5 Moves Microsoft Must Make In 20125 Moves Microsoft Must Make In 2012

Top 20 Top Add-Ons For Microsoft SharePoint

3. Jump into services.

Microsoft will ultimately need to come to terms with the fact that its customers are becoming less willing to pay for the type of software from which it makes most of its money--operating systems and desktop applications. Nobody buys an iPad because it runs iOS, they buy it for the Apple experience. Android does have some brand recognition as an OS, but it's free. Microsoft's other big software cash cow, Office, is also feeling pressure from free or low-cost offerings in the form of Google Apps and, to a lesser extent, from OpenOffice-based products like IBM's Lotus Symphony.

To compensate, Microsoft needs to ramp up its efforts in enterprise tech services. The explosion in new computing form factors and architectures, from mobility to social networking and the cloud, means integration will remain a major challenge for IT shops for the foreseeable future, and they'll need help with all that heavy lifting and should be willing to pay for it. At the same time, all this Web 2.0 stuff has many companies rethinking their business models, a trend that provides an opportunity for high-end business consulting services.

IBM successfully made the transition to services and consulting once it saw that PCs were becoming a commodity. Microsoft needs to follow the same path now that software is becoming commoditized. It has the cash to pursue an acquisition of an Accenture, with whom it already has a services joint venture, or a Cap Gemini.

4. Lead With Xbox.

Despite its troubles over the past year, Microsoft has had one resounding success--the Xbox Kinect system. The company sold 10 million units in the four months after it launched the device on Nov. 4, 2010. Kinect features motion and speech recognition technologies that let users control the Xbox through physical gestures and vocal commands. In addition to filling Microsoft's coffers, Kinect has elevated the Xbox brand into the leading gaming and entertainment system.

The company needs to leverage that brand recognition across its other lines. It could start by launching a line of consumer phones and tablets that, even if they run Windows under the hood, carry the Xbox livery. That could be the beginnings of a strategy under which Xbox is the face of Microsoft's consumer products, while Windows remains the brand for the enterprise. In the consumer space, Windows has become your father's Oldsmobile, but in business it remains a trusted name that implies security and compatibility.

5. Take the Yahoo plunge.

Microsoft has toyed with acquiring Yahoo for the past several years, at one time making an offer as high as $33 per share. The Web portal could now be acquired for less than half of that. Reports indicate that Redmond may in fact be part of a consortium, which also includes Silver Lake and TPG Capital, that is looking to acquire a chunk of Yahoo.

Microsoft should go all the way. It already handles search for Yahoo via Bing, and despite Yahoo's missteps over the past couple of years, it remains the Web's most popular portal. Microsoft's own MSN, meanwhile, is an also ran. Yahoo could give Microsoft a much needed (and far less confusing) platform to pitch cloud services such as e-mail and apps to consumers and small businesses.

The new year is just around the corner Mr. Ballmer--have at it.

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