This story was published on July 12, 2010 in the print version of The Seattle Times.

WASHINGTON — Microsoft executive Bob Muglia said he was meeting with a chief information officer last year when the man grabbed him and said, "You don't get it. We never want another update from Microsoft again."

The man was frustrated by the software updates a corporate customer has to install if it uses Microsoft software — security patches, service packs, other bug fixes.

"I said, 'Wow,' " recalled Muglia, president of Microsoft's Servers and Tools business. "It was really at that moment I got it; I got what cloud computing was all about. What he was asking for was for me to deliver IT as a service."

Monday, Microsoft came up with an answer for the CIO: a new product that would also encourage companies to take a step into cloud computing: the Azure appliance.

The appliance is a cloud-computing server Microsoft manages from afar. Instead of having to install alerts and patches every month, corporate customers won't have to worry because Microsoft will do it for them. It's like a cable set-top box for the corporate data center.

Microsoft is betting its business on the cloud, the new computing frontier, where people access software and data from Internet-connected devices instead of using software installed on a desktop or laptop computer. Some examples of cloud computing are Facebook, iTunes and Google Docs.

At the Worldwide Partner Conference this week, Microsoft's pitch is that cloud computing is the next big opportunity for its partners, 640,000 companies that resell, build on and sell services based on Microsoft software. About 14,000 people are at the conference in Washington, D.C.

"We are not at a phase where we are just seeing small companies take experimental steps in the cloud," said CEO Steve Ballmer during the keynote at the Verizon Center. "This opportunity is real and concrete and available to all of us today."

Microsoft launched Azure, its cloud-computing platform, in February. Azure allows developers to build and deliver software stored in Microsoft's data centers. The service has signed up 10,000 customers, Muglia said.

The challenge to Azure was that Microsoft — and its cloud competitors, Amazon.com, Google and others — have expected companies to trust software and their corporate data to the equivalent of a public-storage unit.

The appliance Microsoft announced Monday could be viewed as a steppingstone to that future. With it, a company's software and data would remain on the company's premises while having cloudlike abilities and features.

This, in effect, creates a private cloud, one that should provide more reassurance to customers concerned with security and privacy.

Muglia said the appliance is a "key piece of strategy" spurred by customer feedback. "People wanted what we were doing with Azure and to allow them to run it in partners' databases and client databases."

Microsoft did not give details on how it would charge customers for the appliance.

Fujitsu announced a partnership with Microsoft to build a Fujitsu-branded appliance. It would install the Azure appliance in its data centers, sell the service to its clients and train 5,000 employees to become Azure specialists.

"Customers like banking, retail, defense, government, local governments, [federal] government, they won't go straight to public cloud," Silvester said. "They may go over time, but they want to learn within their own supplier relationships."

Muglia doesn't see it as a steppingstone so much as a set of choices.

EBay is an example of a company that wanted the choice. The online auction retailer, based in San Jose, Calif., has 200 million items for sale in its database and manages 90 million users. It did not want to move all that information to servers in Microsoft's data center.

But the company has signed up as a beta partner for the Azure appliance and will start testing some low-risk features this year. If it goes well, eBay plan to move more and more of its core functions to the Azure appliance.

James Barrese, vice president of technology at eBay, said it will free up resources for his engineers to build better shopping applications instead of managing server space. He surveyed several cloud companies when he began thinking about migrating.

"Every technology company says the same thing about cloud computing," Barrese said. "For me, it came down to execution. They [Microsoft] are investing aggressively. They are playing to win."