SEATTLE (Bloomberg) — Five years after unveiling a plan to shift into cloud computing, Microsoft Corp. may finally be making headway.

Microsoft's then-chief technology officer Ray Ozzie penned a memo in October 2005, saying the company was at risk if it didn't reinvent itself as a provider of software and computing services over the web.

Heeding the warning, Microsoft has signed up customers including Toyota Motor Corp., 3M Co. and Lockheed Martin Corp. for its cloud product. By March, 90 percent of the company's engineers will be working on cloud-related products, says Chief Executive Officer Steve Ballmer. And the server unit may generate $10 billion in annual revenue from cloud services in a decade, says Microsoft president Bob Muglia.

"We will see those numbers and more," Muglia said in an interview.

Developers were learning more about the cloud strategy at a conference yesterday at the company's headquarters in Redmond, Washington, where Microsoft was highlighting tools that make it easier to move applications to the cloud.

Further progress in cloud computing will hinge on whether Microsoft can narrow Amazon.com Inc.'s lead. Microsoft in November released its flagship cloud product, Azure, which stores and runs customers' programs in its own server farms.

That came three years after market leader Amazon introduced a suite of cloud services that let companies rent, rather than buy, servers — the powerful machines that run networks and handle complex computing tasks.

Still, Microsoft ranks high in surveys asking chief information officers which cloud vendors they plan to use, said Sarah Friar, a software analyst at Goldman Sachs Group Inc.

"What Microsoft is doing well from a cloud perspective is they are enterprise class and understand what it means to both sell to large enterprise but also meet all their requirements," said Friar, who is based in San Francisco.

The approach won over Toyota City, Japan-based Toyota. The automaker is using Azure to track the 2,000 calls daily that come into the Lexus roadside and crash assistance service. The program took days to implement, compared with weeks for an internal database, said Glen Matejka, a Toyota manager.

3M, whose products range from Post-It notes to flu tests, uses Azure to host a new program, called Visual Attention Service, that lets website designers assess which parts of a site catch the human eye.

3M, based in St. Paul, Minnesota, halved costs by entrusting the program to Microsoft's machines instead of its own, said Jim Graham, technical lead for the program.

Cloud computing can make it affordable for companies to tackle projects that previously would have required purchasing and maintaining tens of thousands of servers.