Bill Gates, in his farewell address at Microsoft’s TechEd developer conference today, sketched out Microsoft’s expansive plan for cloud computing. The company, he said, will have “many millions” of servers in a network of data centers. Those centers will ultimately provide as utility services everything done today by traditional Microsoft software installed on local servers:

We’re taking everything we do at the server level, and saying that we will have a service that mirrors that exactly. The simplest one of those is to say, okay, I can run Exchange on premise, or I can connect up to it as a service. But even at the BizTalk level, we’ll have BizTalk Services. For SQL, we’ll have SQL Server Data Services, and so you can connect up, build the database. It will be hosted in our cloud with the big, big data center, and geo-distributed automatically. This is kind of fascinating because it’s getting us to think about data centers at a scale that never existed before. Literally today we have, in our data center, many hundreds of thousands of servers, and in the future we’ll have many millions of those servers.

The design of massive data centers, said Gates, is one of the key areas of innovation in computing today, and the huge investments required will limit the construction of cloud-computing centers to just a handful of companies:

When you think about the design of how you bring the power in, how you deal with the heating, what sort of sensors do you have, what kind of design do you want for the motherboard, you can be very radical, in fact, come up with some huge improvements as you design for this type of scale. And so going from a single server all the way up to this mega data center that Microsoft, and only a few others will have, it gives you an option to run pieces of your software at that level.

Cloud services will be offered through three different business models, said Gates: “Some of these will be free, some will be ad-supported. A number, the ones that provide rich [service] guarantees, will be provided on a commercial basis [ie, through subscription or other fees].”

Gates also suggested that different kinds of services would be provided in different locations, depending on the capacity of local networks:

… if you look at the really utilitarian uses of the Internet, a lot of those can be done at fairly low bandwidth, even with a cell phone in a rural village in say Africa or India looking at the crop prices or your health records or getting advice and things like that. So, we will have to start to think of the Internet as including parts that are not super high bandwidth and adopting applications for that, and then another part which is more in the rich-world urban type area where you can assume [the availability] of very high bandwidth.

That’s a good point: It will be a long, long time before the cloud covers the globe uniformly.