Microsoft has identified a number of core areas in which to focus its R&D efforts over the next three to seven of years, and has committed to continue investing about 17% of gross margin in R&D. 

Topping the list that Steve Ballmer, CEO of Microsoft, spoke about during last week's analyst briefing is the area of consumer electronics, and particularly the entertainment arena.
"There's a whole set of things that we think are going to happen. Many of these things are still very nascent, and we have a fairly comprehensive agenda of things that we will invest in. And it's this agenda across the board that's going to continue to drive R&D investments over the course of the next three or four years."
The area of information workers is another big area, he adds.
"Information workers, both at work and at home, people who are trying to get something productive done through the use of technology, analysis, discovery, research, presentation, communication: there's still a very broad agenda that we need to invest in."
Ballmer cites as an example the agreement announced recently with Nortel, to change the way people communicate.
"That's going to take R&D investment. There's certainly much more that we can do to improve the way people communicate with one another: online meetings, the way videoconferencing works, the way IP networks are used to process and handle voice, and let you unify all the things that you do; just an example of one of the areas of investment for us on that agenda."
The changing software model , to a service business, will also come under the spotlight, according to Ballmer.
"Information technology, with the whole move of software to a service business, the whole way IT people think about their jobs will morph, and we need to make sure that we're making the investments that will essentially enable that so you can think of essentially people having very self-managed systems, the system takes care of itself, whether Microsoft is operating it for you out in the cloud, or you're running it yourself."
The way that developers work is another area where the company is focusing its efforts.
"Software development hasn't changed much basically in the 27 years I've been at Microsoft," says Ballmer. "We still write programs in very low level ways.
"One of the largest R&D groups at Microsoft focuses strictly on software developers and how to make them more productive, and we think that remains a critical asset for us. You might say it's not a critical business in and of its own right, but it remains an asset that helps us in everything else that we do."
The final area of focus is Windows itself, he adds.
"Last but certainly not least is what we like to call the Windows core, the basic way in which operating systems use hardware and present user interface. And that will change: speech, natural language are very important technologies which we'll introduce into the basic experience.
"Intel is putting power at us in a new way. They used to give us more clock speed every year; now they're giving us more cores. And that's a fundamental change to literally everything we do from operating systems to productivity applications to development tools and the like."
Underscoring its commitment to ongoing research, Ballmer points out that Microsoft management recently went through the approximately 70 areas in with it will measure itself to ensure it's making progress and getting products to market.
"You ought to expect to see us continue to be a big, big investor there in R&D," he says.