"We're not the ones with high license fees," he said. "I look at this as structurally a very beneficial thing for us. But, sure, we have to innovate."

, Microsoft's platform-as-a-service cloud, opened for business more than a year ago but hasn't gained the adoption seen by Amazon's infrastructure-as-a-service offering or Salesforce's PaaS cloud.

Still, Nadella insisted that Amazon's success can help Microsoft, because Amazon hosts Windows Server instances.

"A good chunk of our Windows business, we do through Amazon," he said.

Going forward, application developers could build services that use Azure for computing and Amazon for storage, and even make calls back to the customer's internal , he said.