BROADER CLOUD STRATEGY
Turner also went beyond virtualization to spell out Microsoft's new "vision statement" developed by the new leadership team of CEO Steve Ballmer, chief software architect Ray Ozzie, chief research and strategy officer Craig Mundie, Muglia, and himself. Three decades ago, co-founder Bill Gates staked out a mission of building software to run on every desktop and server in the world. The new vision is to build software that leverages the Internet to operate anywhere on a "world of devices."

That means spreading its $8 billion-a-year R&D budget across four areas: Vista-enabled desktop computing; entertainment software for the Xbox and other devices; consumer cloud computing such as search; and the commercial aspects of the cloud, including virtualization and software such as Exchange Server, SharePoint, Live Meeting, Communications Server, and Outlook.

Microsoft's virtualization portfolio and strategy have significantly expanded and matured since its 2002 acquisition of Connectix, which laid the foundation for the company's initial Virtual PC and Virtual Server products. The portfolio now spans the server, desktop, application, and management layers of virtualization. The strategy of leveraging its Windows Server installed base, differentiating itself by using end-to-end virtual and physical Windows management tools, and offering lower-cost (but not as technologically sophisticated) alternatives to VMware may pay off and make Microsoft a leader in the virtualization market.

The current versions of VMware ESX Server and Virtual Infrastructure provide more functionality than Hyper-V, but Microsoft is betting its virtualized server farms that many IT shops won't be willing to pay VMware's price for the difference.