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Microsoft's Windows Azure Cloud still has to prove itself good enough to eat. A recent blog from the Windows Azure team talked about how Microsoft uses Windows Azure in various parts of the business. Although that's true, Microsoft themselves hosts the cloud service, and most of the company's IT infrastructure does not run in the cloud--but it's a good start.
Microsoft coined the phrase "eating your own dog food" over 20 years ago, beginning a tradition that showed that not only were Microsoft products good enough for the world, they were good enough for Microsoft themselves to use.