Microsoft this week faces a considerable challenge as it announces Microsoft's long-awaited cloud computing strategy and the future of Windows and .Net during its Professional Developers Conference next week.

The company must prove it can maintain Windows' relevance while also throwing off the yoke of legacy desktop software as more businesses and consumers get comfortable with cloud computing.

PDC is Microsoft's foremost conference, occurring only semiannually whenever Microsoft has a series of big announcements to make, like the next version of Windows or the birth of .Net. This time around, Windows, cloud computing and .Net will act as the conference's three centerpieces, with a bunch of other technologies under discussion as well. It's not entirely clear what Microsoft will be announcing next week, but the tea leaves aren't too hard to read: Session descriptions have been posted online and Microsoft has been dropping hints about the conference agenda for months.

Cloud Computing Microsoft's lagged greatly behind others including Amazon.com, Google, and Salesforce.com in its cloud computing announcements, but much is expected from the company this week, including more details on the Live Mesh synchronization and developer platform, a utility computing platform recently referred to by Microsoft CEO Steve Ballmer as "Windows Cloud," online storage, and the future of the SQL Server Data Services cloud database services.

An announcement of a utility computing platform or 'cloud operating system' from Microsoft at least somewhat akin to (if not broader in scope than) Amazon's EC2 is all but confirmed.

"The idea of a distributed operating system is something that has merit," Zane Adam, Microsoft's senior director of virtualization strategy, said in an interview this week. Microsoft CEO "Steve [Ballmer] has talked about what he's called 'Windows Cloud' and you'll hear more from Steve about this later this month at PDC." Other reported code names for "Windows Cloud" have been Red Dog and Strata.

This being the PDC, developers will be a focus of Microsoft's cloud computing discussions, including the unveiling of something called .Net Services and more details about how developers can take advantage of Microsoft's Live Mesh synchronization platform. Microsoft will show off some scenarios it has built with its cloud computing services like publishing and conferencing services and talk about how companies and individuals can build applications that include both on-premises and cloud-based components with technologies like .Net Services and a new application server code-named Dublin.

Look for Microsoft to argue that only it can bring businesses and developers the scale, expertise, and breadth of choices they need when deciding on how best to embrace elements of cloud computing.