Microsoft’s Nadella: overall IT spending will expand, not contract, in move to cloud

For all the talk of greater efficiencies gained by the move to cloud computing, it’s probably not surprising that Satya Nadella, president of Microsoft’s(s msft) Server & Tools Group (the folks that bring you Windows Azure cloud) sees net IT spending growing over the next few years, even in this tough economy.

“If you look at the percentage of GDP and whether IT spend will decrease, increase or stay same, I think it will increase,” Nadella said at the LeWeb conference in Paris on Tuesday. “If software is eating everything to the degree that’s happening, it is participating in all verticals in a much more mainstream way. Take agriculture: software is making it more efficient.”

In his view, IT is finding its way into more heretofore non-techie markets and that’s good for IT vendors, at least those who manage to stay relevant.

satya le webMany now question whether Microsoft, which must balance its legacy base of Windows and Office users in a world now more obsessed with mobility and cloud offerings, can compete with Amazon(s amzn), Google(s goog), and Apple(aapl). Nadella acknowledged that his 30-year old company has a tough balancing act, but said it’s negotiated similar huge technology shifts before and come out standing.

Nadella, also probably not surprisingly, said Microsoft is doing better in this brave new world than most people think. Office 365, in his view, is a SaaS application that’s more widely deployed than’s(s crm) CRM because “everyone uses email” and not everyone uses CRM.

Other takeaways from Nadella’s on-stage conversation with Gigaom Founder Om Malik:

On NSA-gate’s impact on American tech companies: 

“It’s problematic in the sense that businesses and end users will use tech only if they can trust it. Clearly its the responsibility of governments to restore that trust. The only mechanism we’ve learned is respect for liberties of people and the rule of law is how societies will survive. The surveillance system has to be reformed and the only way to do that is through law.”

On his primary competition:

“We’ve seen many waves of competitors. Day in day out, you mentioned Amazon and Google, they have the capability…  in the enterprise space we have traditional competitors from VMware to Oracle but I’m more occupied by new competitors that have emerged.”

On how a legacy OS giant can compete with these new competitors:

“For any company including ours, it’s all about what we do going forward versus what we’ve done. We’ve had great successes with Windows and Office but it’s now a question of what we’re doing next. Xbox — what is it? A console, a game, a cloud gaming service? It’s everything. Same thing with Surface: It’s Windows, it’s a Windows device, it comes with Office, it’s got speech and ink. It’s different.”

“In broad stroke technology shifts, at least on the device and client side it’s change in UI, input, output touch or ink or voice or gesture, We have our shot at it like anyone else”

On how he can work knowing he’s a candidate to be Microsoft’s next CEO

Basically no comment. He reasserted his need to focus on the work at hand. “For me it’s a great time to be at Microsoft. “