Despite the "inmates running the asylum" aspect of software-as-a-service, cloud computing should not be looked on as an overthrow or elimination of IT. For large organizations, it simply can't be. The challenge, then, is figuring out how to reconcile, integrate, and optimize, internal and external cloud capabilities.

While some see the cloud as the death knell of internal IT, others see the greatest opportunity for cloud computing, as well as the evolution of IT, in a hybrid model of public utility computing and internal corporate/organizational technology service providers.

The latter is Microsoft's view. "Our job, simply put, is to deliver what customers need to take advantage of cloud computing on their own terms," said Bob Muglia, Microsoft's senior VP of server and tools business, at his keynote speech at the company's Tech-Ed 2010 North American conference in New Orleans this week.

That hybrid approach sounds both functional and pragmatic. And while it may be self-serving on Microsoft's part, given that Microsoft has a wide-and-deep vested interest in on-premises software, it is far-sighted if it helps IT managers develop innovative ways to use compute power and resources, wherever they are and however they're needed.

At least one CIO I know has expressed interest in being able to develop applications and stress test them in the public cloud, then bring them back in-house to run in an internal cloud architecture, already optimized. There is also potentially great advantage to being able to run applications in-house that can tap external (public) resources, processing or storage, on an ad-hoc, as-needed basis.

Microsoft is putting its money (and expertise) where its mouth is. At Tech-Ed, Microsoft announced an updated software development kit for its platform-as-a-service system, Windows Azure; enhancements to its cloud database, SQL Azure; and product availability of Windows Server AppFabric, a middleware layer that supports the development and management of "composite" cloud applications, which had been in beta test stage.Despite the "inmates running the asylum" aspect of software-as-a-service, cloud computing should not be looked on as an overthrow or elimination of IT. For large organizations, it simply can't be. The challenge, then, is figuring out how to reconcile, integrate, and optimize, internal and external cloud capabilities.