This article is from The Telegraph :

 Around 70 per cent of Microsoft employees are working on cloud-related projects, and that figure will reach 90 per cent within a year, Mr Ballmer told an audience at the University of Washington. He said that he was "betting our company" on a move towards cloud-based software and services, and that there was "so much unrealised potential" in this sector.

"The cloud fuels Microsoft, and Microsoft fuels the crowd," he said. "We're all in."

Cloud computing – the idea that software, files and services are not tied to an individual computer, but are in fact accessible everywhere, on any machine, via the internet – is a matter of increasing importance for technology companies.

Microsoft, which has traditionally earned most of its revenue from its operating systems and computer software, is keen to find ways of adapting this model for the internet age. The company has launched Windows Azure, a platform for developers to create cloud-based applications and services, and has also created online versions of popular programs, such as Word and PowerPoint.

Mr Ballmer said that although browsers lay at the heart of cloud services, the devices used to access these services really mattered. "The cloud wants smart devices," he said, saying that the new Windows Phone 7 Series mobile operating system was designed with the cloud in mind, compared to previous versions of Windows Mobile, that were built for "voice and the legacy world".

After his speech at the University of Washington, he sent an email to Microsoft staff reaffirming his commitment to the cloud initiative.

"Other companies have defined the cloud in a narrow, one-dimensional way," he wrote. "Although these companies provide some interesting components, Microsoft is uniquely delivering on a wide range of cloud capabilities that bring increasingly more value to our customers.

"This view fuels our investments across the entire company, from datacenters to cloud platform technologies to cloud-based development tools and applications. Today, nearly every one of our products has, or is developing, features or services that support the cloud. As I said today, when it comes to the cloud, we are all in. We are all in across every product line we have and across every dimension of the cloud.

"Of course, there is more work to do. We have strong competitors. We need to be (and are) willing to change our business models to take advantage of the cloud. We must move at 'cloud speed', especially in our consumer offerings. And we need to be crystal clear about the value we provide to all our customers.

"We have an enormous opportunity in front of us. We have great products and services in the market today and a range of new ones on their way.

All of our products make the cloud better, and the cloud makes our products better."

I think Microsoft is taking the right approach to the cloud, particularly with mobile devices.  Compare, say, Bing Mobile on a Windows phone to the browser-based Bing Maps on a desktop or laptop.  The desktop version, IMO, is a mess- it's unintuitive, and lacks any type of clear, logical menuing system, whereas the mobile version is easy to use and logically laid out- I'd love to see a Bing Desktop app that leveraged Bing Maps data in a more traditional "app" interface (like MS' Streets and Trips.) 

The best cloud computing experience, IMO, is a good marriage between the app on your device (whether that device is a desktop, laptop, tablet, PDA, or phone) and the data in the cloud, like Microsoft is demonstrating with projects like Live Mesh, Office Live, etc.  Compare the power, speed, and ease of use when using Office Live with an installed copy of Office on your PC, vs. trying to get any real work done with Google Docs in your browser.    If you think about it- the rich client/cloud marriage is really the basis for Exchange- the original "cloud computing before cloud computing was cool" product- the promise of anywhere access to all your data, using a killer, robust, rich client (Outlook or Pocket Outlook) on your PC and/or mobile with the option of browser-based client-free "backup" access (OMA or OWA) if you're not near your usual computing devices.  That's the best of all worlds, and seems to be the Microsoft cloud-computing strategy- if you look at Live Mesh or Office Live, they are primarily client-based, with a limited-functionality browser-based version as a backup.

The Google concept of cloud computing, where everything is done in the browser (which, if you recall, was the original third-party apps for iPhone concept as well!) is really only suitable for lightweight tasks, as any user of Google Docs, or even Outlook Web Access can attest- it's fine for simple tasks or when no better option is available, but you'll run screaming to a "real" app whenever possible!