July 14, 2009 8:31 pm

Microsoft sets ‘cloud’ computing launch

Ray Ozzie, Microsoft’s chief software architect, has crossed a significant threshold in his efforts to reinvent the company for the internet era.

At its annual partner conference in New Orleans on Tuesday, Microsoft unveiled pricing details and launch plans for Windows Azure, the “cloud” operating system that Mr Ozzie hopes will become the online analogue to Windows on the personal computer – a platform that supports applications on the internet.

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The formalising of the plans, with Azure services going on sale in November, caps the first stage in an planned cultural and technological transformation of the world’s biggest software company. Since arriving at Microsoft four years ago, Mr Ozzie has sought to shift the focus away from big money-earners – the Windows and Office PC software businesses – towards a new range of services delivered over the internet – where it is competing head to head with companies such as Google and, in the case of Azure, Amazon.com.

Speaking last month at the Commonwealth Club in San Francisco, the man who took on Bill Gates’s mantle as the company’s top technology visionary confessed Microsoft, when he arrived, was not ready for the challenges of the internet: “The PC was still at the centre of how people thought about everything. It was a bit scary.”

Part of his response was to bring together a small team of developers to work on Azure, treating it as a separate start-up.

Building the massive computing platform on which Azure depends, and refining it to run internet services with high efficiency and reliability, has ac­counted for much of the development effort. Craig Mundie, Microsoft’s chief strategist, says there are now more than 1m servers in the company’s datacentres, making the Microsoft “cloud” one of the world’s biggest pieces of computing infrastructure.

From November, Microsoft’s customers will be able to rent capacity in these datacentres, for instance paying 12 cents an hour for computing resources and 15 cents for each gigabyte of storage used. With the experience honed running its own high-volume internet services such as Hotmail and Messenger, Microsoft hopes to persuade corporate customers to shift an inc­reasing amount of their own computing to Azure.

The prices closely match those already charged by Amazon.com, which has become the early leader in selling access to cloud computing resources in this way. Amazon says “hundreds of thousands” of developers have signed up and on some measures the amount of computing it is handling for these customers already exceeds the demands of its own internet service. Microsoft, by contrast, says 6m-8m developers use its “dotnet” technologies, making them potential customers for Azure.

Besides mastering the new technology and the different sales and support operations that go with a services business, Microsoft will also have to learn how to make money in a business with much lower levels of profitability.

In an interview recently, Werner Vogels, Amazon’s chief technology officer, said his company’s origins in retailing had prepared it for the high-volume, low-margin nature of cloud computing. “[Retail] is known for its notoriously small margins, especially compared to technology margins,” he said.

Even Mr Ozzie concedes that Amazon has set the pace in this new market – although with technology giants such as IBM and Google also eyeing up the territory, the stakes are going up fast.

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