Microsoft holds the crown as king of the IT industry, and while companies such as IBM and HP earn more money overall, they still haven't managed to topple Microsoft from its position. However with co-founder Bill Gates stepping down from his full-time position at the company, can Microsoft continue to hold on to its crown?

According to Forrester Research CEO George Colony, Gates wasn't a technology innovator, but he "possessed the competitive drive to force his technologies into monopoly positions in the marketplace". That drive, Colony added, has been missing from Microsoft in recent years as Gates has focused less on the company and more on his philanthropic activities, allowing rivals such as Google and Apple to steal the IT spotlight.

With Microsoft approaching corporate middle age - the company was founded 33 years ago - it faces more threats than ever to its long-held and fiercely defended IT alpha dog position. The Microsoft-controlled standardisation of IT is being challenged by proponents of open document formats, while open-source software, web 2.0 technologies and software-as-a-service (SaaS) offerings are nipping away at Microsoft's lucrative Windows and Office franchises.

Chief among the threats is Google. "When Microsoft looks at Google," said Rob Horwitz, CEO and head of research at consulting firm Directions on Microsoft, "it sees a younger, beefier and more suntanned version of itself, and it says, 'Wow'".

Google Docs, an online rival to Office 2007, is a dagger aimed at the heart of one of Microsoft's top profit generators. And collectively, Google's lineup of cloud-computing technologies is designed to smash Microsoft's desktop dominance.

Unlike Microsoft, Google "doesn't have to deal with any legacy issues", said Creative Strategies analyst Tim Bajarin. "That's why they can be a bull in a china closet and experiment."

Bolstered by its huge web-advertising business, Google can also afford to bide its time. Most of its would-be Microsoft-killers are still technically in beta and hence free to users.

Google is "trying to deny Microsoft revenue by getting corporations to stop renewing their enterprise agreements with Microsoft," said Enderle Group analyst Rob Enderle. "Even if [Google doesn't] make any money, Microsoft can't make money."

For now, Microsoft appears to be perfectly healthy. The company is expected to post a profit of $16.4bn on revenue of $58bn for its 2008 fiscal year, which ends on June 30. That would represent double-digit growth from fiscal 2007.

Also, the respective market shares of both Windows and Office remain above 90 percent, and the company's $10bn+ server and tools business - which includes Windows Server, SQL Server, Visual Studio and System Center - continues to grow, as yet unopposed by any offering from Google.

NEXT PAGE: The challenges ahead

  1. The challenges ahead
  2. Can Microsoft's biggest competitor defend itself from the others vying for the crown?

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