Much has been made about why Microsoft cannot seem to compete effectively in the Web 2.0 world. One would assume that with virtually unlimited development resources and the ability to hire the brightest minds in software, Microsoft would be able to at the very least successfully copy the Google or Amazon model. Microsoft has a long history of successfully copying a technology and dominating the market with their own version but of late they seem to be struggling to duplicate some of the simplest concepts. I have a theory on why that is, bureaucracy.
Microsoft is struggling to support the weight of it's own infrastructure. We see the most obvious evidence in Windows. There is no freedom to innovate because of the sacred cows in the product and the dependencies of historical features that must be supported. Another pitfall that seems to have trapped Microsoft is the insatiable desire to plow their own flavor of standards into any new product. I recently found an article in PC World that illustrated how the Federal Government is unable to innovate because of the layers of standards and many Gov websites are running on 2001 technologies and designs. Most of the .gov websites have missed the Web 2.0 wave. Microsoft is in the boat with them.
The best thing for Microsoft would be to spin off and divest itself of several divisions. It's time to let the kids leave home and go innovate on their own. That my be the best and perhaps the only hope of avoiding a slow decline into obsolescence.