Unlike some of my readers, I’m old enough to remember when Bill Gates was the new kid on the block, the young upstart who first partnered with and later challenged stodgy, old IBM’s position at the top of the technology heap. Recently I’ve heard quite a bit of chatter regarding how Microsoft has grown old and cranky itself and is now thought of much as IBM was back in those days: as a lumbering giant whose glory days are behind it.

Microsoft is, as discussed in last week’s column, still a highly profitable entity, despite pronouncements by many that the company is failing. It’s still making money — lots of it — but on Forbes magazine’s recently released list of the world’s most innovative companies, Microsoft comes in at a not-very-impressive 86, with main competitors Apple and Google making it into the top ten.

Too big to not fail?

Some say the problem with Microsoft is that it’s just too big. Once an organism exceeds its maximum optimal size, it inevitably starts to break down. With close to 90,000 employees (compared to almost 50,000 at Apple and fewer than 40,000 at Google), no one can argue that Microsoft isn’t a size XL when it comes to head count. On the other hand, stodgy, old IBM would qualify as a XXXL, employing well over 400,000 workers. But what do these figures really mean?

Is slimming down the answer to making Microsoft more successful? Does the company need to get leaner and meaner? In the chart titled “Employees in 2011 vs. 2008” in the linked article it’s interesting to note that Microsoft is actually the only company in the list that showed a lower employee head count in 2011 than in 2008 (89,000 vs. 91,000). Indeed, there have been a number of well-publicized layoffs in the last few years, with 5,000 employees getting the axe in 2009 (but at the same time, new positions opened bringing the net change to 2,000-3,000). Even well-known Microsoft “rock stars” such as Steve Riley weren’t safe. A smaller number of job cuts were made in July 2010.

Those cuts probably had some positive effect on Microsoft’s bottom line, but did they make the company more streamlined or better in any way? And was size really the problem to begin with?

Too old to rock and roll?

I’ve heard others say that the problem isn’t size, but age. According to Microsoft’s own web site, more than 43 percent of employees are over 40, with another 41 percent in the 30-39 age bracket. Median age, according to PayScale.com’s “Top IT Employers Compared,” is 35, only a couple of years older than the median of 33 at Apple (Google’s median age is 31 and at Facebook it’s only 26). The leaders at Microsoft (CEO Steve Ballmer and Chairman Bill Gates) are in their early to mid-50s. Google’s CEO, Larry Page, is a bit younger (38), although Executive Chairman Eric Schmidt was born in 1955 — the same year as Bill Gates and Steve Jobs.

But maybe it’s not about chronological age. Hedge fund manager David Einhorn accused Steve Ballmer of being “stuck in the past” and blamed that for Microsoft’s stagnant stock performance. He’s not the only one who’s questioned whether Microsoft is too old to be innovative. As 2009 came to an end and we entered the new decade, Mary Jo Foley was already wondering whether the 40- and 50-year-old leadership was “too old to keep Microsoft at the cutting edge in our Tweet-happy, Foursquare-obsessed world.”

Is a clean break called for?

If the problem is that Microsoft is stuck in the past, the obvious solution would be to make a clean break with that past. But how do you do that? Einhorn and others think the housecleaning should start at the top. Numerous bloggers have called for the resignation or firing of Steve Ballmer. About a year ago, a TechRepublic Windows Blog poll asked whether Microsoft should dump Ballmer, and comments were all over the map. There is obviously a lot of dissatisfaction with (and even vehemence toward) Ballmer out there.

Some have likened Ballmer to John Scully at Apple and have suggested that just as Apple brought back Steve Jobs — and then skyrocketed from “down and out” to wild success — Microsoft should bring Bill Gates back to the helm. The idea has merit; it also worked for Dell, when CEO Michael Dell came out of retirement to breathe new life into the company he founded. Whether Bill would even be interested in the job is another question. Others have suggested replacing Ballmer with Mark Zuckerberg or other “young blood.”

