Heading into 2014, Microsoft faces a more difficult competitive landscape than it has since Windows rose to prominence over 20 years ago. Increasingly irrelevant in personal computing, the firm must find its way in what many are calling the post-PC world.

What is Microsoft's role in this post-PC world? And how will the changes that are rocking personal computing affect those who have historically relied on Windows and Microsoft for their livelihoods?

That we're in a "post-PC" world is of course a matter of semantics. Microsoft has countered this claim, which was made famous by former Apple CEO Steve Jobs, by asserting that we're actually in a "PC-plus era," one in which PCs are used alongside other digital devices such as tablets and smart phones.

While arguments could be made for either term, the simple truth is this: Sometime soon, potentially this year, PCs will be the slowest-selling of these three mainstream computing device types. And it's only a matter of time before tablet usage surpasses that of PCs as well. (Smart phones are already well ahead.)

The PC isn't out. But it's on the way down.

Post-PC World: Smart Phones, Tablets, and PCs

This is a problem because while Microsoft's Windows has long dominated the PC market, it has found little foothold in tablets or smart phones. These markets are dominated by Android, which many have described as the Windows of the device world. In 2013, Android accounted for over 80 percent of all smart phones sold and about 65 percent of all tablets.

If you examine the sales of all of these devices together—a market we might describe as "personal computing devices"—Windows accounted for only about 14 percent of that market in 2013, compared to 38 percent for Android and 11.6 percent for Apple platforms (Mac plus iOS). And while sales of Windows on non-PC devices are expected to rise over the next few years, that increase will occur much more slowly than will the rate for Android and iOS devices. And since PC sales are going down each year, Windows's overall share of the market will keep dropping.

How bad will it get? According to the latest figures from Gartner, Windows will account for 18.6 percent of the overall personal computing market in 2014, compared to 44.5 percent for Android and 13.9 percent for Mac/iOS. In 2015, Windows hits 16 percent, with Android at 48 percent and Mac/iOS at 15 percent.

In short, Android will account for almost 50 percent of all personal computing devices sold within the next two years, and while Apple's platforms don't quite overtake Windows, they will come pretty close. Both Window and Mac/iOS become in effect secondary platforms, with Android driving three times the unit sales of either. And sales of Android devices will surpass one billion units in calendar 2014, an amazing milestone.

Related to this surge in Android devices, of course, is the popularity of non-PC devices. Smart phones long ago surpassed PC sales and usage, but tablets and so-called hybrid-PCs—tablets with a clamshell or transforming form factor—are perhaps more obviously directly competitive with traditional, non-touch PCs. In 2013, even a diminished PC market that sold about 300 million PCs outperformed tablets, at 180 million units, and hybrid PCs, at about 17 million units. But that's set to change.

In 2014, Gartner expects hardware makers to sell 263 million tablets, a bit lower than the expected 278 million traditional PCs that will be sold. But when you add in 40 million hybrid PCs, that combined market surges ahead of the traditional PC. And in 2015, even standard tablets—which some called media tablets—will outsell the PC.

I've often pegged the hybrid PC as the future of the PC, and here of course Microsoft and Windows do make a relatively strong showing. But hybrid PCs remain a tiny portion of the overall market—64 million units in 2015, or about 2.4 percent of all personal computing devices—and even if you lump this device type in with traditional PCs, there's not much to celebrate. Post-PC it is.

Microsoft's Role in the Post-PC World

So what's Microsoft's role in this post-PC world? Naturally, the software giant is keen to push Windows as a viable platform going forward, and while Windows 8 didn't get off to a great start, Windows 8.1 was better received, and Microsoft has plans to continue improving Windows over the next few years and, perhaps as important, consolidate the platforms it currently offers for PCs, tablets and smart phones.

Currently, Microsoft creates three mainstream Windows versions for personal computing devices, and the strategy, and how these products interrelate, is a bit of a mess. The firm offers Windows 8.1 for x86-type traditional PC products, Windows RT 8.1 for ARM-based PCs and tablets, and Windows Phone 8 (also ARM based) for smart phones. But thanks to the recent Microsoft reorganization, that's about to change.

Terry Myerson, who previously oversaw Windows Phone development and is now in charge of Microsoft's core and client OS efforts, has indicated that he would like to consolidate Windows RT and Windows Phone into a single platform. That won't happen overnight, and the change is complicated by the fact that Windows RT and Phone are currently at different stages of development. But it's certainly possible for Microsoft to move these releases closer to each other over a series of minor updates this year, given their common core, and perhaps to a single platform in time for Windows 9.

Windows 9, you ask? Currently scheduled for an April 2015 release, Windows 9 is codenamed Threshold and will be publicly revealed at the April 2014 BUILD Conference (which will otherwise be very much focused on Windows Phone and Xbox).

