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Originally published Sunday, March 7, 2010 at 10:03 PM

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Microsoft commits to future with cloud computing services

On Feb. 1, the hype of cloud computing met the reality as Microsoft began selling its cloud computing services Windows Azure and SQL Server. Microsoft joined several tech companies all jostling at the starting line of what could become a wave of opportunity in computing.

Seattle Times technology reporter

If cloud computing sounds bleeding edge, it's not. Masses of people are cloud computing each time they check Hotmail, upload photos to Facebook or buy music on iTunes. Microsoft says that's just the beginning.

It wants the cloud to deliver pizzas.

The company has been courting Domino's to move its online pizza-ordering system to Microsoft's cloud service. And Domino's would be just the start of a major business Microsoft wants to dominate in the years to come.

On Feb. 1, the hype of cloud computing met the reality as Microsoft began selling its cloud-computing services Windows Azure and SQL Server. Microsoft joined several tech companies all jostling at the starting line of what could become a wave of opportunity in computing.

"For the cloud, we're all in," Chief Executive Steve Ballmer said in a speech Thursday at the University of Washington.

Cloud computing is being heralded as the next-generation shift that combines the Internet and computing. Rather than storing software on a computer or a corporate server, applications and content would run on remote servers and be accessed by Web-connected devices, including computers, phones and TVs. Microsoft, Amazon.com, Salesforce.com and Google would run those servers.

It's a zero-revenue business now for Microsoft, Server and Tools President Bob Muglia said at an investors conference this month. In 10 years, he thinks cloud computing could make up as much as half of Microsoft's sales.

Sarah Friar, an analyst at Goldman Sachs, estimates that, altogether, cloud companies probably are bringing in $100 million in sales this year. "It's very early days" for this technology.

Even though cloud computing may be in its early days, some competitors say Microsoft is already behind.

"It's a decade too late" for Microsoft's cloud, said Salesforce.com CEO Marc Benioff. "They've held on to their Windows franchise for too long." Salesforce.com launched its cloud platform, Force.com, in 2008.

Regardless, Microsoft is making a large investment in its development. Ballmer said Thursday that 75 percent of Microsoft's software developers are now working on cloud-based or cloud-inspired software and he expects that to increase to 90 percent next year.

For cloud customers, the cost savings could potentially be huge because they could outsource the personnel and hardware costs they spend maintaining servers in house.

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"Economy of scale"

Domino's Pizza was an early partner win for Microsoft when the Ann Arbor, Mich.-based company said in November it would put its online pizza-ordering system on the Microsoft cloud. Twenty percent of Domino's pizzas are ordered through the Web, and the company just hit a $1 billion milestone in online sales in February.

"By leveraging a public cloud, you get the benefit of all the automation Microsoft has put in place. That's economy of scale," said Jim Vitek, director of e-commerce for Domino's.

The other benefit is that the cloud expands to handle spikes in traffic. "Our business is very peakish," Vitek said, because people mostly order pizza during mealtimes, and ordering can go crazy at times like Super Bowl Sunday.

"Using a public cloud allows us to scale up around mealtime and we're only charged for our use of servers in the cloud," Vitek said. "Whereas when we have our own infrastructure, we have to be able to buy enough servers to handle our highest peak."

But for now Domino's is still running it on its own servers, waiting for Microsoft to get its security and privacy controls in place. None of the cloud companies is certified by the payment-card industry [PCI], Vitek said. "Because a large percentage of our orders that we receive online requires payment with a credit card, we have to be PCI-certified," he said. "Public clouds at this point are not PCI certifiable."

Microsoft declined to make anyone available to comment about its cloud product.

Some hiccups

The Associated Press has also explored using the Microsoft cloud — to deliver its news — but the reliability is not yet in place. "It's way too early to make any significant decisions," said Alan Wintroub, director of development in the AP's technology group. One of the issues is which party would be responsible for failures in the network. For instance, how can the AP be sure that a breaking news story about a massive earthquake gets delivered as fast on the Microsoft network as on the AP's network?

Meanwhile, even Microsoft has had small and big hiccups with cloud services it runs. Last year, the service it runs for Sidekick mobile-phone users, sold through wireless carrier T-Mobile USA, failed for several weeks, with users losing their contact lists, pictures and messages. The Bing search engine, another cloud service Microsoft runs, had a 30-minute outage in December.

For now, many companies like the AP are using the cloud as a petri dish for small projects.

"It allowed us to build something on a small scale quickly that from an architectural perspective we would be able to ramp up and scale up if the business opportunity arose," Wintroub said. "It wouldn't require any extravagant upfront investment based on the unknown of does anybody care."

Popular with startups

The opportunity to outsource infrastructure is also popular with startups that don't want to buy hardware and set up their own networks, especially as they operate in development stages.

"We're planning on doing more things with Azure," said Martin Cron, a software developer at Cheezburger Network in Seattle.

"The idea around that is, as a smallish startup, we don't want to have to maintain a lot of infrastructure ourselves. The things we can make not our responsibility, like individual servers, that's a win for us."

Cheezburger runs humor sites such as the Lolcats Web site featuring photos of cats that users can add captions to.

Goldman Sachs' Friar said if all companies moved their testing and developing to the cloud, that would amount to 10 percent of all corporate computing. If those companies took another leap and moved their e-mail systems to the cloud, that would account for 40 percent.

"That would be a massive pile of data" in the cloud, Friar said, and would put the cloud well on its way to becoming a central cog in how businesses manage software.

Sharon Pian Chan: 206-464-2958 or schan@seattletimes.com

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