We have been reading about the cloud warfare. We have seen how big companies like Google, Apple and IBM are offering their services and applications online, changing the way people use technology. We’ve seen smaller companies like Salesforce.com, Facebook, and Groupon become giants (literally) starting new cloud-based industries. We vomit every time we see those idiots in the Microsoft commercial who forgot to program their TV and are able to do it from the airport by going “to the cloud.”

And yet… do you know who is going to win the small business cloud war? Microsoft. Do you want proof? All you have to do is visit Paducah, Kentucky.

Paducah (population approximately 30,000) is located approximately two hours from Nashville and three hours from Memphis, St. Louis and Louisville. The city was founded in 1815, occupied by Union forces for most of the Civil War, and had a major flood in 1937. The city is known for its annual telethon (Betty White appeared there in 1959) and is one of the only two cities named in the famous song “Hooray for Hollywood.” The former MLB player Terry Shumpert was born there. Dippin’ Dots, the candy maker, is based there. And also Bradshaw & Weil.

That’s where Jared Morgan works. His family bought the 144-year-old insurance agency in 1994, and Jared started working there after college. And, aside from a two-year stint in a youth ministry, that’s where Jared has always worked. And the Paducah area is where he has always lived. He married his high school sweetheart.

Bradshaw & Weill has eight employees, each with an average of twenty-five years of experience. One employee has been with the agency for over fifty years. Jared, 29, is the young man. The company is “light years behind in technology,” he says. “The smallest of changes can make things very difficult for our people.”

Jared is being humble. His company is not light years ahead of technology. In fact, tiny Bradshaw & Weil, compared to most other small companies from San Francisco to New York, is a technology leader. For the past several years, they have been using Microsoft’s Business Productivity Online Suite, or BPOS, to share emails and documents. In Paducah, Kentucky, for God’s sake!

Quietly, Microsoft is adding more and more of its key applications to the cloud. If you visit their online productivity site, you’ll find a lot of their offerings like Exchange Online for email and calendar, SharePoint Online for portals and document sharing, Office Communications Online for communications, Live Meeting for web and video conferencing. , Dynamics CRM for customer relationship management and Windows InTune for PC management.

The cost is quite low. For example, just renting Exchange costs $5.00 per month per user. Or if you prefer to host your SharePoint system which costs $5.25 per month per user. However, the greatest value is registering with BPOS. That costs a total of $10.00 per month per user and includes Exchange, SharePoint plus Office Communications and Live Meeting as well.

Of course, something is still missing here. BPOS does not include any of the standard Microsoft Office products that we are used to using every day, such as Word, Excel, Outlook, Access, and Powerpoint. Those apps will be available online, according to Microsoft, in 2011 when the company launches its Office 365 hosted services, which is currently still in beta. That’s going to be another thing I’ll write about when the time comes.

BPOS contains the features you would expect to find in any cloud-based offering in 2011. Security, uptime, storage, rapid deployment, and online and mobile accessibility. This is what the cloud is all about.

And it’s not that there isn’t good competition out there. Google offers its own email hosting, document sharing, and voice/communication services (but not meetings). Zoho offers a great set of hosted applications for small businesses. Box.net is an excellent alternative to SharePoint. Citrix Online has products for hosting meetings and webinars. But let’s go back to Paducah. and Jared.

Jared appreciated the benefits of going to the cloud. He saw the potential time and cost savings of using someone else’s servers to host his applications instead of doing it himself. As a 20-year-old, he was more comfortable with the technology than others in the company, and he had the confidence to move things to the cloud with little discussion from senior management.

And it tried other cloud services, notably some offered by Google, which currently hosts the company’s website. But ultimately he settled on BPOS, particularly Exchange and SharePoint. Was it because of the features? He says he loves the way Outlook works so easily with Exchange. And, with SharePoint, he helped others create shared files that document the company’s processes for serving certain customers, scheduling reminders, and tracking renewals. But I’m not convinced that Jared is doing anything with Microsoft’s BPOS that he couldn’t be doing with other cloud-based services.

That’s why Microsoft is going to win the cloud war. Look, I’m not the biggest Microsoft fan in the world. Yes, my company sells one of your products. But they have brought me to tears too many times to mention Windows crashes. I have watched my fingernails grow in front of my eyes while waiting for my computer to boot up (or shut down). I show advanced Parkinson’s symptoms every time I have to pay for an Office upgrade.

The cloud until now was mostly about consumers. Cool apps for your mobile devices. Cool new ways to schedule parties and share photos. Great websites for stocking videos, chatting with your friends, and finding that perfect new car.

But now the story is changing. Microsoft is moving to the cloud. big time And the company, along with its thousands of partners, will bring hundreds of millions of users to its small and medium-sized business customers. Like Bradshaw and Weill. And that’s why Microsoft is going to win the cloud war.

Because the battle will not be won with cool products and features and apps and cool gadgets. People, especially small business people, will be asked to make choices very soon. The choice will be about the companies and services and who we will trust with our data and business applications. Small business owners are nervous about this. Our data is our livelihood and losing it can lead to bankruptcy. We are not going to entrust it to just anyone.

Regardless of what people say about Microsoft, we know them and, for the most part, trust them. We have been using your apps for decades. We are comfortable with the appearance of your products. Most of the small businesses out there today have survived and prospered in part because of the technology they’ve used that runs on Microsoft platforms. And even new entrepreneurs are going to take a close look at your offerings. Sure, we’ve been frustrated with technical issues and issues with your products. But we know that these problems are more related to the technology, not the company. We know that products from Google, Apple, and others like them also come with their technical headaches.

Of course, Microsoft could screw it up. They could make lousy products. They could fall on the stand. They could be left behind in technology. And just because they have a history of entering the market late and then crushing their competitors (like WordPerfect, Lotus, Netscape) doesn’t mean their current management will be able to do it again.

But they have one distinct advantage: Their products are used and appreciated by millions of small business owners around the world. We don’t want to change. We don’t want to learn new products to do the same things we are already doing. We just want to do things faster and better. As long as Microsoft makes it easy for us to adapt to the cloud, we will agree with them.

And as Microsoft continues to win over companies in cities like Paducah, Kentucky, they’re going to win the small business cloud war.