Enterprise Priorities and Roadmap for 2016
Contributing analysts: Wes Miller, Don Retallack, Rob Sanfilippo, Andrew Snodgrass, Joshua Trupin
Microsoft-hosted cloud services and products for mobile devices will continue to dominate the company's enterprise strategy in 2016. While 2015 saw major updates to e-mail and collaboration applications, 2016 updates will focus on platform: Windows Server, SQL Server, Azure services, and Windows 10. By understanding the company's enterprise priorities and technology roadmap for this year, organizations can avoid short-term surprises and see trends that could affect their long-term plans.
Priorities: Cloud and Mobile
Microsoft's enterprise business and technology investments continue to center on two main areas:
Cloud. Microsoft hosts its own applications and customer applications in its data centers as several families of services. Azure services enable customers to rent virtual machine computing, storage, and networking infrastructure and to run server applications on a Microsoft-managed platform in Microsoft data centers. Office 365 services offer e-mail and other collaboration and business intelligence (BI) applications. Services licensed with the Enterprise Mobility Suite, such as Azure Active Directory (AD), Azure Rights Management, and Intune, provide single sign-on and identity management for users and security and configuration infrastructure for mobile devices and PCs.
Mobile. Microsoft sells software such as Office for phones, tablets, and other mobile devices and supports mobile devices with management services such as Intune. Microsoft mobile software and services have recently focused on the iOS and Android OSs that dominate the market. However, Microsoft continues to improve Windows as a mobile OS and promote it through Microsoft-branded mobile devices such as Surface tablets and Lumia phones (acquired with Nokia in 2014).
Both cloud services and mobile software are sold on a subscription basis, as Microsoft tries to shift from the less predictable business of selling perpetual licenses. Cloud and mobile businesses have also encouraged the company to release and retire software more frequently and to integrate technologies with competitors such as Salesforce, whose products also complement emerging Microsoft cloud and mobile offerings.
By expanding its cloud and mobile businesses, Microsoft has built alternatives to its main PC software businesses, the Windows client OS and the Office desktop suite, which have suffered from slowing PC hardware sales. So far, cloud and mobile businesses have had little visible impact on company financial results: Microsoft revenues continue to grow and the company remains profitable, but profits have been flat or declining. (For details, see the illustration "Financial Results by Fiscal Year".)
Updates to the company's Windows Server OS and SQL Server database software in 2016 will deliver new technology first developed and tested in Microsoft-hosted Azure services. The Azure-inspired updates are intended to enhance scalability, management, and security of the software and to simplify Azure migration and connectivity. The Microsoft-hosted Office 365 services will also see improvements in 2016 to strengthen data protection and bolster the case for migration. For Azure and Office 365, "hybrid" systems with both Microsoft-hosted and on-premises components will play a bigger part in Microsoft's plans.
Windows Server 2016 and Azure Stack
Windows Server 2016, currently in preview and due for release in the third quarter of 2016, will ship new virtualization, storage, security, and management features prototyped in Azure data centers. Examples include a new Nano Server minimal installation mode, simplified application deployment and updating through container technology (similar to the Docker technology popular on other OSs), and improvements to storage deduplication and replication technology to reduce storage costs and improve availability. The new OS should provide a better platform for what Microsoft calls "software-defined data centers," which are large-scale installations that offer high levels of scalability, availability, and management automation on commodity hardware.
Azure Stack could also appear in late 2016 or early 2017. Azure Stack is a software add-on for Windows Server 2016 that offers capabilities of the Azure platform for customer on-premises and third-party hosted deployments. Stack will be more comprehensive than Azure Pack, an existing on-premises offering that provides some Azure functionality. For Microsoft, Azure Stack will help bring Azure technology to more countries, developers, and administrators and outflank competitors such as Amazon Web Services that do not offer on-premises or partner-hosted alternatives. For customers, the software could simplify compliance with regulations by enabling systems built with Azure technology to run in customer-controlled data centers. Microsoft is already building at least one product on Azure Stack: Dynamics AX "Rainier," the next version of the enterprise resource planning application, which might ship in 2016. If Azure Stack is successful, it could become a prerequisite for more Microsoft applications, although it could take many years for the company to move applications to the technology.
SQL Server 2016
SQL Server 2016, the next version of Microsoft's database management and business intelligence (BI) software, is also currently in preview and will probably ship in May 2016. SQL Server 2016 will deliver major updates to all areas of the product, including performance, security, and management. Many features are influenced by Microsoft's Azure development efforts and include specific capabilities for hybrid systems. The version incorporates performance and reliability improvements already being tested in the Azure SQL Database Microsoft-hosted service and delivers capabilities such as "stretch" database tables that enable organizations to move parts of their on-premises databases to Microsoft data centers, reducing the cost of archival storage.
