Preface
Nearly all clients are seeking greater prosperity in 2024.
While client organizations are still focused on cost reductions to meet the challenges of their new economic and market realities, the pent-up demands of the business are increasingly calling for innovation, automation, and organizational performance improvement.
Digital Transformation has emerged as the #1 Way to Boost Performance and Savings concurrently. Client organizations that are digitally transforming are harvesting greater value by:
- Automating tasks (RPA) to streamline efficiencies
- Unlocking data insights (ML) for better organizational (AI) decision-making
- Empowering flexible (Cloud) solutions for more cost-effective scaling
This drives greater innovation, improved organizational performance, and significant cost savings ranging from 25-30% (depending on industry, scope of transformation, maturity of transformation, and the methodology and execution) while at the same time, lowering risk by diversifying and improving the technology supply chain.
NET(net) is the #1 IT Cost and Value Optimization Provider. In the last 20+ years, NET(net) has shaped over $2 Trillion of investment, captured well over $400 Billion of incremental value for our clients and partners, and has an 85% probability of helping you save between 13-53% on your existing and planned IT costs. Our performance numbers are simply unmatched.
Introduction
The cloud computing landscape is undergoing a fascinating transformation. While Amazon Web Services (AWS) remains the industry leader, Microsoft Azure has been steadily gaining ground. Recent reports indicate Azure's growth rate outpaces that of AWS, a trend that has significant implications for enterprises considering cloud migrations.
- CNBC - Microsoft Azure outpaced AWS and Google Cloud in latest quarter (October 27, 2023): https://www.cnbc.com/2023/04/30/cloud-providers-amazon-microsoft-and-google-face-spending-cuts.html This CNBC article highlights how Microsoft Azure's cloud business saw accelerating growth in Q3 2023, surpassing AWS and Google Cloud.
- ProjectPro - AWS vs Azure-Who is the big winner in the cloud war? : https://iot-analytics.com/global-cloud-projects/ This article discusses how, while AWS holds the market share lead, Azure's growth rate has been steadily increasing, closing the gap.
Current Market Share of major cloud infrastructure services providers
- AWS: 31%
- Microsoft Azure: 25%
- Google Cloud Platform: 11%
- Notable Others
- Alibaba (7%)
- IBM (4%)
- Tencent (3%)
- Oracle (2%)
- Salesforce (1%)
Current Growth Rates of major cloud infrastructure services providers
Here's a breakdown of the current growth rates for the 3 major cloud providers:
- Amazon Web Services (AWS): While its lead remains strong, AWS growth has slowed down slightly compared to the previous year. According to Synergy Research Group, AWS growth in Q1 2024 was 21% year-over-year.
- Microsoft Azure: Azure is experiencing significant growth, exceeding AWS in recent quarters. Synergy Research Group reports Azure's growth at an impressive 24% year-over-year in Q1 2024.
- Google Cloud Platform (GCP): While GCP growth has slowed compared to the previous three years, it still maintains a healthy pace. Acceleration Economy reports GCP's growth at 28% in 2023.
Growth rates can fluctuate over time and different sources may provide slightly different figures, but it’s important to note that the data suggests (at least thematically) that Azure will overtake AWS as the #1 provider in this space in 4 or 5 years if these trends continue, and that does not factor accelerated adoption for market leading Generative AI solutions as an example, an area where some suggest Azure has a significant and growing lead over AWS.
Adding another layer of intrigue, the recent resignation of AWS CEO Adam Selipsky has sparked speculation about potential changes in AWS's strategy. While the announcement could have addressed areas of concern regarding AWS’s weak response to the market demand for Generative AI solutions, appointing Matt Garman (most recently Sales & Marketing SVP at AWS) does nothing to allay those concerns. Instead of a product development focus, it looks like AWS is more concerned about regaining some lost ground in comparison to Azure’s growth rates which have outpaced those of AWS in recent results.
It’s common for great product companies that develop a monopoly (like IBM and Xerox did) to push product people out of the decision-making processes in the executive management ranks, in favor of sales and marketing executives who end up influencing key decisions - but risk being disconnected from the way their customers use their products.
This blog explores these dynamics and dives deep into optimizing your Azure spending, particularly through the lucrative Microsoft Azure Consumption Commitment (MACC) program.
