LOS ANGELES (Reuters) - Microsoft expects its new "cloud computing platform, Windows Azure, to be profitable at launch, the company's top software executive said on Monday.
Cloud computing is the trend by Internet powerhouses to array huge numbers of computers in centralized data centers to deliver Web-based applications to far-flung users. Windows Azure will allow companies to build Web applications using Microsoft's data centers.
Microsoft built its business selling software to run on local machines -- both computer servers and personal computers -- but in recent years, it has invested billions of dollars in massive data centers.
In an interview, Ray Ozzie, Microsoft's chief software architect, said the company's new platform to let third-party developers build, manage and store data for Web applications inside Microsoft data centers would eventually generate "a lot" of revenue albeit at a lower margin than traditional software.
"When we do offer it as a commercial service, we will be profitable from day one," said Ozzie at the Professional Developer's Conference, Microsoft's annual gathering of third-party engineers to detail the company's future plans.
Azure is only available in a free, limited preview, but the company expects the platform to underpin a new wave of applications for itself and others looking to take advantage of the flexibility and cost benefits of cloud computing.
It will take a while before Azure will be a significant business on its own, but one of its benefits would be to boost the margins of existing Microsoft products built on the new platform.
Ozzie would not elaborate on any specific figures.
Research firm IDC expects spending on cloud computing services to grow nearly three-fold to about $42 billion by 2012. Spending growth on cloud computing is also expected to accelerate over the next few years, making up as much as 25 percent of the increase in 2012.
One goal for Windows Azure, Ozzie said, is for third-party companies to make between $7 to $9 for every dollar Microsoft makes on the platform, providing the incentive for outside developers to write applications on Azure.
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.
CLOUD OPERATING SYSTEM
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. Companies such as Amazon.com (AMZN.O: Quote, Profile, Research, Stock Buzz), Google Inc (GOOG.O: Quote, Profile, Research, Stock Buzz) and Salesforce.com (CRM.N: Quote, Profile, Research, Stock Buzz) already offer a cloud computing platform.
"Right now, we are still in the early adopter phase of cloud computing, but I think this one will ultimately ... be really, really big," said Ozzie, who replaced Bill Gates as Microsoft's top software guru in 2006.
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.
Traditionally, Microsoft has been a low-fixed cost and small-capital expenditure business, but the services push has changed that. In recent years, Microsoft investors have seen it spend billions to build out data centers all over the world.
Ozzie said the company has gotten better at ensuring the build-out of data centers do not outpace demand for services.
"We are throttling our investments commensurate with the demand and how it grows," said Ozzie, who joined Microsoft after it bought Groove, a company he started.
The advantage Microsoft holds over competitors, according to Ozzie, in building a platform for cloud computing is because it is one of the few companies who have experience building operating systems for PCs and computer servers and running Web services used by hundreds of millions of users.
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