Implementing Hybrid Cloud at Microsoft

Published September 2013

After extensive experience with cloud computing, Microsoft Information
Technology (Microsoft IT) has updated its cloud computing adoption
strategy. Emerging and upgraded technologies, realigned organizational
goals, and lessons learned in the cloud-computing environment have led
Microsoft IT to redefine its own cloud adoption strategy to enable the
organization-wide goal, All of Microsoft runs in the Cloud.
Situation
In 2011, Microsoft IT defined a cloud adoption strategy. At that time, the goal was to have 80
percent of its hosting requirements provided through public cloud services. Much has changed in
the last two years, including public cloud service offerings, and products and management tools
that combine both on-premises and public hosting environments. Microsoft IT has learned a great
deal about cloud computing since 2011 through its cloud adoption projects. In 2013, Microsoft IT
decided to revisit and revise its strategy.
Solution
Microsoft IT developed a new cloud computing strategy that utilized a combination of both public
and private cloud computing, which is commonly known as hybrid cloud computing. The new
hybrid cloud strategy enabled Microsoft IT to leverage new capabilities in cloud technology, and
to accelerate their plan for cloud computing adoption.
Benefits
Return on investment
Improved agility
Improved support
Improved quality
Risk reduction
Focused resources
Products and Technology
Windows Azure
Windows Server

2012
Windows Deployment Services
Microsoft Dynamics

Hyper-V

Microsoft Lync

Microsoft System Center 2012
Microsoft Office

365
Windows Intune
Microsoft Exchange Server
Microsoft SharePoint




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Situation
Cloud computing has changed considerably since Microsoft IT made its first substantial migration to
the private cloud in 2011. As cloud-computing capabilities have grown, Microsoft business goals have
aligned with cloud-based adoption to realize cost and infrastructure efficiencies, enable new and
emerging ways that Microsoft employees use IT, and to demonstrate the effectiveness of Microsoft
cloud computing platforms.
Cloud computing is a significant priority at Microsoft. In 2011, Microsoft IT set an internal goal that 80
percent of application infrastructure would be cloud-based by 2015. However, that goal depended on
several factors that did not materialize in the first two years of the Microsoft cloud adoption strategy.
As a result, Microsoft IT discovered that at the current adoption rate, cloud computing adoption rates
would be closer to 21 percent.

Figure 1: Microsoft IT cloud adoption forecasting
In 2013, Microsoft added new functionality to Windows Azure, its public cloud computing offering.
Microsoft also released new versions of its primary private cloud infrastructure components, Windows
Server 2012 R2, and Microsoft System Center 2012 R2. These changes to the underlying cloud
computing infrastructure were also a factor in Microsoft ITs decision to update its cloud computing
strategy. The final deciding factor was that Microsoft IT wanted to do an even better job making its IT
infrastructure work for the business goals at Microsoft, instead of making the business work around
IT.
Solution
Microsoft IT executive management had a vision of 100 percent of Microsoft infrastructure being
hosted on cloud-based platforms. Microsoft IT developed a simple, but straightforward mission that
all Microsoft operations would run in cloud services. This was a daunting and absolute mission choice,
and one that Microsoft IT knew would take complete organizational participation and agreement to
achieve.
Planning
When planning its cloud computing strategy, the cloud computing team worked extensively with both
the IT leadership team and the IT planning group to establish alignment with business goals.
Microsoft IT wanted the new strategy to focus on solving business problems by developing business
solutions first, instead of first developing technical solutions, and then retrofitting the business need
into that technical solution. Rather than approaching a solution by focusing on the technical merits or
drawbacks, IT changed their approach to first looking at the business needs, including considerations
such as market trends, company and customer expectations, financial requirements, risks,
dependencies, and expected return on investment.

