Microsoft has built its massive software business by watching other companies take the lead in emerging technology markets and then following fast with competitive products that eventually become dominant once those markets begin to pay out.

The company did it against IBM during the birth of the PC, Netscape during the browser wars, and is currently making a strong showing against Sony and Nintendo in the game-console market.

However, Microsoft's inability so far to capitalize on online advertising and services and its inability to make any headway against Google shows that, despite its huge cash reserves, this strategy may no longer be effective.

On Wednesday in an unexpected move, Microsoft reorganized its Platform and Services division, which oversees its Online Services Business (OSB) and its lucrative Windows OS business, into two groups to separate its distinct online brands. It also announced the departure of the president of the group, Kevin Johnson, who is reportedly leaving the company to join Juniper Networks.

Both the new organizations -- one that oversees its online advertising and search properties and another that runs Windows Live services and Windows OS -- will report directly to Steve Ballmer.

This move shows the CEO taking firm control of a part of Microsoft's business that has been searching for an identity since the company launched Windows Live services in late 2005 -- in part as a complement to its MSN and search businesses and in part as a rebranding of previous online efforts.

"For the past two years, I've been totally confused about [the difference between] Windows Live, MSN and Windows," said Charlene Li, an independent technology industry analyst. "The messaging and product features don't pull together."

She said splitting up businesses is "a good thing" for the company because it will help clarify Microsoft's online strategy. "You start seeing some differentiation between what Windows Live brand stands for and what online services is trying to do," Li said.

The move to divide its online brands follows the news last week on a financial conference call that Microsoft would invest "hundreds of millions of dollars" in OSB in light of its failure to close a deal to purchase Yahoo or at least its search business. OSB has operated at a loss for years and has shown only meager signs of life despite Microsoft's best attempts to revive it.

For Microsoft's fiscal 2008, OSB showed a year-over-year revenue gain of 32 percent, from $2.44 billion in 2007 to $3.21 billion in 2008. For the year, however, OSB lost $1.23 billion in operating income; a nearly 100 percent increase over the $617 million loss in operating income in fiscal 2007.

Last Thursday, Microsoft Chief Financial Officer Chris Liddell sketched out some vague plans for Microsoft's investment, which mainly will go into its search business to bolster online advertising revenue.

However, published reports say Microsoft's biggest shareholders aren't convinced that the company's financial bet will yield much of a return. Microsoft is hosting its annual meeting for financial analysts in Redmond, Washington, Thursday, and likely will shed more light on how it plans to revive OSB with the restructuring and with its renewed investment in the group.

Analysts will certainly be looking for some serious clarity on this topic, especially since Microsoft has been throwing money at online services for years.

"Microsoft's execution online has been poor," said Matt Rosoff, an analyst with Directions on Microsoft. "They've never had a runaway success with a product line ... nothing that has dominated the market or changed the game."

To be fair, the online advertising game -- which some analysts estimate will represent about a US$50 billion revenue opportunity in the U.S. alone in the next few years -- is far from over, he said.

Rosoff noted that Microsoft only really began going after Google in earnest three years ago when it launched MSN Search, which was overhauled and rebranded Windows Live Search, and then simply Live Search shortly thereafter.

Microsoft takes a "10-year view of things," he said, noting that Microsoft made more than $60 billion in revenue last year, and the business continues to grow. The company has the "luxury of looking at this as a very long-term business," he said.

"If any other company had thrown this much money away online, they wouldn't be in business right now," Rosoff said. But because of its cash balance and the strength of its business, Microsoft "can invest a lot of money in it without having to worry about the short-term."

Still, Microsoft is facing vulnerability in areas that have been a lock for the company for many years. For example, many attribute Apple's modest growth in computer sales to negative publicity surrounding its Windows Vista PC OS. While the Windows client OS is still a cash cow and is in no real danger of obsolescence, Apple's success shows there are new chinks in the Microsoft armor.

The popularity of the iPod and iPhone may be showing Windows customers that there are credible alternatives, said Greg Sterling, principal analyst for Sterling Market Intelligence.

This so-called "halo effect," combined with Apple's aggressive advertising campaign that exploited problems users had with Vista early on, proves to PC users that they don't have to settle for what may be perceived as a subpar OS if they don't want to, he said.

"To the extent that people are less fearful of using alternative systems -- that gives them a sense they can stray from Microsoft products and still be OK," Sterling said. The growth of Google's search engine and other online services and applications also provides people with alternatives to Microsoft, he added.

