Picture life back in 1985. The desktop’s arrived. People are discovering local applications. There is no Internet.

But 2009 is a very different place. The Internet’s our home, we want more for less. We didn’t get Vista and Windows 7 is just a compromise. The desktop is dying.

So where does this leave the giant of the desktop. What’s the next big thing for Microsoft?

From the past to the future

Every business is on a journey led by its market. Even Microsoft, who came closest to leading its market where it wanted it to go. But even Redmond had to bend with the wind. Out of the office and into the Cloud.

It doesn’t really matter how good Windows 7 will be. Its a solution for yesterday’s problem. Sure, people will buy it. The hardware manufacturers have little choice but to sell it to us. But its not what we want.

And slowly but surely, we’re shifting to the browser for our needs. The desktop, well that just gets us there. It doesn’t need to have wizzy 3D, spinning windows and smart effects. Everything just needs to be fast, easy and above all cheap.

Show me the money

But Microsoft doesn’t do cheap. And it sure doesn’t do free. But its competitors do – and very well. So where can Microsoft make money from a world that is giving away so much of what Microsoft charged for?

Well, Microsoft sees its next fat cash cow to be not us, the consumer, but the people the consumer buys from. The Internet retailers.

You see, the Internet makes a lot of money – more than the high street. Fashion retailer Next could afford to close all its shops and go totally on-line. Even Marks and Spencer sell more on line than in their stores.

So capturing this new market is vital. At the moment, one company dominates. Google. What we get for free is paid for handsomely by Internet retail providers. All through search.

“We can do that!”

So says the Microsoft development teams. “We can look at what Google and Yahoo have done work out why it works so well and because we’re new, we can do it better.”

And this is why Bing is so important to Microsoft.

Bing has to succeed. You see, Microsoft’s a marketing company that sells technology, not a technology company that simply markets its product well. Note that subtle distinction. Because to understand Microsoft, Its vital to understand that.

Previously, it bought in what it needed. Yes, even Windows. NT, then XP, Vista and soon Windows 7 are all products produced from the legacy of a guy called Steve Cutler who Microsoft brought from Digital Equipment Corporation (DEC) a long, long time ago.

He designed a product called VMS (some say Windows NT, WNT was just VMS moved along one place) which gave Microsoft its server lead, enabling it to win that market and with it the desktop.

But there is no new Steve Cutler around that Microsoft can buy for the Internet market. Google’s far too strong and too wise to lose its lead that way. And Yahoo wouldn’t sell out. No, Microsoft has to do this itself.

Had Yahoo succumbed, Microsoft would have been number 2 in search instantly. But it didn’t happen, so its building from the ground up. For a new product, Bing is pretty good. Not radical, but not that bad. It may just succeed where Windows Live Search failed.

Talking to the man

A couple of weeks ago, a group of leading social commentators and on-line journalists – OK, bloggers – including me, were invited to meet Jordi Ribas, Marie and Sofie of Microsoft’s European Search team in London to hear about what they were doing and to offer our views about it.

It was a fascinating meeting. Very open, unstructured apart from the mandatory death by PowerPoint that Microsoft just can’t avoid doing to us. Yes, Microsoft’s serious about Bing. But has it done enough?

Bing is all about the consumer. it needs the access the consumer gives Microsoft within the browser from cookies and adware to gain an insight into what people are looking for. Microsoft won’t get that from locked-down, corporate environments.

Bing learns about your habits and tailors a response to that. Or tries to, anyway. But its a fine line between on-line privacy and information gathering. And the restriction imposed may prevent Microsoft winning that clandestine invasion.

You see, search is all about intelligence gathering, not brute force. Not the “buy this or buy nothing” ultimatum Microsoft used to present. That’s something Google is great at doing. But can Microsoft run as fast as Google in this market?

If that’s all it does, it won’t win because its too far behind. Microsoft has to not just be as good as Google. it has to be better than Google. And that, my friends, is a big ask.

But let’s remember my first point. the desktop is dying. If Microsoft doesn’t win the next stage of the technology war, search, its lost. And that’s something its not prepared to do…