By Rory Cellan-Jones
Technology Correspondent, BBC News, Los Angeles
Tour of Microsoft's virtual storage centre
Microsoft has unveiled a cloud computing service, in which data and applications will not be stored on individuals' computers.
The new platform, dubbed Windows Azure, was announced at Microsoft's Professional Developers Conference in Los Angeles.
The platform was described by Microsoft's chief software architect Ray Ozzie as "Windows for the cloud".
The framework will be offered alongside the next Windows release, Windows 7.
The move sees Microsoft taking on established players like Google and Amazon in the rapidly growing business of online software.
The aim is to allow developers to build new applications which will live on the internet, rather than on their own computers.
Microsoft believes consumers will also want to store far more of their data - from letters to photos to videos - on the servers in its "cloud" of giant data centres around the world, so that it can be accessed anywhere, from any device.
Microsoft software architect Ray Ozzie on the new "Windows for the cloud"
The move, which Microsoft sees as a major shift in its corporate strategy, was unveiled in front of 6,000 software developers from around the world.
The term cloud computing has become increasingly fashionable, as companies with large data centres start renting out space to businesses wanting to build rapidly growing online applications without needing to invest in more servers as traffic grows.
For consumers, there is the prospect of a future where much of their data and many of the applications they use could be stored online "in the cloud".
Microsoft, which still reaps huge profits from its Windows and Office products, is now moving into territory where it has so far struggled to make an impact.
Google, dominant in search and in online advertising, already has a suite of online applications living in the "cloud". Sam Schillace, who runs Google Docs, says he is not worried by the arrival of a big new rival.
"Competition, even stiff competition from Microsoft doesn't bother us because it will either make the internet as a whole better or it will be irrelevant to making it better."
Google's cloud computing developer Sam Schillace predicts a move to online documents
Without naming Microsoft, Mr Schillace drew a contrast between the old model of "bloaty" software and a more open future where online applications would be updated virtually every week.
"The way people work and the way people communicate, openness and velocity and nimbleness and focus are much more valuable and I think that's a very big shift."
Amazon, with big data centres handling millions of e-commerce transactions, has been another pioneer in this field, with its Elastic Cloud Service.
Using the spare capacity on its servers, it allows a range of customers big and small - from Facebook application developers to the Washington Post - to build applications which can cope with a sudden rush of demand.
In his speech in Los Angeles, Ray Ozzie said he "tipped his hat" at Amazon for its work in this field, saying "we are all standing on their shoulders."
Microsoft is taking a different approach from some of its rivals, insisting that its customers still want to be able to choose to have their software offline, on their own computers, as well as online in the web cloud.
"We believe deeply in on-premises software and we believe deeply in this new world of software in the cloud," said Ray Ozzie.
Azure is Microsoft's bid to enter the cloud computing market
It's a strategy which rivals will say is designed to protect the profits from its existing software products. But the scene is set for a battle in the clouds between the few big companies wealthy enough to be able to build the huge data centres on which this new form of computing will depend.
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