Ray Ozzie introduces Windows Azure at Microsoft's Professional Developers Conference in Los Angeles Monday.

LOS ANGELES -- Microsoft's unveiling of "Windows Azure" this morning will give the company a foothold in the market for cloud computing -- letting outside developers use its own data centers to deliver online services across PCs, the Web and mobile devices. It also creates a new level of competition between Microsoft and another Seattle-area tech giant, Amazon.com.

Ray Ozzie, Microsoft's chief software architect, took the unusual step of acknowledging Amazon's existing EC2 cloud computing platform this morning as he announced Windows Azure. Ozzie said Microsoft had already been secretly planning its own system -- under the code name "Red Dog" -- for a number of months by the time Amazon launched its service.

"I'd like to tip my hat to Jeff Bezos and Amazon for their innovation, and for the fact that, across the industry, all of us are going to be standing on their shoulders, as they've established some base-level design patterns, architectural models and business models that we'll all learn from and grow," Ozzie said on stage at the Redmond company's Professional Developers Conference here.

Other players in cloud computing include Google and Salesforce.com.

As an example of what its system can do, Microsoft showed a new service called Bluehoo, from a technology company called Sentient. The application, designed for mobile phones and PCs, is a social-networking tool that uses Bluetooth wireless technology to detect nearby people using the service, showing them as animated avatars. It runs on Windows Azure, Microsoft said.

The unveiling of Windows Azure is another step in the company's effort to move beyond its traditional software business. But in making the move, Microsoft is also seeking to take advantage of its legacy in PC and server software.

"Where we see this going is a world where customers continue certainly to have on-premises systems, they begin to figure out ways to take advantage of the services platform, and build services that exist inside the cloud," said Bob Muglia, Microsoft's Server & Tools chief, on stage. "One of our goals is to create symmetry across these two things, so that the knowledge, the skills that you've built, and even in many cases the code that you've built, can be transferred up into the cloud environment."

Microsoft has spent large sums in recent years to build out a network of data centers around the world. The facilities are used to run the company's own online services. Windows Azure will open that infrastructure to others.

"Windows in the cloud," Ozzie called it.

The company is making an early version Azure available as a technology preview to developers attending this week's conference. Microsoft didn't give a specific timeline for the subsequent rollout. Ozzie didn't say how much Microsoft will charge developers or companies for access to Windows Azure and related services, but he said it will be "competitive with the marketplace."

Update, 4:30 p.m.:  Asked for a reaction, an Amazon spokeswoman said this via e-mail:

"[W]e have a longstanding policy of not talking about other companies.  In general, we always thought that there would multiple companies pursuing this space.  It’s too good of a value proposition for developers and businesses for there not to be.  It’s important to note that we’ve been at this for two years with a significant team and we’ve been heads down focused on providing outstanding service to our customers.  In fact, we think we are much better at this today than we were two years ago.  We’ve learned a lot about what it takes to operate these services, what kind of features and enhancements customers want, and how these services need to fit together to create an integrated platform."

Walid Abu-Hadba, corporate vice president of Microsoft's Developer and Platform Evangelism Group, said in an interview here that he believes Microsoft's approach is fundamentally different.

"We're filling up the entire spectrum from a tooling standpoint, from a management standpoint, from the choice of on-premises vs. off-premises, from identity, authentication, I mean, you name it. Our approach to it comes from the ground up all the way through. Not to take anything away from Amazon, I think they've done a very good job. But I would ask Amazon the question, what business, really, are you in? The investment required to continue, and the investment in the channel, and the investment for developing for the (independent software vendor) ecosystem, the investment you do with the developers, the investment you do to create and tend the ecosystem, and get it healthy, is a massive investment, and are they going to commit for the long term or not?"