A lot of people are asking if Microsoft will prevail in the cloud. While the jury is still out, it's becoming clear that Microsoft's strategy makes more sense than even it has explained.
In a recent post, InformationWeek's John Foley provided several points showing that Microsoft should be able to win, thanks to a massive user base and nearly unlimited resources. Most agree that Microsoft's cloud efforts are not so much a strategy issue as much as an execution problem.
I am starting to agree that "Software plus services" is the right approach--at least for Microsoft. One of the most overlooked Microsoft assets is Visual Studio, and if Microsoft adds a "cloud deploy" capability into the development environment, all of a sudden, things will start to get interesting.
Deployment and management are starting to be addressed for Amazon Web Services by companies like RightScale, but development is a much different story. There isn't an obvious cloud integrated development environment that does the heavy lifting typically necessary to build infinite-scale applications.
Microsoft has basically 100 percent of .Net developers using its tools. Once the cloud becomes an easy deployment option, it would seem obvious that more .Net developers will choose to deploy to a Microsoft cloud.
I definitely expect strong demand for Windows-based internal clouds, something the company hasn't yet mentioned as a deployment option. There are obvious enterprise reasons (including security and management) why an internal cloud would be very appealing to Microsoft shops, especially if they already have trained resources.
The big challenge to get adoption is that Amazon.com's totally open system profiles (i.e., run whatever you want) versus Microsoft's single-vendor platform won't likely cause people to switch to their cloud offerings. Azure won't be interesting for non-Microsoft developers for a long time.
Microsoft must give developers what they need in order for the Azure strategy to work. Without developers on board, Azure will be dead on arrival.