10 Challenges Microsoft Must Overcome in 2010

10 Challenges Microsoft Must Overcome in 2010

Over the past four months, Microsoft hasn't spent too much time in the headlines. For the most part, the company has been in the shadows of Apple, Google, Twitter and other prominent tech companies that have done a better job of grabbing the spotlight.

But that doesn't mean all those headlines don't have a direct impact on Microsoft and how it will conduct its business over the coming months. Quite the contrary, most of the big news that has broken so far this year is a direct challenge to several of Microsoft's businesses. And the onus is now on Redmond to respond.

How it will respond to those challenges is slowly becoming clearer. The company has said it plans to release Windows Phone 7 later this year, its online efforts are getting stronger and, with the help of its Kin smartphones, it hopes to become a more prominent player in the social networking market. But the challenges that it faces are extremely dangerous and if it's not successful at fending off attacks from all sides, Microsoft might emerge from 2010 a far less powerful and influential company than it was coming into this year.

Let's take a look at 10 challenges Microsoft needs to overcome this year:

1. The iPhone onslaught

Microsoft arguably waited too long to release a mobile operating system that could compete with the iPhone. The company stuck with Windows Mobile for so long, it witnessed a significant drop in market share. Regaining that market share will be extremely difficult. But at this point, it has no choice. Microsoft needs to invest heavily in Windows Phone 7 and try to show consumers that what it offers is superior to anything they can get from Apple. Achieving such a feat will be difficult for sure, but the longer Apple dominates the market and Microsoft can't regain lost share, the worse it will be for the software giant.

2. Tablets

Tablets could be one of the biggest issues Microsoft faces in 2010. Currently, the company isn't offering any devices that can compete on the same level as the iPad. And since it's content to offer software, rather than hardware, it can only hope that some of the vendors it has partnered with, like HP, will be able to supplant Apple as the top tablet maker in the industry. That will be difficult. Microsoft can't simply mimic its strategy in the netbook space and muscle its way to dominance. Apple has set the tone in that market, and unless Windows 7 can offer a substantial increase in value over the iPad's operating system, Microsoft could be kept out.

3. Chrome OS

As Apple's iPad and iPhone OS have gained much of the limelight, some have forgotten about Google's upcoming Web-based operating system, Chrome OS. Hopefully Microsoft hasn't. Chrome OS promises to be one of the biggest operating system launches in recent history. And based on how it's received by consumers, it's entirely possible that Microsoft will lose some of its hard-fought market share to Google's new alternative. Luckily for Microsoft, it has Azure in its corner, which should help it fend off early attacks from Chrome OS. But if Google's operating system can gain traction, it'll be yet another headache that Ballmer and Company need to deal with.

4. The social conundrum

Microsoft is in a strange position when it comes to social networking. It doesn't operate a social network, but it owns a small slice of Facebook. It's unwilling to deliver a Twitter-like service, but it provides access to tweets through its Bing search engine. It's on the periphery of a broad, profitable market. Perhaps that's why Microsoft has decided to invest in its Kin smartphones. The devices will boast social networking features to appeal to hipster college kids and those just starting their careers. But was it a smart move? Neither Kin device seems all that unique or innovative, and we can't forget that with the help of third-party apps, the iPhone can be just as social. Microsoft might have a tough time dealing with social networks in 2010.

Mighty Microsoft Looks Vulnerable These Days

5. Android OS

As Microsoft toiled away with Windows Mobile 6.5, Google's Android operating system stole market share. The result is a battle between the two tech giants for supremacy in the software side of mobile. Worst of all for Microsoft, Google's Android operating system continues to gain market share as consumers realize it's a viable alternative to the iPhone. A key component in Microsoft's strategy this year must be to stymie Android's growth and get to work on stealing market share from Google. If it can't, Microsoft could find itself in a precarious position.

6. Windows Vista

It might sound odd that an operating system that was replaced last year would be included in a list of challenges Microsoft faces this year. But Windows Vista is still fresh on the minds of enterprise customers that are trying to determine if Windows 7 will have the same issues its predecessor did as time goes on or if it's trustworthy. Some are also waiting for Service Pack 1 to be released, so they know that the new operating system is more robust. Windows Vista was extremely damaging to Microsoft, and the company has been forced to deal with its aftermath for far too long. Going forward, it needs to do everything it can to make enterprise customers (and even consumers) forget that Vista existed.

7. A potential netbook takeover

Microsoft did a tremendous job overcoming Linux to dominate the netbook market. It realized at the right time that the space was growing and it needed to take control. But netbooks are under siege. Consumers, attempting to find a product that can bridge the gap between their mobile phones and their laptops, could opt for an iPad over a netbook. That's troubling for Microsoft. There's no guarantee that the software giant can dominate the tablet space. And since the iPad is likely to lead tablets going forward, the only way to overcome the netbook takeover is to grab as much tablet share as possible and hold on to it at all cost. Good luck.

8. Google Search improvements

Although Google won't admit it, the company is facing increased pressure from Microsoft's Bing search engine. Perhaps that's why Google has done quite a bit over the past couple months to improve its Web offerings and keep people coming back to its search. On Microsoft's side, it needs to be prepared for any improvements Google makes to search and attempt to improve upon those going forward. Search is a key battleground for Microsoft, and it could mean the difference between Web profitability and being kept out of the profitable advertising market. As Google improves its search, Microsoft must respond with Bing.

9. Increased focus on the cloud

Speaking of Google, the company is doubling-down on its move to the cloud. It most recently improved Google Docs to appeal to those folks that might not require the power of Microsoft Office. That's a problem for Microsoft. Currently, the company is heavily invested in desktop-based applications. Google, on the other hand, has realized that the future is online and bringing as much functionality to Web apps as possible is the best move. Microsoft needs to follow suit. It's easy to say that Office and Windows will be successful over the next five years, but will they enjoy success after that? It's up for debate without cloud integration.

10. Its own insecurity

These days it seems Microsoft lacks a certain swagger that Apple and even Google enjoy, which it is ironic because it was accused on many fronts of displaying too much swagger and arrogance in the not too distant past. Now the company sometimes seems scared to go all the way with products. It also tries to stay conservative when the market is asking for more. As we move further into 2010, Microsoft needs to strip the insecurity and take risks. What does it have to lose? The company has billions in cash on hand, and Office and Windows are cash cows. Now is the time for Microsoft to push the envelope and be more than the software company that makes Windows and Office. Insecurity is only holding Microsoft back, and it's giving Apple and Google the upper hand. That's unacceptable.