It seems that the Internet services area should be a growth area. And Microsoft is still not making much headway in that important arena. About two years ago they tried to build on one of the areas which would seem to be their strongest suit. This was Microsoft Messenger (and MSN). Using the advantage of desktop dominance, Microsoft have established a substantial presence in the under twenty-five market for their Messenger service. In 2006 they tried linking up with Facebook, which (it was hoped) would build it even further.
All of this may hearken back to the good old days of "embrace and extend". And in a sense Microsoft got their start in messaging by "embracing and extending" AOL's Instant Messaging technology. And at the start of the century many believed that messaging had the potential to be a "killer app".
Of course those good old days are long gone and never to return. Nevertheless, the advertising deal with Facebook may have caused some temporary rejoicing in the ranks of the (then) rapidly diminishing Microsoft cheer squad, when it was reported in the New York Times in August 2006. Although the terms of the deal remain a secret, it is speculated to have involved a nine figure amount. However, since it promised to deliver an important young demographic to Microsoft, it seemed to be a good deal. The Facebook agreement came only a month after the announcement of a deal between Google and MySpace, which would involve $900 million over three years.
In a sense Microsoft is trying to fight today's battles using the previous century's tactics. Google can afford to offer generous terms with their advertising deals because their superior search technology delivers results to their customers and generates superior advertising revenue for Google.
Microsoft's decision to stick with Messenger and buy partners is another example of poor strategy.
MS Messenger is largely a desktop product, despite grand schemes to expand it into all available niches. And Microsoft used to have a ninety per cent share of the desktop market. The moves to integrate and enhance Messenger will not slow the decrease in Microsoft's market, and since Microsoft is using an inferior technology that will not deliver the same revenue stream as Google, it is unlikely to be a profitable venture.
Ironically, the partnership with Microsoft might even damage Facebook. A recent story has started to do the rounds of the blogosphere, about how Facebook has given Microsoft access to email addresses, possibly in violation of the Facebook privacy agreement with customers.
And it may be to no avail! If the advances in mobile devices and Internet services continue at their present rate, Microsoft Messenger may soon be as relevant as telegrams and carrier pigeons.
Google, on the other hand have maintained a consistent support for open systems and open standards. The most recent application that they released, the Voice Search Applet for Apples's iPhone, was destined for a competitor's platform rather than their own. No doubt there is a Voice Search Application in the pipeline for Google's Android phone.
Of course if Microsoft wants a good old fashioned "format war", there are a few companies, such as Sony, who are willing and able to fight last century's battles using last century's tactics. And it seems that with the release of a new operating system for the Xbox, Microsoft are just as willing for a good old "stoush". Both Sony and Microsoft recognise the importance of a "set-top box" in the lounge room. And both are determined to get both hands on the prize.
However, the important markets of mobile devices and Internet services may determine where the next leading technology corporations go and how they get there. And streaming video is only one part of that mix.
Microsoft have very deep pockets. This puts them in a better position than most corporations to ride out an economic downturn. However the coming troubles are going to hit them where they are rather sensitive.
Microsoft's biggest problem today is "software" or more precisely "lack of software". Vista now has the unenviable reputation of being the worst operating system since "Windows 95". Some commentators are even calling it the worst ever. Certainly in performance terms it is an appalling operating system.
Poor performance, lack of compatibility with previous releases and incompatibility with the existing hardware base make Vista the least likely choice during economic "Hard Times". Vista sales will dwindle along with sales of new machines.
Along with the threat of declining sales, Vista still faces the class action that arose as a result of the "Vista Capable" scandal.
Companies such as Apple can deploy their Unix operating system (OSX) on a server or high-powered workstation or on an iPhone! Google can use their Unix operating system (Linux) to run a vast super cluster of computers, one of the largest and most powerful super computers in the world. They can also use the same operating system on their Android handset! Companies such as Apple and Google can get on with the demanding tasks of writing applications and integrating them.
Microsoft, on the other hand are bogged down with trying to produce an operating system as well as trying to write applications and integrate them. Their last attempt at an operating system was the Vista abomination. The question today is: Can they deliver a lean, efficient kernel, compatible with Windows XP, capable of handling multi-user, multi-tasking and multi-threading, and still be scalable and inter-operable? And most importantly, can they deliver it in a reasonable time frame?
Although there is a lot more to Microsoft than Windows, the OS is still the flagship of their enterprise, and it has an iconic importance for the corporation. So, there is a lot riding on the release of Windows 7. Obviously a supreme and far reaching software re-write is required and although it might be technically feasible, the big question is do they have a corporate culture that can deliver an efficient inter-operable operating system. Over the years, bloated, ponderous operating systems have become a way of life at Microsoft. It has been the key to their past success. It may now be reason for their undoing.
The release of a complete new operating system for the Xbox does show that Microsoft does have the ability and the capacity to roll-out a complete new version of an Operating System. However this is much easier when the hardware platform is very specific. Vista is more problematic. The hardware can vary considerably.
In any case, a rational software developer should ask "Why bother writing an operating system?". Especially when all the work has been done for you (if you used a Unix variant). But by the time that idea occurs to them, it will be too late.