I figure that Microsoft has about 5 years. Just think of where General Motors was in 2003, when they had high margin products making the company good profits, and were using low cost labor, as to where they were in 2008, after their high margin products had steadily lost market share over a 5 year period, and the company had to apply for Chapter 11 Bankruptcy Protection.

I wrote an article a while back where I pointed out that the majority of Microsoft profit comes from Office. This is a serious weakness, as every sale lost in this area, has a far bigger impact than every sales of Windows that is lost. And Microsoft is under a lot of pressure here.

Consider Apple. Apple was a big supporter of Office for a long time. Even now, every Mac shipped, ships with a demo copy of Office. You can order Office when you order your new Mac through the online store. Or you can order IWork, which is $100.00 cheaper, and does all of the same things. Guess Microsoft lost a few sales there.

And then there’s Open Office, which is available for Windows (unlike IWork), as well as OSX and Linux. Its a free download. You can’t complain about the price (well, Microsoft can).

And then there’s KOffice, which is Linux based (there were OSX and Windows versions promised, I don’t know if they were ever delivered), and has some beautiful features. It’s also free.

Every time someone chooses an Office Suite that doesn’t come from Microsoft, it drives down Microsoft’s profit margins. And since Microsoft is loosing money on a bunch of products (XBox, Search, Mobile, etc.) the company doesn’t have a lot of room to move. They have already canceled a bunch of products, and as the pressure gets worse, more products will be canceled.

And the pressure will get worse. After all, who would pay for an Office Suite, when you can download one for free?

M$ leadership has been selected in a different environment. The good old embrace-extend-extinguish responses, when M$ could dictate standards and lock-out competition, are no longer the appropriate responses in this changed environment.

The future will be all about mobile devices, cloud services and (heaven forbid) open standards like HTML5. M$ is not only out of fit with its environment but probably lacks the capability and culture to respond appropriately to this change.

When the money from the the desktop centric Windows/Office cash cows drys up, suddenly there will be consequences for poor performance, and as they say, things will get interesting as the leadership tears itself to pieces, I for one wouldn’t want to be the person who allowed active sync to be licensed to anyone…

Dan has been a great commentator on this process, it will be interesting to see when more mainstream tech press start documenting this situation more openly. I imagine most will think it more prudent to wait and see the once mighty bully a little more weakened before daring to opine openly about M$’s terminal decline.

It must be a pretty massive screwup if even Dilger believes sabotage more likely than ineptitude!