Azure: Can Microsoft Meld Windows with the Web?

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But Azure may appeal in particular to providers of corporate software, whose customers have decades of investment in using Windows. For example, Muglia points out that Microsoft can run e-mail programs for corporate customers in its own data centers for a fraction of the cost of customers running the systems themselves. That can free up capital spending dollars and allow staffers to focus on more critical jobs. Lubor Ptacek, an executive at software maker Open Text, which helps companies keep track of various types of information, plans to advise customers to let Microsoft archive older records at its data centers. "In this economy, companies still need to keep their content, but they don't have the money to spend on fancy new storage systems," he says.

Vast Unused Computing Power

Still, Microsoft has a long way to go to prove it can meld Windows and the Web. If it stumbles, Google's more Web-centric approach may gain even greater momentum. It wouldn't be the first time a supposedly invincible technology became obsolete. Just ask Digital Equipment, whose minicomputers were pushed to extinction in the 1990s by cheaper forms of computers, including Windows PCs. Google's pitch: Almost all tech tasks should occur out in the cloud, no Windows necessary.

Microsoft executives say such simplistic visions will never come to pass. Nodding at a reporter's iPhone (AAPL), Muglia sighs: "It's crazy. You've got an amazing amount of computing power in that cell phone, or on the laptop in your briefcase. Why not take advantage of it?"

Many IT chiefs who have invested millions in Windows are likely to feel similarly. Walking out of the expansive hall after the presentation, one IT director for a large utility was intrigued. While most techies knew Redmond was working on ways to leverage its power with Windows to make it more of an Internet star, the idea of being able to tap into an unlimited capacity from Microsoft—say, if a hurricane took out one of his company's data centers—was attractive.

But it will be a long time before any of Microsoft's plans come to pass. "Realistically, you're talking about five to 10 years" before Azure's full impact is felt, said Muglia. So far, all it has done is give programmers at the conference some software tools to begin experimenting with Azure. Actual services won't begin to roll out until 2009. And Microsoft hasn't given any indication on pricing other than to say there will be multiple approaches. Some services will be delivered on a pay-as-you-go basis while others will be tied to various tiers of speed and reliability. Others may make money through advertising.

Burrows is a senior writer for BusinessWeek, based in Silicon Valley .