Bob Muglia, Microsoft&39's president of the server and tools business, talks about upcoming additions to the Windows Azure platform to PDC attendees.

REDMOND, WA.--Microsoft is betting big on the cloud and wants businesses to do the same.

After two years of building Windows Azure, Server and Tools President Bob Muglia said yesterday that the cloud operating system is ready for business customers of all sizes to give it a try. At its annual Professional Developers Conference, Microsoft announced several new Azure features including the ability to move existing applications and virtual machines into Microsoft's hosted service.

In an interview with CNET, Muglia talked about the new cloud advances, small business server products, as well as the impact on Microsoft of recent executive departures, including last week's announcement that Chief Software Architect Ray Ozzie will be leaving the company.

Below is an edited transcript of the interview:

Q: It's been two years since Microsoft introduced Azure. Can you talk a little bit about where things are now--both in terms of a technology, and as a business, as well as what's shifted Bob Muglia: I think the big thing now is, two years ago, obviously, Windows Azure was brand new. We first announced it, first talked about it, and there wasn't a whole lot there for people to do. Now I think it's reached a point where, particularly with all the services that were announced today, it's really broken through in terms of its maturity and its readiness for people to write applications.

Azure came online as a fully paid service just earlier this year in February. We added a whole bunch of new features in June at TechEd and then today we've got a whole set of new things that we're adding.

I feel like this is sort of at the point where it is really ready for action and ready for people to write applications. In terms of anything that sort of surprised me, I don't think that what we're doing surprises me at all. I think it's great to see the response from people and the kinds of apps that people are interested in.

We took a bet on platform as a service (PaaS). We took a very big bet that PaaS is the future and where people are going to be going.

What's the difference between, say, moving your infrastructure to a cloud-based service--whether it's a storage in the cloud service, or virtualization that VMWare offers--versus moving to Azure Muglia: With infrastructure as a service, you're still working and managing the environment. You're still thinking about the infrastructure. In particular, you're still managing virtual machines. With platform as a service, you're focusing on the application. And so that really takes all those infrastructural components and handles them for you.

The second big thing is that with infrastructure as a service, you're maintaining that virtual machine image. You're patching it, you're updating it. With platform as a service, we take care of all that for you. And then the third thing with infrastructure as a service, you're still assembling all the other services you need. You're putting them together, you're creating the images, you're deploying it. And with PaaS, the services are -- there's a broad set of services, particularly on Windows Azure.

It seems like the jump that companies have to make is writing to this new platform instead of writing to traditional Windows and Windows Server. Muglia: That's correct.

But it seems--today you guys did a couple things that made it less of a jump--what are some of those things Muglia: Well, to summarize the benefit, because I think you bring up a good point, the benefit is you're focusing on the application versus focusing on the infrastructure. First of all, the fact that Windows Azure is still from and on Windows Server means that it's a familiar environment. And we talked today about how we're providing Server App-V, I think it's probably the most important thing we announced today to help people move onto the platform as a service.

So if you've got an application, a server application that has an install process, server App-V, can take that application and package it up as just a component that can be deployed, copied into Windows Azure and then deployed.

So does that mean any program that's written for Windows Server can basically run on Azure Muglia: "Any" is a very big word. I would not say "any." I mean, what we're doing is trying to take a very broad set of applications that people have written and simplify the process of moving it to Windows Azure.

Now, that said, just because you've done that doesn't mean the application takes advantage of Windows Azure. It certainly won't take advantage of all the services that are available. It may not scale out automatically as an example, and it certainly doesn't provide things like multi-tenancy, if that's important.

So I'm not saying, "hey--one click, boom, you're done," but it is a good stepping stone to help people get existing applications onto Windows Azure.

One of the challenges with the shift to the cloud is making sure businesses even understand these costs and benefits. How does Microsoft talk to businesses about that Muglia: Yeah, they're still all deciding that. We had a CIO Summit here about a month ago, and one of the things I talked to CIOs about was that they have some applications that [are] sometimes referred to as context, they provide context to their business. And they're critical applications, but there's no differentiation in them. And those are great candidates to go to software as a service. So, you know CRM, e-mail, collaboration -- those are all good examples -- maybe an expense-reporting application, something like that, where you can get a provider. Microsoft, or whoever it might be, to run the app for you. And we're seeing those apps move very quickly to the cloud.

Then when it comes to business applications, the question for every company is: When does it make sense What applications make sense and when does it make sense to do it And of course they have the option of either using a public cloud or their own private cloud within their own data center. My advice to companies, very simply, is every company has an application that they can take and write to Windows Azure and move up onto the public cloud. In fact, I was in Hong Kong talking to a large financial institution. I said, "Look, I know you're not going to move your core banking systems to Windows Azure tomorrow, but you've got an application. You have 4,000 apps, you've got an application that you can move up there. Start doing that now because the platform is really ready for applications to move."

