Steve BallmerIt's always shocking when a stalwart of any industry topples. It makes people pause and lay blame in a variety of directions. Now that General Motors is undergoing bankruptcy proceedings, many will wonder what the next victim of the economic climate will be. Could it even be Microsoft?

There are three primary reasons why GM tanked: First, GM seemed to focus a lot of attention on high-margin gas guzzlers. Next, GM hit some competition from Toyota and Ford (both of which seemed to be better prepared for the economic crisis). Add to that the obvious, a financial recession, and we have a bankruptcy.

Now where does Microsoft stand in comparison? Some might say Microsoft has faced a few serious bumps over the last 10 years but came out fine. Going back to Windows Me (possibly the worst of the Windows releases), it was able to rebound with Windows XP. But the Vista debacle that began in 2006 has brought along an avalanche of criticism.

Windows Vista SP2 beta review

Although I've never personally agreed with the technical complaints, the fact that there are six or more variations of the software, combined with price tags that have just gone overboard, makes the anger directed at Vista understandable. When you look at the many upgrades and varieties of Vista and now Windows 7, the slew of new System Center products, and the Xbox division (which may continue to do well with the new body controller idea), you have to ask if Microsoft is overbloating its product line. Is it stretching out in too many directions, instead of improving the core products and lowering the cost to consumers?

Some may say, "Well, Microsoft has a ton of money, so there is nothing to worry about." But Microsoft has already begun trimming the fat. Microsoft said in January that it would cut up to 5,000 positions over the next 18 months, starting with an initial 1,400-person wave. And many analysts expect that number to grow.

Beating the competition

What about competition? So far, nothing substantial. Microsoft is actually competing with itself in many ways. People love Windows XP so much that they won't switch to Windows Vista, partly because they've heard it wasn't good, not because they've seen it or it's caused them any problems. Upgrades to Vista and Office 2007 have not been as plentiful as Microsoft had hoped. Windows 7 may turn it around a bit, and certainly a bouncing economy may loosen the money belt with some companies.

Apple may make a better commercial than Microsoft (even I laugh at Apple's Mac-versus-PC ads, while I grit my teeth in anger for Microsoft's Seinfeld/Gates commercials), but the Mac doesn't have much traction in the business market. The Mac is still a niche product, not a threat. Linux supporters have yet to unite. Essentially, Microsoft has one advantage over GM: the competition won't cause its downfall.

Next page: Developers, developers, developers >>

Knowing the work Microsoft developers put into their products, I believe they are the saving grace of the company - as long as they are allowed to hear the voice of the people. This is an area where I've seen a problem. For example, when Windows Server 2008 was released, it was odd that you could not perform an Exchange 2007 backup through Windows Server 2008. You needed a separate product (Microsoft marketing encouraged the new System Center Data Protection Manager). People complained - loudly - on the Exchange team's website. They were told that Microsoft would develop a fix. That was over a year ago.

Finally, Microsoft announced at TechEd 2009 that SP2 for Exchange 2007 would contain a backup fix. The actual fix, however, is the bare minimum Microsoft could provide to satisfy the crowd but not steal any thunder away from the separately sold Data Protection Manager - a tremendous disappointment. Now whose fault is that? If it were up to the Exchange team, I'm confident it would develop a fully functional tool, as opposed to this volume backup tool that doesn't even provide what we have in Windows Server 2003 and Exchange 2007.

Microsoft will continue to have a long and healthy life ahead if it does three things. First, adopt a new marketing strategy. Second, let its developers go crazy and really nurture their product, trimming out solutions and honing the primary pillars of Microsoft (Windows, Office and Windows Server). Third, provide a more reasonable price tag, starting with Windows 7.

What do you think? Do you see Microsoft following the wake of GM into dangerous waters or do you think it still has a long, clear path ahead? Any suggestions on how Microsoft can pull it around or stay the course?

See also:

Windows 7 RC1 review

Windows Vista SP2 beta review