This perception could hurt Microsoft in other markets it's attempting to dominate -- such as the one for virtualization software -- even if the company has the cash to play the waiting game.

Microsoft is chasing VMware in virtualization. To combat its giant competitor, VMware said on Tuesday that it would offer a free version of its basic hypervisor product -- similar to the Hyper-V product Microsoft now offers in its Windows Server OS.

If history is any indication, Microsoft should eventually be able to overtake VMware, especially since its hypervisor is tied to such a successful operating system.

But even Paul Maritz, VMware's new CEO and a former Microsoft executive, pointed out on a VMware conference call Tuesday that Microsoft is not completely invincible, especially when another company already has a substantial lead in a market.

Indeed, Sterling said, "I think there is clearly a perception in the market that Microsoft is not the invincible juggernaut it was."

Not all of this week's news involved global financial turmoil: while IT budgets are being cut and AMD is breaking itself up, a security tool was released for Firefox that prevents "clickjacking" and Microsoft said that Windows 7 will fix issues in Vista's user account control feature.

1. Economic malaise hits IT industry : Disappointing earnings from some IT companies, fewer initial public offerings, lowered earnings forecasts -- all are part of the grim global economic outlook. On the bright side, though, IBM reported this week that its net income rose 20 percent in its third quarter and maintained its profits will be strong for the full fiscal year.

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2. AMD to spin off chip fabs to raise funds : Advanced Micro Devices is splitting into two companies, with one designing chips and the other making them. The company also said that two investment funds owned by the Abu Dhabi government will provide capital to AMD and help it compete better with Intel. The news was hailed by analysts, investors, customers and employees as a way to strengthen AMD, particularly in the harsh economic climate.

[ Related: Rival Intel has launched an investigation into AMD's spinoff plans | Intel may be worried because analysts think the split could help AMD make up market share quickly ]

3. Firefox extension blocks dangerous Web attack : An update of a free security tool for Firefox blocks "clickjacking," one of the most dangerous and vexing problems on the Internet. Clickjacking happens when a Web user clicks on an invisible, malicious link without knowing it. The tool, called NoScript, now includes ClearClick, which can tell if a Web page contains a hidden, embedded element. Users of NoScript who click on such links will be asked if they really want to do that.

4. Microsoft to improve Vista's problematic UAC in Windows 7 : Microsoft is tweaking the user account control feature in its Windows client OS and admits that what was meant to be a security feature in Vista has been a hassle for users. The idea behind UAC in Vista is to give primary PC users more control of applications and settings, but it hasn't quite worked out that way. "What we've learned is that we only got part of the way there in Vista and some folks think we accomplished the opposite," said a blog post attributed to Ben Fathi, Microsoft corporate vice president of development in the Windows Core Operating System Division.

5. Microsoft elaborates on Oslo : Microsoft shed some more light on its Oslo vision for model-based software development this week, detailing the "M" declarative modeling language and the Domain Specific Languages concept that are integral to the overall Oslo package. The company also offered reassurances to developers thattheir role is not being minimized by this raising of the level of abstraction.

6. Apple to hold special notebook event on Oct. 14 : Apple sent out an invitation to reporters to attend an event next Tuesday, saying that "the spotlight turns to notebooks." We assume this means that new Macbooks will be out in time for the all-important holiday shopping season.

7. For a promising IT career, go east, young techie : The IT job market had tightened up even before global financial turmoil gave us all a whack, but opportunities are more plentiful in China, India and Russia, according to analysis of growth trends. Working in such countries also can be good for the old resume. "IT is going global. The IT profession is going global. Developing product for markets all over the world is something you have to learn how to do. Overseas work is a huge enhancer for IT professionals," said Rob McGovern, CEO of JobFox, an international IT employment agency.

8. Mono 2.0 lets .Net apps run on Linux: Considered a major upgrade, the open-source Mono 2.0 runtime leverages Microsoft's .Net Framework 2.0 programming model, letting developers build desktop and server applications using Microsoft-based environments and deploy them across multiple platforms, including Windows, Linux, and Mac OSX. By bringing apps beyond Windows, Mono will help developers reach a larger audience.

9. 11 Microsoft security updates due next week : There will be no rest for weary systems administrators next week -- Microsoft expects to roll out 11 security updates, with four of them rated critical. The monthly patchathon will apply to bugs in Windows Active Directory, Internet Explorer, Excel and the Microsoft Host Integration Server. Besides the critical patches, six others will be rated important and one will be moderate.

