At its Professional Developers Conference in Los Angeles this week, Microsoft will try to sell companies and developers on the benefits of its new Windows Azure cloud computing platform, in preparation for its official rollout. But it looks like one of Azure's toughest customers will be Microsoft itself.

Tony Scott, who oversees Microsoft's internal IT systems as the company's chief information officer, outlined the benefits of Azure during a speech last week to the Society for Information Management's national convention. At the same time, he noted one of its current shortcomings, and he made it clear that Microsoft isn't taking its systems completely to the cloud, even in the long run.

Scott and a member of his staff showed a Web-based application that the company built on Azure to run Microsoft's internal charity auction. The application was a great candidate for cloud computing, Scott explained, because it experiences long periods of slow traffic but also huge peaks in demand, at key moments in the auction process. One benefit of cloud computing is to expand and contract a service across servers in a data center as needed, sharing resources with others rather than letting dedicated corporate servers site idle.

"This was literally built in a very small environment, and then when we were ready to test, ported up to the cloud," Scott said. "We ran it at scale, verified that it was going to work -- all much less expensively from a capital standpoint than would have been the case otherwise."

At the same time, Scott offered a pragmatic view of Azure's potential reach inside the company.

Tony Scott

"Like virtualization, I don't think we'll be anywhere near 100 percent of our applications running on the cloud," he said in response to an audience member's question.

Scott said Microsoft IT staffers are working with the product group to make sure Azure has the features they need. With the auction tool, he said, the Microsoft IT team found that that the database services in Azure were "a little limiting," so the database behind the tool actually wasn't hosted in the Azure environment, even though the front end was. When the Azure product capabilities are further developed, more internal Microsoft applications will be hosted in the cloud, he said.

But he noted that some applications just aren't suited for cloud computing.

"Frankly, I don't think SAP is ever going to run on Azure. It's just not that kind of application," he said. "So we're looking at the portfolio of applications that we have. I have this whole long list of ones that have this characteristic of variable demand, scalability, access internally. I think there's a lot of great collaboration platforms that will run great in this environment, where we want access inside and out, our partners, we want to have a shared IT environment, in some sense."

Scott said his rough estimate is that 30 percent to 40 percent of applications are well-suited for cloud computing. Another 20 percent to 30 percent are "on the bubble," he said. And the remainder, he said, will probably never go there.

His mixed comments on Azure might come as a surprise, but they reflect the fact that Microsoft is in a different position than Google, Amazon and others that focus heavily on cloud computing. The Redmond company makes billions of dollars on traditional servers and databases. So even as it rolls out Azure to meet the growing demand for cloud computing, the company is still positioned to benefit if companies stick with in-house corporate systems. In that way, Azure to some extent represents a hedging of its bet.

Microsoft's Professional Developers Conference begins at 8:30 a.m. Tuesday morning with a keynote address by executives Ray Ozzie and Bob Muglia, streamed live online. Microsoft's Channel 9 will be offering live coverage throughout the event, and several Microsoft and technology writers are collaborating on a live blog. Check back for coverage on TechFlash throughout the event.