Having coined the phrase "the network is the computer" more than a decade ago Sun could expect to be leading the march towards cloud computing, but in some ways it is still at the start line.

Sun recently pulled the plug on its Grid Compute Utility service, which was launched two years ago and allowed companies to buy computing power from Sun's data centers at a fixed rate per hour, like a public utility.

The service, which predated Amazon.com's EC2 service, is now "in transition" as Sun prepares to launch some new services, according to its Web site. Sun is still supporting customers who signed up for the Grid service but stopped accepting new customers several weeks ago.

"That was kind of an early attempt at cloud computing. We got some features right and some not right," said Dave Douglas, senior vice president in charge of Sun's Cloud Computing division. "We still think that model totally makes sense," he added.

On Tuesday Sun gathered some press and analysts together to discuss how it will tackle the cloud market moving forward. It talked about its plans only in general terms and said specifics will follow after the New Year.

Thanks partly to its early embrace of the Web, Sun has a formidable list of technologies that it can bring to the cloud market. Besides its servers and storage gear it has its Solaris OS, MySQL database, xVM virtualization software and ZFS file system, to name a few. Most of the software is open source.

The question now is how it will package that technology and persuade service providers and enterprises to let Sun be their vendor of choice for the cloud.

"A lot of the enabling technology is there. It's how they are going to pull it together and take it to market that matters," said Jean Bozman, an analyst at market research company IDC.

CEO Jonathan Schwartz formed Sun's Cloud Computing division a few months ago and it now has several hundred engineers, Douglas said. Sun also hired Lew Tucker, who helped build Salesforce.com's online AppExchange, to be the division's CTO.

Sun sees three levels of cloud computing, Douglas said. At the highest level are software as a service applications such as Salesforce.com's CRM; in the middle are cloud development platforms such as the Google App Engine; and at the bottom are infrastructure services such as Amazon's EC2 (Elastic Compute Cloud).

The IDG News Service is a Network World affiliate.