Organizations may or may not be ready, and we will work with them to help them get ready and to listen to their concerns, understand what they need from us for them to feel good about moving applications, what we need to do to help them with compliance issues, and reassure them on security and things like that--which are areas that are inhibitors right now. Fundamentally, the platform is ready for applications to move.

Earlier this year Microsoft talked about this notion of hardware makers building an Azure appliance. Customers could use them to basically run Azure in their own private cloud in their own data center. Where are things with that What does it look like Muglia: Most of the early ones for customers will wind up being racks because that's what their data centers are designed to handle. It turns that in order to put a container in a data center, you actually need to have a concrete floor and the ability to take the 70,000 pounds or whatever it takes to roll the thing in. And Windows Azure is very happy sitting in racks, and it's just as happy sitting in racks as it is in a physical container.

It's moving along. I was actually just down in the Bay Area talking to eBay yesterday about the work we're doing with them and it's going along really well. We're working through getting their Azure appliance up and running and talking about how they'll use it, and it's been great and exactly what we needed because we're getting the feedback that we need from customers to understand what they want to run in their data center, what they want to have control over in comparison to what they want Microsoft to do. So, it's still pretty early.

Is Microsoft still defining what it will be Muglia: We are still defining exactly what roles our OEM suppliers have, what role customers have, what roles we have. We're still at that stage.

One of the things you talked about today is this idea of companies being able to move existing virtual machines to Azure. What does that mean Is that a big request from customers What does that allow Muglia: It's important to people because what it does is it allows people to take existing applications and just have pieces of them run on Windows Azure. Now, we're taking a bit of a different tact. I mean, to us, that's not the destination. That's not what we think is the long-term solution for applications. But we do understand that customers have applications that have parts of it or components that can't run in the Azure platform as a service environment yet, and this helps get them there.

One of the products in your universe is the Windows Home Server. The next version includes a feature that lets users back up (their information), even if they're on a Mac. How is that coming Muglia: It's coming and we've got a new version that's been in beta tests for a while that I think will be out sometime next year. There's a new version of that, as well as new versions of Small Business Server that are also (coming).

Can you talk more about Aurora--Microsoft's hybrid server solution that mixes local machines with the cloud. What's happening with that Muglia: The interesting thing here is that we've been building Small Business Servers since 1996. I think was the first version that came out. You know, and there the whole idea was, "gosh, I can get Exchange and get a file server and get Active Directory all in a box." And that's great, but what we've learned is that now with cloud services, if a customer can use Exchange and SharePoint out of the cloud, that simplifies their infrastructure for particularly these small businesses.

Now, it's still important to have localized entities, that's still an important thing, and that's something that Aurora provides. It connects back to these cloud services.

Microsoft showed a slide awhile back, and out in 2012 it had the next server release, and you guys have said that's a major release. Can you talk a little bit about broadly what are the goals kind for Windows Server going forward Muglia: (Stares silently, an homage to Windows Division President Steven Sinofsky).

Maybe you can tell me the answer in Dutch. Muglia: (laughs) We have certainly been working on the next release of Windows Server. But, unfortunately, I think I'm under the same embargo on that one.

The kind of things that you can expect us to do with Windows Server are the things that customers want us to do: Improve the way we do availability, make the system more manageable, simplify the manageability of the system, do more things to connect the cloud services. That's becoming really important. And then of course, you know, we'll continue to evolve the underlying components, the remote desktop components.

Remember Windows Server 2008 I said the most important thing about Windows Server 2008 is it's the next release of Windows Server. And this will have that same exact characteristic.

You've been kind of immune to this, but there's been a fair amount of turnover at Microsoft this year, in particular, Ray Ozzie who was an early champion of the cloud and really influential saying "let's move the company in this way, this is where the industry is going." What do you think his departure means to Microsoft, to your business in terms of that cloud vision Muglia: Well, Ray is a great guy and he's done some fantastic work in terms of getting Windows Azure started, as an example, and pushing the company on the cloud, so it's been great. I've known Ray for a really long time and I enjoy working with him.

I think we're well under way on all of this, and Ray has not been involved day to day in what we're doing on Windows Azure since the team moved over into my organization. So, going forward, I feel like we're well-equipped and got a lot of great people at Microsoft that are driving these things, but we love Ray...

My sense is that really in terms of that cloud work, like you said, that has really reached the point where all the business units get it, and are on board. So now is the goal to get them moving to Azure Muglia: No, we don't need to pull people to Windows Azure. We do see that different properties within Microsoft will move onto Windows Azure at different times because they're at different stages of maturity. I talk to my guys about new things we're doing. With Windows Intune, for example, getting that up and running on Windows Azure is one of the key focus items of that team. We're working on this with our Forefront technology, for example, deal with end point protection--those sorts of things. But they're all coming. It's the direction of the future.

