I sat front-row, center at Tuesday’s all-hands meeting while BillG and SteveB expounded on the future of the company.

Ballmer’s memo somewhat echoed my suspicions from over two years ago; the Business Week article sums it up reasonably well.

Our current tack is simply a question of scale: the Windows and Office businesses are far bigger in the absolute than anything else at Microsoft. Growing even one of them by 10% is far more profitable than starting a few hundred-million-dollar businesses. It’s more profitable than starting even one billion-dollar business.

I’m no tycoon, but I wonder if these basic economics will precipitate Microsoft’s slow descent into insignificance.

Operating systems and information worker software are destined to become valueless commodities. Despite this, Microsoft — ever the engineering-driven company — continues to brand on features. Feature saturation for our core businesses was reached years ago; it is only a matter of time before principal features have equivalent free-software counterparts.

At the same time, top talent at Microsoft is generally unable to push new platforms and products up the chain. Most will never be large enough to warrant attention, but a few (such as search) represent disastrously missed opportunities from a supposed leader in innovation.