Lessons from Microsoft

Microsoft is having a hard time, but how much of it is down to the recession?

While the decline in PC sales is undoubtedly helped by the recession, is that the full story. Or is it that Microsoft's business model has become out-dated?

The Internet has caused 2 key changes that are impacting MS:

1 - Wikinomics would suggest the Internet has ushered in an era of mass collaboration which means that big business is no longer the most powerful force in R & D. The most obvious area in is the development of open-source software as a real alternative to expensive licences. Losing this advantage means that MS can no longer dominate as a monopoly supplier. (Related article.)

2 - Cloud computing is challenging the PC purchasing model where software developments drive the need for more powerful PCs.

Microsoft is certainly keenly aware of the challenge that it faces. It is developing it's own Cloud solutions, as well as diversifying into other Internet business. But at it's heart it is still built on a proprietary solution.

It will be fascinating to see whether it can defend this position, whether it can re-invent itself or whether it will ultimately wither.