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Microsoft Apps Cloud: Service Provider Business Models

Microsoft Enterprise Applications

Microsoft Enterprise Applications suite includes Exchange, Active Directory, SharePoint, Skype for Business, Teams, Hyper-V, RDS, VDI, and Office applications.

Offering these applications in public cloud is mostly dominated by Microsoft 365 but offering these Microsoft enterprise applications in Private and Hybrid clouds is an emerging market for other cloud providers.

An estimated 85% of medium to large organizations worldwide are using Exchange for messaging or Active Directory for identity data.

This document mentions different variations of business models that large cloud providers may offer using technology provided by Hosting Controller.

Hosted Private Cloud

In this model, the Cloud-Provider offers an instance of Hosting Controller Control Panel hosted on its infrastructure for every new customer who wants a ‘managed private cloud’ environment for moving on their Microsoft applications to.

Cloud-Provider has to provide virtual machines running Windows servers. Customers will use these Windows instances to run Hosting Controller and other Microsoft applications.

To further facilitate customers, cloud-provider may choose to keep readymade virtual machine images for Hosting Controller application and all other supported Microsoft applications like Exchange, Active Directory, Skype for Business, SharePoint and others. This will remove the requirements for customers to install these applications manually onto newly created Windows server instances.

Hosted Private Cloud

Sample Offering

A sample offering from Amazon AWS can be found at: www.aws.amazon.com/windows/products/exchange/

Customers start by ordering the required mix of virtual machines based on their target deployment topology. An order will consist of at least one Windows machine running Hosting Controller itself and one or more machines for other Microsoft applications like MS Exchange, Active Directory, SharePoint etc.

Customers will get root level access to Hosting Controller from where they will login, onboard all the required applications and start managing them with automation provided by Hosting Controller.

Licensing

Cloud-Provider will include license price of Windows servers. For all the rest of the applications, customers will put their existing licenses (BYOL) and will be fully responsible for compliance with Microsoft licensing required whether per CAL, per subscriber, per core, or per processor etc.

SLA

Cloud-Provider will be responsible for infrastructure i.e. compute, storage, networking, backups, restore etc.

The customer will be responsible for the operations of software applications.

Infrastructure Windows License Apps License Microsoft 365 License Cloud-Provider Revenue
Cloud-Provider Cloud- Provider Customer N/A Based on Infrastructure used

On-Premises Private Cloud

In this business model, Cloud-Provider only offers licenses for Hosting Controller software. Customer deploys Hosting Controller on-premises and uses it to further manage Microsoft applications also deployed on-premises.

Cloud-Provider’s infrastructure is not used directly.

Infrastructure Windows License Apps License Microsoft 365 License Cloud-Provider Revenue
Customer Customer Customer N/A Hosting Controller License
On-Premises Private Cloudd

Hosted Exchange Public Cloud

In this configuration, the Cloud-Provider deploys Hosting Controller in a multi-tenant configuration where one instance of Microsoft application is shared among multiple tenants. The Cloud-Provider makes user-based subscriptions for hosted Microsoft applications and offers to customers.

Customer pays subscriptions to Cloud-Provider (in a way similar to how they would deal with Microsoft 365). Cloud-Provider needs to take SPLA license from Microsoft for all the applications hosted on its infrastructure.

Infrastructure Windows License Apps License Microsoft 365 License Cloud-Provider Revenue
Cloud-Provider Cloud-Provider Cloud-Provider SPLA N/A Subscriptions for hosted applications

Hosted Exchange Multi-Cloud

In this configuration, Cloud-Provider makes subscriptions for individual users for Microsoft applications hosted on its cloud infrastructure.

Some of those applications are offloaded towards Microsoft 365.

Customer pays subscriptions to the cloud-provider. Cloud-provider in turn needs to take SPLA license from Microsoft for the apps hosted on its own infrastructure and get CSP licensing from Microsoft 365 for the applications offloaded towards Microsoft 365.

