Recommended reading:
Battling Google,
Microsoft
Changes How It Builds Software
This is one of the most interesting, candid & informative articles
about the internal situation at Microsoft that I have read in a long time. It
includes insight on why WinFS was dropped from the original Longhorn timeframe,
how Microsoft is trying to meet the challenge Google is bringing and how
Microsoft plans to develop and release software in the future.
(follow the /.
discussion of the article here)