While influenced by cloud services, SQL Server 2016 also delivers the most significant update to on-premises Reporting Services, Analysis Services, and other BI components since the 2008 version. The improvements are based in part on technology acquired with Datazen in 2015 for mobile reporting and data analysis. This is a change of emphasis for Microsoft BI development, which recently has focused on the Microsoft-hosted Power BI reporting and analytics service, rather than SQL Server's on-premises BI components. However, the new on-premises BI capabilities share concepts with Power BI, Azure Data Factory, and other Microsoft-hosted BI services, and so they could ultimately draw more customers to those services.
SQL Server 2005 will leave Extended Support Apr. 12, 2016, which could prompt some organizations to move databases to SQL Server 2016. (For details, see the illustration "SQL Server and Windows Server Roadmap Overview".)
Office 365 offers Microsoft-hosted services (such as Exchange e-mail) and on-premises software (such as the Office suite) under a subscription license. Office 365 received major updates in 2015 and will remain a priority in 2016.
Notably, Microsoft will tackle security, privacy, and other regulatory compliance issues for Office 365. In Germany, local data centers and a new "data trustee" legal structure could protect customer data privacy from some types of U.S. government data requests. If successful, the approach will probably be extended to other countries. Customer control of encryption keys (a service called Key Vault) will probably roll out in 2016, and Office 365 security and compliance services (such as Exchange Online Advanced Threat Protection malware scanning) that were launched in Dec. 2015 will become available in more countries.
More capabilities will be introduced exclusively in Microsoft-hosted Office 365 services, or for hybrid systems where on-premises software accesses Office 365 services for some functions. For example, Delve Analytics (work tracking and reporting) and Office 365 Planner (task and project management) will probably roll out exclusively to Office 365 customers in the first quarter of 2016. Microsoft-hosted Skype for Business Online telephony will probably become available outside the United States and could attract global organizations for remote offices and other branch sites. These changes will give Microsoft customers stronger incentives to migrate to Office 365 or build hybrid systems.
SharePoint Server 2016, the next version of Microsoft's Web collaboration software for on-premises customers, will likely appear in the first half of 2016. It will incorporate some administrative and compliance improvements from Office 365 for on-premises use, such as simplified patching and data loss prevention features to prevent leakage of sensitive data. However, many new capabilities for end users (such as Delve personalized search and discovery) will only work in hybrid systems, where SharePoint Server on-premises accesses services hosted by Microsoft in Office 365.
In 2016, Microsoft will invest more in Windows as an OS for tablets, phones, and similar mobile devices, and in Microsoft-branded devices. However, the company will continue to promote cross-platform services and software for mobile devices on iOS and Android, enabling users to employ Microsoft software and infrastructure with the most widely used devices.
Windows and Hardware
Windows 10 will receive additional improvements as a mobile OS in 2016. At its launch, Windows 10 delivered client-side support for mobile device management services, including Microsoft's own Intune service. A Nov. 2015 Feature Upgrade expanded these capabilities, delivering enrollment of devices for management in Azure AD, finer-grained control of OS settings through mobile device management technologies, and delivery of enterprise applications through an organizationally controlled section of the Windows Store.
In 2016, Windows 10 Feature Upgrades will probably bring more device security and management improvements. For example, an Enterprise Data Protection feature will use the Microsoft-hosted Azure Rights Management service to automatically encrypt an organization's data on mobile devices and enable selective remote deletion of data. The feature will be especially valuable on personal Windows 10 devices used for work. More tablets, phones, and other hardware will appear that enable Windows 10 device security features such as Windows Hello biometric login. That could prompt organizations to update their hardware purchase standards for Windows devices, even if they don't intend to deploy Windows 10 soon.
In 2015, Microsoft wrote off most of the financial value of the Nokia mobile phone hardware business that it acquired in 2014. Nevertheless, the company launched new Lumia flagship phone models at the end of 2015. The Microsoft-developed Surface line continues to expand: revenue grew from US$1.88 billion in fiscal 2014 to US$3.90 billion in fiscal 2015. The hardware business enables Microsoft to promote Windows 10, exploit new component technologies (and competitor mistakes), and develop new types of devices such as the HoloLens augmented reality headset, which Microsoft should ship to software developers in the first quarter of 2016. Consequently, the company will stay in the hardware business for the foreseeable future.
Applications and Management Services
While promoting Windows for mobile devices, Microsoft will continue to support iOS and Android with its applications and hosted services.
