All roads lead to SharePoint
Customers who insist on hosting their own servers, of course, have long been Microsoft's bread and butter. Such customers can choose to deploy the Office Web Apps on SharePoint Server 2010, the forthcoming version of Microsoft's "Swiss Army knife" solution for intranet applications; this method has other advantages, as well.
SharePoint is a Web-based platform that allows customers to rapidly build and deploy workgroup collaboration applications using preconfigured components. Although it has drawn criticism for being a proprietary platform in a market filled with open source alternatives, SharePoint's rich collection of services has earned enough converts to make it the fastest-growing product in Microsoft's history. The upcoming version sees SharePoint taking an even greater role as the central nexus of networked Office workgroups, providing improved integration with core Office 2010 apps.
In addition to Office Web Apps, SharePoint Server 2010 can play host to SharePoint Workspace, a rich, client-based collaborative environment. In reality, SharePoint Workspace is simply a retooled version of Ray Ozzie's Groove client. In its new guise, however, it becomes a true thick-client interface to SharePoint's traditionally Web-based services. In a sense, SharePoint Workspace is to SharePoint what Outlook is to Exchange, complete with data synchronization for intermittently connected users. In the same way that Outlook provides a richer experience than Outlook Web Access, Microsoft is betting customers will find SharePoint Workspace preferable to Google's strictly Web-based collaboration services, including Google Wave and Google Sites.
Google's chief advantage is that its cloud-based applications require no on-premises hardware, no software installation, and no ongoing maintenance. To offset this, Microsoft has begun offering SharePoint and Exchange servers hosted in its own datacenters on a subscription basis. Under this arrangement, customers get most of the benefits of running servers on their own premises, with fewer headaches.
Microsoft's datacenters are your datacenters
Microsoft's plans for its datacenters don't end with simple outsourcing, either. The last piece in Ozzie's puzzle, and by some accounts the most critical, is Windows Azure, the company's new "cloud services operating system." The product of collaboration between Microsoft's MSN and Windows platform teams, Azure is a set of services and APIs that allow customers to develop and deploy scalable Internet services on Microsoft's own infrastructure, similar to competing cloud platforms from rivals such as Amazon and Google.
Unlike its competitors, however, Azure furthers Microsoft's message that cloud services work better when used in tandem with client-based software. For example, one application that Microsoft has built atop the Azure APIs is Live Mesh, a service that synchronizes files between the cloud and multiple client computers.
From a developer's perspective, the relationship between the cloud and the client runs even deeper. Azure is based on Microsoft's .Net platform, and developers can write cloud applications in either ASP.Net or any .Net language. A Full Trust mode even allows applications to call DLLs containing unmanaged code. Further, Azure's close relationship with the Windows programming environment means developers can use familiar client-side tools to develop cloud services, including Microsoft's flagship Visual Studio IDE. (With Visual Studio 2010, Microsoft's flagship IDE also gains new features for developing SharePoint 2010 applications, making it something of a one-stop shop for developing server-side applications.)
But beyond offering a Windows-centric counterpunch to Google's cloud strategy, Microsoft has a business incentive for opening its datacenters with Azure. Although Microsoft has invested heavily in its Web application infrastructure, so far its own online services have operated at a loss. By offering the use of its infrastructure to outside developers, Microsoft can better offset the cost of scaling its datacenters to compete with Google's while it waits for Bing and other services to gain traction.