One of Microsoft's biggest problems that contributes to their insular view is that they are located in Redmond. They're insulated from the rest of the highly competitive technology field (except for Amazon). This works out great for them when it comes to retaining talent in Redmond as employees are usually not willing to uproot their lifestyle to head to 'greener pastures'.

Contrast this to how Google handles compensation and employee retention. Granted, Google is a much smaller organization and can afford to be more nimble, but part of it has to do with with the fact that being in the valley means that its incredibly easy for talented, motivated engineers to move to the next hot startup once they're dissatisfied with their current job.

In Redmond, however, these options don't really exist and creates a culture of stagnation. People goto their jobs because they have and leave as soon as it is culturally acceptable.

I fear a lot of Microsoft's future as I just don't believe that they are able to recruit top young talent anymore. Not only is Microsoft not a "hip" place to work anymore, but their compensation is generally below market. Its pretty standard for funded startups to give more BASE salary than Microsoft. Google's base is roughly 50% more than what Microsoft pays. New hires at Google make more money than level 64 Microsoft engineers (5 levels from starting).

Microsoft will continue to execute and create good products, but until their internal culture drastically changes they will slowly slide into irrelevance.