Office applications will continue to receive updates for iOS and Android. These applications let users with appropriate Office 365 subscription licenses work with e-mail and perform light editing and reviewing of shared documents while mobile, and generally offer better capabilities than Microsoft's Web applications for that purpose. Outlook mobile applications will advance particularly quickly as Microsoft integrates the acquired Acompli, Sunrise, and Wunderlist technologies. More of the Microsoft mobile applications will probably enable selective data wipe and other management operations through mobile device management services, including third-party services.
Specialized mobile clients for Office 365 services will also continue to improve, including the newly unified file-sharing and sync client for OneDrive for Business and OneDrive, Delve for search and discovery, and Outlook Groups for team collaboration. The Cortana natural-language search assistant will be enhanced on iOS and Android, not just Windows, and it could gain traction by shipping preinstalled in some Android OS distributions (such as Cyanogen).
Microsoft will continue to improve the mobile device security and management services—Azure AD Premium, Azure Rights Management, and Intune—that it hosts and sells in the Enterprise Mobility Suite and the Enterprise Cloud Suite. These services can help organizations secure and manage personal mobile devices that they do not own or control. The services will receive several improvements in 2016 for managing and securing Windows 10 devices, such as the Enterprise Data Protection technology for Azure Rights Management mentioned above. However, the services will also receive improvements that apply to clients on iOS, Android, and other platforms, including Azure AD tools to enable login with Facebook and Google IDs to "business-to-consumer" systems, and improvements to conditional access (which controls access to services based on device health status and other factors).
Other Corporate Priorities
While cloud and mobile will dominate the 2016 technology roadmap, other Microsoft business priorities could affect customer plans.
Subscription licensing. Microsoft will continue to promote subscription licensing, hoping to generate predictable revenue regardless of software release schedules. Many new Microsoft-hosted service features launched in 2016 will require high-end subscription licenses, such as Office 365 E5, the Enterprise Mobility Suite, and the Enterprise Cloud Suite. Price increases for perpetual Per-User Client Access Licenses, initiated in Aug. 2015, will take effect for many customers in 2016 as they renew contracts, and will make Per-User subscription licenses for Office 365 and other services more attractive. Organizations should factor in higher perpetual license prices and shifts to higher-end subscription plans when projecting the costs of new or renewed multiyear contracts.
Updating software continuously. More Microsoft software will receive new features annually or more frequently, a pattern already set for Windows 10 and planned for the Office 365 ProPlus suite and the System Center Configuration Manager server product for computer configuration and software management. With more frequent upgrades come more frequent Microsoft product support deadlines: for example, Microsoft support for the initial (Aug. 2015) release of Windows 10 Pro will probably end in 2016. More frequent upgrades enable Microsoft to deliver improvements more quickly, keep client software in sync with Microsoft-hosted services, upgrade the installed customer base faster to reduce product support costs, and encourage customers to maintain subscriptions for the latest developments. For systems that need to be kept stable, however, customers need to select specific software editions (such as Windows 10 Enterprise) that are updated less frequently, use administrative tools to opt out of Feature Upgrades until they have had time to test them, and ensure that computers get software from organization-controlled sources rather than from Microsoft directly. The faster pace of releases also means that customers might need to test each release more thoroughly than in the past.
Integrating with competitors. Microsoft will continue to integrate products with competitor technologies where there are important joint enterprise customers. A key partner is Salesforce, which competes with Microsoft in customer relationship management and other markets but plans 2016 integrations with Skype for Business (for online meetings), OneNote (for notes on customer data), and Delve search and analytics services, among others. Integrations with competitors such as Box, Dropbox, Salesforce, SAP, and Slack might make "best of breed" purchasing of enterprise applications more feasible for organizations with big Microsoft investments, and it could simplify collaboration for their users by enabling them to work with business application data in familiar Microsoft products.
Windows Server 2016 is previewed in the Feb. 2016 Research Report, "Windows Server 2016 Preview Evaluation Guide."
Windows 10 mobile management improvements are summarized in "Windows 10 and Personally Owned Device Manageability".
Azure AD, Azure Rights Management, and Intune are outlined in the Aug. 2015 Research Report, "Enterprise Mobility Suite Evaluation Guide."
SQL Server 2016 improvements are detailed in "SQL Server 2016 Replication and Backup Improvements" on page 18 of the Feb. 2016 Update, "SQL Server 2016 In-Memory and ColumnStore Enhancements" on page 3 of the Jan. 2016 Update, "SQL Server 2016 Security Enhancements" on page 16 of the Dec. 2015 Update, "SQL Server 2016 Introduces Temporal Tables" on page 11 of the Nov. 2015 Update, and "SQL Server 2016 Tuning and Management Enhancements" on page 3 of the Oct. 2015 Update.
The Windows 10 release and retirement schedule is summarized in "Windows 10 Roadmap Update" on page 7 of the Feb. 2016 Update.