It came as quite a surprise to me to read an reports, including this one from Gartner ( , that indicated that cloud spending was at around 210 billion in 2016 out of a total IT spend of around 3.5 trillion dollars (

Why was I surprised? Mostly because Microsoft seems to be relentlessly banging the drum about the future being all cloud and that on-premises IT was on a path to irrelevance and extinction. Listen to some Microsoft evangelists and you’d get the impression that you’d be mad to deploy any workloads on-premises anymore.

210 billion isn’t a small number. It does, however, seem more like a cup of water in the bucket when you compare it to the 3.5 trillion dollars. What’s perhaps even more confusing is that of that 210 billion spend on cloud, Microsoft isn’t in the lead. Microsoft is in second place, with by far the market leader being Amazon.

So what is going on?

I don’t have answers, but I do have a number of reasoned speculative hypothesis:

On-premises as a mature market.

While the vast majority of IT spend is on-premises, on-premises is a mature market. The growth rates in mature markets are small. The growth rate in the cloud market at the moment is high. Businesses are always looking to grow profits, not maintain them. Sales people aren’t looking to maintain each year’s numbers, they are looking to grow them. While there might be a high reliable income stream for Microsoft in the on-premises workload business, it’s not an income stream that is growing in the same way that it did in the company’s first 3 decades of existence. The on-premises gold rush is over. How much attention should a company pay to a market that is essentially saturated?

Land grab

IT markets trend towards monopoly ecosystems. As the cloud market isn’t mature, there is the digital equivalent to a “land grab” going on with competitors trying to lock in as much of the emerging market as they can. Not only is cloud showing high year on year growth, whoever wins cloud is going to reap the rewards for the foreseeable future. As mentioned, it is no secret that Microsoft isn’t in first place when it comes to cloud, so rather than tend to their reliable on-premises income stream, they are putting almost all their efforts into evangelizing their cloud offerings. Pushing hard now might put them in front. Certainly pushing hard now will put them in a better position than taking a wait and see attitude.

Does Microsoft want to abandon on-premises?

There are certainly Microsoft spokespeople who belittle on-premises IT and there is a growing perception in the broader Microsoft community that at some stage Microsoft’s current on-premises products are going to go the way of Small Business Server and ForeFront Threat Management Gateway.

My personal take is that a lack of public attention doesn’t imply a lack of strategy, but I can see why the vast majority of IT Professionals who make a living working with Microsoft’s on-premises products are getting skittish about the depth of the company’s ongoing commitment to their on-premises ecosystem. My guess is that Microsoft needs to be publicly gung-ho about cloud so that their cloud customers know that they are “all in” when it comes to cloud and still don’t have an on-premises mindset. Even though realistically, with the actual numbers being what they are today, it would be crazy for Microsoft not to maintain the duality of being the solution for the massive mature slow growth on-premises IT market as well as for fast moving high growth, but substantially smaller, cloud based IT market.

Might this backfire for Microsoft?

Microsoft has made it quite clear that it loves Linux. In the year that Windows Server 2016 was released, we heard more from Microsoft’s public evangelists about the company’s love for Linux than for its own server operating system offering. This certainly hasn’t gone unnoticed in the wider community and I know of a number of organizations that have put on hold any move towards Windows Server 2016 on the basis that they aren’t entirely convinced that Microsoft has any serious belief in the future of on-premises IT in general. The approach from Linux vendors is more the traditional “it’s Linux, it’s never going away” and that the fate of on-premises Linux isn’t dependent on the whims of any one particular company. There is definitely some movement within on-premises Microsoft ecosystem IT to investigate migrating workloads to platforms where roadmaps aren’t inexorably pushing one towards having everything hosted in the cloud.

Another area where things seem to be drifting off course for Microsoft is that a good number of the people that are heeding the apparent Microsoft messaging about the cloud being the future are looking at who is currently leading the market and going with their option rather than Microsoft’s. In telling everyone that on-premises IT is a sinking ship, a good number of customers deciding that if the ship is sinking, they should be heading for Amazon’s lifeboat because it’s clearly the most popular and successful lifeboat.

The challenge of evangelising that the future is the cloud when you aren’t the market leader in the cloud is that you can end up pushing your existing customers into the arms of your more successful competitor. It certainly doesn’t help when your existing customers feel that they are being abandoned. As one particularly snarky conference attendee suggested to me: “If they are willing to abandon us on-premises, why should we trust them not to abandon us in the cloud?”

In Microsoft’s favor

For all the talk of disruption and moving fast and breaking things, the reality is that enterprise IT is that things move at a glacial pace in enterprise IT. It’s a big reason why there were millions of servers still running Windows Server 2003 when the operating system fell out of support in 2015. Not simply because of intransigence, but because enterprise IT is conservative and moves at a glacial pace. Companies that couldn’t move fast enough to get of Windows Server 2003 by the time the expiry date rolled around are certainly going to take their time migrating their entire on-premises workloads and infrastructure to the cloud.

Microsoft’s income stream from on-premises IT will continue its strong flow for many years to come. At some point Microsoft will need to provide its on-premises customers with a much firmer ongoing public commitment and roadmap of its on-premises strategy, just to reassure them that the company isn’t abandoning on-premises IT for a lofty cloud-only future. If they don’t, their on-premises customers who want to remain on-premises will instead look towards vendors and ecosystems that have articulated clear ongoing on-premises strategies.