"Plenty of companies are large enough to own their own racks of virtualized servers and would pay good money to run well integrated Microsoft software on them."
They already do - that's where a significant proportion of Microsoft's revenue comes from.
What I'm saying is that CIOs of pretty much every medium to largish company needs to justify their salary to the other C*s.
If he can justify it in terms of cost savings he justifies his salary. Right now, big companies either buy appliances (at huge cost and medium support cost) or build their own networks at small (or maybe huge) cost and huge support cost.
And what I really mean by "cloud" is the fact that pretty much any CIO will call a rack of servers with any virtualization vendors' software running on the bunch of them as the cloud. And honestly it's not wrong. If your company's culture is built right whether your "cloud" is "private" or otherwise shouldn't matter.
If Microsoft can turn the enterprise into the desktop, every enterprise on our software as a new goal. Which mean abandoning huge margins, they could make huge dents into SAP, CGI, IBM, Accenture and all these huge terrible enterprise software vendors. All of them combined are a huge opportunity for Microsoft to steal all market share from and honestly I think Microsoft could definitely pull their 90s tactics and be successful.
Not if they are responsible for the CapEx, administration, upgrades, data center space etc.
I would state that the defining characteristic of "cloud computing" as far as senior managers go is that these things are all someone else's problem and all you are left with is a predictable monthly/yearly fee, application support and making sure your users have a decent internet connection.