While a change in top personnel would undoubtedly change the culture and business focus of the company, at least in subtle ways, a real analysis requires looking at what specific actions might need to be taken — whether by Ballmer or a replacement — to turn things around and spur Microsoft to grow in the way Apple and Google have been.

I’ve heard some pretty drastic measures suggested. One was to drop the Windows branding and give the next generation of Microsoft operating systems a new name and a completely rewritten kernel. There was even a rumor floating around last month that this was under consideration. Lance Ulanoff responded in PC Magazine with all the reasons this is highly unlikely.

OK, let’s keep the name then, but make some really big changes to the OS. To do that, to get truly innovative, Microsoft just might have to do something that would surely earn them the ire of many of their customers and would definitely constitute “risky business.” I’m talking about dropping legacy support and backward compatibility. That’s right — a whole new code base with a whole new file system that won’t run your old applications.

Sound crazy? It’s essentially what Apple did. They switched from the classic Mac OS that they had been using since the 1980s to the UNIX-based OS X. Early versions included a compatibility layer called the Classic Environment, but they dropped that with OS X v10.5 (Leopard). Intel-based OS X Macs don’t support the Classic Environment, and the old apps don’t work on them. This freed Apple to create a much more robust and innovative operating system.

My take

Microsoft may have gotten a little long in the tooth after all these years, but companies — unlike biological organisms — don’t have predetermined life spans. It’s possible to make changes that are more than cosmetic and reinvigorate a business entity that seems to be going downhill.

Leadership and vision are important elements, but I’m not sure Steve Ballmer can really be held responsible for Microsoft’s loss of its former position at the top of the tech industry charts. I think that’s more a matter of Apple’s and Google’s success than Microsoft’s “failure.”

There’s someone I would fire, though, and that’s the company’s marketing team. Apple beat Microsoft into submission in large part through a clever advertising campaign. The Mac guy/PC guy commercials, although they eventually deteriorated into mean-spirited manifestos that were, I think, alienating potential customers before they were bagged, started out brilliantly.

Microsoft has had a series of ad campaigns that were just blah at best and downright embarrassing at worst. The Seinfeld commercials were just silly and confusing. The laptop hunter series was mildly interesting but ultimately forgettable. The recent “to the cloud” ads are less than compelling to the average person and highly annoying to techies who know that the features being shown (picture editing with Windows Photo Gallery, copying a recorded TV file from a remote computer to watch locally on Windows Media Center) aren’t really about cloud apps at all.

Whether to sacrifice backward compatibility in order to move forward is a tougher question. There would be much weeping and wailing and gnashing of teeth if that happened, and Microsoft would likely lose a substantial part of its customer base, as many people would say if their programs won’t run on the new version of Windows, they might as well switch to Mac or Linux. However, with virtualization becoming more transparent and easier for “regular folks” to use, that might provide a potential solution (as it has done, to an extent, with XP Mode in Windows 7).

As for dropping the Windows name, that depends. If Microsoft develops a truly different UI that breaks out of the traditional “windows” way of doing things, it might make sense to change the name.

One area in which they could definitely use some improvement is in naming the OS incarnations. Apple has a naming scheme that evokes power, speed and elegance, with the big cats theme. Microsoft has numbers (3.1, 95, 2000, 7), letters with vague or undefined meanings (NT, XP, ME), and one actual name that, although not bad in itself, didn’t generate any exciting images in one’s mind and is now associated with an OS that’s probably considered one of the company’s biggest failures (Vista).

How about adopting a new naming theme that’s as compelling as Tiger, Leopard, and Lion and can be carried through all the new versions? Maybe look to the periodic table (Titanium, Cobalt, Selenium, and Argon) or to the stars (Andromeda, Centaurus, Gemini, and Mensa). Maybe the latter could be billed as the OS used by really smart people, in response to the recent bogus report that IE users have low IQs.