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The role of blockchain in Microsoft’s GitHub acquisition


The main benefit to Microsoft from the GitHub deal is the potential to attract developers to Azure and Microsoft’s developer tools. But blockchain might have something to do with it. When it comes to Blockchain as a Service (BaaS), Microsoft was the first mover, and Azure has the broadest offering. Microsoft has a vision of how blockchain can transform business, which makes GitHub irresistible.

Since the PC era when Microsoft started, only the first of the four technology phases – PC, dotcom, web2.0/social, mobile – favored a business-centric company like Microsoft.

The four tech eras: consumer v business

All of the computer technology phases since the launch of the PC have impacted both consumers and business, but not to the same extent. The PC phase arguably was the productivity period with high profile products like Microsoft Office and Exchange. The DotCom era was a consumer period with signature services like Yahoo, Google, Amazon, and eBay.

The web 2.0 and social media period was unquestionably user-centric starting with MySpace and Flickr, but giving way to Facebook, Twitter, Instagram, and SnapChat. And the mobile period again has a consumer emphasis.

The blockchain era that’s just getting started will predominantly be a business chapter.

Blockchain and the app stores for business

Consumers will undoubtedly benefit significantly from blockchain through payments and digital money, greater control over data, rewards, financial inclusion, and economic participation. The latter refers to an affiliate-like ecosystem on steroids driven by cryptocurrencies, rather than cryptocurrency trading or investing.

But the impact on business will be at least as significant. For some industries, blockchain will be transformational with improved efficiencies and reduced fraud. For others, blockchain will disrupt.

In last week’s IBM/Maersk announcement about their supply chain project, the concept of an ‘ecosystem’ was at the forefront. Both the large insurance blockchain consortia RiskBlock and B3i also talk about ecosystems.

Ecosystems may refer to the range of organizations involved, but when it translates to software, the result is a blockchain-based software platform that hosts a B2B app store. Many industries will have one or more of these. As a result, the next 10-15 years will see an explosion of business-centric software development. And Microsoft want’s to attract those developers.

One of Microsoft’s developer tools, Xamarin, enables cross-platform app creation. In addition to IOS and Android, it can also create a Windows app. And for blockchain business apps, many will need to be available on desktops. It’s no coincidence that the future CEO of GitHub is Nat Friedman, founder of Xamarin.

Following the deal’s announcement, quite a few GitHub users quickly jumped ship. However, according to GitHub the numbers were both small and more than offset by new users. Friedman ran a chat on Reddit to address developer concerns. Some were surprised at the adverse reaction to the takeover because they’re too young to know about Microsoft’s history before its image makeover around 2005.

Blockchain and GitHub go together

When developers work in teams on applications, they share the source code. Historically those code repositories were on private servers even if hosted on the web. For companies that don’t want to manage the repositories, GitHub provides a convenient SaaS option. But it is just an option. In fact competitor GitLab and others provide web-based interfaces that can be deployed on a private cloud or server and managed yourself.

Turning to blockchain, hosting on a shared public repository isn’t an option, it’s essential. The vast majority of blockchain protocols are open source, and the code is hosted on GitHub. But moving beyond the protocols to industry blockchain platforms, the code still needs to be shared. The need for access applies whether or not the platform software is open sourced. And GitHub is the number one platform for code sharing.

What does Github do?
What does Github do?

Open source Git came out in 2005 when Subversion was the leading software version control tool. Today Git has an 87% (2015 69%) market share. Git lets a developer track code changes on their own machine and then optionally sync the code to server storage. It’s a backend command line tool without a web interface.

Github is the most popular place to store code on the web for teams and individuals and provides a convenient web interface. Teams can pay to keep code private, but many developers use Github to showcase their code for recruiters.

The company has 24 million developer users and a revenue rate of $300m, but Microsoft’s $7.5billion bid was seen as a steep price to pay.

Because Microsoft fully appreciated the potential for blockchain relatively early, it also understood the important position GitHub plays. Hence when bidding for GitHub, it was willing to pay more than Google.

But that’s not the only reason.

The extent of Windows’ loss of dominance

Of the big five US tech giants – Alphabet, Amazon, Apple, Facebook, and Microsoft – Microsoft is the one that’s lost its competitive advantage.

The failure of Windows to make inroads into mobile has cost Microsoft dearly. Back in 2008 when Apple launched the iPhone, Windows made up 90% of web browsing traffic. Now it’s just 40% with Android at 38% and Apple at 20% (MacOS and IOS combined).

However, when it comes to desktop, the market share is declining at a far slower rate, and Windows still dominates (83%). But even there it has ceded some position to Apple.

The gradual decline in desktop dominance is far more exaggerated when it comes to developers. That’s in part because developers building native IOS applications need to use a Mac. And once you’ve made that switch, it’s hard to go back.

In 2018 for the first time, the percentage of developers that use Windows as their primary operating system dropped below 50% (2007 74%). In the last five years its gone from 60.4% to 49.9%. Of the remainder, MacOS is 26.7%, and Linux is 23.2%.

If Microsoft wants to expand its cloud reach it has to attract more developers, without relying on Windows.

Microsoft’s secular transformation

For Windows, the slippage started when Google became a major force. Google’s Chrome and Docs were the uppercuts to the jaw, but IOS and Android were the knockout blows.

