Microsoft last week unveiled its cloud computing strategy, a plan that was met by some with skepticism and doubt. Yet, while it's true that Microsoft is behind Amazon and Google in offering on-demand Web services, it's a mistake to think Microsoft won't catch up. It will, and here's why.Microsoft's cloud strategy, laid out at the company's Professional Developers Conference in Los Angeles, revolves around Windows Azure -- "Windows in the cloud," as Ray Ozzie called it -- and the Azure Services Platform, the base upon which Microsoft will offer Web-based services. For a recap, see InformationWeek's Nov. 3 cover story, "A Cloud & A Prayer," or download the full report from our InformationWeek Reports center.

Not everyone is impressed with Microsoft's plan. In a post titled, "Is The Cloud The End Of Microsoft?," my colleague Art Wittmann writes that "there's no inevitability about Microsoft's success as a cloud platform." ZDNet's Dana Gardner refers to Microsoft's cloud push as "tepid." Dave Rosenberg says Azure "isn't very compelling."

I agree that Microsoft has come up short in some respects, but it's important to separate the company's half-baked, first-generation platform from its overall strategy. The plan makes sense; it's the execution that's sputtering. Here are five reasons Microsoft's Azure cloud initiative has a very good chance of success.

Software plus services is the right approach. Microsoft has stubbornly insisted on using the term "software plus services" to describe its cloud strategy, with good reason. The emerging model of computing involves software-laden PCs and smartphones hitting up against servers, some in corporate data centers and others in the cloud. There are a million ways that developers can leverage this model to create rich, mobile user experiences. In this regard, Microsoft is ahead of competitors, not behind. (This also means that Microsoft doesn't have to live without a software revenue stream, by the way.)

Microsoft has the resources. Microsoft has everything it needs to make Ozzie's cloud vision come true -- thousands of internal developers, tens of thousands of outside developers, $20.7 billion in cash, and new data centers going up all over the world.

The delay doesn't matter. Microsoft is behind the competition in delivering cloud services, but most of its customers don't care. That's because businesses are taking a deliberate approach to cloud service adoption, as they mull the security, reliability, data-integration, and IT governance implications of storing data outside of their own data centers. The runway for cloud services will be measured in years rather than months, so Microsoft's foot-dragging hasn't put it hopelessly behind.

Installed base. Microsoft has a half billion end users and millions of business customers around the world. As has happened many times in the past (browsers, databases, business intelligence, and, more recently, virtualization), those customers can be converted to Microsoft products as they become available, even when alternatives exist. Expect to see the same phenomenon as Microsoft rolls out its Azure cloud services.

Microsoft already is in the game. Microsoft offers its CRM, Exchange, SharePoint, and Office Communications applications as services for enterprise customers, and other services -- Windows Live, Office Live, Xbox Live -- for consumers. Live services run on hundreds of thousands of servers and are used by 460 million people, according to Microsoft. That translates into 11% of all "Internet minutes." I'm not sure exactly what that means, but when you put it all together, it's clear that Microsoft is well along the Web services path.

Amazon and Google have a head start in cloud computing, and they will continue to forge ahead with new capabilities and add customers along the way. But it's a mistake to underestimate Microsoft. It will be there in a big way, too.