So what's next? The answer may be Live Mesh. Currently in early beta, Live Mesh at first looks like yet another file sharing service. However, the vision is much bigger. Microsoft sees Mesh facilitating easy, instant data sharing across devices and platforms, with the ability to control devices from any other device. For example, you might control a program on your home PC with your mobile phone or use a web-based desktop when you're on the move. It's not a Windows-only plan either.
Microsoft plans to make Live Mesh cross-browser, cross-platform and available for everything from consoles to printers. Live Mesh is Microsoft's answer to the current buzz about Software as a Service (SaaS), where applications – from word processing to Photoshop – are hosted on central servers and delivered via web browsers. Microsoft is betting that the future isn't SaaS, but Software and Services. If it's right, we'll still use traditional software, but Live Mesh will connect it to the cloud.
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Silverlight, Microsoft's platform for web applications, has a crucial role to play here. Its 1.5 million daily downloads are impressive, albeit dwarfed by Flash's 98.8 per cent market share and installed base of 864 million machines, but its role in Live Mesh should dramatically boost adoption. It's likely to be the platform that brings Live Mesh not just to Windows and Internet Explorer, but also to Firefox, Macs and Nokias.
In another smart move, Microsoft has signed a deal with Google-owned DoubleClick to serve adverts on the Silverlight platform – something that will help persuade content publishers to take Silverlight seriously.
Silverlight's availability for Firefox is another sign that Microsoft recognises reality: while the resurrected IE team is making very good browsers that address IE's legacy of poor security and standards support, the firm knows that its days of near-100 per cent browser market share are long gone.
Despite Microsoft's best efforts, its share of the search market is dismal. The latest figures from comScore show that Google has 61.5 per cent of the US search market and 75 per cent of the UK one, with Microsoft at 9.2 per cent in the US and 3.4 per cent in the UK. While those figures show a slight year-on-year improvement for Microsoft, it's clear from the figures that when people search, they generally Google.
Google's sheer dominance of the search market makes it a hard company to beat – a position that, rather ironically, Microsoft has been in once or twice over the years. As Microsoft's rivals know all too well, it's not enough to build a better mousetrap; you also need to persuade huge numbers of people to use it.
So is Google the Microsoft of search? Kevin Ryan is Vice President of Search Engine Strategies, the publisher of Search Engine Watch. "We have learned several things from the development of search over the last few years," he says. "Google definitely has the pole position in search in many areas of the world. Google's strategy of building small applications in an organic culture of development is working. A series of small acquisitions targeted and complementary has beaten the big 'buy and build' strategy. In other words, you don't build one mousetrap, you build a lot of little ones."
So what should Microsoft be concentrating on to become a market leader in search? "Gaining market share is difficult in this marketplace, but it always has been," Ryan says. "The strategy should not be 'become a leader in search'. The strategy should be 'build a culture of need fulfilment and become necessary'. Becoming necessary or irreplaceable will build the next need fulfilment category for gathering information and ipso facto the next leader in search."