Microsoft well placed to rise to the challengers

 

THE CHALLENGE for any company that dominates a particular market is how to remain dynamic and react to changes that are being driven by hungry young pretenders.

For Microsoft, the world's largest software company, it's an even bigger challenge, with Google's rapid rise just the most striking example of how new firms can quickly establish themselves in a sector the Redmond powerhouse might have justifiably thought was its own.

In 2009 a resurgent Apple, whose Macs have been eating into Windows' share of the PC market, will be as strong a competitor as it has ever been.

The rise and rise of the iconic iPhone saw Apple do what Microsoft has only had patchy success at - repurpose its PC operating system for mobile use. Apple's iPhone has set the bar in terms of user interface but it is still firmly a premium product that appeals to a minority of mobile phone owners.

By showing the possibilities for mobile applications it has also opened up a new category of opportunities for other manufacturers and mobile operators.

Speculation continues to mounts about what Apple may look like post-Steve Jobs, talk re-kindled by the chief executive and co-founder's decision not to deliver the keynote speech at next week's Macworld event in San Francisco. In contrast Microsoft has already successfully moved into life after Bill Gates.

While Gates stepped down from an executive role last summer, to concentrate on his other interests including his charitable foundation, he remains chairman of the board and has a starring role in the company's "I'm a PC" advertising campaign.

In preparation for Gates's departure last June, Microsoft hired some senior executives and rearranged their responsibilities, work which will really start to pay dividends this year. Ray Ozzie, a highly regarded engineer who

was central to the creation of Lotus Notes, has assumed his old boss's role of chief software architect, which gives him oversight on all product and technical issues.

Ozzie has also been responsible for the implementation of Microsoft's "software + services" strategy whereby it integrates web services deeply into its products. As net-centric concepts such as cloud computing and software-as-a-service become the norm Microsoft is having to adapt. The challenge is how to do so without cannibalising the profits from its Windows and Office cash cows which between them accounted for the bulk of its $17.6 billion profits last year.

Last October, Ozzie was the star-turn at Microsoft's Professional Developers Conference in Los Angeles where he pulled the wraps off Windows Azure, the company's cloud computing platform. Still just a technology preview rather than a commercial release, 2009 will provide some insight as to whether Azure is finding traction with customers and how Microsoft is fending off new competitors such as Salesforce.com and online retailer Amazon, who both have a head start in the space.

The world's largest software company is also hoping that a more rounded web strategy will help it eat into Google's coveted online advertising revenues.

Windows 7, the successor to the much-maligned Vista, also looks set to make its debut this year. The relatively short gap between Vista and 7 is in sharp contrast to the almost five years between the release of Windows XP and Vista.

The smart money is on a Christmas 2009 debut for Windows 7 - giving a much needed shot in the arm to slowing PC sales. The man now responsible for ensuring that the latest release of the ubiquitous operating system is ready for prime time is Steve Sinofsky, who oversaw regular updates to Office while the Windows team was floundering in the early part of the decade.

Early previews of Windows 7 look promising but many observers, including Gartner analysts who have called it Vista Service Pack 2, see it as the product Vista should have been, rather than a major new release. If the new operating system boosts sales, Microsoft executives may be more than happy to take those criticisms on the chin.