As Microsoft and Yahoo go their separate ways, IBM and Google are cozying up to move into what they think will be the dominant IT delivery model of the future--so-called cloud computing.

Over the next year, IBM and Google plan to roll out a worldwide network of servers from which consumers and businesses will tap everything from online soccer schedules to advanced engineering applications. The IBM-Google cloud, fresh off testing at several major universities, runs on Linux-based machines using Xen virtualization and Apache Hadoop, an open source implementation of the Google File System.

Google already has launched numerous cloud-based services for consumers, such as e-mail and storage. With the exception of security requirements, "there's not that much difference between the enterprise cloud and the consumer cloud," Google CEO Eric Schmidt said earlier this month during an appearance in Los Angeles with IBM chief Sam Palmisano. "The cloud has higher value in business. That's the secret to our collaboration."

A STUDY IN CONTRASTS
Palmisano and Schmidt insisted that their companies are similar, despite obvious differences. "We're boring, they're exciting. We're slow, they're fast. We're fat, they're skinny," Palmisano joked. But the contrasts are mostly skin deep, he said, noting that the companies share "a common technical alignment."

	Palmisano: Picture the IBM-Google cloud as yay big Photo by Dan Farber

IBM believes the cloud model will allow it to reach small and midsize companies around the world, which it says represent a $500 billion IT market that it has trouble serving profitably through the usual sales channels. Google and IBM could conceivably supply computer users--both business and consumer--with hosted offerings ranging from basic productivity software like word processing and calendaring to sophisticated management and security tools through IBM's Tivoli brand and Google's Postini unit.

Under a portion of its cloud strategy it's calling the Blue Business Platform, IBM plans to launch an online marketplace offering its own pre-integrated products and services, as well as those from other software developers. Customers will be able to use the software they buy "on premises or in the cloud," Palmisano said.

The IBM-Google alliance started a couple of years ago with a phone call from Palmisano to Schmidt. "Sam called and wanted to know what we thought about distributed computing," Schmidt said. "We weren't looking to sell them anything," Palmisano insisted. Last October, the companies gave their joint platform project to several top engineering universities, including Carnegie Mellon, MIT, and Stanford, to poke away at. Now, IBM and Google say it's ready for wider use.

Their partnership is solidifying just when Microsoft's efforts to acquire Yahoo have broken down. Microsoft's approach to the cloud trend is to move some of its applications to the Internet under a strategy it calls software plus services. But the bulk of its profits still come from products either sold in boxes or preinstalled on PCs. Microsoft's enormous user base gives the company time and space to get its Internet efforts right. But, for the first time in years, Redmond is seeing clouds on the horizon--and they look a lot like Google and IBM.