Microsoft's business model of flogging expensive software to outfits that will have to buy it again in four years is starting to wear at the elbows. It is not because the outfit is being undercut by free software from Linux either.

Redmond's main problem is the popularity of cut price hardware which runs on a lower spec. True, netbooks are starting to drop out of fashion, but they are being replaced by ultra-thin notebooks which run on lower specs than their notebook or desktop equivalents. Microsoft wants to stick Windows 7 into these machines but the problem is that the Operating System is a huge chunk of the final cost.

Smart users are wondering why they are bothering if there is other software out there that will do the same thing. Microsoft would not have bothered with such questions in the past as its businesses customers would certainly have upgraded without question. But it is starting to look that business customers are not replacing desktops and are looking to dumber, cheaper, more portable computers instead.

Redmond is having to start looking seriously at this problem. It tried controlling buyers by insisting that its cut down versions of Windows 7 should not be installed on machines with bigger screens. With the advent of Google's operating system that proved to be a dangerous plan. Its latest cunning plan is to offer its software as a renting option along with Office. However this will not attract the sort of money that Microsoft is used to getting from its operating system. Lately Microsoft has been pinning its hopes on the cloud. Certainly this is some of the sort of thinking it has to do if it is going to succeed.

However Microsoft is getting short on the vision thing. It needs to come up with new ideas fast. Google is starting to carve up its empire and businesses are starting to wonder what returns they will get on Office that they can't get from OpenOffice. Microsoft's prices have to drop before it will be considered viable for the next software buying cycle.