A few days ago I suddenly realized Microsoft was dead. I was talking to a young startup founder about how Google was different from Yahoo. I said that Yahoo had been warped from the start by their fear of Microsoft. That was why they'd positioned themselves as a "media company" instead of a technology company. Then I looked at his face and realized he didn't understand. Microsoft? He didn't say anything, but I could tell he didn't quite believe anyone would be frightened of them.
No one is even afraid of Microsoft anymore. They still make a lot of money—so does IBM, for that matter. But they're not dangerous.
When did Microsoft die, and of what? I know they seemed dangerous as late as 2001, because I wrote an essay then about how they were less dangerous than they seemed. I'd guess they were dead by 2005. I know when we started Y Combinator we didn't worry about Microsoft as competition for the startups we funded. In fact, we've never even invited them to the demo days we organize for startups to present to investors. We invite Yahoo and Google and some other Internet companies, but we've never bothered to invite Microsoft. Nor has anyone there ever even sent us an email. They're in a different world.
What killed them? Four things, I think, all of them occurring simultaneously in the mid 2000s.
The most obvious is Google. There can only be one big man in town, and they're clearly it. Google is the most dangerous company now by far, in both the good and bad senses of the word. Microsoft can at best limp along afterward. I'd say they took the lead in 2005. Gmail was one of the things that put them over the edge. Gmail showed they could do more than search.
Gmail also showed how much you could do with web-based software, if you took advantage of what later came to be called "Ajax." And that was the second cause of Microsoft's death: everyone can see the desktop is over.
Ironically, Microsoft unintentionally helped create Ajax. The x in Ajax is from the XMLHttpRequest object, which lets the browser communicate with the server in the background while displaying a page. (Originally the only way to communicate with the server was to ask for a new page.) XMLHttpRequest was created by Microsoft in the late 90s because they needed it for Outlook. What they didn't realize was that it would be useful to a lot of other people too—in fact, to anyone who wanted to make web apps work like desktop ones.
The third cause of Microsoft's death was broadband Internet. Anyone who cares can have fast Internet access now. And the bigger the pipe to the server, the less you need the desktop.
The last nail in the coffin came, of all places, from Apple. Thanks to OS X, Apple has come back from the dead in a way that is extremely rare in technology.  Their victory is so complete that I'm now surprised when I come across a computer running Windows. All the computer people use Macs or Linux now. Windows is for grandmas, like Macs used to be in the 90s.
And of course Apple has Microsoft on the run in music too, with TV and phones on the way.
I'm glad Microsoft is dead. They were like Nero or Commodus—evil in the way only inherited power can make you. Because remember, the Microsoft monopoly didn't begin with Microsoft. They got it from IBM. The software business was overhung by a monopoly from about the mid-1950s to about 2005. For practically its whole existence, that is. One of the reasons "Web 2.0" has such an air of euphoria about it is the feeling, conscious or not, that this era of monopoly may finally be over.