The announcement was not unexpected, and officially puts Microsoft in competition with other providers of Internet storage and computing services such as Amazon’s Elastic Compute Cloud (EC2) – which Ozzie credited for innovations in the hosted computing model but noted it had narrower and different objectives than Azure.
The new service is an integral part of Microsoft’s transformation strategy which sees the company lessening its emphasis on desktop software and shifting more resources to web-based offerings. According to them, Azure only offers a fraction of its envisioned capability today and will get better over time. Current components include SQL Services, .NET services, Live Services, SharePoint Services, and the Dynamics CRM Services. You can read more details on Azure here.
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