Microsoft is showing signs that it is willing to evolve but it needs to do much more to survive in the networked age, argues Bill Thompson
Sales of the Vista operating system have been higher than expected
The long-delayed launch of Windows Vista and the associated Office 2007 seems to have been a success, at least financially.
In the last quarter Microsoft earned $14bn (£7bn) and the company believes its sales for 2008 will be around $57bn (£28bn).
More people are buying Vista - or buying PCs that come with Vista already installed on it - than anticipated, although like any sensible company Microsoft will have pitched expectations at the low end of its real internal projections.
In general, levels of consumer acceptance of the new software, both the operating system and the new generation of office applications, have been reasonably high.
The news that Dell has decided that it will once more sell PCs with Window XP installed, instead of forcing new buyers to move to Vista, is seen as evidence that the new operating system is not proving popular.
However, that could just as easily be a reflection of the reality that in a two or three computer household most non-technical people would rather have them all running the same operating system, even an older one.
And despite the continued criticism of Microsoft in the technology press and on blogs, chat rooms and discussion groups around the internet, Vista seems to be bedding in well.
Some people find this surprising. Reporting the company's quarterly results, John Naughton of the Observer wrote: "apparently there are more masochists in the world than I thought."
The widely-regarded BoingBoing blog continues to point out the many defects in Windows rights management and consistently calls Vista "crippleware".
One reason why sales are strong is that most ordinary users of personal computers, at home, school or office, use what they are given and they are generally given Windows.
It is pre-installed, or it has been decided at a higher level that this is the operating system of choice.
And some people might be using Vista simply because their expectations are so low that they simply do not know that there could be an alternative.
Like medieval peasants content to live under a feudal system and work the fields for the lord of the manor, they simply do not think of revolting, or running Linux.
But I do not think it is that simple, or that bad.
Windows, in its various incarnations, is in daily use by millions of people around the world and by and large it does the job.
I have a desktop computer running XP and it meets most of my needs.
Although Mac OS is smoother and Ubuntu is cheaper and more flexible, XP is satisfactory and has proved stable.
Microsoft needs Vista to be a success, but not so that it can maintain the continuing revenue stream that previous versions of Windows have provided.
It needs the money so that it can cover the vast expense of changing the way it does business. This is the real challenge facing the senior management team of Steve Ballmer and Ray Ozzie as Bill Gates reduces his day to day involvement with the company.
Other companies have faced this problem, and they have come through it.
Microsoft today resembles the mainframe-building IBM of my early career more than anyone else. It is dominant, its main product is big, clunky, expensive and often over-featured, and it is unpopular.
IBM reinvented itself to remain a successful business
Yet over the last twenty years IBM has reinvented itself, largely because it embraced open standards, worked with other companies and decided that it was better to be a successful player in a whole IT ecosystem than it was to try to define its own environment.
Today it remains larger than Microsoft, with revenues of $22bn (£11bn) last quarter, yet is also a leader in the open source community.
It will take a similar act of corporate reimagination to ensure Microsoft's long term survival as we move from a world of standalone computers that happen to have a network connection to the model of processors as nodes in a larger network environment.
When we reach that stage it will be the final realisation of the phrase trademarked back in the 1990's by Sun Microsystems: 'the network is the computer'.
This week's announcements at Mix07, the Microsoft developer event, and the continued development of Windows Live as a platform for computing services, show that the developers at Microsoft are trying to work with the grain of the Web 2.0 world instead of pushing everything onto the desktop or a Microsoft-branded server.
Silverlight, the company's just-launched rich media platform that is intended to take on Flash for building interactive Web services, is cross-browser and cross-platform compatible from the start, and I've just downloaded and installed it for Firefox on my Macbook.
This alone marks a shift in Microsoft's thinking that may be as significant in the long term as the point when Windows became an operating system and MS-DOS turned into just another application.
Of course, it's just a start, and Microsoft is going to need all the money it can make from Vista and Office to pay for these changes.
The network will be there, whether or not Microsoft manages to remain a major player, but there are at last clear signs that the company knows what it has to do to survive.
Bill Thompson is an independent journalist and regular commentator on the BBC World Service programme Digital Planet.