3 | Implementing Hybrid Cloud at Microsoft
Through this process, Microsoft IT realized that they also could use cloud computing to approach the
delivery of their services as a service provider and partner, rather than a department that requires
capital investment and resource allocations.
To assess the impact of a redesigned cloud computing strategy, Microsoft IT created a specific
evaluation and planning process. This process would review the current IT situation to ensure that the
technical state of Microsoft IT was ready to support business-first cloud computing. The evaluation
and planning process was broken down into the following four key areas:
Evaluate available technology
Assess the current state of IT at Microsoft
Calculate financial implications
Determine organizational readiness
Evaluating Available Technology
Cloud computing types are defined by how and where the resources used for cloud computing are
hosted. The two most common choices are the public cloud, and the private cloud:
Public cloud. The key difference between a public and a private cloud is the notion of corporate
multi-tenancy. Private clouds host only one company or enterprise, whereas public clouds host
multiple companies on the same infrastructure. The main advantage to a public cloud is economy
of scale. Microsoft currently offers cloud services to customers. Microsoft cloud services include
several different service options, including Window Azure, Windows Intune, Microsoft Dynamics,
and Microsoft Office 365,
Private cloud. Private clouds must exhibit the five main characteristics of cloud computing (self-
service, broad network access, resource pooling, elasticity, and measured service). However, in a
private cloud scenario infrastructure resources are hosted within the customers datacenter.
Microsoft supports the use of private clouds through a combination of Hyper-V in Windows Server
2012, and Microsoft System Center 2012. IT uses these components to construct the similar
capabilities as for a public cloud, but by using infrastructure resources hosted on-premises.
The primary benefits of an on-premises private cloud deployment are security, physical control, and
autonomy. The primary benefits of an off-premises public cloud deployment are economy of scale
and automation.
As part of the evaluation process, Microsoft IT reviewed both cloud types and assessed their benefits.
While both cloud types were valid solutions, the public cloud economy of scale and automated
support made it the logical end model for all applications. However, the success of the public cloud
depended on its ability to meet the requirements of all applications that it hosts. For Microsoft IT, the
public cloud was, and still is the ultimate end goal.
Realizing Hybrid Cloud
While the public cloud is the theoretical ideal, Microsoft IT realized that not all internally hosted
infrastructures were ready for migration to the public cloud. Several concerns, such as legal
information security requirements in certain regions, and the logistical limitations of public cloud
solutions meant that Microsoft IT needed to consider an alternative to the using only the public
cloud. They understood that some services, while not yet ready for public cloud migration, could be
migrated to a private cloud.
Microsoft IT identified the on-premises private cloud as an intermediate solution and as a way to gain
a better understanding of the resources involved in hosting cloud computing services. Microsoft IT
realized that hosting a private cloud could help prepare applications for eventual transition to the
public cloud, and make it easier to achieve the All of Microsoft runs in the cloud vision. The private
cloud enabled Microsoft IT to realize further efficiency gains, and provide a destination for internally

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hosted applications to be redesigned for the cloud.. It also changed the IT operational model to one
of self-service,
Determining Applicable Delivery Methods
Microsoft IT evaluated both private and public cloud computing at another level. Understanding the
different delivery models that are available within cloud computing would affect evaluation of how
Microsoft IT could migrate on-premises services in to public or private cloud computing. The
following assessed delivery models make up the basis for cloud computing platforms:
Infrastructure as a Service (IaaS): Customers typically use IaaS to run client and server applications
on virtual machines. The vendor manages the network, servers, and storage resources so that
customers no longer need to buy, track, or decommission hardware. Operating systems, databases,
and applications are still managed by the customer, and pooled resources such as networking,
memory, and CPU allocation may be configurable by the customer, depending on how the service
is presented.
Microsoft provides IaaS in the public cloud through Windows Azure. IaaS in Windows Azure was
one of the critical factors for Microsoft IT to enabling its cloud computing strategy. The Windows
Azure Virtual machine service was released to the general public in 2013, and it provides full IaaS
capability within Windows Azure. With a Windows Azure virtual machine, the customer maintains
control over the details of the infrastructure, such as resource allocation, computing capabilities,
and choice of operating system to install.
Microsoft IT recognized Windows Azure virtual machines as an excellent vehicle for migrating on-
premises services and applications directly to the public cloud.
Platform as a Service (Paas): Customers use PaaS to develop, deploy, monitor, and maintain
applications, while the cloud provider manages everything else. Developers can manage
configuration remotely as with IaaS, but they need not configure the virtual machine image
directly.
Windows Azure is highly recognized for its PaaS offerings, and Microsoft IT identified these
offerings as targets for migrating individual on-premises web applications and all new
development of applications.
Software as a Service (Saas): In this delivery model, customers subscribe to prepackaged
applications that run on a cloud infrastructure and allow access from a variety of devices.
Enterprises are rarely responsible for much beyond limited configuration and data quality
management.
The Microsoft primary SaaS offerrings are: Microsoft Dynamics, Windows Intune, and Office 365,
which provides instantly available Office applications, SharePoint sites, Exchange services, and Lync
services.
Assessing the Current State of IT at Microsoft
Microsoft IT manages an immense number of IT infrastructure resources throughout the world. With
an organization of this size, the first and most complex step was planning for the implementation of
the hybrid cloud strategy. Microsoft IT needed to determine the state of the platforms and
applications in their organization, prior to deciding how they would or could be migrated to cloud
computing.
The current Microsoft financial and migration model is a conservative approach that is based on the
migration rate to virtualization observed in the past. Given the status of cloud computing and the
potential for positive organizational impact, the previous rate of migration was deemed unacceptable
by Microsoft IT..
Assessing Infrastructure Readiness
Infrastructure management is an important part of what Microsoft IT does. As such, assessing the
current state of infrastructure at Microsoft, and determining the cloud computing readiness of both
infrastructure and infrastructure management was an important part of evaluating the overall status