10. NASA: Messenger sends back never-before-seen Mercury images : NASA's Messenger spacecraft transmitted images of Mercury to scientist this week, proving them with data about parts of that planet that have never been seen before. The Mariner 10 mission in the 1970s identified the Kuiper crater on Mercury, the planet nearest the sun, and an image of the crater was among the first to be relayed to NASA. Messenger took hundreds of photos of Mercury as it got within 125 miles (201 kilometers) of the planet's surface.

A new Forrester Research study that polled more than 200 SAP customers found widespread discontent over the vendor's recent decision to shift customers to a pricier Enterprise Support offering, and also provides tips on how customers can mitigate the increased cost.

SAP announced in July that Enterprise Support would replace its basic and premium support options. Enterprise Support costs 22 percent of a customer's license fees, compared to 17 percent for basic support. The additional costs will be phased in over the next few years, and new charges won't begin until Jan. 1.

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But Forrester clients voiced a number of common gripes.

Eighty-five percent of the clients interviewed described minimal utilization of the Basic Support offering. "The average customer claims to connect with SAP fewer than six times a year -- the equivalent of buying a comprehensive but expensive insurance policy and rarely utilizing it," the report states.

Customers also complained to Forrester about the time it takes SAP to meet requests for new features.

"Customers believe that the maintenance dollars paid to SAP should go to filling in key functionality gaps in the software. However, there are a plethora of examples where key functionality requested two to four years ago by multiple customers in the same or different industries were not delivered in SAP R/3 4.7, let alone available in SAP ERP 6.0," the report states.

Clients "want to know how much of their support dollars really go back into reinvestment versus profit margins," it adds.

SAP has cited a number of reasons for its decision, such as greater complexity in customer environments, and argues that Enterprise Support provides a higher level of benefits for customers -- points the Forrester report does not dispute.

To mitigate the increased cost of maintenance, customers should seek steeper discounts on licensing deals, according to Forrester.

Another tactic would be to create a long-term "SAP containment strategy," which could include taking a look at other vendors. "Many SAP clients with whom we spoke have begun the process of evaluating Oracle Siebel, Salesforce.com and others for customer relationship management as well as Siperian, Initiate Systems and IBM for master data management."

Customers also should consider third-party options for support. While one company, Rimini Street, has announced plans to provide such support, it has not yet begun doing so, and even when it does will focus on only SAP's R/3 products.

The Forrester report's results stand in contrast to SAP's past contention that while customers may not like to pay more money, they understand the value of the new service.

An SAP spokesman was given a copy of the report on Friday, but did not immediately provide comment on its findings.

The collective sigh of relief when Apple lifted the iPhone NDA, which had prevented developers from discussing iPhone programming, came not just from developers, but also from educators, authors, and publishers. With the NDA gone, iPhone-related books can be published, and conferences can be much more detailed, leading to better education.

Publishers and authors who had books written were forced to shelve them because publishing the material would have broken the guidelines of the NDA. However, with the NDA removed, users can expect to see an abundance of information hitting the market, targeting everyone from developers to end-users.

[ Special report: IT's guide to the iPhone ]

"It was huge having the NDA lifted," said Bill Dudney, trainer and co-author of the upcoming book "iPhone SDK Development" (Pragmatic Bookshelf, 2008).

Like many other authors, Dudney had a book written about the iPhone, but couldn't publish the book without breaking the NDA. Now, Dudney -- along with countless others -- can bring his product to market. (A quick search for  iPhone books on Amazon.com shows a number of titles available for pre-order.)

An abundance of books on the market isn't the only benefit we can expect to see. Conferences will now feature better sessions because speakers and trainers will be able to speak freely about what it takes to make a good iPhone application.

iPhoneDevCamp organizer and co-chair of O'Reilly's iPhoneLive conference, Raven Zachary said he is excited about what this means for future conferences. Zachary said they have tentatively added an introduction to iPhone development session at the upcoming conference, which is something they couldn't have done before Apple lifted the NDA.

In previous conferences, speakers would have to talk about Mac development tools and try to relate them to the iPhone, without speaking about the iPhone -- a tough task.

The NDA stifled growth in the development community simply because new developers had a limited amount of resources to seek help. Now, Dudney said, trainers can speak freely and actually help attendees with questions they have about developing for the iPhone. With new developers come new applications and innovation, which only helps the platform.