Why Azure? A Strategic Choice
For client organizations heavily invested in the Microsoft technology stack (Windows Server, Office 365), Azure offers slick integration and some cost savings through economies of scale. Azure excels in specific areas such as:
- Hybrid Cloud: Azure Stack enables businesses to extend Azure services to their on-premise infrastructure, ideal for organizations with compliance or latency concerns.
- Windows and SQL Server Workloads: Azure offers significant performance and cost advantages when migrating Windows Server and SQL Server workloads.
- Developer Tools and Services: Azure integrates seamlessly with familiar Microsoft development tools like Visual Studio, streamlining development workflows.
However, the recent trend of cloud workload repatriation, where companies move workloads back from the cloud to on-premise infrastructure, has impacted both Azure and AWS. While specific figures are elusive, cloud workload repatriation appears less common with Azure compared to AWS. This can be attributed in part to Azure's tighter integration with on-premise Microsoft environments, particularly Windows Server and SQL Server. This integration simplifies the back-and-forth movement of workloads between cloud and on-premise infrastructure. Organizations heavily invested in the Microsoft stack already possess the tools and expertise to manage both environments, minimizing technical hurdles and retraining needs associated with repatriation compared to a complete migration to a new cloud platform.
Generative AI: The Next Frontier
Generative AI, a form of AI capable of creating entirely new content (text, images, code), is poised to revolutionize numerous industries. Both Azure and AWS are heavily invested in this space, with Azure offering services like Azure Cognitive Services and Azure AI, vs Amazon Comprehend.
- Azure Cognitive Services: Offers a wide variety of AI services, potentially catering to a broader range of use cases and therefore may be better suited for projects requiring functionalities beyond text analysis, like image recognition or speech processing.
- Amazon Comprehend: Might be a better choice for tasks focused solely on text analysis, potentially offering higher accuracy in this specific domain as some reports suggest Amazon Comprehend might have a slight edge in terms of processing speed and error rates for text analysis tasks.
For enterprises considering generative AI solutions, a cloud provider with a strong focus on this emerging technology will be a key consideration.
Now that we've explored Azure's strategic advantages, let's delve into the best ways to save money on Azure and discuss the potential benefits of the Microsoft Azure Consumption Commitment (MACC) program.
Top 5 Ways to Slash Your Enterprise Azure Bill
Cloud computing offers incredible scalability and agility, but managing costs can be a challenge. Here are the top 5 ways to save money on your enterprise Azure bill:
- Power Down When Not in Use: Think of all those lights left on in empty conference rooms. The same goes for idle VMs. Identify VMs that aren't in constant use and leverage auto-shutdown features or schedule downtime during off-peak hours to eliminate obvious waste. Azure DevTest Labs can also automate VM management for development and testing environments.
- Reserve Instances (RIs) for Predictable Workloads: If you have predictable workloads running on VMs, consider Azure Reserved Instances. These offer significant discounts (up to 72%) compared to pay-as-you-go pricing. Unlike AWS, the MACC discount is not additive to the reserve instances discounts. The trade-off? You commit to a specific VM size and region for a set period (1 or 3 years). This works best for workloads with consistent usage patterns.
- Embrace Spot VMs for Flexible Workloads: Need a VM for a temporary task or burstable workload? Consider Azure Spot Spot VMs are unused compute capacity offered at significantly lower prices. The catch? Their availability can fluctuate. If the underlying capacity is needed by Azure, your Spot VM might be interrupted. However, for non-critical workloads, the cost savings can be substantial.
- Rightsize Your VMs (Virtual Machines): Just like your physical space, you wouldn't rent a mansion if you only needed a studio apartment. The same applies to VMs. Azure offers a wide range of VM sizes. By analyzing your workloads, you can identify opportunities to downsize underutilized VMs to a more cost-effective option. Azure Advisor, a free service by Microsoft, can provide valuable insights and recommendations.
- Optimize Your Microsoft Azure Consumption Commitment (MACC): The MACC program is designed for enterprises with high, predictable Azure spending. By committing to a minimum spend amount upfront for a specified term, you can unlock significant discounts on your overall Azure bill. The exact discount tiers are confidential, but Microsoft offers a range of benefits depending on your commitment level.