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of IT at Microsoft. Microsoft IT needed to consider several different aspects of infrastructure
management:
Architecture
Engineering and deployment
Infrastructure provisioning
Integration
Infrastructure capacity
Security and compliance
Monitoring
Microsoft IT identified these categories as critical to assessing the effectiveness of infrastructure
management in the cloud computing environment.
Microsoft IT currently has over 1,100+ supported applications in its portfolio. Of that total, 90 to 95
percent have the requirements necessary to be moved to either private or public IaaS environments. 5
to 10 percent will be redesigned and migrated to a PaaS environment, and the remaining small
fraction of applications will need to remain on-premises, hosted by Microsoft IT on dedicated
hardware.
Challenges to Public Cloud Adoption
The percentage of the applications that are ready to move to public cloud is much smaller than the
total that could be moved to private cloud. This is primarily due to three key factors that need to be
resolved in the public cloud space:
Enterprise connectivity: Large data flows and hybrid applications will stress the network
connectivity between our datacenters and the cloud. Most low-impact applications (25 precent of
the total Microsoft application portfolio) can be directly migrated to Windows Azure IaaS.
Enterprise security: Risk tolerance will define which workflows are acceptable to be hosted outside
Microsoft data centers. In the case of Microsoft IT, medium business impact applications could be
migrated to Windows Azure IaaS.
Enterprise manageability: When operational processes and management systems are seamless
between the private and public clouds, most of the current application portfolio can be migrated to
Windows Azure on the public cloud.
With the current state of the IT environment and with the current Windows Azure functionality, a
large portion of the Microsoft IT portfolio will need to be transitioned to a private cloud until which
time the three factors above satisfy the application requirements.
Calculating Financial Challenges and Opportunities
For any business, the financial outcome of a solution or project is the ultimate test for success.
Microsoft is a business, and as such, exists to be profitable and successful. As such, Microsoft IT also
has to consider financial implications, risks, and rewards for any solution it implements, particularly
one the size of a cloud computing strategy.
Accordingly, Microsoft IT evaluated the financial requirements necessary to support their hybrid cloud
efforts. The first realization was the requirement for capital investment. Traditionally, cloud computing
reduces capital investment, and while there are ongoing operating costs, cloud computing usually
provides a significant reduction in the cost/savings ratio. Microsoft IT realized that because the bulk
of the applications needed to first migrate to the private cloud, this would require the addition of on-
premises infrastructure to the private cloud resource pool, which in the short term would result in a
less favorable cost/savings ratio. However, as migration to the public cloud continues, capital

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investment costs will decrease. While ongoing public cloud implementation costs will continue to
increase, they will do so at a slower rate, resulting in cost savings.
Determining Organizational Readiness
The primary function of Microsoft IT is to keep computer and server systems running at Microsoft.
Change, therefore, is a threat to the stability of the Microsoft IT insfrastructure stability. However,
improvement cannot come without change, and change implies risk. Microsoft IT realized that to
achieve greater cloud computing adoption, production application support and application
development teams would need to take measured risks by deploying various scenarios to the cloud.
This element of risk was not limited to the support and development teams, but extended to the
leadership team. By demonstrating that they valued risk taking through innovation, by acknowledging
the success and failures of risk taking, and by providing a level of coverage without fear of failure, the
leadership team helped effect change in the Microsoft IT culture.
Cloud computing enables a more dynamic and responsive IT infrastructure, and Microsoft IT
established that its IT personnel and teams needed to adopt the same general approach to
implementing their services applications. Early in the planning and implementation process, Microsoft
IT established that cloud computing requires a shift in the way that IT perceives itself, in addition to
the way the entire organization views IT and the services it provides. Microsoft IT mandated that the
cloud computing strategy be adopted and embraced by the entire organization.
Beyond the need for changes to organizational culture, specific roles within IT must adapt to support
the cloud model. This was identified as one of the greatest benefits of cloud computing migration,
but also the most disruptive. Once migration to the cloud occurs, IT organizations are less involved in
the day-to-day operations of running servers, and are free to expand their roles to include more
solution-focused responsibilities. This provides additional opportunities for growth in the careers of IT
professionals, as they move from technology and service providers to business process enablers.
The majority of role changes that cloud computing enables in the IT environment involve the reduced
focus on infrastructure. Once the majority of infrastructure maintenance tasks are absorbed into the
cloud infrastructure, the time and capital historically spent on infrastructure will be freed up for more
creative and innovative areas of IT management. At Microsoft, roles are evolving as cloud computing
becomes more integrated into the IT environment. Infrastructure-based roles such as user-interface
(UI) designer, developer, software development engineer and tester (SDET), and database
administrator (DBA) can refocus their role towards implementing a solution in a role such as User
Experience (UX) Engineer, and Solution Architect.

