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It’s strange and almost silly to think of putting Microsoft on a death watch, but chatter is increasingly rising about the steady decline and dimming future for the world’s largest and most successful software company. Just a couple of years ago Microsoft seemed an invincible force, yet an increasing number of pundits and solution providers are watching Microsoft with a distant eye to a glorious past rather than the promise of a bright future.

Over the past week, I’ve had a few conversations with solution providers about the top vendors and where they’ll line up in 2010. While none is taking Microsoft out of contention, the company doesn’t pass their lips when they rattle off their top five. Top of mind awareness is owned by Cisco, HP, IBM, EMC, VMware and Google. Microsoft is a passive consideration.

Last week, Mark Anderson of Strategic News Service wrote that Microsoft’s days as a leader in the consumer market are over. He predicts that Windows 7 and Office 2010 are the last iterations Microsoft will field as solid performers in the consumer market. The trend, as he sees it, is consumers migrating to social networks and Web-based platforms, where Microsoft doesn’t currently play well.

Joe Wilcox, a former eWEEK writer and now BetaNews reporter, expanded upon Anderson’s thoughts by saying the situation is much worse. Microsoft, he writes, was built not just as the platform of choice for IBM PCs, but rather on the strength of owning the standards for files and documents. As early 1995, Bill Gates warned of the threat the Internet posed to Microsoft since the standards–HTML, TCP, etc.–were open and not Microsoft standards. Fourteen years later, the plethora of different content standards–PDF, MP3, MP4, WVA–are fueling the growth of Adobe and Google at Microsoft’s expense.

Microsoft was one of the first major software vendors to recognize the potential of cloud computing (it was called Web services back then), but is a relative laggard in building out its cloud business. Much of Microsoft’s hopes are pinned to Azure, the cloud-based version of Windows. Developers and ISVs see Azure as an extensible platform for cloud computing, but there are signs of trouble. Rumors are now circulating that Ray Ozzie, Azure’s champion and technology guru successor to Bill Gates, is losing his political clout and is on his way out at Microsoft.

Perhaps one of the most surprising signs of Microsoft’s challenges is in security – or vulnerability to security threats. Microsoft has spent hundreds of millions of dollars over the past decade to improve the quality of its products and make them more resilient to security threats. Windows remains the operating system target of choice for hackers, but the rise of application-level attacks is pushing other software vendors and packages to the top of the vulnerability list. Adobe’s growing security woes could be seen as an indicator of Microsoft’s declining importance.

All this said, I’m not counting out Microsoft. On top of Windows 7, Microsoft is rolling out a series of new products in databases, middleware, communications and security. It’s cloud-based Exchange and SharePoint business is forming the foundation of its cloud computing franchise. And it retains the single largest network of channel partners, which is of course one of its greatest assets for maintaining relevancy. While the software giant is becoming muted in conversations, it’s not unusual for it to come from behind and assert dominance. As one solution provider told me, Microsoft is rarely first on anyone’s list and they have a great attribute for overcoming adversity.

So what is Microsoft’s future? Will it find its way to the next generation of technology and computing? Or will it end up on the dust heap with DEC, Wang and Netscape?