Perhaps not coincidentally, a week after lifting the NDA, Apple announced the iPhone Tech Talk World Tour, a series of free tech talks about the iPhone for developers. Topics include an introduction to Objective-C and Cocoa Touch, how to integrate the iPhone into an IT environment, submitting your app to the App Store, and iPhone game development

The end result for iPhone users should be a better choice of applications as developers continue to push the envelope of innovation.

MSI is continuing its assault on the Eee PC by launching the Wind U120.

[ For more on products in the hot mini-notebook category, check out our hands-on looks at Asus' Eee PC 901 and 1000, the Cloudbook Max netbook, Elitegroup's G10IL mini-laptop, MSI's Wind low-cost laptop, Giga-byte's M912X mini-laptop, HP's Mini-Note netbook, and Acer's Aspire one. ]

The U120 will feature similar specs to its predecessor, the Wind U100, which is powered by an Intel Atom processor. Customers will be able to choose between a 120GB hard-disk drive or a 40GB solid-state drive. The U120 also includes 802.11n Wi-Fi connectivity and a built-in 3G modem.

It is expected to be priced around £350 ($595) and available by December.

Shedding more light on its Oslo vision for model-based software development, Microsoft this week elaborated on plans to preview Oslo technologies, offering code names and citing the company's DSL (Domain Specific Languages) concept as a lynchpin of the platform.

A Community Technology Preview of Oslo is due at the Microsoft Professional Developers Conference in Los Angeles on October 27. Featured in the CTP will be a declarative modeling language now being identified by the code name "M," as well as software modeling tool code-named "Quadrant.

A repository for integration between models also will be part of the CTP. User feedback on the CTP will help determine the overall road map for Oslo technologies, said Robert Wahbe, Microsoft corporate vice president of the company's Connected Systems Division, during an interview this week.

With Oslo, Microsoft seeks to provide another layer of abstraction for developers and make development easier; models become the applications. Business analysts also could make changes to models. For example, an analyst could change an application that requires two managers' approvals for lunch expenses exceeding $100 to requiring these approvals for a $50 lunch, Wahbe said.?

"It's easier in many cases to look at a model and see what it's trying to do rather than look at hundreds of thousands of lines of code," Wahbe said.

With the M language, ISVs and developers could build textual DSLs, he said. A DSL enables a developer to write down intent in a way that is close to how a developer is thinking about a problem, Wahbe said. M also can be used to build data models.

"The idea of DSLs has been around. What we're trying to do with Oslo is make it easier for mainstream developers to use models in general," Wahbe said. Microsoft, as an ISV itself, will use DSLs for building domains for activities like workflow and databases.

"[The] notion is that M is excellent at building these DSLs in an easy way," Wahbe said. "In turn, once you have that DSL, what it does is it lets you produce something that the platform can execute directly."

A model is translated to XAML, which can be executed by the platform. Oslo also can work with multiple runtimes from platforms like Java if developers customize the Oslo tools.

Quadrant, meanwhile, provides a way to author models visually. "The way to think about it is M lets you build textual DSLs and Quadrant lets you build visual DSLs," Wahbe said.

Oslo will be featured as part of the Visual Studio product family; the company has not yet announced which version would include Oslo. While Oslo at first glance might appear to be minimizing the role of the developer by raising the level of abstraction, Microsoft believes it is just a natural step in the evolution of software development that does not put developers' jobs at risk, Wahbe said.

"Developers can deliver higher-quality applications faster," he said.

With Oslo, Microsoft has "definitely raised the bar," said analyst Nick Gall, vice president of the enterprise architecture team at Gartner.

"The Oslo approach to modeling is a refreshing new approach. That said, it is ambitious," Gall said.

"Any attempt to do really do model-driven architecture is ambitious. We've been trying to do executable models for 25-plus years, and all to date have failed," such as with CASE (Computer Aided Software Engineering) and Object Modeling Group efforts, said Gall.

Microsoft is attacking the two core issues of modeling: translating from models into executable code and the functional aspect of an application, in which functional models must accommodate nonfunctional aspects of an application such as security and systems management, Gall said. Microsoft has not yet completed the integration with nonfunctional models, he said.

Oslo integrates with existing applications, according to Microsoft. It brings together a connected view of models and builds on existing investments on top of the Microsoft platform. Microsoft also is working with ISVs on solutions built using Oslo, including line-of-business applications and DSLs, the company said.