Microsoft critics are fond of pointing out that the software giant rarely leads the way into any new market. That's certainly true, though I'd respond by noting that the Microsoft laggard tends to eventually dominate those markets which it identifies as being critical to its business. For example, where Apple led the way to PC-based graphical user interfaces (GUIs) with the Mac, it is Microsoft, with Windows, that now claims over one billion active users and about 95 percent of the PC operating system market. And while Microsoft CEO Bill Gates was busy in the mid-1990s penning a supposedly visionary book called "The Road Ahead" that barely mentioned the Internet at all, tech pioneers like Netscape were paving the way to today's ubiquitous Web. A decade later, of course, Netscape was toast, destroyed by the dominant if late-to-the-party Internet Explorer. And while UNIX-based servers from Sun Microsystems and other once-great server companies were considered the only true mission critical solutions in the data center at the turn of the millennium, it was Microsoft, with its Windows Server products running on mainstream PC-based servers, which became the standard for businesses of all sizes.

They always seem to come out on top, don't they? As it turns out, however, things aren't so simple. And as I consider these events here in the early months of 2008, Microsoft's business, while strong, is being assailed in ways that were barely imaginable just a few short years ago.

Keeping to the examples cited above, I note the resurgence of Apple's Macintosh on the desktop, especially in the US, and especially with consumers. I point to Netscape's progeny, Mozilla, whose capable Firefox browser is eating away at Internet Explorer's market share in ever-increasing numbers. And I point to Linux, which has found a comfortable home, yes, mostly in smaller servers, but increasingly in businesses of all sizes as well. Microsoft's core successes are no longer the sure thing they once were.

But it's worse than that. Much worse: Microsoft has had virtually no success moving into new markets at all over the past decade.

Its Windows Mobile business was usurped, first by RIM and the Blackberry, which has garnered mindshare well beyond its actual sales, and then more alarmingly by Apple, whose iPhone burst onto the scene in mid-2007 amidst much hype and excitement. Apple's gotten a lot of credit for various iPhone-related tech innovations, but the hidden advantage of this platform is actually Apple's ability to constantly update the device, something Microsoft simply can't do with Windows Mobile, thanks to the insanity of the wireless carrier-dominated market. Your wireless provider doesn't want you to download new software updates: They want to sell you a new phone and extend your service agreement another two years instead. Apple didn't bow to this system, but Microsoft did.

Microsoft's video game business has performed poorly as well. The first generation Xbox was an also-ran in a market dominated by the Sony PlayStation 2. And even with a year-long head start, its second generation Xbox 360 has quickly fallen behind Nintendo's surprising smash hit, the Wii, and may eventually even be eclipsed by Sony's once-laughable PlayStation 3. Not helping matters is the fact that the Xbox 360 may literally be the single most unreliable electronics product ever foisted on consumers. Sure, the games are great--I'm a huge fan, actually--but the hardware is a joke.

Speaking of jokes, have I ever told you the story about Microsoft's digital media platform? Excuse me, that should be platforms: After failing miserably at getting its Windows Media-based platform to fly with partners and consumers, and watching Apple nimbly steal the market with its iPod hardware and iTunes software, Microsoft is back for round two with the Zune, a pure play platform that copies everything Apple has accomplished already, right down to the cool packaging. Consumers have ignored the Zune in droves, so much so that when Apple's iPod sales finally cooled in the first half of this year, the blame was placed on a maturing market, not on some distant number two player like the Zune.

The point to all this is that there are no sure things in life, and when it comes to the Microsoft of today, it's not so much a shadow of its former self as it is a victim of its past. The strategies that led to great financial success in markets like operating systems, productivity applications, and servers have not translated into success in other markets. Antitrust regulation around the world has curbed Microsoft's more voracious behavior. And companies are continuing to innovate and succeed in spite of Microsoft's best efforts to thwart and/or copy them.

Most alarming for Microsoft, those core products, though still successful, are beginning to succumb to a natural evolution in the computer industry. We're moving to a new model of software distribution, updating, and usage. It's called cloud computing. Like so many previous computing trends, it's going mainstream not because of Microsoft but in spite of it. Companies like Google, Yahoo!, and a host of much smaller companies that many of us have never heard of are moving the core computing experience off of the PC and up into the Internet cloud. These companies don't have Microsoft's legacy or customer base, but then they don't suffer from the ponderous slowness and change angst that comes with such a thing either.

Anytime cloud computing comes up, I hear from two types of people. Those who completely "get" that this is the future and those that clutch desperately to the past, claiming that cloud computing a fad whose time will past. For purposes of this discussion, our opinions don't matter. All we need to agree on is that Microsoft is firmly embracing this computing paradigm and is moving ahead with products and services that, for the first time in the history of the company, will actually compete directly with its traditional and core businesses. These products and services will be delivered under the Live Mesh umbrella. And I'd like to take a look at how this platform looks now, in these early days of a new era.

Welcome, Windows users, to cloud computing. Welcome to Live Mesh.

Why now?

