Microsoft shows amazing confidence in Azure with re-org

Sending a clear signal that it sees cloud computing and its Azure platform as a significant new revenue stream, Microsoft is re-organizing its server group. The Azure platform group will merge with the Windows Server and Solutions Group to form the Server and Cloud division. But Azure is not just joining as an equal. The new organizational structure seems designed to put Azure’s managers in charge of Windows Server development.

The manager who was in charge of Azure development (Amitabh Srivastava) will lead the new group. The manager who had been running Server and Solutions (Bob Lang) will report to Srivastava.

This is a supreme vote of confidence in Azure’s market potential. Microsoft’s server division is a certifiable cash machine. For fiscal 2009, the server division (of which Server and Solutions is a part) had $3.64 billion in revenue (according to Microsoft Watch’s review of SEC filings).

Azure has been offered for free; the first time customers will begin paying is in February 2010.

It is not as though the server business was in trouble. It was the only group within Microsoft to have shown revenue growth in the challenging 2009 fiscal year, and the only division to have shown income growth in the last quarter.

It is a natural transition for a product that is coming out of R&D to have its team move. In Microsoft-speak, “Azure is being productized.” Ray Ozzie, who holds a kind of “at-large” title within Microsoft of Chief Software Architect, will no longer be responsible for Azure development.

In one sense, this is a gift to the Azure team. Microsoft will now be evaluating Azure within the overall budget of its Server and Cloud division, which means Azure will have a much easier time justifying its existence. However, with so much revenue at stake, the company has no reason to take a gamble. It clearly believes Azure has the ability to deliver.

InformationWeek has reported that Microsoft already committed more than $500 million to build Azure data centers.

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