The problem is Cloud Computing. If you look at some of the features Microsoft plans to release with Microsoft Outlook 2010 next year, they are pretty cool - conversations like GMail, search like Xobni, etc. Pretty awesome stuff. But when will users get to see this new product on their work and home computers - at least 3 or 4 years out. And so, if Microsoft recognized a killer feature like 'converstaions' in Gmail, and decided to add it to the product last year (2008), the product will be released in 2010 and by the time people replace their PCs and corporations adopt the latest as 'standard' - it will be 2013 to 2015 for many. Many of us are still running Windows XP 8 years after release (released 2001) even on new machines.
This is a huge problem for Microsoft. And why can't they break out of it? The one time selling model which collects all license fee upfront. Ideally, Microsoft would keep enhancing its products continuously offering new features (like cloud vendors of today do) enhancing the customer experience and keeping it fresh. But then no one would upgrade. So you are stuck 'creating demand' for your product upgrade by lagging behind. It works when you are the only game in town, and everyone else is bound by the same rules. Enter Cloud Computing.
Cool Outlook 2010 Search Feature: Too late to catch up with GMail?
Imagine if your existing Outlook started supporting faster search or conversations - wouldn't that change your perception of the products and the company?
So here is the conundrum for Microsoft - even if they respond to consumer demands and push out great features, they will still lag cloud computing vendors by 7 years. May be that's why they call it Window 7 - it has features that are frankly 7 years too late!
And this problem is not limited to Microsoft. Oracle and SAP face the same challenge from cloud vendors like Salesforce.com, Taleo, Omniture, SuccessFactors,etc. Fusion has been half-way done since 2006, and there are no signs of when customers will actually get to buy and implement - and then the users will finally see features like integrated search and analytics.
What do you think?
Update: Vinnie asks is Microsoft is winning the battle and losing the war, along similar lines.