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This week at the Professional Developer's Conference in Los Angeles, Microsoft made a big splash by announcing a new cloud computing initiative it's calling Azure. It's significant on several levels.

First of all Microsoft wants to compete with services like Amazon S3 and offer online storage and online computational services. Secondly it begins to blur the line between the cloud and the traditional desktop operating environment where Microsoft has made its living, and finally and perhaps most significantly it will expose some key pieces of Microsoft business software including Sharepoint and Exchange to external developers who will be able to tap in the cloud versions of these packages and perhaps come up with some interesting results.

By all accounts it's an all-out attempt by Microsoft to take the cloud by storm (so to speak), but not everyone is convinced that Microsoft can succeed at all aspects of the venture.

Whoa Nelly! Not so Fast

One person who is throwing up a big caution flag is Zoho CEO Sridhar Vembu, a chief executive who know a thing or two about the cloud. Vembu says any time a company like Microsoft gets involved you have to respect it, but he says, Microsoft has to start from scratch and it's a completely different way of doing business. As such, he's not completely convinced Microsoft is equipped to handle the cloud business for a couple of reasons.

Can Microsoft Compete with Amazon and other Existing Cloud Infrastructure Players?

First of all, he says Amazon created its cloud computing business as a natural offshoot of its retail business. As it built a huge computing infrastructure, it realized it could build a side business by selling cloud computing services. Microsoft, on the other hand, Vembu explains, needs to build out its own infrastructure from scratch and he sees this as a low-profit game for them. "They are not a data center company and it's a low-margin business," he says.

Tapping into Services

While Vembu is not excited about the Microsoft infrastructure play, he thinks the ability to tie into Microsoft services is potentially much more interesting. "What interesting is the application perspective and which applications they will integrate. They will be offering Sharepoint as part of the whole suite and third party applications could use the Sharepoint libraries, and that's potentially interesting to company like us because we could tap into Sharepoint services."

Microsoft Grew Up in a Different World

That said, Vembu also wonders if Microsoft can succeed in a world that is so different from the desktop environment it is used to. "They are trying their luck, but I don't believe the environment today is the same as 10 years ago that will allow them to succeed," he says. In the new world, the browser becomes the OS for all intents and purposes. He says that part of the problem for Microsoft is corporate DNA. "It's going to be hard for them to come to this world and get used to more a more level playing field...That's going to be a DNA challenge, not just a technology challenge," he says and adds that the desktop, proprietary, locked in type of mentality is built into Microsoft's corporate culture and it's going to be a challenge making a transition from that.

One thing is certain, Microsoft is in the cloud computing game now and everyone should be paying attention. Who knows if this venture will succeed, but it's bold and it's a direction in my view Microsoft needs to go. Whether they can compete on a more level playing field as Vembu points out, remains to be seen, but it should be interesting watching what happens.

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