Microsoft CEO Steve Ballmer announced today that he will be retiring within 12 months. My Forrester colleague Ted Schadler laid out some of the strategic challenges his successor will face in coming years. Here, I add to Ted's analysis.

Microsoft remains one of the great global technology companies, a solid member of the Fortune 50. Although it no longer enjoys the reputation for innovation it did in the 1990s, it’s a critical player in every aspect of end user computing (including devices, software, browsers, development platforms, and services) and of other technology product and service markets.

As CEO, Steve Ballmer solidified Microsoft’s stronghold in enterprise solutions. Microsoft built and maintained — or built and made itself into a key challenger — in several enterprise markets. Microsoft Office remains a titanic success, even as it faces lower-cost competition from Google and others. Windows Azure has been cultivated into a full-fledged contender in the cloud services market. Exchange remains entrenched in enterprises, as do many of Microsoft’s Server and Tools offerings. Microsoft remains the company to beat in some of these markets, and has become a formidable challenger (e.g. as Azure takes on Amazon Web Services) in others.

On the consumer side, Xbox and its Xbox Live services stand out as a major success of Ballmer’s tenure. And overall, revenues have grown considerably during his tenure, even if not at the rate investors might have liked to see.

At the same time, it’s important to point out some of the unresolved challenges that Microsoft has faced during the Ballmer era:

  • Struggling to find relevance in the face of the mobile revolution. Microsoft remained wedded to PC-oriented computing models even after as the initial smartphone wave (Blackberry) and then the modern, app-rich smartphone wave (from 2007 forward with Apple’s iPhone) proved the criticality of mobile to computing. A great example is tablets: Forrester wrote a report in November, 2011 in which we asserted that Microsoft was already late to the tablet market (in 2011…) – even though Bill Gates had proclaimed the tablet the future of computing as early as Comdex (in 2000). By the time Microsoft released proper tablet OSes – in October, 2012 with Windows 8 and RT – Apple’s iOS and Google’s Android had sucked up consumer and developer interest. It remains to be seen if Microsoft can come from behind here.
  • Releasing several OS misfires. Microsoft has had its share of operating system misses over the years: Windows CE, Windows Mobile, and most certainly Windows Vista. While Ballmer’s Windows organization steadied the ship with Windows 7 following the failure of Windows Vista, the “reimagining of Windows” with Windows 8 hasn’t gone as smoothly as many at Microsoft would have hoped, though Windows 8.1 shows promise in improving the OS’s fortunes.
  • Losing connection with consumers… just as the age of consumerization dawned. Microsoft once ruled the imaginations of consumers world-wide: the release of Windows 95 was a rock star event (quite literally – the Rolling Stones’ “Start Me Up” was commissioned as the theme song for the OS). Over the years, Microsoft became more and more an enterprise company, losing touch with consumers. This wouldn’t have been a problem, except that during Ballmer’s CEO tenure consumerization took off, and consumer-oriented players (Apple, Google, Samsung) began to dominate the fields of computing, software, and mobility.

All three of these battles still loom ahead, as the next Microsoft CEO will put his or her strategic imprint on how the company chooses to contend with mobility, the platform wars, and consumerization. The company has resources and talent on its side, but needs a faster-moving strategy to address these challenges.