The Profitability Debate for Hosters: Private Clouds or Microsoft Azure

In 1965, Gordon E. Moore – the co-founder of Intel - discovered that the processing power of computer chips doubles every two years while the cost is cut in half. This regularity is known as the Moore’s law and it is still used today to predict the future cost of virtual machines on Microsoft Azure.

In fact, the recent announcement of new Azure VM series proves that this old regularity still applies; the Dv5 series are twice as powerful as Dv4, and at half their cost.

What does this announcement mean for private cloud providers?

1. Azure is no longer more expensive than hosting – even without SPLA.
   SPLA is generally a hosting partner’s favourite licencing method to build their economy of scale, as Microsoft doesn’t allow this on Azure. This announcement, however, means that Azure becomes very compelling- even without SPLA.
2. There’s no need to invest in a new generation of hardware to match that offer – you can replace your VMs anytime – if you are on Azure, of course.

How do you compare your profitability options on Azure?

This blog reviews considerations voiced by Australian hosting providers. We then identify a series of questions that any hosting partner may use to quantify their business case for Microsoft Azure, and finally we outline how Dicker Data and Microsoft will help.

Profitability of Microsoft Azure for SPLA providers

In 2020, Dicker Data invited early adopters to take part in a program, whereby, they completed business planning and strategic workshops to conceptualise and design a tailored Go-To-Market strategy for their Microsoft Azure based services.

The program provided invaluable learning for both partners and us, Dicker Data, alike. The key discovery being that instead of reselling VMs (which many SPLA providers believe is what Microsoft wants them to do), hosters need to first build their own cost projections to understand their profitability with Azure.

Some more specific considerations that SPLA providers asked us to address:

Taking onboard these learnings, Dicker Data determined that rather than a sales pitch, SPLA providers want to compare their real profitability options on Microsoft Azure and quantify on their own how to accommodate for the change.

Introducing ‘Blue Impact’ - Azure profitability program for SPLA providers

‘Blue Impact’ is Dicker Data’s new profitability program for those SPLA providers that are ready to reconsider Microsoft Azure. The program offers tools, methodologies, and resources to build your own profitability-based business case – without the need for technical designs or solutioning - required in the past to conduct a similar study. Blue Impact will make things easier. With your business outcomes in mind, Dicker Data will help you review considerations above and also quantify the following:

Summarising, we believe that the level of misconception about Azure profitability among private datacenter providers is still very high. In fact, some have learned how to use the Microsoft’s Azure Calculator to sell their own, cheaper options. It’s not surprising: cost optimisations on Azure work fundamentally different and it’s not always easy to understand. There are also other serious cost considerations, that are difficult to quantify – until now.

We also believe that SPLA providers do want to see their business model working on Microsoft Azure, they just need a genuine way to quantify their profitability considerations for themselves.

Dicker Data now have a way to help you build a business case for Microsoft Azure, our Blue Impact program. You can see for yourself that your customer prices don’t need to change, your current profit levels can stay similar, and you can a choose a migration path that makes commercial sense for your business.