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Ray Ozzie's cloud hangs over the Valley

During a talk in Palo Alto, Calif., Microsoft's chief software architect discusses the impact cloud computing will have on the tech industry.

Ray Ozzie, speaking Thursday at the Churchill Club in Palo Alto, in a discussion moderated by Wired's Steven Levy. Ina Fried/CNET

PALO ALTO, Calif.--Ray Ozzie tends to see things much like a Seattle meteorologist--always cloudy.

Making a trip to sunny Silicon Valley, Ozzie addressed Silicon Valley's Churchill Club, outlining the transformational role that cloud computing will play.

As he discussed that vision, moderator Steven Levy asked if Microsoft itself was sufficiently cloudy when he had arrived.

"The Hailstorm had passed," Ozzie quipped, making a reference to Microsoft's widely panned first attempt to offer cloud services.

In seriousness, though, Ozzie said that Microsoft wasn't really cloud-focused when he joined the company, following Microsoft's purchase of his Groove Networks.

"Respectfully, they were very busy working on things that would become Vista and Office 2007," he said. "There was a lot of 'PC' thinking. I worked with Steve and Bill on change management and that's what I have been doing."

Ozzie declined to agree with Levy's assertion, however, that perhaps packaged software was the buggy whip of our times.

"No," Ozzie said. "Different market segments want to consume value in different.

The goal of the cloud era, he said, is to create a world in which applications are sandboxed like the browser, cached like Javascript and all the data fully synchronized.

Levy suggested that perhaps that kind of world might be bad for Microsoft's Windows business, but Ozzie disagreed.

"We'll always need an OS," he said. "Every device needs an OS. The programming model on top's of that OS is what's changing."

Ozzie said the key is making sure that operating system is "contemporary and relevant."

The Netbook factor
Netbooks really are an opportunity, he insisted. "We have to write an OS other than XP runs on it, and we've done that with Windows 7."

He expanded later on, noting that what most users really want in a Netbook is actually a full-fledged PC that can do more than just browse the Web.

"The Netbook as consumers have spoken for it is a laptop," he said. "People expect Office for it. They expect to be able to go to download for it." (Editors' note: is a property of CBS Interactive, which also publishes CNET News.)

As for ARM-based devices, or other non-Windows products, Ozzie noted that historically consumers haven't bought keyboard-based devices that weren't full computers.

"I'm not writing it off," he said. "If it happens and if it happens in volume it will be a different type of device."

But he said. "I believe the X86 instuction set and Intel and AMD Netbooks...they are going to be the majority of what's out there."

Levy also pressed Ozzie on what it's like now that Bill Gates has been gone from full-time work for just about a year.

"He writes, he calls, but infrequently," Ozzie said. He said Gates remains involved on a few key projects. He's also just an e-mail away, when he or others have concerns.

Some things have changed, he said, such as the company's review process as well as its famed ThinkWeek in which employees from all over Microsoft would submit hundreds of papers for Gates' review.

"Bill has an amazing ability to consume very quickly," Ozzie said. "A thousand some papers would come in for each Think Week. He would go off to a cabin and sequester himself. He would probably read a couple hundred of them. People loved it."

However, Ozzie said that ThinkWeek, as it was set up was "a very Bill-unique thing"

"I don't think that's something we want to reproduce," Ozzie said. The replacement for that, he said, is a process in which a broader set of technical people offer their thoughts on new ideas.

"People like feedback--senior technical feedback," Ozzie said.

Steering the ship
Ozzie noted that Microsoft is a bigger company than the one he competed against during his time at Lotus and Groove.

"We always were amazed at how quickly the ship could turn," Ozzie said. "But that was a different era. It was a smaller company."

In trying to change Microsoft, Ozzie said he has tried both things very much in the company's tradition--his Internet services disruption memo was modeled on Gates' missives--as well as in ways that are less familiar, such as trying to break down the company's well known organizational structure, with software developers working in offices and corresponding over email.

Levy asked Ozzie how many companies have the ability to build the kinds of data centers that Microsoft and Google are building.

"Not too many," he said. When asked about who will be there for the long term, Ozzie wasn't ready to include Amazon in that list.

"I don't know about Amazon," he said. "They are the leader. They have done amazing work, but the level to which you need (to invest) to build it's very substantial."

Ozzie credited an unusual source for Microsoft's position to be able to deliver cloud-based services--its much maligned MSN consumer services. He noted that it was Hotmail and Messenger that gave Microsoft the skills it needed to ultimately build Windows Azure.

"Had we not kept MSN alive...we wouldn't have had those competencies in-house," he said.

It was a rare public speech for Ozzie, who also spoke at an investor conference last month.

Ozzie also spoke about the business side of cloud computing. I captured his answer on video. (Apologies in advance for any quality issues--I'm multitasking).

In the question-and-answer period, Ozzie was asked for his thoughts on Google Wave, the company's recently introduced tool for combined collaboration and messaging.

He praised Google for taking on a big task, but also took issue with their approach saying it is "anti-Web."

"As a system, I think the complexity is an issue," Ozzie said. "The problem, the way the defined it is a complex one."

That said, it will offer insight into whether people want messaging that is distinct, such as e-mail or instant messaging, or whether there is demand for a more integrated product.

"I hope we learn, as an industry, an awful lot from Wave," Ozzie said.

Other questions from the audience ranged from what computer science professors should be teaching to whether Internet Explorer would support HTML 5. Ozzie said he had nothing to announce on the latter front, but added, "It is our commitment to be a world class Web browser, what our competitors like to call a modern web browser. I think you can expect us to do the right thing."