Christopher Baus enumerates many reasons. Among them: not embracing network-centric computing.
In 20 years the islands of functionality that were the PC will be a flash in pan, and the multics proponents will be finally proved correct. Computing will be a utility, except the services will be connected via the internet.
The desktop is already becoming marginalized in the overall computing picture. Users are moving to web based email, web based calendars, network connected cell phones, and photo iPods. Consumers want their data to be securely managed, and they want it everywhere, all the time. They don’t want it locked up on their PCs.
By putting personal data on the desktop, Microsoft wants everybody to be their own sys admin. No matter how you slice it, sys admining is tricky work. Consumers are going to leave it to the experts, and move their data to the network, and google is going to lead the way. I think JWZ said it best. It’s all about the network.
Microsoft is playing defense and trying to prevent this from happening. This is a classic mistake. I predict a replay of DEC’s failure to move to PCs that spelled their demise. Microsoft can’t force relevance into the desktop. This is also why WinFS on the desktop is a waste of time. Consumers don’t want to manage their contact database schemas on the desktop. They want google to do it for them. And businesses are already using centrally managed LDAP servers. WinFS has no marketable advantage.