Microsoft’s announcement of its Windows Azure cloud computing operating system at its Professional Developers Conference late last month came at a timely juncture, with the current economic climate meaning that firms have to look at how to save costs.

It’s not just about saving costs but also about being flexible. Our parent company EMC just did a customer council with CIOs and the biggest thing the council said they were interested in was datacentre transformation and how they apply agile project management skills to infrastructure. It’s a very interesting area and firms not only want to save costs but also want that agility to spin up and configure projects very quickly.

One way to do that is to use aspects of cloud computing. We researched our customers and were surprised to find that half of them have already tried the most established cloud computing model, Amazon.com’s Elastic Compute Cloud (EC2). Even more interesting was that not one of them said they were disappointed and all said they would use it more seriously in the next six months – and not just in test-bed environments. This is a very real new way of doing application serving and provisioning. If we’re writing an application for business intelligence or whatever, this means we can write it not only as a standard application, but we can also deliver it on a virtualised world.

The competitive situation is also interesting here. Microsoft is moving faster than I’ve ever seen because this cloud thing could really kill its whole operating model. Microsoft has also really started to push Windows 7, and I think that this will be its last big full-fat, thick-client release. We have got a pre-release of Windows 7 and have demonstrated an application with Tesco. It’s very good despite being very early code, and the user interface and touchscreen capabilities are very attractive. It’s a Vista-like interface with a Windows Presentation Foundation layer on top, and you can drag items around. But the other big thing is the web services interface and Live Mesh support that provides interoperability between rich clients and web applications.

Microsoft has to be careful because confidence has been knocked by the Vista experience, but it is being very aggressive and wants to make sure that if cloud computing is a success then it’s all going to be hosted by Microsoft or its partners. It will be a new channel although Microsoft will have to be careful to avoid the interest of regulators by linking desktop and cloud resources too tightly.

But Microsoft is late to the party and Amazon is being seriously considered by a lot of companies for the reliability and resilience of its infrastructure. Microsoft is going to have to catch up because it has a huge mountain of intellect to throw at this. Google is also well positioned but doesn’t seem to understand the business requirements, whereas Amazon has improved greatly in this area and has very talented people including Brian Valentine, the senior vice president of the e-commerce platform and previously an SVP at Microsoft’s core operating system division. As for the others, SAP and Oracle will be more interested in ensuring they get continued licence revenue and EMC and HP will be keen on supplying storage and management tools.

I said before that I think Windows 7 will be Microsoft’s last major desktop OS release. There are also big changes taking place on Office where Microsoft has shown off capabilities to let users make online edits to Word, Excel and PowerPoint documents. They still want you to use Office but the future is surely one where you embed application capabilities into the Outlook web browser interface. In spreadsheets, all I do is look at Excel and make an edit here and there most of the time so I don’t need the full power, the same with PowerPoint:even if I do create my own spreadsheet or presentation I only use its basic capabilities. Word, meanwhile, will become an online/email text editor.

For CIOs, the main thing to understand is that just as you once kept your datacentre capabilities locked behind closed doors, then you outsourced it and then you offshored it, the next change will be that it will completely virtualised so you have to completely rethink the datacentre in terms of stability, manageability and change management. There will be big advantages such as getting rid of the current problem where many clients take up to six weeks to do a new application or bring in an upgrade. On the other hand you are going to put more pressure on networks and people like Cisco will be rubbing their hands. After all, any major change knocks on where the critical issues are down the line.

Ordinarily all these changes would have been phased in but the need for CIOs to save costs and increase flexibility means things are moving very fast right now.

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