1. Home
  2. Enterprise
  3. Mobile
  4. Microsoft just made a brilliant acquisition in the cloud wars against Amazon, Google

Microsoft just made a brilliant acquisition in the cloud wars against Amazon, Google

Microsoft just made a brilliant acquisition in the cloud wars against Amazon, Google
  • Jason Stowe, Cycle Computing

    Cycle Computing

    Cycle Computing cofounder and CEO Jason Stowe looking happy after Microsoft bought his company.

    Microsoft has acquired a startup called Cycle Computing for an undisclosed sum.
  • Cycle Computing's software allows companies to run massively huge apps in the cloud, a profitable area for cloud vendors.
  • Cycle was an early partner with AWS and Google and its customers will be asked to move to Microsoft's cloud.

In a bit of a coup in the cloud computing world, Microsoft on Tuesday announced that it bought a startup called Cycle Computing for an undisclosed sum.

Cycle may not have the name recognition of some of its better-known tech peers, but the startup has played a crucial role in creating today's cloud computing industry. When businesses swipe a credit card today and instantly get access to unlimited supercomputing power, it's in large part thanks to Cycle.

Cycle Computing gained nationwide attention in 2012 when its technology transformed Amazon's then nascent Web Services into a supercomputer boasting the equivalent of 50,000 individual computers.

Scientists were trying to find potential new cancer drugs and they used Cycle's software to simultaneously run their app across tens of thousands of virtual computers in Amazon's datecenters. (Specifically, they used 6,700 Amazon EC2 instances to create a 51,132-core computer - with each core is basically equivalent to a single computer). The setup was so powerful that it cost researchers $5,000 to run their AWS app for just one hour.

It was an early proving project for Amazon's AWS business which, back in 2012, was still trying to convince enterprises to give it a go. This project was pointed out by Amazon's cloud genius Werner Vogels as one of his most proud moments to date, he told Business Insider at the time.

In the years since, Cycle Computing grew to be used by all three of the big cloud vendors, AWS, Google and Microsoft Azure. Plus, a bunch of competitive products came onto the market that also let virtual cloud computers work together as if it were one massive supercomputer.

A grab for AWS, Google customers

Flash forward to 2017 and there's now an entire market of such products called "cloud orchestration," complete with its own consortium under the Linux Foundation, the "Cloud Native Computing Foundation" of which Cycle was a founding member. CNCF has grown so powerful that Microsoft and AWS bowed and joined it last week.

Microsoft did not disclose the terms of the sale and it's hard to guess because Cycle Computing was unusual in another way: it was bootstrapped, taking on zero VC funding. Cycle raised $1 million in debt financing in 2016.

Amazon CTO Werner Vogels


Amazon CTO Werner Vogels

The founders "started Cycle twelve years ago on an $8,000 credit card," founder and CEO Jason Stowe said in a blog post on Tuesday announcing the news.

So this could have been sweet exit for them and their employees, who own 100% of the company. Or it could have been an aqui-hire fire sale.

There's some reason to believe it was a happy exit. Cycle claims Novartis and NASA as marquee customers as well as a list of unnamed top companies in manufacturing, life insurance, pharma and biotech, media and financial services/hedge funds. Stowe says that all told, its customers are using the product to run the equivalent of "1 billion core-hours this year, growing at 2.7x every 12 months," in other words, a billion hours of computing time and growing.

But here's the clincher: while Microsoft says it will continue to support all of Cycle's customers on their original cloud of choice like AWS or Google Cloud, future Cycle customers won't be given that option. And existing Cycle customers will be asked to move to Azure.

Microsoft says: "We will continue to support Cycle Computing clients using AWS and/or Google Cloud. Future Microsoft versions released will be Azure only. Customers will be given assistance to migrate."

And that's why this is brilliant. These are huge application that use a lot of cloud services and rack up big cloud computing bills. Microsoft is trying to boost usage of its cloud Azure. With this acquisition it gets to do that, while also encouraging AWS and Google customers to jump ship.

Get the latest Microsoft stock price here.


Popular Right Now