It's no secret that Microsoft has seen a lot of pressure from the rapid rise of Google and free web-based services, even if this new competition has yet to demonstrably hit the company's bottom line. What's interesting is that there have been people inside the company warning about the shift in the industry, and the need to embrace alternative revenue models like advertising-based services. The Wall Street Journal offers a nice glimpse inside the company, and how management viewed the warnings. Basically, it felt that as long as the company could out-muscle its opponents by investing more in technology, it could always stay ahead. And as long as the company only had to face competitors with a similar business model, selling software licenses, then it probably would have worked. But once competitors found an end run around the traditional distribution system, no amount that Microsoft could spend could guarantee that it retains its top position. And although the company is now trying to take online ads and services more seriously, it still remains tied to the success of Vista, the ultimate example of its choice to try to out-invest all comers.
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