Microsoft is one of the biggest names in technology industry, dominating the software and operating systems markets for

more than three decades. Its stock rising from $25 to $85 in less than a year. Microsoft success is most often distributed not to its creation of innovative products but rather to its strategic business practices of integrating products and building partner relationships. The summer of 2010 may have marked the end of the Microsoft era, even though Microsoft continues to dominate the enterprise market, it has started to lose ground to competitors in the consumer (individual) market. As always, the technology industry changes rapidly and, of late, Microsoft has lagged behind its competitors in the introduction of modern technologies such as tablets, gaming, mobile, and media. The products it has offered are often judged outdated by the time they reach market. Human capital was a major asset and one of the main reasons Microsoft is number one in the software industry today. However, Microsoft is losing many of its creative resources to the competition and many top executives have retired or left for other companies. Employee concerns such as wage and benefit reductions despite high profits, bureaucratic management that stifles creativity, and poor stock performance now surface through media.

Product History Microsoft was established in 1975 by Bill Gates and Paul Allen. Microsoft was able to gain an early foothold by striking an exclusive agreement with IBM in the early 80s to provide BASIC software and MS-DOS operating systems, while retaining the right to sell these products to IBMs competitors. In 1983, Microsoft replaced the MS-DOS operating system with Windows to compete with Macintoshs Apple computer interface. Seven years later, Microsoft released Windows 3.0 Microsoft established its business model as the high-volume, low-cost software provider of choice, and Microsofts strategic relationship with IBM would lead it to dominate the market. In the mid 80s, Microsoft began releasing Microsoft Works, a program that combined features found in typical office applications, such as a word processor, database, and spreadsheet. In 1995, Microsoft released Internet Explorer, a technology providing Internet browsing and multi-media features. Microsoft returned to its strategy of bundling software with its release of Internet Explorer 3.0 in 1996. By 2002, Internet Explorer dominated the market with 96 percent market share. Microsoft made an unsuccessful attempt to acquire Yahoo! for $47.5 billion in 2008 In 2009, Microsoft introduced its own search engine--Bing. At present, Microsofts Bing is third in the search engine rankings.

In 2001, Microsoft launched its Xbox gaming console. Xbox Live, an internet multiplayer gaming service, followed in 2002 and 2010. In June 2010, Microsoft belatedly introduced the Kin to compete in the rapidly growing smart phone market. Due to low sales, Microsoft pulled Kin from the market after just two months. Microsoft launched Windows Phone 7 in October 2010, that too has fallen short but remains on the market.

The House That Bill Built Organizational Structure In 2005, Steve Ballmer, Microsofts President and CEO, re-organized Microsofts structure in an effort to align our business groups in a way that will enhance decision making and speed of execution Three new divisions are Products and Services, Business, and Entertainment and Devices. Many analysts didnt think Ballmer had gone far enough and called on him to take more drastic measures. Their suggestion that Microsofts size and structure was impeding its ability to innovate and compete. From an internal point of view, Microsoft biggest issues are: bureaucracy due to size, multiple strategies that can sometimes conflict, and same people with same ideas.

Windows and Windows Live Division It is the largest source of revenue for Microsoft. The main products are Windows Operating System (OS), Windows Live, and Internet Explorer. Microsofts primary OS competitors are Mac OS X (Apple) and Linux. Sales of both Windows and Internet Explorer depend heavily on the strength of the PC market. Internet Explorer faces multiple competitors including Google, Mozilla, and Apples Safari.

Business Division It is the second largest source of revenue for Microsoft. The main products are Microsoft Office, Sharepoint, Dynamics ERP and CRM, and Office Web Apps. Despite the diversity of these offerings, Microsoft Office is the powerhouse of this division. Office has 500 million users and its installed on more than 81 percent of enterprise PCs.

Server and Tools Division It provides software, tools, and services designed for enterprise systems and IT professionals and developers.

Annual licensing agreements contribute 50 percent of divisions revenue, 30 percent from transactional licensing agreements, original equipment manufacturers, and retail sales, and 20 percent from enterprise services.

Online Services Division The Online Services Division includes Microsofts search engine and online advertising platform, Bing, posted a loss from operations for fiscal year 2010 of $2,436 million. This was mainly due to an agreement penned with Yahoo! in 2009 to provide the algorithmic and search platform for Yahoo! websites. Although Microsoft posted a short-term loss due to the Yahoo! agreement, it anticipates the alliance will have future benefits. Bing has gotten the attention of its top rival with Google turning tables to take a page from Microsofts playbook the pilfering its most popular features for its own site.

Entertainment and Devices Division It offerings include the Xbox platform, Windows Phone, and Zune digital music platform. The Entertainment and Devices Division hasnt been successful with its non-gaming products. Zune, a digital media player marketed to rival Apples Ipod, failed to make even a small dent in Ipods huge market share. Similarly, the poor sales performance of the Kin and Windows Phone do not bode well for Microsofts future in the smart phone industry.