Is "Windows Live" DOA?

Microsoft just unveiled a new strategy called "Windows Live" designed to fend off a growing threat from Google, Yahoo!, and others of their ilk. By offering services, Microsoft hopes it can figure out how to compete against these nimble Internet upstarts without cannibalizing sales of its own two monopolies: Windows and Office.

Google'’s reputation of just giving away as much as possible and sharing revenue with everybody on everything is a dead simple message that everyone just naturally gets. Microsoft's reputation, on the other hand, has been one of selling high volume, high margin, feature-rich, shrink-wrapped software. Microsoft's past historic efforts to bully potential rivals doesn't exactly make the word "trust" one that readily rolls off the lips of someone describing the world's largest software company.

Microsoft with its MSN Search and Virtual Earth is obviously trying to replicate the tremendous success of Google Search and Google Earth. Competition through imitation is a tried-and-true Microsoft strategy.

Microsoft will likely move towards a web service based model for a select few traditional client software products in order to compete against companies like Salesforce.com. But, don't expect "Office Live" to start offering a free alternative to Word and Excel anytime soon. Conversely, Sun and Google have already announced an agreement to promote and freely distribute Sun's Java Runtime Environment (JRE), the Google Toolbar, and the OpenOffice.org office productivity suite.

Microsoft's online push represents its most ambitious attempt to adapt to the challenges and opportunities posed by the Internet. Yet, Microsoft has little choice but to shift more of its business online because the Internet is steadily becoming the preferred computing platform. Still, it needs to protect its core franchise of licensing software for installation on a single computer. But Microsoft's long-running dominance is being threatened by rapidly growing companies like Google and Yahoo! which are offering Internet-based applications and services for free. The line separating what's being hosted on the Web and what's stored on a computer hard drive is rapidly blurring.

Can Microsoft copy Google's advertising-based model? Will potential partners be attracted to Microsoft in the same way they've bought into Google's simple approach that says Let'’s make money together? Let the competition begin!