Microsoft turns 30 today. We tend to associate Information Technology (IT) with a rapidly expanding market of young start-up companies but whilst it is nothing compared to the global giants IBM, Hewlett-Packard (HP) and Fujitsu, 30 years is significant.

Microsoft has become ubiquitous – largely through its Windows operating system and Office productivity suite, but recently (and somewhat worryingly for someone who makes a living architecting solutions based on Microsoft technology), Microsoft has been drifting and MSFT stock prices (which were once rising at astronomical levels, splitting nine times between the company’s IPO in 1986 and 2003) have been virtually static in recent years leading to a number of reports suggesting that the company has lost its way. Maybe it was because Bill Gates stepped down as CEO, maybe it was just the sheer size of the giant, which employs almost 60,000 staff in 100 countries and had annual revenues of $39.75bn in 2004/5 (up 8% on 2003/4), generating profits of $12.25bn (up 50%).

On the surface, these figures look great – 8% growth and 50% increase in profits. But a look at the figures for the last 10 years shows that growth has slowed from 49% in 1995/6.

The trouble is that Microsoft has been losing ground to young upstarts like Google (mission: “to organize the world’s information and make it universally accessible and useful”). Let’s face it, it was Microsoft that was the young upstart when Bill Gates and Paul Allen persuaded IBM to make MS-DOS the operating system for the first PC in 1981 (ousting CP/M). After being slow to embrace the Internet and a series of legal wrangles (some justified, others not), Microsoft was also late to embrace search technologies, whereas the current industry darling dominates with 36.5% of the web search market.

It didn’t help that for a period between 1995 and 2001, the flagship product (Windows) was split between the (unreliable and insecure) Windows 95, 98 and ME product line and the expensive business version, Windows NT (later Windows 2000). Since Microsoft finally converged the two product lines with the launch of Windows XP (which is still based on the Windows NT kernel) there has been a push towards delivery of a trustworthy computing platform, and despite its critics, I think Microsoft generally does pretty well there. If you have the largest market share you will get attacked my malware writers – that means Microsoft for PC operating systems and Nokia for mobile handsets!

The trouble is that since Windows 2000 and XP sorted out the security issues, operating system upgrades have been a little dull, with limited innovation. It doesn’t help that any bundling of middleware seems to result in a lengthy courtroom battle but without innovation, there is no reason for consumers to upgrade, and in the business market, where IT is a business tool (not the business itself), IT Managers are under pressure to reduce costs through standardisation. That often means standing still for as long as possible.

I really hope that Windows Vista/Longhorn and Office 12 are not the death of Microsoft. Microsoft’s mission is “enabling people and businesses to realize their full potential” and this week, in an attempt to realise its own potential, a massive re-organisation was announced, with the aim of making the giant more dynamic (and hence able to respond to the industry – let’s face it, Microsoft has never been the innovator but it is very good at marketing other people’s ideas and making them work – even MS-DOS was licensed from Seattle Computer Products). Maybe the new organisation will help the timely delivery of products but it’s amazing how the rising fortunes of the Mozilla Foundation’s Firefox browser has focused Microsoft on delivering a new version of Internet Explorer after years of poor standards compliance) with very few new features and how the desktop search functionality provided by Google (and others) has focused Microsoft’s attention in this space (even if the current MSN Search strategy appears to be failing). Maybe increased competition in the operating system market (come on Apple, give us OS X for the PC – not just Intel-based Macs, which are really just Apple PCs and could also run Windows…) in the shape of the major Linux distributions (Red Hat and Novell SuSE) or free UNIX distributions like the x86 version of Sun Solaris will focus the giant on delivering great new features for Windows.

Microsoft was built on a dream of “a computer on every desk and in every home”. Despite all of the negative publicity that Microsoft tends to attract, it seems to me that (at least in the “developed” world) this dream has largely been realised. Let’s see what the next 30 years brings.