Figure 2: Transitioning traditional roles to solution-focused roles.

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Implementing a Hybrid Cloud Strategy
Microsoft IT has identified the hybrid cloud as the current design goal for their cloud computing
strategy. The hybrid cloud enables Microsoft IT to take advantage of public cloud economies of scale,
elasticity, and scalability for compatible and capable applications. the hybrid cloud also enables
Microsoft IT to move applications that at present are not ideally suited for the public cloud, and place
them in the Microsoft IT private cloud. This creates a staging ground, or preparation area for eventual
migration to the public cloud. In general, services and applications will have two possible destinations
in the hybrid cloud: the public cloud, or the private cloud with intent to migrate to the public cloud
once requirements are met.

Figure 3: The hybrid cloud environment.
Implementing Cloud Computing Management
While application placement and migration are important considerations, managing the newly
migrated services is equally as important. Microsoft IT analyzed the currently available cloud
computing management functionality against the following capabilities:
Provisioning capacity (both self-service and programmatically)
Monitoring systems and applications
Managing virtual machine changes (deployment and configuration)
Measuring usage
Together, these four capabilites help provide a functional and capable cloud management. In
analyzing the available management platforms for Windows Azure on the Internet, and in analyzing
both public and private cloud management capabilites in the System Center family of products,
Microsoft IT determined that a custom cloud computing management platform was not required for
hybrid cloud implementation.
Determining Application Placement and Accelerating Adoption
Determining application placement will first be based on capabilities that exist natively in the cloud as
commodities, such as Exchange services, Office, and Microsoft SharePoint. Beyond the commodity
applications, next the legacy applications will be moved to Windows Azure Virtual Machines (IaaS).
New applications will be developed in Windows Azure (PaaS) by default. When developing or
implementing any new applications or services, the public cloud (Windows Azure) will be the desired
and default hosting location.
One of the most important factors in the Microsoft IT application placement and migration strategy is
ensuring that an application is ready for cloud computing, and that the migration processes and
infrastructure are ready for migration of the application. For example, Microsoft IT began their
migration to cloud computing using applications with low-impact, and minimal technical implications.

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These test migrations helped Microsoft IT develop best practices and migration strategies for more
complex migrations that would come later.

Figure 4: Assessing readiness for application migration.
While Microsoft IT attempts to accelerate cloud adoption, it recognizes the need for continual
investment in new on-premises capacity to support applications that cannot yet migrate to public
cloud services. Microsoft IT also recognizes that that some applications will always require isolation or
specific levels of service that may preclude them from participating in a shared public cloud
environment. Based-upon todays processes and technologies, these are shown in this document as a
substantial cost in years 2014 and 2015. While new investments are reduced, they still exist into 2018.
However, there will be opportunity to reduce these investments with new infrastructure designs and
operating processes. Challenges to this plan include: lack of clarity on how technology will evolve, and
Microsoft IT's ability to alter workplace culture in order to adapt to a cloud model. At minimum,
Microsoft IT believes that by adopting the hybrid cloud, they can provide necessary configurations,
improve availability and performance for the tenants, and significantly reducing costs with new
hardware designs.
Microsoft IT forsees several opportunities to move forward with the private to public cloud transition,
and to more aggressively manage current and future costs. Rapidly enabling the public cloud features
for the enterprise and for the development and management teams means taking more measured
risks, but may result in accelerating the transition to the public cloud. Additionally, Microsoft IT has to
change its operating model and evolve the organization around cloud computing. Cloud computing
has the potential to bring far more agility and efficiencies to Microsoft IT operations, and thus
contribute more saving than just cost reduced infrastructure costs.

