Microsoft just introduced a new tool that lets customers use its services on rival clouds like Amazon and Google, and experts say it's because 'they don't have a choice'

Jason Redmond / Reuters

Microsoft CEO Satya Nadella

• On Monday, Microsoft announced Azure Arc, which helps customers manage and secure their infrastructure running on its own Microsoft Azure cloud - as well as rival clouds like Amazon Web Services and Google Cloud.
• Experts say that this shows that Microsoft is aware of the trend where customers are increasingly using multiple clouds to run their applications.
• While some say that it's a shot at Google Cloud and its new Anthos software, one expert says that it's unlikely that Microsoft will go as far as Google when it comes to opening up to rival clouds.
• Experts also see potential for government customers to use Azure Arc, especially now that Microsoft has won the $10 billion Joint Enterprise Defense Infrastructure cloud computing contract with the Pentagon.
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Microsoft is making a move at making it easier for its customers to use rival cloud computing platforms - a defensive move against Amazon, and an offensive shot at Google, experts say.

On Monday, Microsoft announced Azure Arc, which allows users to run its security, governance, and data services on not only the Microsoft Azure cloud, but also their private data centers - and rival clouds like Amazon Web Services and Google Cloud. It's available in a preview stage, for customers to try out ahead of a formal release.

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With Azure Arc, users can use the same features to manage Azure and the rest of their infrastructure, without having to switch between tools. That's especially useful, because it means customers can use Azure's tools for ensuring compliance with regulations like FINRA or HIPAA across all of their clouds and servers.

Azure Arc is an expansion of Microsoft's hybrid cloud strategy, which allows customers to run software across both the cloud and private data centers. This has long been a lynchpin of Microsoft's strategy, given that its software already powers the servers for the biggest companies in the world for a long time now.

It's a market in which Microsoft has always stood apart, and that Amazon and Google have only just begun to explore in earnest. Amazon Web Services last year introduced Outposts, data center hardware that links servers with its cloud. Notably, Google Anthos, which was launched this April, allows users to also run Google Cloud services on rival clouds, including Microsoft Azure and AWS.

Now, though, another trend has emerged: Customers using not just one cloud, but many, from different companies. And they expect those clouds to work in harmony.

"What Microsoft is doing with Arc shows their continuing intention to make Azure work with other systems," Ed Anderson, distinguished VP analyst at Gartner, told Business Insider. "Everyone has multiple technologies and multiple clouds. They want these things to work together."

Which is to say that Microsoft is now making a play at letting customers use other clouds because "they don't have a choice," says Jeb Su, principal analyst at Atherton Technology Research.

'They don't have a choice'

Overall, experts say that Arc shows that Microsoft is acknowledging what its customers want and need. Beyond just their own, existing data centers, companies are increasingly comfortable using multiple clouds, matching specific applications to different features or price points of Microsoft's, Amazon's, or Google's platform.

"It's a huge trend and customers tell us all the time, they don't want to be tied into one provider," Su told Business Insider. "Now enterprises, just like for hardware or software, they don't want to have all the eggs in the same basket."

That's a particular challenge for Microsoft, because as long as AWS dominates the market, that's what most IT pros will be most familiar with. If Microsoft can use Azure Arc to become one of the standard ways to manage even Amazon's cloud, it can make itself more familiar and appealing to developers and managers in turn.

"All the developers and cloud technical leads know how to work with AWS," Maribel Lopez, founder and principal analyst of Lopez Research, told Business Insider. "While companies take Microsoft seriously, their employees still have to learn how to work with Microsoft services. If Microsoft offerings are available in more places, it's more compelling to work with Microsoft."

Regardless, Su expects the trend of customers turning to multiple clouds to only continue.

"There's no turning back," Su said. "This is it. This is how the future is going to be."

Google has been 'trying to invade Microsoft's turf'

Su also says Azure Arc is "clearly" a response to Google's Anthos, with which it shares some similarities.

Daniel Ives, managing director of Wedbush Securities, views Azure Arc as both an offensive and a defensive move. It's a shot at Google, he says, "as they've been trying to invade Microsoft's turf" in the hybrid cloud space with Anthos.

Right off the bat, both of them allow customers to use cloud services across multiple cloud providers, even those with which their makers compete. Under the hood, too, both Azure Arc and Anthos use Kubernetes, an open source cloud computing project started at Google, to move applications between different clouds and data centers.

Anthos had won some critical acclaim for Google: In a report, William Blair analysts said that Google Cloud is on the right track with Anthos, and that supporting multiple clouds is just the right move at this point.

That being said, Su says Microsoft has some major advantages over Google Cloud in this case. Azure has more customers and a longer history with enterprises. He says customers may feel more secure using Azure because they're already familiar with many of Microsoft's applications, like Microsoft Office.

"If you have to summarize, that's really the scale in number of services, support, customers, and scale of the cloud infrastructure compared to Google Cloud," Su said.

At the same time, as much as it may lead Google, Microsoft Azure still operates under the shadow of Amazon Web Services. From that perspective, Ives says, Azure Arc may help Microsoft win deals it might have missed out on - as a way to guarantee some kind of interoperability with AWS.

"I think it adds to the tentacles of Azure and Microsoft's push as more enterprises push to cloud," Ives told Business Insider. "They're doubling down from a product perspective. It feels like the tide is shifting towards Azure on a lot of fields that historically have gone to AWS."

What Azure Arc is and isn't

All of that said, Anderson says he does not see Azure Arc as a shot at Anthos. Where Google sees Anthos as a platform for building software that can run across multiple clouds, Microsoft is pitching its Arc as more of a tool for management. Both have applications in that hybrid cloud space, but Microsoft's is more concerned with software that already exists, whereas Google Anthos is pushing for so-called cloud native development.

Anderson says that this distinction is especially important, because it means you shouldn't hold your breath for Microsoft to be quite as open as Google when it comes to supporting its rivals.

Google's strategy of openness comes from the fact that its cloud lags behind Amazon and Microsoft - meaning that there's less to lose by using software like Anthos, which can encourage people to use other clouds. Microsoft, however, is firmly entrenched as the second-place player, giving it an incentive to keep Azure itself at the center of its strategy as much as possible.

"[Microsoft has] enough market momentum and critical mass that they can drive the benefits of their own platform," Anderson said. "In the case of Google, it's a different strategy that makes Google more relevant. I don't think you'll see the same strategy from Microsoft or Amazon because of their market position."

Anderson says that Arc is promising, but time will tell how much it will expand on using non-Microsoft products.

"I think what remains to be seen is what extent Microsoft makes this open and how fully it embraces technologies," Anderson said.

Lopez says that while Anthos "threw down the gauntlet" for a multi-cloud strategy, the market is still early, giving Microsoft the chance to move in.

"I'm continually amazed at how much more open Microsoft is and how much more aggressive they are in doing whatever it takes to win cloud workloads," Lopez said.

Doing 'whatever it takes to win cloud workloads'

There's also potential for Arc to be used by the government, Su says - especially since, in October, Microsoft won the $10 billion Joint Enterprise Defense Infrastructure cloud computing contract with the Pentagon in a surprising upset over AWS.

Both AWS and Microsoft can claim the Department of Defense as a major customer, so it will likely need the technology to move its applications between those clouds, as well as its legacy data centers.

"There's going to be bridges to make sure that in this case, the applications of the US government and IT managers will be able to manage resources across AWS and Azure," Su said.