Microsoft took the wraps off a new computing service that allows companies to use its data centers to run their Web applications in a bid to become a player in the "cloud computing" trend.
Ray Ozzie, Microsoft's chief software architect, said it will start previewing "Windows Azure," a platform that allows third-party developers to host, manage, calculate and store data for applications running on the Internet.
"It's a transformation of our software. It's a transformation of our strategy," Ozzie said at the Professional Developer's Conference, Microsoft's annual gathering of third-party engineers to detail the company's future plans.
Ozzie, who replaced Bill Gates as Microsoft's top software guru in 2006, is spearheading the company's push into cloud computing, a trend that taps into computing power in distant data centers and delivers applications over the Internet.
Traditionally, software has run on a single computer's hard drive, but as Internet connections became faster and more reliable, companies started to deliver software as an online service by using the computing power of the "cloud," a network of powerful computer servers accessed over the Web.
The success of Web-based companies such as Google and Salesforce.com in creating online applications competitive with Microsoft has forced the company to embrace a new way of delivering and supporting software.
"We are in the early days of a transformation to services across the industry," said Ozzie at the conference.
Microsoft has worked to add online services elements to most of its traditional software, which required the company to invest billions in building massive data centers with thousands of computer servers and data storage systems.
In an interview, Ozzie said Azure will be profitable when it launches and will eventually generate "a lot" of revenue. He did not offer specifics and said the platform will help its online offerings built on Azure be more profitable.
Computing for rent
Now, Microsoft wants to let other companies rent out its computing power so third-party developers can run applications over the Internet without the need for hefty investments in data centers. It also allows companies the flexibility to increase or decrease computing needs according to demand.
Similar to how its Windows operating system became the main platform for programs on personal computers, Microsoft aims to be the platform of choice for Web applications.
"It's one of these times that the battleship turns around for Microsoft," said Neil MacDonald, a vice president at research firm Gartner. "This is the direction that the industry is heading toward."
Amazon.com Inc and Salesforce are already in the market with computing services for Web developers, but Microsoft has a few advantages. It has deeper pockets, longer relationships with third-party developers and more expertise in building a software platform.
"I'd like to tip my hat to Jeff Bezos and Amazon," said Ozzie, referring to Amazon's chief executive. "Across the industry, all of us will stand on their shoulders."
Microsoft said Windows Azure differs from rival cloud computing offerings because it balances the work load required to run an online service over multiple machines in various locations on its own without a need for developers to provision the program to do so.
It allows the developer to focus purely on writing an online application versus worrying about data center failures, power outages or other potential problems.
Research firm IDC expects spending on cloud computing services to grow nearly threefold to about $42 billion by 2012. Spending growth on cloud computing will also accelerate over the next few years, making up as much as 25 percent of the increase in 2012.
Developers can write applications on Windows Azure using the tools and programming languages necessary to write software to run on top of the current Windows operating system.
Microsoft did not announce any details on pricing, saying it would depend on the level of usage - usually, a per-hour rate - and the level of service required. Ozzie said Windows Azure will be priced competitively with "the marketplace."
Dell Inc said Microsoft has picked its computer servers for the company's data centers running Azure.