Microsoft Corp. and Taiwan's economics ministry said they plan to set up a research center on the island by next year, in the software company's first Asian foray into the budding cloud computing industry.

Cloud computing -- the hosting and storage of services and data on remote centralized computers, is expected to cut costs and has quickly become the sector's buzzword. Many of the world's largest technology companies have jumped on the bandwagon.

There were no details on the size of investment or the number of people the Taipei center will employ, but the establishment of the center is expected to benefit contract manufacturers such as Hon Hai and Quanta.

During a visit to Taipei, Microsoft Chief Executive Steve Ballmer said on Wednesday the Software and Services Excellence Center will focus on co-ordinating and further developing the cloud computing efforts with its contract manufacturing partners.

We need to keep our ability to really work with our ODM (original design manufacturing) and OEM (original equipment manufacturing) partners on what the devices will look like, Ballmer said.