, and through Dynamics, you offer that through the cloud as well. Have you noticed any differences in how customers are drawn to or using Dynamics in the cloud versus the on-prem version of the product?
Max Long: Well, again, it really depends on the business and their state at the time on what they're trying to deliver with CRM. Quite often we’ll see hybrid versions, where the customer will say, "I will have some of my CRM in the cloud and some of it actually on premise" — and that’s nice to have that option, or to have the option of having Dynamics hosted by a partner, which is very common [in Canada] as well.
Michael O’Neil: Is that hybrid approach used to enable mobility or is there some other reason for that kind of approach?
Max Long: Sometimes it’s mobility, sometimes it’s the nature of the data they're handling — there might be regulatory responsibilities which require some of the data to be on premise. Now, if [the customer is looking to enable a mobile work force], it’d be great for them to go through the cloud, because you can spin it up and get users added very easily, and then complement that with head office workers using on-premise versions. It really depends on the organization. For a company that has a decentralized group approach to business, a cloud for CRM is perfect, because you don’t have to worry about getting a huge data center set up for CRM across all the conglomerate organizations. They can all just go and do their own thing and spin it up in the cloud with CRM online. So I don’t think there’s one answer for why our customers move to the cloud.
Michael O’Neil: You’ve been in the Platform-as-a-Service market with Azure for a while, and you recently announced Azure Infrastructure-as-a-Service as well. Who do you see as the early customers for these kinds of services and what do you see is the key benefits that they're getting from Microsoft hosted infrastructure?
Max Long: When we first announced Azure, I saw a lot of organizations adopt it as a great development environment for testing. They’d say, "Hey, we’re doing this new development. How can I be sure it’s going to deliver what we expect it to at [production] scale?" They can spin it up on Azure and test away. And there are examples…for instance, where a customer would say "I’m a media company. I’ve got a huge election coming up where I’ve got to provide coverage. There’s going to be a massive amount of traffic going through my website. Do I really want to go and spin up [the resources needed to deal with a demand spike] myself? No, I can use Azure for that." So Azure has been well-adopted in that type of instance. But I think as we go forward, we’re going to see Azure become more and more just an extension of the data center for our customers. An ISV that’s writing an application and wants to make sure it’s freely available to everyone will say, "great, let’s platform it on Azure and deliver it out to our customers." Or we’ll see a bank thinking about how it can drive a more social enterprise within the organization with its own collaboration environment I’m creating, and realizing that they can do that on Azure, and the new system is just managed through a single pane of glass by my administrators right from my data center as if it was on premise, even though it’s in the cloud. I think that extensibility and ability to be agile are crucial to why folks are looking at Azure and the early adopters see that very much.
Michael O’Neil: One of the things I’ve been seeing with organizations that are using cloud is a real disaggregation into four quadrants of users, with one axis defined as being large versus SMB and the other being IT decision makers versus business decision makers. Our research has shown that each of these four groups has different reasons for moving to cloud, different expectations of what cloud is and will deliver and different objections to cloud. Where do you find the most receptivity to Microsoft’s message across that now?
Max Long: Well, if we talk about specifically Microsoft Canada, we’ve seen a particularly big take up of cloud by small and medium businesses across the nation. I think there’s an acceptance there [with the organizations] saying, "I run all these great applications that very big organizations run, but I don’t have a huge IT staff and I don’t have a huge data center to provide me with service." They are really taking to the ability to have those enterprise applications kept up to date at a fixed price. With Azure, Office 365, CRM and across the board, we’ve seen cloud adoption in SMB.
Michael O’Neil: Do you find those decisions being driven primarily by the line of business manager or by the IT manager? Where is the impetus for cloud in those SMBs coming from?
Max Long: Well, in most SMBs you don’t have one job! If you’re running an organization of 50 people, you can’t say, "I’m the CIO," because typically the CIO is actually doing three or four other things as well. I think one of the reasons why cloud’s been successful in that space, is that there are so many pressures on the individual to do so many things. I would say, though, that everyone, when you think about a small business, is very focused on what’s trying to be achieved. You’re very connected to the output for that small business. If you look at [cloud in that light, you see why] business owners very much see cloud as a benefit to them. Now, I would say that while I focused on SMBs [to this point in the discussion], we are now seeing very rapid take-up in larger customers as well as they start to think about what workloads to move on to the cloud. But I would say in the larger enterprises, they’ve been very conscious about what is the impact [of cloud on] security, manageability, regulatory compliance, legal compliance — because in some places in Canada, BC and Quebec, for instance, public bodies aren’t allowed to go to cloud outside the nation. So there are other concerns, but now we’ve really seen enterprises starting to accelerate towards that.