Figure 5: Cloud computing adoption percentage.

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Microsoft IT believes that through a concentrated organization-wide effort that fully embraces cloud
technology, they can accelerate the adoption model such that the inflection point between private
and public cloud becomes year 2016 rather than year 2020, which is the current trajectory. By
accelerating the adoption model, IT will reduce the need for additional hardware as planned for
currently. Microsoft IT will continue to they review financials as as public cloud features emerge, and
as they have oportunity to increase the scope of migration.
Ultimately, the incorporation of cloud computing into IT operations enables Microsoft IT to act as a
business partner to the rest of the organization, and not simply a technology provider.
Benefits
Microsoft IT has realized some benefits from their initial hybrid cloud implementations, and
anticipates realizing additional benefits as the migration process continues.
Return on Investment
As cost per operating system is replaced with the lower Windows Azure operating costs, overall
investment capital decreases, as a result of the economies of scale provided by both public and
private cloud implementations. The following graph illustrates cost savings for past, current, and
future projections, as Microsoft IT moves from a physical IT infrastructure toward a public cloud.

Figure 6: Projected return on investment.
Additionally, projected operational costs improve as a result of:
Using capacity only as needed.
Hardware abstraction and standardization.
Infrastructure consolidation.
Data center reduction.
Reduced helpdesk and support requirements.
More agile business continuity and disaster recovery.
Improved Agility
Improved agility in the form of faster provisioning, testing, integration cycles (leading to quicker
release), and quicker proof of concepts with reduced infrastructure friction help Microsoft IT meet
their business demands.

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Improved Support
When critical problems occur in production, the ability to rapidly create a consistent environment
enables the engineering team to respond quickly to critical problems. Having multiple environments
on demand (such as development and test) ensures that ongoing releases are not affected.
Improved Quality
Teams are able to implement complex and real-world testing environments to perform their testing
efforts at scale. This results in better case coverage per release.
Risk Reduction
With faster provisioning and greater test coverage, Microsoft IT is now able to address issues more
quickly, resulting in higher quality releases with more predictable outcomes.
Human Resources Focuses on Their Primary Functions
A consistent and predictable foundation environment (including the base operating system, packaged
software, security, patches, and all base configurations) enables developers, testers, managers, and
engineers to focus on their core tasks rather than creating environments and or troubleshooting
environmental issues.
Best Practices
While adopting and implementing a cloud computing strategy can be an imposing task,
ensuring participation and buy-in throughout Microsoft has provided Microsoft IT with both a
successful and educational outcome
Successful implementation of a cloud computing strategy requires involvement from everyone across
Microsoft IT. Most all barriers to adoption disappear with advanced virtualization and private cloud
capabilities, and in time, these barriers will also come down with the public cloud. The specific
practices that should be adhered to within the organization include:
Production application support and networking
Enable core infrastructure services of cloud connectivity and manageability.
Deliver new on-premises virtualization infrastructure solutions.
Advance operational readiness to migrate to cloud services.
Security and risk management
Accelerate adoption by providing appropriate security policies and oversight for both private and
public clouds.
Business units
Deploy applications to appropriate cloud services.
Participate in self-testing programs to test new cloud features.
Take calculated risk when business value is anticipated.
Finance
Provide funding to acquire necessary infrastructure resources and operating model changes to
accelerate cloud adoption.
Enterprise architecture
Provide guidance for cloud innovation, deployments, shared components, and architectural
designs.


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Conclusion
It is an exciting time to be in IT at Microsoft. The consumerization of IT is enabling agility and
business benefits that were unimaginable even five years ago. As Microsoft IT continues to implement
and mold its cloud computing strategy, they understand that many of the factors that will affect this
strategy in the future are unknown. Furthermore, the technology surrounding cloud computing is
constantly evolving and providing new ways to look at how IT is imagined. As such, Microsoft IT must
remain flexible and adaptable as an IT organization, and leverage the growing capabilities of cloud
computing at Microsoft.
Video Resources
How Microsoft IT Built a Cloud Strategy

Discussing Microsoft ITs Hybrid Cloud Strategy

Driving the Cultural and Organizational Shift to the Cloud Within Microsoft IT

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SharePoint, System Center, and Windows Azure, Deployment Services, Intune, and Windows Server are
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