A fact that Bill Gates himself has articulated clearly, is that Microsoft has been losing badly on the internet battle front to the pure internet players Google and Yahoo. For a company like Microsoft, which is already at the top of the tree in the desktop space, there is only one direction to go unless it can translate its desktop success into the online world. Therefore Windows Live is the place where Microsoft will be spending much of its R&D investment resources.

The MSN business segment has been a dismal failure for Microsoft and the company obviously wants a fresh start with Windows Live, which in the first instance replaces the existing Hotmail and Windows Instant Messager products with new and improved Live branded systems, plus a host of other web services to compete with the online players. Live Mail will include 2GB of storage and will be faster than Hotmail because it uses the new Ajax (Asynchronous JavaScript and XML) technology, while the Live Messenger instant messaging service will be based on a similar peer-to-peer file sharing technology to that employed by products like Skype.

There will also be a suite of products called Office Live, which includes an ad supported system for micro-businesses to set up free web pages with email accounts. Other goodies in the basket include local search and mapping services plus a subscription-based PC security service. In addition, there will be web based contact management and rudimentary booking keeping systems. And, of course, in the true Microsoft proprietary tradition, the data, which can be stored on Microsoft's servers, will only exportable to Microsoft Office desktop products.

As the pundits and critics have pointed out, there is not much if anything that Microsoft has flagged so far that is not already available from the major internet players. However, Microsoft knows it has to make a serious fist of playing in the web services space because it's the future of computing and it's where the growth is. Microsoft may also insist that its Windows desktop and Windows Live divisions are working totally separately but it's a fair bet that Windows Vista and Windows Live will be tightly integrated.

Some might say that, given Microsoft is still the most successful IT company in history, it's being a touch melodramatic to say the company's future depends on the success of its online strategy, as embodied in Windows Live. However, the startling growth of Google, compared to the stagnating growth of Microsoft's Windows and Office divisions, show that unless the software giant can gain traction in the internet space, it will be like a beached whale suffering a slow painful death by a thousand cuts.