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Microsoft already hosts many of its own legacy apps, but they aren't hosted on Windows Azure--yet. The plan all along was to move things over to Azure a bit at a time--in April Microsoft announced that it was going to begin moving its enterprise resource planning (ERP) products over to Azure. The first ERP tool to be moved, Dynamics NAV, will be available on Azure in 2012.
Many companies are beginning to look at Windows Azure services as a viable, economic option. Microsoft is no exception, and this month they began moving their Photosynth immersive camera app to the Microsoft Azure Platform as a Service.