Infrastructure Windows License Apps License Microsoft 365 License Cloud-Provider Revenue
Cloud-Provider Cloud-Provider Cloud-Provider SPLA Cloud-Provider CSP Subscriptions for hosted applications

Microsoft Apps Hybrid Cloud

In this configuration, customer is running some applications on-premises while some other applications or accounts for some organizational users are offloaded towards the cloud-provider.

Infrastructure Windows License Apps License Microsoft 365 License Cloud-Provider Revenue
Cloud-Provider / Customer Cloud-Provider / Customer Cloud-Provider SPLA / Customer N/A Hosting Controller License
Subscriptions for Apps hosted on its cloud

Hosting Controller supports two different configurations for Hybrid-Cloud offerings

Replicated Hybrid-Cloud

In this configuration, the on-premises Active Directory instance is replicated with another instance of Active Directory. A trust relationship is established between on-premises AD and cloud based AD. This configuration allows the customer to choose where to deploy the Microsoft applications. Usual options are:

  • check_circle Fully on-premises.
  • check_circle Primary on-premises and secondary in the cloud.
  • check_circle Primary in the cloud and secondary on-premises.
  • check_circle Fully in the cloud.

    • The customer can also switch back and forth easily based on availability issues or other disaster recovery scenarios.

    Synchronized Hybrid-Cloud

    In this configuration, the on-premises Active Directory is synchronized with cloud based identity and access management systems. Cloud-based IAM systems could be:

  • check_circle Other instance of Microsoft Active Directory.
  • check_circle Native IAMs provided by large cloud providers like AWS IAM, GCP IAM, and others.
  • check_circle Cloud based Radius, Diameter or other Authentication and AAA systems.
  • check_circle Cloud based databases providing authentication services.

    • No trust relationship is required between on-premises AD and cloud based AD. Hosting Controller’s AD Sync tool monitors on-premises AD for changes and copies them onto the cloud based IAMs. Read More

    Hybrid Multi-Cloud

    In this configuration, the customer is running some applications on-premises and offloading other applications to the cloud-providers’ offerings.

    Customer needs to take commercial license from Microsoft for all applications hosted on-premises.

    Cloud-Provider needs to take SPLA license from Microsoft for all self-hosted applications.

    The Cloud-Provider delegates some apps for some users to Microsoft 365. For this purpose, Cloud-Provider needs to get CSP license from Microsoft 365.

    Infrastructure Windows License Apps License Microsoft 365 License Cloud-Provider Revenue
    Cloud-Provider / Customer Cloud-Provider / Customer Cloud-Provider SPLA / Customer Cloud Provider CSP Hosting Controller License
    Subscriptions for Apps hosted on cloud-provider’s cloud and the ones offloaded to Microsoft 365

    Sample Costing of Microsoft licenses for Public Cloud

    SPLA (Service Provider License Agreement) Prices

    SPLA (Service Provider License Agreement) Prices

    These prices apply when a cloud-provider offers hosted instance of Microsoft applications on its own cloud infrastructure.

    Sample costing of Microsoft licenses for multi-cloud CSP (Cloud Solution Provider) Prices

    In this configuration, the Cloud-Provider makes subscriptions for hosted Microsoft applications and offers to customers.

    These prices apply when a cloud-provider or broker resells subscriptions from Microsoft 365 to its own customers. These prices also apply in cases of Multi-Cloud offerings where some apps are hosted in cloud-provider’s own infrastructure while others are offloaded to Microsoft 365.

    CSP (Cloud Solution Provider) Prices

    Example Offering

    Multi-Cloud subscription offering as follows:

    Cloud Provider (SPLA License)

  • check_circle Exchange
  • check_circle SharePoint
  • check_circle Active Directory

    • Microsoft 365 offloaded (CSP License)

  • check_circle Teams

    • Microsoft pricing is complex and Microsoft is known to offer huge discounts to large customers and service providers. It is estimated SPLA pricing is 40% of typical subscription offerings and CSP prices are 70% to 80% of subscriptions offered.

    This means cloud-provider’s gross margins will be around 60% for applications hosted on its own cloud and 20% to 30% for the applications offloaded to Microsoft 365.

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