It is proposed that services under the alliance will include:

• Hosted business applications: Through Telstra’s T Suite portal, businesses would be able to access Microsoft business software hosted by Microsoft in the cloud and delivered as a subscription service.
• Mobile services and devices: An all-in-one mobile email, calendar, contacts, web browser, business software and phone solution including security features, automatic software upgrades, support and data plan.
• Unified communications: Integrating Telstra’s hosted IP telephony service (TIPT) with Microsoft Office applications.

The more I talk with Mark, the more I think he's a very, very smart person. He recognizes that Ubuntu needs to be more appealing on the desktop than the Mac to generate user adoption, but that's not really where his attention is focused, so far as I can tell. He's thinking bigger than desktop bits.

He's thinking of cloud-plus-desktop bits. And this, my friends, is why Mark may end up winning the "desktop" war.

Let me end on a speculative note: There's one layer in the cloud that O'Reilly failed to mention, and that layer is actually on top of the application layer. It's what I'll call the device layer - encompassing all the various appliances people will use to tap the cloud - and it may ultimately come to be the most interesting layer. A hundred years ago, when Tesla, Westinghouse, Insull, and others were building the cloud of that time - the electric grid - companies viewed the effort in terms of the inputs to their business: in particular, the power they needed to run the machines that produced the goods they sold. But the real revolutionary aspect of the electric grid was not the way it changed business inputs - though that was indeed dramatic - but the way it changed business outputs. After the grid was built, we saw an avalanche of new products outfitted with electric cords, many of which were inconceivable before the grid's arrival. The real fortunes were made by those companies that thought most creatively about the devices that consumers would plug into the grid. Today, we're already seeing hints of the device layer - of the cloud as output rather than input. Look at the way, for instance, that the little old iPod has shaped the digital music cloud.

Today, we tend to look at the cloud through the eyes of the geek. In the long run, the most successful companies will likely be those that look at the cloud through the eyes of the consumer.

I believe strongly that open source and open internet standards are doing the same to traditional software. And value is migrating to a new kind of layer, which we now call Web 2.0, which consists of applications driven not just by software but by network-effects databases driven by explicit or implicit user contribution.

So when Larry Ellison says that cloud computing and open source won't produce many hugely profitable companies, he's right, but only if you look at the pure software layer. This is a lot like saying that the PC wouldn't produce many hugely profitable companies, and looking only at hardware vendors! First Microsoft, and now Google give the lie to Ellison's analysis. The big winners are those who best grasp the rules of the new platform.

So here's the real trick: cloud computing is real. Everything is moving into the cloud, in whole or in part. The utility layer of cloud computing will be just that, a utility, without outsized profits.

CIO: Steve, I guess the $64,000 question from a lot of people’s point of view is, is there going to be an Office for the Web, something that really competes head on with Google Docs, Google Apps?

Ballmer: Well, those are not very popular products! I hope that we are not competing head on with those! I hope we actually compete head on with Microsoft Office. If you take a look at it, Google Docs and Spreadsheets have relatively low usage and have not grown over the last six months or so.

There’s a reason. I think what people want is something as rich as Microsoft Office, something that you can ‘click and run’, if you are not at your own desk. Something that is compatible, document-wise with Microsoft Office and something that offers the kind of joint editing capabilities that is nice in Google Docs and Spreadsheets. Will Microsoft Office offer that? Yes! Standby for details in the next month.

Much is made of the fact that Google's empire relies solely on its advertising search prowess, for example, but the truth is that Internet search is responsible for just 3 percent of the time people spend online. So while Microsoft will continue working on search, it also feels that the other 97 percent is important as well.

Breaking down the average Web user's time online, Microsoft sees that 32 percent of that time is spent viewing content, 33 percent is spent engaged in online commerce, and 33 percent in communications tasks (like email, IM, or social networking). They can break down these broad categories further as well. For example, email takes up 9 percent, IM 13 percent, and social networking 10 percent.

Cloud computing – where IT power is delivered over the internet as you need it, rather than drawn from a desktop computer – has gained currency in recent years. Large internet and technology companies including Google, Microsoft and Amazon are pushing forward their plans to deliver information and software over the net.

But Richard Stallman, founder of the Free Software Foundation and creator of the computer operating system GNU, said that cloud computing was simply a trap aimed at forcing more people to buy into locked, proprietary systems that would cost them more and more over time.

"It's stupidity. It's worse than stupidity: it's a marketing hype campaign," he told The Guardian.

"Somebody is saying this is inevitable – and whenever you hear somebody saying that, it's very likely to be a set of businesses campaigning to make it true."

The 55-year-old New Yorker said that computer users should be keen to keep their information in their own hands, rather than hand it over to a third party.

His comments echo those made last week by Larry Ellison, the founder of Oracle, who criticised the rash of cloud computing announcements as "fashion-driven" and "complete gibberish".

"The interesting thing about cloud computing is that we've redefined cloud computing to include everything that we already do," he said. "The computer industry is the only industry that is more fashion-driven than women's fashion. Maybe I'm an idiot, but I have no idea what anyone is talking about. What is it? It's complete gibberish. It's insane. When is this idiocy going to stop?"

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