You can find out more in "Threshold" to be Called Windows 9, Ship in April 2015. But before that happens, Microsoft needs to bring Windows RT and Windows Phone closer together, and it will do so via a series of updates to each this year.

The first, Windows Phone 8.1, has been in development for the past year or more and will bring the Windows Phone platform up to speed with the changes Microsoft made to its other Windows clients last year. A Windows 8.1 Update 1 release, expected in April alongside Windows Phone 8.1, will further improve Microsoft's PC- and tablet-based offerings. And it's possible that future updates (like Update 2) could target both platforms.

But Microsoft's move to become a devices and services powerhouse requires it to focus on more than just Windows. In-house, there are businesses such as Office that are already bigger than Windows. And as we discussed earlier, there are bigger platforms outside of Microsoft as well. The firm intends to leave no stone unturned.

This strategy can already be seen in much smaller and consumer-focued offerings, such as Xbox Music—available currently on everything from the web, the Xbox One, iPhone and iPod Touch, and Android smart phones and mini-tablets, in addition to Windows—Xbox Live games, Bing, Skype, SkyDrive, and more, across as many popular platforms as possible. If Microsoft makes a service, it will be available on other popular devices via a native mobile app or the web, and not just on Windows.

Of course, Microsoft's biggest strength is in productivity, not the consumer market. And it already makes business-oriented offerings such as OneNote, Lync, SkyDrive Pro, SharePoint, and Office Mobile available on rival platforms, and its Office 365 email, calendar, and contacts services are broadly available on any modern device through Exchange ActiveSync (EAS). These smaller offerings will lead the way to a much bigger opportunity.

In 2014, Microsoft will deliver a "Modern" (what we used to call "Metro") mobile version of its Office productivity suite for multi-touch Windows tablets and other devices. But the bigger news, perhaps, is that it will be followed up by similar Office releases for iPad and Android tablets, and possibly quite quickly. I'd be surprised if this year passed without all three releases, in fact.

What About Us?

If you're focused on Microsoft technologies, you don't need to be told the world is changing and that's true regardless of what's happening on the client. Despite concerns about privacy and government snooping—some fanciful, some legitimate—2013 was the year that cloud computing took off in a meaningful way, and that trend will only continue going forward.

For all the changes, Microsoft's server- and services-side advantages for businesses of all sizes remain in place. Management of core services—Exchange/Office 365-based email, calendar and contacts, SharePoint-based document management and so on—won't fundamentally change, though more and more of this infrastructure will be cloud-based rather than in-house.

On that note, Microsoft has done a good job of making its traditional on-premises server offerings available as cloud services, and of course the firm's hybrid deployment offerings—which let businesses move to the cloud at their own speed—are a strength. But even those that stick with Microsoft across the stack will find the ground shifting under their feet.

Business acceptance of consumer-oriented, public cloud services—Dropbox, Google Drive, SkyDrive and so on—will continue to be an issue. In the past, businesses worried about employees walking out the door with vital information on a physical device such as a USB stick or laptop, and then losing that device or having it get stolen. But today, the concerns are broader, and it's more likely for internal information to make its way out of a company, purposefully or not, via a public cloud service.

The changes we see in the personal computing devices space will also continue to wreak havoc with traditional PC management models going forward. If you've not invested in mobile device management capabilities, this should be the year, as the coming generation of knowledge workers will expect choices when it comes to the devices and services with which they interact.

This more agnostic future will include a preponderance of Android devices, iPhones and iPads, Windows PCs and hybrid devices, and even the occasional Chromebook, though Gartner's numbers suggest Google's other computing platform will remain an also-ran for the foreseeable future.

The time to prepare for that future is now. Because it's not the future. It is now.

Embracing Change

Change is something you can either embrace or fear, but it's fair to say that the advent of this devices-and-services era—which is really just another way of saying "post-PC world"—is the biggest change to rock the computing industry since the appearance of the original PC. In some ways, this change is made all the more difficult because previous changes— the rise of Windows, workgroup computing, or the Internet era—were such natural evolutions.

The post-PC world isn't so much a reaction to the past as it is a repudiation of the past, an attempt to move personal computing beyond its complex and old-fashioned beginnings and into a simpler place. We're shocked by this because previous shifts were so less dramatic.

The change from, say, Exchange 5.0 to Exchange 2000 was difficult, but not as difficult as the move to a cloud-based Exchange. But what happens when you're asked to move beyond Exchange? It's the uncertainty that creates such fear.

And that's why 2014 is going to be a pivotal year for Microsoft, its customers, and those who have bet their careers on this company's technologies. Change is coming.