I don't think MS had any particular aspirations for The Cloud regards XB1. Cloud computing is about making loads of money from services and big corporations, which is why MS built Azure. As an afterthought, they probably looked at what Azure could bring to their platform as it no doubt ran Live, and maybe, somewhere along the line, an exec pressured the divisions for ways to make Xbox seem better.
"What about all this Azure server power? Surely we can do something with that?"
"We can definitely run game servers and Xbox Live services from it."
"Services schmervices! How about each Xbox connecting to servers to be made better? Can that be done?"
Engineers look at each other.
"Well...conceptually, I guess."
"Awesome. That's our message."
"But we don't know..."
"Hi, Marketing John. New platform message for you - The Power...of the
Cloud. I know, great isn't it."
"Latency and bandwidth..."
"Gives an idea of limitless potential. Love it. I'll see what the biggest numbers I can get from the engineers."
Engineer under breath..."He does realise that clouds are just water vapour, right, and have pretty much zero power?"
Honestly though, the lack of anything needing the cloud shows it was never a serious consideration. If it was part of their gameplan, they'd have been working on content from the off and using the Cloud substantially in their first and second party content. It's very much a solution looking for a problem. The benefit of the Cloud over static servers is the ability to spin up jobs, so realistically what it brings to gaming is an economy, which is more for MS's bottom line than any game feature. You could potentially have MMOs bridging servers on the Cloud, for massive populations, but too many players gets unwieldy anyway and doesn't make a difference. MAG had 256 players and it played the same as having 64 because they were spread out.
The ideal of sending off jobs from a machine and having the Cloud return a response - someone in this game has crashed; deform their car and return the model. Someone in a different game has shot a building; model the destruction for them - is a pipe-dream. The Cloud can't be any more than server-based gaming and can't do anything dedicated servers couldn't. Only if there was a cost thing, and MS offered free server power to drive a game that'd cost to much to run on dedicated servers, could Azure enable something unique.