Google and IBM are who’s trying to push everything back up to the cloud. Microsoft made it’s fortune with a distributed architechture and will mostly stay there unless open source destroys the ability to make money on the desktop and forces them up the stack, which I doubt. Pure open source is actually waning right now and Apple is the hot new topic.
Cloud jargon notwithstanding, MS knows very well that individuals and particularly businesses will not continue to purchase upgrades they don't need at ridiculous prices (as they are experiencing with Office 2007),even though they are pressuring them to do so through extremely complicated licensing schemes like "Software Assurance" that even MS's own licensing experts have difficulty understanding.
When MS said it was "betting the company on dotnet" it was referring to a strategy of "... it would essentially transform the heart of its revenue base from packaged software to subscriber-paid ''interactive services.'"
http://query.nytimes.com/gst/fullpage.html?res=9A01E7DE1730F936A15755C0A9669C8B63