For the past several years, outgoing Microsoft chairman Bill Gates has used his CES keynote address to push a world view that put the PC at the center of everyone's digital life. Sure, people would move beyond the PC with connected devices, and would engage with others online, but the PC was always at the center. When you think about it, putting a PC in the center of our lives makes a lot of sense ... when you're a company that almost exclusively writes software for--get this--PCs. But this viewpoint is increasingly quaint when you compare it to the reality of today, and it's only going to get worse as more and more people utilize Internet-connected smart phones and work and play online in ways that, as it turns out, don't actually require Windows or traditional PCs.

Now, the people at Microsoft aren't dumb. In fact, I regard some of my friends and acquaintances there among the smartest people I've ever met. But they've also been constrained, somewhat, by an internal requirement, whether it was explicitly stated or not, to conform to the needs of the company's core products. When a Web-based office productivity solution called NetDocs popped up inside Microsoft several years ago, for example, it was killed because it would compete with the company's dominant Office. There are hundreds of examples of this kind of thinking over the last 10 years of Bill Gates' reign at the company.

This mindset was driven by what I think of as Microsoft's Old Guard. But with Gates and a slew of other old-timers leaving the company over the past year and Microsoft turning increasingly to outside talent to bolster its executive ranks, we're finally seeing the positive effects of the new blood at Microsoft. And nowhere can this be seen more clearly than with the company's 2005 hiring of Ray Ozzie. This is a guy who has been involved first-hand with several major computing trends over the entire history of the PC, including LAN-based networking, the first PCs, software suites, groupware (with Lotus Notes) and decentralized business collaboration (Groove), among many others. And now he's Microsoft's chief software architect, in charge of setting the future direction for the world's largest software maker. And unlike his predecessor, Ozzie has little interest in milking past successes.

Ozzie, as it turns out, is the guy behind Microsoft's cloud computing efforts. And the products and services he's discussed most frequently and are clearly the most he's invested in have little do with Windows, Office, or Server. No, this is a services guy. He gets that the world is moving on. And he's moving Microsoft, inexorably, to that new world. Some people there will go willingly. So will go kicking and screaming. And some may simply retire, unable to handle the future Microsoft. Regardless, change is happening.

So you see things like Windows Live and Office Live. Microsoft's Software + Services initiative promotes the best of the old (what Microsoft does best) with the best of the new (what Microsoft will do increasingly more frequently in the future). And now you see Live Mesh. Tellingly, Live Mesh was codenamed Horizon. Get it?

What is it?

At its simplest, Live Mesh is a platform that encompasses an Internet operating system (exposed as a Web-based desktop), your PC or Mac computer(s), and your mobile device(s). I should note here, that this view represents the plan for Live Mesh. Today, with just the first tech preview of Live Mesh available, the reality is a bit less dramatic. There's a basic Web-based desktop and there's PC software. You can sync documents and other files between the Web-based desktop and your PCs (but only at the folder level). You can also remotely access other PCs using a Remote Desktop-based experience. I'll get into details in a moment, but that's about all that's available right now.

To understand why this limited set of services is still revolutionary for Microsoft, note that the PC desktop is not at the center of this Live Mesh platform. Instead, Live Mesh is envisioned as a ring or circle, where your PC(s) and Macs(s), mobile device(s), and Web desktop are all equal partners, like spokes on a wheel. All of the capabilities of the Live Mesh, today and in the future, will work identically via each entry point. Note, too, that Microsoft intends to support non-Microsoft PCs and mobile devices with this platform. Mac users will have a native Live Mesh client. Linux users? Maybe not, but they'll at least be able to access Live Mesh fully from the Web.

It's also important to note that what makes Live Mesh important is that it's a platform. Microsoft Evangelist Jon Udell said recently that the folder sharing and remote access components of Live Mesh that are available today are essentially trivial and shouldn't obscure what's at the heart of this project. What's really going on here is that Microsoft is creating a cloud computing platform in which the PC is but a component. Like it or not, most computer users today don't actually use just a single device. People increasingly use multiple PCs (and/or Macs), both in the home and at work. They have desktops and laptop computers. They have smart phones, MP3 players, digital cameras, and other mobile devices. And they have a host of online personas via email and instant messaging services, social networking memberships, e-commerce sites, and other online communities. We, as users, manage these disparate components separately and with great complexity and difficulty.

In a recent episode of the Windows Weekly podcast, I compared this situation to what it must have been like being one of the first automobile owners 100 years ago. Back then, you had to have extensive technical knowledge about the vehicle to use and maintain it. Today, that market has evolved and matured so that the vast majority of car owners simply use the vehicles without ever needing to understand how they work. Computing, too, must mature in the same fashion. And it must do so while meeting the ever-increasing needs of a mobile and interconnected user base.

With Live Mesh, Microsoft seeks to bridge the gap between all the currently-disconnected devices, computers, and Web services we now use. And though a Web-based desktop sits conceptually on the "Live Mesh" ring, you use the Web as a hub of sorts for authentication and connections. Naturally, Microsoft utilizes Windows Live ID for this purpose. This provides an individual user with a way to collect the list of computers and devices they're using, of course. But it also provides the infrastructure for sharing between users. So if you want to do something very simple like provide a way for others you trust to access the contents of a shared folder, Live Mesh will make it both possible and seamless.

On to Part Two: Hands on with Live Mesh...