Recognising the loss of Windows’ dominance, Microsoft’s CEO Satya Nadella shifted the technology emphasis away from Windows-centricity towards what he terms a more ‘secular’ focus.

Nadella made the following comments to CNBC about the GitHub acquisition: “If there’s a secular market segment that’s going to grow, we’ll always be attracted to that. But more importantly, we need to have a real position that we can contribute something unique to that market. In this case being a developer first company from the very start gives us confidence that we can bring real value to the developer community.”

This comment works just as well when considering blockchain.

And to demonstrate that secular shift, as of late 2017 forty percent of virtual machines on Azure were Linux.

Azure's strengths in the cloud
Azure’s strengths in the cloud

Microsoft’s Azure cloud offering is a distant second to Amazon’s AWS. It’s hard to know how far behind it is, because Microsoft doesn’t reveal Azure’s figures, only growth rates. The implication is there’s a wide gap. But it’s making inroads. It’s having enough of an impact that AWS is responding to the competition. AWS had a substantial first-mover advantage plus, well, it’s part of the Amazon machine.

Nonetheless, AWS has its weaknesses, and Microsoft has several relative strengths. Top of the list is AWS can be overwhelming for newcomers. And even once you’re up the learning curve, there’s a seemingly never-ending list of new features. (Disclosure: the author is a long-time AWS customer.) It feels like AWS targets full-time systems administrators.

The average business developer is often not so confident on the server side, and Azure may be more user-friendly. Azure doesn’t have Apple-level usability, but it’s better than AWS. When you consider that the majority of developers are young and have grown up with mobile-level user friendliness, that’s not good for AWS. According to a 2015 Stackoverflow survey, 61.8% of developers were under the age of thirty.

Secondly, Microsoft was the first mover with blockchain. Increasingly developers are looking for serverless solutions where they can deploy containers and not worry about the server itself. An example is Blockchain as a Service where Azure has the broadest offering.

Thirdly, is the hybrid nature of the cloud. Because of its history, Microsoft understands that many businesses want to keep some elements on premises and others in the cloud. AWS was very slow to appreciate this and has only recently launched support for it. The hybrid aspect will especially apply to blockchain applications.

Finally, Microsoft has gone all in on IoT for Azure. Which dovetails neatly with blockchain.

Other cloud players

Concerning other competition, Google is a very distant third in the cloud race. This year for the first time it made it (just) into Gartner’s ‘leader’ magic quadrant for Cloud Infrastructure as a Service (IaaS). And it’s perceived as especially strong in AI. There’s currently much speculation about what Facebook’s going to do with blockchain. But given the blockchain era belongs to business, Google’s plans should attract more attention.

Gartner put IBM into the Niche Player segment of IaaS, but its blockchain initiatives might help to improve its position.

A quick BaaS comparison

Microsoft launched its blockchain as a service offering back in 2015. IBM followed in mid-2016, but the other major players – AWS, Google, SAP, Oracle – only launched during the past four months.

Azure offers the most blockchain choice with multiple flavors of Ethereum, as well as JP Morgan’s Quorum, Hyperledger Fabric, R3’s Corda, or MultiChain. Plus it offers Microsoft WorkBench integration tools.

AWS offers Hyperledger Fabric and R3’s Corda. Through its Kaleido relationship, it also provides Ethereum and Quorum.

IBM Cloud offers only Hyperledger Fabric, as does Oracle. SAP provides Hyperledger Fabric plus the option of MultiChain.

Google Cloud was the late comer and supports Digital Asset and the BlockApps flavor of Ethereum. It plans to launch Hyperledger Fabric and Ethereum later in the year.

Azure and IBM have advantages when it comes to blockchain because of their enterprise backgrounds, particularly with their mature on-premises cloud options.

GitHub is the LinkedIn for developers

As a major player in enterprise software, Microsoft’s acquisition of LinkedIn fitted in with Dynamics CRM as another tool for sales professionals. Though for many developers LinkedIn is unimportant. Ethereum founder Vitalik Buterin explicitly says on LinkedIn ‘I DON’T USE MY LINKEDIN ACCOUNT’.

The place developers are active is on GitHub. In a recent Exponent podcast, James Allworth suggested that another attraction for Microsoft is the ability to apply machine learning to GitHub repositories to figure out who is active in which sectors, and identify developers’ skills and experience. Microsoft could integrate the data with LinkedIn’s recruitment offerings.

He said: “If you think about the employees that are the most important in terms of building the companies of the future, it’s engineers.” Technology strategist, Ben Thompson agreed with the logic but countered that the need to attract developers to Azure and developer tools was the driving force.


GitHub appeals to Microsoft for numerous reasons. Windows’ declining share with developers means Microsoft needs to find a new way to attract users to Azure and developer tools.

Microsoft recognizes the role of blockchain in triggering an unparalleled wave of business software development, a position where it has some advantages. Blockchain makes sharing code across enterprises essential, and GitHub is the leader in that space.

As a bonus, there’s potential for integrating developer skill data gleaned from GitHub with LinkedIn recruiting services.

If Microsoft manages to execute on its strategy, in a few years the GitHub acquisition could look cheap.

Update: Since publishing this article, IDC released survey results showing 50% of IT decision makers plan to move away from the Cloud in the next two years. That will put even more pressure on Azure to find replacement customers.

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