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IDG News Service - Seventy percent of the 40,000 people who work on software at Microsoft are in some way working in the cloud, CEO Steve Ballmer said Thursday at the University of Washington.

"A year from now, that will be 90 percent," he said.

In a wide-ranging talk to computer science students at the university, Ballmer explained why he thinks cloud computing is important and how Microsoft aims to take advantage of the trend toward hosted computing services.

"Our inspiration, our vision ... builds from this cloud base," Ballmer said. "This is the bet, if you will, for our company."

All Microsoft products, including Windows, Office, Xbox, Azure, Bing and Windows Phone, are driven by the idea of being connected to the cloud, he said. While some recently introduced products like Windows 7 included a lot of work that is not cloud-based, the inspiration for the product starts with the cloud, he said.

Beyond software, Ballmer also described Microsoft's different strategies for creating devices that connect to cloud-based services. "The cloud wants smarter devices," he said.

He admitted mistakes in the way that Microsoft historically approached the mobile market, giving hardware makers a wide range of potential for form factors. "We didn't standardize enough. The cacophony of form factors for you, the user, was too high," he said.

Microsoft has unveiled a new version of its mobile software, Windows Phone 7, which has a much stricter set of hardware requirements. Still, it should have more options for hardware makers to innovate than some Microsoft competitors like Apple and Research In Motion where "you get what they choose to build for you," Ballmer said.

In the case of its Xbox gaming console, Microsoft uses that same strategy. But Ballmer hinted that there could be some variety with the Xbox. "You might have more form factors in the future for different price points and options," he said.

Ballmer also said that Microsoft wants to help foster the development of different cloud-computing services, both private and public. "How does the cloud become something that not just Microsoft and four other companies run on the behalf of the whole planet? How do we give the cloud back to you?" he said. "You should be able to, if you want, run your own cloud."