One of the things that struck me with Ray leaving is what happens the next time the company really needs to shift broadly It doesn't seem to me there's somebody--and maybe that person is you, who has both the position in the company and the technical knowledge to see the winds of change coming and say "wow, the whole company needs to tilt this way." I mean, Bill Gates is not there, Ray's not going to be there... Muglia: I think what's happened (is that) the company is focusing in a set of different areas right now, and we have very strong technical leaders inside each of the areas of focus, whether it's for Windows Phone or Windows -- my organization. And I think that amongst us, we've got a lot of people that can see the sets of changes that are coming and really help to drive the company in that direction.

I still hear from Bill, so it's not like if there's something coming that Bill might see, I'll certainly hear about it.

When was the last time you got mail from him Muglia: Oh--just within the last month or so. I get mail from Bill all the time. While he's not active in the company day to day, he's certainly active across the industry. And while his focus is clearly on philanthropically--the work that's happening with his foundation, he is still our chairman and he still gives us feedback.

How has that change worked You used to have Think Week... Muglia: Still do.

You still have it, but it's different. Muglia: It's different.

Are you involved I know it's a bunch of people now as opposed to just Bill reading a bunch of papers written by people across the company. Muglia: I am. My technical assistant is more involved because he helps to gather the papers that get submitted from my organization into it -- and it's now much more. I think it's an example of how Microsoft isn't about one person. It might have been about Bill at one time, or maybe Ray has done some key things. But now it's a much broader company, and Think Week's an example of how that's changed. And so many people work together to pull together the best ideas.

Do you expect more competitors in that platform as a service Even though you don't see just virtualizing infrastructure as an endpoint, you guys have said there's customer need. Muglia: Sure.

Do you think that the Amazons and Salesforces are going to try Muglia: I think there are only two other platform as a service actually available in the market today: Google with AppEngine, and Salesforce. Both of those are very narrow and special purpose relative to what Windows Azure provides. Windows Azure has a much broader set of services that is applicable to a much broader set of app than either of those.

It will be interesting to see what Amazon is going to do. I mean, Amazon has been adding some services, but they're still so infrastructure-focused, and VMware is in exactly the same place. The litmus test, to me, is if you're managing the virtual machines, it's not platform as a service.

Do you think that that's going to end up being more of an interim business for you guys than you expected Your infrastructure as a service Muglia: I think that what we'll see is a relatively rapid evolution of developers. Like when we talked to eBay, they're going to move (straight to platform as a service). That's what they're doing. And while I don't know that that will be the typical case, I think that people getting to platform as a service will be the key destination. That's one of the reasons why we're so focused on getting the Azure appliance out and making that something that people can deploy broadly, because public clouds are great, and we think that public clouds are really important for a large set of customers, but we do think there will be a lot of private clouds too.

Besides these Azure units you're designing for businesses, can you give us an update on your efforts on your own data centers I get the sense that building on that had slowed down some. Muglia: We're picking up now. What happened is we built Chicago. I mean, very literally what happened is we built this massive data center.

Which CNET visited. Muglia: And, you know, it's cool. And then 2008 happened and it slowed everything down, so we had about 12 months of incremental capacity available within our data center building. So now we've absolutely built it up. And we're doing things like we're expanding Quincy and we're adding new capacity.

This PDC is not like the others, right Muglia: This is an interesting PDC for us because we're doing it on campus -- it's a cloud PDC that's being done through the cloud. And we have all of these events -- it's actually very cool because for the longest time, our subsidiaries in different countries said, hey, we want a PDC. But, we've never done a PDC outside of the U.S., this is the only place we've ever done a PDC before.

And now what we did by doing it this way, we've enabled every country to have their own event and essentially their own PDC. So, we're live-streaming this, and we're using Silverlight and a very cool new player for that. But one of the really interesting things is with IIS and with the cache, with the CDN and the content delivery network, we are doing all on demand -- the entire on-demand infrastructure is being run on Windows Azure.

That is interesting. Muglia: And we did not run the live streaming on it today. It was a little too fresh for us to do that, but that's the direction we're going to go, and that whole infrastructure is now available to run HD-level video broadcasts globally.

Have you guys run any live events on Azure yet, or not yet Muglia: We have not yet. Not live yet. Technically, there's no issue for doing it, and you will see us do that in the future, but that was a little too fresh.

But you wouldn't do something as big as the Olympics on Azure yet Muglia: Not this week. Whether NBC would We'll talk with them about doing it at some point in time, but you will see us do our major events, and then all of the on-demand stuff is coming off of Windows Azure and our content delivery network.