Kurt DelBene (left) and Satya Nadella (right): The men behind Microsoft's push into the heavens. Photo: Jon Snyder/Wired

People keep asking Kurt DelBene if Microsoft is serious about cloud computing.

DelBene is the man in charge of Microsoft’s Office division and one of five division heads who report directly to CEO Steve Ballmer, so he’s the right person to ask. But he finds the question a bit perplexing.

“We’re as serious about the cloud as we are about evolving our businesses,” he says, nodding to the man beside him, Satya Nadella, who runs Redmond’s Server and Tools division. “We always look a little askance when we get the question, because it always seems odd to us. Particularly as engineers, we say: ‘[The cloud is] the way the world is moving.’”

On one level, you can understand why they still get the question. But at the same time, you can see why DelBene responds with incredulity. With a company like Microsoft — a massive corporation entering its fourth decade — change often comes in small steps, and old reputations die hard. But as the world moves to the proverbial cloud — pushing both applications and their underlying infrastructure onto the web — Microsoft is clearly moving the same way.

In other words, the situation is complicated.

It’s been more than a year since DelBene’s division unveiled Office 365, a web-based version of Microsoft’s venerable suite of business applications, and it’s been nearly two since Nadella’s Server and Tools biz took the wraps off Windows Azure, a service for building and deploying applications across the net. But Microsoft has spent more than 30 years selling desktop and server software, and as it moves to the web, it will continue selling desktop and server software for years to come.

With both Office 365 and Azure, Microsoft is actually straddling the line between the web and local software. As they talk of the world moving to the net, DelBene and Nadella are just as adamant that today’s businesses still want — and indeed need — their own software. “We’ll support you on-premises. We’ll support you in the cloud,” DelBene tells Wired, dropping the buzzwords of the day as he discusses Microsoft strategy alongside Nadella. “We’ll support you when you go cross-over and want some of your users in the cloud and some of them on-premises.”

But his overarching point is well taken: Microsoft is evolving. The company’s dual-identity may be difficult for some to grasp. But for DelBene and Nadella, it’s quite obviously the best way forward. Microsoft is serious about maintaining the software business that have served it so well over the past three decades, but, yes, it’s also serious about cloud. “If there’s one thing … I want to make sure that’s clear,” DelBene says, “it’s that we feel very deeply in our hearts that [the cloud] is where we’re going.”

The Anti-Google

Office 365 is a microcosm of the New Microsoft. The year-old service offers hosted versions of three Microsoft server tools — Exchange, for email; Lync, for IM, VoIP, and video conferencing; and SharePoint, for all sorts of other collaboration — and these tools can be accessed from a web browser. But in the main, they’re meant to be used in tandem with Microsoft’s desktop clients — i.e. software you install on your PC.

About 90 percent of Office 365 users are small businesses with fewer than fifty employees, and according to DelBene, these businesses typically use the service with local software. The web apps serve as a kind of fall back — something you use when you’re not at your primary machine. “They’re running [the desktop version of] Office. They want an Office client experience,” he says. “In most cases, we do see [that] almost everybody goes to the web apps, but they use the rich clients as well.”

Google — Microsoft’s chief rival — has openly criticized Office 365, trumpeting its own suite of business applications, Google Apps. Google Apps eschew all local software, and Mountain View argues that such a setup provides benefits you don’t get from Microsoft.

“Microsoft is trying to extend its client-server model to the Web, which is a very hard thing to do,” Google tells us. “We started with the web, require zero client software and Google Apps updates automatically – simply refresh your browser for the latest innovation. Google Apps is based on entirely modern technologies designed for today’s world.”

But Kurt DelBene won’t entertain suggestions that Office 365 is somehow less flexible than Google’s suite. If you install Microsoft’s desktop software on your laptop, he says, you can use it on the go. And if you’re on some other random machine, you can use the web apps. “That kind of occasional use is something we think [Microsoft's] web applications are actually quite good at,” he says.

Microsoft’s web apps don’t give you everything the local clients do, but just as Google can automatically update its web apps, so too can Microsoft. The company continues to improve its web apps, DelBene says, and though Microsoft is still fully committed to its desktop clients, he’s adamant he won’t hold back the Office web apps merely to protect the company’s existing software business. “We have a very rich investment in the web applications,” he says, “and I tell my team specifically, do not worry about whether you’re going to harm the viability of the Office [desktop] applications.”

Azure Woos the World

Windows Azure is also a balancing act. Like Amazon’s Web Services or Google’s App Engine, it seeks to move application development and hosting onto the web. But for more than a year, Microsoft has flirted with the possibility of offering businesses Azure appliances that would allow them to run a version of the service in their own data centers. eBay is already using an early version of these appliances in its data centers.

But even more so than Office 365, Azure shows that Microsoft is evolving. Satya Nadella took the reins of the Server and Tools group after running the company’s Bing search engine, and he points out that his old group — like other groups inside Microsoft — is using Azure to build and host their own applications. According to DelBene, engineers are now working to move parts of Office 365 onto Azure, and he believes this will, but one measure, make the service one of most widely used “platform clouds.”

At the same time, Microsoft is expanding the service to accommodate the needs of outside developers. At the moment, Nadalla says, Azure is mostly used by developers steeped in .NET, Microsoft’s longstanding development platform. But contrary to popular belief, Azure handles other languages as well, including Java and PHP, and just this week, it rolled a beta version of the open source Node.js platform onto the service.

In this respect, Azure has evolved beyond Google App Engine, a service known for tightly restricting what developers can and can’t do. It not only embraces a wide-range of languages, it handles outside databases and other services. Last week, at a conference in Silicon Valley, 10gen — the startup behind the open source NoSQL database MongoDB — demonstrated the database running on Azure. That’s not something you can do with App Engine.

According to 10gen CEO Dwight Merriman, many of the company’s customers have actually deployed Mongo atop Azure. He says that most of these customers are using Microsoft’s own .NET platform to build applications atop the service — “That’s it’s core audience,” he tells us — but he says he’s seen some PHP use as well.

‘A Unique Place’

Naturally, as Microsoft pushes Azure, it will continue to push its good old fashioned server software as well. But for Nadella, this will only enhance the development of the company’s cloud service. After all, Azure runs atop the company’s Windows Server software and its Hyper-V hypervisor, which spins up virtual servers. By improving Windows Server and Hyper-V, he says, Microsoft can improve Azure. And as it runs Azure, it will better understand how Windows Server needs to improve. Nadella calls it a “virtuous cycle.” Windows Server and Windows Azure, he says, are really “one thing.”

In a way, they are. And that’s why it can be so difficult to sort through Microsoft’s strategy. But ultimately, the strategy makes sense. Microsoft’s notion of cloud computing is very different from Google’s. But that doesn’t mean Microsoft isn’t moving onto the web. It is moving to the web, for DelBene and Nadella, it’s at a pace that befits the company. As it embraces web services alongside its traditional businesses, Nadella says, Microsoft is in a “good, unique place.”