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February 23, 2010 at 10:08 AM

GSC: Microsoft server president Bob Muglia read “Cloud Computing for Dummies”

msftmuglia-2.jpgSAN FRANCISCO — Bob Muglia, Microsoft Server and Tools division president, said he spotted a new book on his admin’s desk as he was leaving Redmond Monday: “Cloud Computing for Dummies.” He grabbed it for plane reading on the way here for the Goldman Sachs technology investors conference.

He said it wasn’t half bad. “Once you see a ‘Cloud Computing for Dummies’ book you know it’s hit a certain vernacular,” Muglia said in a Q&A session with Goldman Sachs analyst Sarah Friar.

Muglia defined cloud computing as “a next-generation way of doing computing that covers a great deal.”

Cloud computing puts software and data on remote servers run by companies like Microsoft that users access through the Internet on their PC or smartphone. Examples of cloud computing are Flickr, iTunes and search engines like Google and Bing. Microsoft launched its cloud computing platform Azure in January and began charging for it at the beginning of February.

“Cloud will create new model for how hardware is built. It transforms the way applications are created. It transforms how people run and manage systems,” Muglia said.

Here are the highlights from his session:

  • Cloud computing is not expected to be material (meaning more than $1 billion in revenue) to Microsoft’s sales for the next three years. “If you go beyond there it becomes very material,” Muglia said.
  • On how Microsoft’s data-center construction has changed. “About 10 to 15 years ago when we started building MSN properties, we would buy servers from Dell and IBM, we would pull them out of a box and put them into a rack and wire them up. About five years ago we would buy full racks configured. … We’ve now gotten to a point where we literally are purchasing shipping containers all preconfigured. … That shipping container has about 2,000 servers and potentially petabytes of storage.”
  • His definition of a cloud application: An application that is “always available” and “the ability for them to scale.”
  • How Microsoft plans to pitch itself against cloud competitors like Google and Yahoo: “There are a few companies that are able to build these cloud applications because they have the resources to handcraft this because they have resources. Our job is to make it easier for everybody to do it. That’s very differentiated.”
  • And whether running cloud applications will erode Microsoft’s high profit margins because of the added capital and operation costs: “There’s no question there is capital cost involved in running these things. That is a fundamental shift in our financial structure,” he said. “There’s opportunity for us to drive revenue up by doing value-added services.”
  • When the server market will recover: Server sales were “anemic, to say the least, last year and perhaps on a path to recovery this year,” Muglia said. “We exited 2009 with server sales being roughly the same as they were in 2006. We lost two years of growth.” Muglia said emerging markets like Brazil and India are recovering most quickly, and the “U.S. is recovering reasonably. Europe is far behind.”
  • On how specific industries are recovering so far: “Public sector has been strongest because of all the stimulus money flowing into the market,” he said. Private verticals are recovering at about the same rate.

Here is a link to the archived webcast.

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