It was a confident - some might say complacent - Microsoft that entered the decade.
Microsoft was the PC. Such was its grip on the desktop and laptop ecosystem that it could force OEMs to ship its browser by threatening to cut off access to its operating system.
In quick succession between 2000 and 2001, Microsoft shipped Windows 2000, Windows XP, Office 2000, and Internet Explorer 6; delivered its answer to Java with .NET; and made a radical departure by moving into hardware to take on games-market leader Sony with the Xbox.
Almost immediately, Microsoft paid the price for its confidence. When the internet changed the world, it became clear that the software Microsoft had refined on the desktop and server was not suited to the new world of the online openness. Windows, Outlook, and IE were slammed - and hard - by wave after wave of malicious worms. They hit millions of systems, taking down everyone from anonymous individuals sending email to databases in nuclear power stations.
Next, Microsoft stumbled over what was supposed to be its core competency: building a new Windows. In 2004, it went back to the drawing board on a version of Windows it had been building since 2001: Longhorn. When Longhorn finally shipped as Windows Vista, it was late and so hated that partners didn't support it, customers wouldn't use it, and Windows XP remained the default choice on peoples' desktops.
As the decade progressed, the PC itself - the bedrock Microsoft bet its business and vision on since the 1970s - was surpassed by a new generation of computing platforms that excited developers and users. People became obsessed by netbooks and cell phones, while consumer goods and even cars became computing platforms.
Meanwhile, for OEMs, developers, and startups, the choice was no longer a straight one between either Java or .NET. At least in that battle, Microsoft had a 50/50 chance of winning. But the Noughties became the decade of open source and Linux. AJAX, Apache, MySQL, and PHP/Perl/Python fuelled a renaissance in development. They didn't come with a pricey or restrictive license.
At times, Microsoft's management didn't help the company. Its internet and mobile strategy were always on the back burner to the PC. By 2009, Microsoft was spending furiously to close the gap on Google's huge ads and search market share. Late in the day, it promised a version of Windows Mobile to match Apple's iPhone - a device chief executive Steve Ballmer had laughed off in 2007. The sobering truth was that in two years, the iPhone had robbed functional but boring Windows Mobile phones of valuable market share.
The IE debacle
The internet and mobile were sins of omission. But with IE, management actively shot itself in the foot. In 2003, Microsoft announced that there would be no more standalone versions of IE and that you could only get IE with Windows. It was the height of arrogance from a 90-per-cent market-share winner.
That decision opened the door to Firefox, then known only to open sourcers and geeks. In the years since, it has been downloaded by millions, eroding IE's lead. It made surfing simpler, safer, and more standards compliant. Today, Firefox stands at 24 per cent market share, while IE has hit an all-time-low of 63.5 per cent. And now that people have been released from the "must-have" IE mindset of the 1990s and found there is another way, IE faces a fresh challenge in Chrome from internet search and ads Goliath Google.
Another disaster: The introduction of a new form of licensing for Windows called Software Assurance. It charged a subscription on the basis customers would get upgrades during the two- or three-year lifetime of their SA contract. But in the end, it pushed up customer's licensing costs and - in the case of Windows - new versions were not forthcoming, breeding anger and resentment among customers. Microsoft spent years spicing SA with extras to make the program palatable and provide some perceived form of value for money.
New world, new Microsoft
As Microsoft moves out of the Noughties and into the next decade, the confidence it displayed when it entered the Millennium is gone. The certainties of the old PC world have evaporated while the tactics of Microsoft used in that world - picking a leader and spending furiously to beat them - are challenged in a world where the competition is diverse, fragmented, free, and open.
Opportunities exist for Microsoft in the next decade and the company can succeed again. It might be late to cloud computing with Azure, but most everyone is still on the start line, so it still stands a chance.
If Microsoft can convince open-sourcers it's genuine - and if it no longer lobs grenades on intellectual property and patents that poison the atmosphere - then it could harness open-sourcers on Windows and Azure. The Xbox looks like continuing to challenge Sony, which has acted with a curious inertia to Microsoft throughout The Noughties. And when it comes to rich media, Microsoft's got a winner with Silverlight as an alternative to Adobe's Flash - at least as far as .NET developers are concerned.
In other areas - particularly mobile phones, browsers and search - the missteps of the past will need to be rectified before Microsoft can move on. As for Windows, Microsoft can bask in Windows 7 for now, but one day must find new ways to persuade users to move on to succeeding editions.
One thing is certain. Microsoft will see 2010 as a chance to re-set the clock - and put a painful ten years behind it. ®