---

October 28, 2008

Microsoft Unveils ‘Cloud’ Operating System

By JOHN MARKOFF

LOS ANGELES — Looking for growth in new markets where it is increasingly being bypassed, Microsoft said Monday that it would begin offering a new “cloud” operating system that would manage the relationship between software inside the computer and on the Web, where data and services are increasingly centralized. The software is expected to go on sale late next year.

Although Microsoft has continued to see strong sales of its operating system software to corporate customers, growth of its Windows Vista operating system appears stalled. Moreover, the company has significantly delayed its next generation of mobile smartphone software at a time that competitors like Apple and Research in Motion are making inroads into the market of software for mobile devices used in businesses.

Declaring a third era of operating systems, Microsoft, which is based in Redmond, Wash., is hoping that it will be able to repeat the success it had with its DOS and Windows operating systems of the 1980s and 1990s in a new computing world populated not by a single style of desktop computer, but instead by dozens of different kinds of Internet connected appliances ranging from smartphones to netbooks.

The new Microsoft “cloud OS” — dubbed Azure — has been designed during the last three years by Ray Ozzie, a software designer whose company, Groove Networks, was acquired by Microsoft in 2005. Mr. Ozzie began taking over the reins from Bill Gates as the company’s principal software architect in 2006.

Before an audience of 6,500 software developers, Mr. Ozzie tried to make the case that missing a shift to a new Microsoft operating platform is a huge risk for the computer industry rank and file.

Speaking as a software developer who had frequently sat in the audience at similar Microsoft events as a customer, Mr. Ozzie said: “Every time there is a major platform shift in our industry, it has turned into new opportunities for my apps and my business.”

His comment was a clear reference to an earlier juncture in the history of the computer industry, when companies like Lotus Development where Mr. Ozzie worked, were late to adopt the first generation of the Windows operating system. That shift gave the Windows Office suite a significant advantage and helped Microsoft dominate word processing, spreadsheet and other office software.

At the same time, while Microsoft’s software business for corporations continues robust growth, there are increasing questions about whether the company will be able to strengthen its desktop computing business in an era that is increasingly defined by free or advertising supported Internet services.

In that sense the arrival of Azure represents a harmonization of the traditional proprietary software world with a new set of tools that is more closely aligned with a set of Internet standards that is being widely used to generate most popular Web services.

“This is the first time they are showing all the pieces coming together,” said Peter O’Kelly, a computer industry consultant based in Andover, Mass. Although the company will not release a commercial version of Azure for a year or more, Mr. O’Kelly said that components of the system such as Live Services are already being used by millions of personal computer users.

Microsoft gave only one significant demonstration of the kind of applications made possible with its new system. Sentient Software showed a mobile social networking application called Bluehoo. The company said that Azure would make it easier to expand the service by using computing resources provided by Microsoft.

On Tuesday, Microsoft is expected to give its first lengthy demonstration of its Windows 7 desktop operating system, which is intended to rejuvenate the company’s sputtering consumer business. Microsoft has also hinted that it would show off Web versions of several of its Office applications for the first time.