Optimizing Your Azure Investment: The Power of MACC
Here's a table outlining various spend scenarios and what potential discounting is available at what commitment level (remember, these are not official figures from Microsoft, rather our assessment of pricing discounts available at various volume levels):
MACC Commitment Level |
Potential Discount (Estimated)* |
Over $1 Billion |
40% - 50% |
$500 Million - $1 Billion |
35% - 40% |
$250 Million - $500 Million |
30% - 35% |
$100 Million - $250 Million |
25% - 30% |
$50 Million - $100 Million |
20% - 25% |
$10 Million - $50 Million |
15% - 20% |
* - Potential Discounts are non-standard commercial concessions and are estimated based on NET(net)’s Federated Market Intelligence. These are NOT official program discounts offered by Microsoft.
Important Considerations for High-Level MACC:
- Commitment Length: MACC typically involves 3-5 year terms, but 1-year agreements are an option and custom arrangements for a different term are possible . Ensure your spending aligns with the chosen term to maximize benefits.
- Pro Tip: Be very careful and conservative here. Of course, the temptation exists to estimate high so you can get higher discounts, but we have a few clients who have committed to a consumption amount, and even when they find cost savings opportunities, they can’t implement them because it will take them below their committed consumption level.
- Flexibility: High-level commitments offer less flexibility than lower tiers. Carefully evaluate your future resource needs before committing.
- Planning and Negotiation: To ensure you get the best deal possible (maximizing your commercial concessions and benefitting from negotiated ‘best-in-class' MACC deal terms), it’s best to work with us at least 3 months in advance of a new commitment or existing renewal. Professional management of your specific interests and requirements in MACC is essential so that you fully understand program options, benefits, implications and limitations so that you don’t end up agreeing to things that end up costing you more than expected in future years.
Beyond MACC: Additional Cost-Saving Strategies
Stacking: Azure Reserved Instances (RIs) offer significant discounts for reserved VM sizes and regions over a set term. Consider stacking RIs alongside MACC for a multi-layered savings approach.
Cloud Management Platforms (CMPs): Invest in CMPs that provide comprehensive cost optimization tools across multiple cloud providers, including Azure. In addition to Microsoft Azure Cost Management (obvious choice), consider some other top providers such as CloudHealth (now VMware Aria Cost – powered by CloudHealth), Flexera One, Datadog, and Azure Monitor with Log Analytics.
Conclusion:
The cloud landscape is dynamic, and Azure's strategic advantages, particularly in the areas of hybrid cloud, Microsoft stack integration, and Generative AI, make it a compelling choice for many enterprises. By understanding the MACC program and leveraging cost-saving strategies, you can significantly optimize your Azure investment and thrive in this evolving cloud environment.
Disclaimer: The discount figures mentioned above are unofficial and not from Microsoft. These are estimates based on industry reports and NET(net)’s own Federated Market Intelligence (FMI) and may not reflect the exact discount structure of the MACC program.
Call to Action
NET(net) can help you maximize your savings and value on all your IT spend categories, including those with Microsoft, those with Azure, and those in Cloud Computing, so Act Now.
About the Author
Steven C. Zolman is a leading expert in technology investment optimization and the founder, owner, and executive chairman of NET(net), Inc., the world's leading technology investment optimization firm. With over 30 years of industry experience, Mr. Zolman has helped client organizations of all sizes maximize the value of their technology investments by minimizing cost and risk and maximizing the realization of value and benefit.
About NET(net)
Founded in 2002, NET(net) is the world’s leading IT Investment Optimization firm, helping clients find, get, and keep more economic and strategic value in their technology supply chains. Over the last 20 years, NET(net) has influenced trillions of investment, captured hundreds of billions of value, and has helped clients cost and value optimize all major areas of IT Spend, including XaaS, Cloud, Hardware, Software, Services, Healthcare, Outsourcing, Infrastructure, and Telecommunications, among others. NET(net) has the experience you want, demonstrates the expertise that you need, and delivers the performance you demand and deserve. Contact us at info@netnetweb.com, visit us online at www.netnetweb.com, or call us at +1 (616) 546-3100 to see if we can help you capture more value in your IT investments, agreements, deployments, and relationships.
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