Microsoft

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Microsoft

Perhaps facing a similar problem as IBM back in the 1990s, Microsoft and its software programs are being threatened by online applications, which are cheaper or even free. It is still hold a relative monopoly on how a computer is run, but the threat is increasing.

For example, Google offers a free online service, funded by advertisements. Last month Google acquired Writely, a popular online word-processing program that directly competes with Microsoft.

Online companies are also faster at developing and deploying new technologies than Microsoft.

One needs to wonder what Microsoft is doing, as a number of the recent technology successes, from Google search to Blackberry to the iPod, are not Microsoft creations. However, “Windows Live” and “Office Live” which add online components to existing products, shows that the company is using the internet as an opportunity, rather than a threat. Charles Fitzgerald, an executive at Microsoft, states that “we’re now in a world where it is easier for us to sell add-ons”.

In addition, the X-Box by Microsoft has 2m paying subscribers on its X-box Live service, where consumers can download games, entertainment and can chat.

Currently, however, managers are still measured on how many boxes of software they sell, an out of date business model. They need to catch up with the online revolution.

Microsoft's share prices drop (Business Week/BBC News)