Sunday was the end of the World Cup so Microsoft decided to play off the theme with videos of fans in the pubs singing OLAY, OLAY, OLAY but instead sang O Cloud, O Cloud, O Cloud, not exactly your bonding IBM theme song.

Just to be clear this is a partner conference full of people who buy Microsoft products and resell them in their markets. And the cloud SCARES THE CRAP OUT OF THEM.

What came across loud and clear is that Microsoft is not going to miss this round of IT transformation.

Steve Ballmer gave the keynote and reiterated the key dimensions of the cloud, something that he spoke about back in March but for most of the partners this was brand new.

Later I found out from a group of Microsoft executives that Microsoft has mandated that 90% of its products be cloud-focused by the end of the year. They felt that they had reached 70% by the conference, a lot of it focusing on Azure and pushing key products to be SaaS.

The key dimensions of the cloud according to Ballmer are:

1. Creates opportunities and new responsibilities.
2. Cloud learns and helps you to learn, decide and take action
3. Cloud enhances social and professional interactions
4. Cloud is going to drive server advances that run on the cloud
5. Cloud wants smarter devices - which was a big play for fat clients!!!

What's important about this is that Microsoft is defining what the cloud will be for many of its customers. And it's doing everything it can to bring the partner community along with them. If you look at the competition, Amazon, Rackspace, Google there's no room for the partner. This is what scares them. Microsoft is giving partners a chance to jump on board.

The big announcement was the Azure appliance, which is a preconfigured Azure platform to be installed at a client's physical site alleviating the concern for security and data proximity. There was not a lot of information and I got the distinct impression the thing was only baked over the last week or two but a number of big vendors committed to building or using the Azure appliance namely HP, Fujitsu, Dell, and - surprise - eBay.

The Azure appliance lets Microsoft extend its cloud solutions to its partners. And by announcing that some larger partners would open Azure-hosted data centers they fulfilled the vision. This is where Microsoft has made an amazing move on the cloud chessboard, at least Check!

They are going to give partners of all sizes and levels a way to host, collocate with a hosting company or buy from Microsoft cloud services for their clients. With the installed base of Microsoft products this could rapidly propel them to the front of the cloud line especially in the SMB areas where partners play.

Still the mood was skeptical because the cloud changes the game on the partner. Where they used to compete only at a local level against other VARs or VADs now they have to compete on a national, even international level with every cloud provider. Welcome to the brave new world. Either get on board or become the next BlockBuster video stunned by Netflix!

Of course there were plenty of the traditional upgrade announcements, the most important being Windows 7 and Windows Server. During the discussion a new message about Windows caught my ear - "Make the Windows experience a vital and LOVED part of users' lives!" Something Vista didn't do!! According to Microsoft 1.1 billion PCs run Windows and 70% still run XP at work but at home they run Windows 7 (of course they didn't mention Mac). The user experience at home is superior to the user experience at work. So Windows 7 upgrades for 2010-2011 is a high priority.

During a demo session Microsoft showed different flavors of laptops, desktops and of course had an iPad-like device they called a slate. Not sure why this got so much attention in the press other than the clear message that there will be full-blown slates (Pads) that run Windows 7, phones that run Windows 7 Mobile, and that life will be great with Windows on a Pad. There was nothing too shocking as there was very little to talk about.

As far as ISVs, a lot of them are coming on board with the Azure and cloud strategy. Some of course are waiting to see what happens and the ones that have to provide secure access and on-site premise solutions are moving slowly. But according to Microsoft 10k customers are using the Azure platform. And for something that's only been shipping this year that's an impressive number.

On the show floor after the keynotes, I talked with a number of hosted Azure providers from all niches. They mostly support the cloud direction and the Azure program. Of course Microsoft gave them the software free to run and opened a marketplace for applications so why not jump on board. I had an interesting conversation with New World App's about its niche play in the government with managed security and disaster recovery. It's extending its partnership with Microsoft by offering Azure for government applications.

It appears that Microsoft buttering up ISVs and resellers by pledging Business Investment Funds (BIFs) - development dollars - to get them to come over. This is the key - apps bring volume and volume brings apps. So a jumpstart is a great model.

Microsoft intends to take some of the billions it's got in the bank and become a leader if not the leader in the cloud. Everyone's jumping on the cloud but they've jumped out in front. Well done.