Michael O’Neil: Comparing your comments to my data would suggest that a lot of those larger organizations are initiating that conversation from IT rather than from the line of business manager.
Max Long: It varies. It’s interesting — I’d say in IT, I’ve seen very much the [new cloud adopters making the] case for email, for instance — it’s very much driven [by IT], and Azure is absolutely spot on [in terms of meeting IT cost and functionality requirements]... When you start talking about CRM online, quite often that comes from the business, because it’s normally a business decision maker would drive the decision for CRM in the first place and the fact that they can spin it up very quickly, they love — so to date, I’ve seen [this type of demand] as well.
Michael O’Neil: Thanks, it’s generally thought that Canada is lacking in cloud adoption relative to the rest of the world and since your background spans the UK and the U.S. in addition to Canada, I wanted to ask you, what do you think is different here that accounts for the lag in cloud adoption?
Max Long: One of the things I would reflect on is that when you say ‘the rest of the world’, I actually think there are places in the world that are way behind Canada. So let’s be really clear on that. And there are other places that are in advance of where we are in Canada.
A couple of things that come to mind for me around the concerns…one is this whole thought around data privacy and there’s been some thought here saying, "Well, hang on a minute. What does the Patriot Act mean to me? What does data sovereignty mean to me?" And people are getting their heads around that discussion and they’ve been thinking it through here in Canada. So it led to a slower startup, but we’re seeing that accelerate now in Canada across the board. I would look at [cloud adoption] as well and say I think there’s an option to be more innovative across Canada. Look at the economy. I believe that we’re in a place where inflation is low, job unemployment or job rates are good. I’d look at the banking and housing markets as being strong. Canada went into the recession later than most countries. It’s coming out better than most, and I would actually say, "Look, if we’re going to be a significant economy moving forward and growing faster than the rest of the world, now is the time to innovate." And I think there’s sometimes been a more conservative approach in Canada. I think now is the opportunity to leap frog that and be innovative. So I think that’s another element in plays in the [cloud] conversation as well.
Michael O’Neil: As a final question, do you have any words of wisdom for IT or line of business managers who are thinking about how to plot their journey in to and through the cloud?
Max Long: The first thing I’d say is it’s not ‘cloud or nothing’ — I think that’s a bit intimidating and certainly it’s not what we foresee and not what we’re seeing being adopted now. Don’t think everything’s going to move to cloud and you're just going to become an aggregator of cloud services. That may be the future, but certainly today what we’re seeing is CIOs or IT directors should sit down and think, "All right, what am I running today? What’s really, really going to differentiate me? What other things could I buy from the cloud which would be able to provide me with the better performance than I get today, more up to date technology at a cost which is probably better than I can deliver as well?" Now, just think about that strategy moving forward. I don’t think cloud is just one of those fashions that is going to come and go. It’s really going to help organizations accelerate their IT and ability for their businesses to be better.
So I would say, first of all, don’t be afraid of it. Secondly, think about it by workflow. Don’t think it’s going to be all cloud or nothing. Thirdly, think about the partners you're still going to need, because [business-class cloud is] not like a consumer service. [Cloud business workloads are] integrating into a business environment and therefore you’ve got to have the right partner alongside you. And the last thing I would say is, don’t just head the stories about what’s going on about cloud in terms of privacy and security and data. Go and learn about it yourself. Work with a company like Microsoft or our partners and really understand what’s going on and what privacy or security means — because frankly, look, Microsoft, as you can imagine, is a great target for people to try to come and hack. And it has been for many years, so how often do you hear about us being hacked?
Michael O’Neil: I can’t recall.
Max Long: Okay, so you can imagine one of the things that is front and centre for us is security of our data and our data centers, and we’re bringing that to the data centres we run on behalf of customers. So, I think there are some things that are out there that are myths around cloud, and I would say, "Go out and really understand what’s the truth behind it, and I think that would really help you move forward in your decision making."