Microsoft understands more than ever that it is critical for them to endure sustained growth. And in order to do this, they need some serious help in their online services arena. Not pointing fingers here, but Gates needs to pull a rabbit out of his hat like never before if they are going to weather the coming storm.

Microsoft Corp. Chairman Bill Gates has endorsed a radical reshaping of how his company develops software and services, citing an internal memo that says much about the challenges Microsoft faces, and underscores the rise of an emerging technical leader at the company.

In an email dated Oct. 30 sent to top Microsoft executives and engineers, Mr. Gates said the software giant needs to better address technologies and trends that are fueling a new wave of money-making on the Internet. “The next sea change is upon us,” Mr. Gates wrote. (See related Portals column.)

The core of Mr. Gates’s email, which was examined by The Wall Street Journal, is a memo from Ray Ozzie, Microsoft’s chief technology officer, who describes some of Microsoft’s missed opportunities and also tips a hat to companies such as Google Inc., Salesforce.com Inc., Skype Technologies SA and other start-ups that have pioneered Internet services. [Read the rest]

[tags]microsoft,skype,bill gates,salesforce.com[/tags]