What does the Microsoft of the future really look like?

It's been four weeks since the company announced its $7.2 billion plan to acquire Nokia's phone business, cementing CEO Steve Ballmer's plan to transform Microsoft from a software provider into a devices and services company, and the answer is getting fuzzier by the day.

The main issue is that Ballmer himself is leaving Microsoft in the next 12 months — he offered a tearful goodbye to employees at last week's annual companywide meeting — and finding a new CEO to execute such a dramatic shift in the company's strategy while maintaining its existing 16 billion-dollar businesses will be no easy task.

There are still a lot of tough decisions to be made

That task has been made substantially more difficult in recent days by activist investors — reports surfaced last week that a group made up of "three of the top 20 investors" was pushing for Ford CEO Alan Mulally to take over the top spot, and yesterday news leaked that Microsoft's board was seriously considering him. At the same time, "three of the top 20 investors" were also credited yesterday with pushing to remove Bill Gates from the Microsoft board, which he currently chairs. That would include his removal from the CEO search committee, which is presumably moving forward on the Mulally recommendation at the same time. None of that feels particularly suited to a smooth transition.

And there are substantial challenges beyond simply replacing Ballmer — as Microsoft begins the long process of reinventing itself, there are a lot of tough decisions to be made.

Who's in charge?

As of right now, the leading name floated as a potential Ballmer replacement is Mulally, who "categorically denied" his interest in the role to Kara Swisher after she said he was "amenable" to the idea several days ago. But things appear to be softening: Mulally simply declined to answer a question about his plans yesterday when asked. "I love serving Ford and have nothing new to add to [my] plans to continue serving Ford," he told USA Today.

The other name in the spotlight is former Nokia CEO Stephen Elop, who stepped down to an executive vice presidential role when the deal was announced and will return to Microsoft as head of all devices when the acquisition is complete. Elop is the natural choice to run the device group, say sources familiar with the transition — he'll have been running Nokia's device business for nearly five years outside Microsoft already, and that will form the bulk of his job within Microsoft as well.

The CEO proposition seems... complicated

But Elop's brief will be bigger than just phones: it will include oversight of the Xbox division, the Surface tablets, and the future of its phone business. That's a big responsibility, and managing and retaining the senior-level executives who've been building those products will require a deft touch for a new leader from outside the company. It will also make finding a new, non-Elop CEO harder: if Microsoft is now a devices and services company with Elop running devices and longtime VP Qi Lu running services, it's hard to see what would lure another strong CEO candidate to the company. Add in the current power play taking place at the board and investor level, and the proposition seems even more complicated.

Ballmer's massive reorganization was designed to end the infighting within the many kingdoms that have long existed at Microsoft, and to unify the company — he literally named the plan "One Microsoft." But that vision is entirely dependent on strong leadership at the top — and right now, it's an empty space.

How will Nokia's phone business and employees integrate into Microsoft?

The purchase of Nokia's phone business and services division means that Microsoft will suddenly find itself with some 32,000 new employees. Many of those employees will come with skills and relationships Microsoft finds valuable, like supply-chain management and the ability to negotiate with mobile operators around the world. But others will almost certainly be let go, as their jobs will be made redundant. The 18,000 employees in manufacturing are also vulnerable, as their new managers seek to cut costs and make the Nokia deal pay for itself faster. Just look at Motorola, which endured two rounds of layoffs that cut 30 percent of its workforce — 5,200 people — after being acquired by Google. These are hard decisions, and they will fall squarely on the new CEO, as Ballmer will very likely be out by the time the Nokia deal closes.

Managing the PC marketplace

It is almost impossible to think of a company that's managed to build a successful platform while simultaneously competing with its own licensees. Apple failed with the original Mac and the Newton, Palm failed with Palm OS, and Nokia itself struggled with Symbian. The only recent example is Google, which has had to build a "firewall" around Motorola and even reportedly treats the company more harshly than its other partners in order to maintain the appearance of propriety and placate important OEMs like Samsung.

Can Microsoft do the impossible with a licensed platform?

But Microsoft is still trying to play it both ways, licensing Windows 8, Windows RT, and Windows Phone to other OEMs all while building its own products for those platforms. And sources say Microsoft remains committed to a model where it produces some devices itself while licensing the software. That combination of approaches will lead to inevitable complications.

It's not a huge problem for Windows Phone and Windows RT, which are barely being licensed by others, but managing Microsoft's ongoing relationships with PC makers as more and more of the market shifts to mobile is a huge task. Company executives insist that there is currently no plan to get into the PC business and that the Nokia acquisition is simply about phones, but Microsoft already makes a Windows 8 PC. Just last week, the company held a launch event focused almost entirely on the Surface Pro 2, which is an extremely competitive entry in the convertible tablet / laptop market. Add in Nokia's manufacturing ability and distribution reach, and suddenly Microsoft is competing in the PC business worldwide almost by default. Is that the plan? And if not, what is?

Can there be peace with Google?

You can't sell a mobile operating system to consumers if it sucks at YouTube, and both Windows Phone and Windows RT suck at YouTube. That's a problem — and a shorthand for issues with using other Google services like Gmail on Microsoft's platforms. Until Microsoft finds a way to reach détente with the search giant, its platforms will be marginalized as bit players from an alternate ecosystem with the wrong kind of lock-in.

Google is as much to blame for this situation as anyone in Redmond, but the sad truth is that Google also has the upper hand when it comes to mobile market share. Whoever takes over at Microsoft will need to make the decision whether to keep fighting this war, or find peace in the service of moving forward.

What's more important, devices or services?

How Microsoft prioritizes devices and services will affect everything the company does in the foreseeable future. Does Microsoft want to be more like Apple, with a fully realized, vertically integrated device business that leverages lock-in services like iMessage and iCloud to drive hardware sales? Or does Microsoft want to be more like Google, with a fully realized horizontal services business that extends across platforms and vendors to drive scale? Right now the company's answer appears to be a mix of both — another strategic choice that's rarely been successful in the industry.

More like Apple or more like Google?

"A services strategy and a devices strategy are fundamentally opposed to each other," writes Ben Thompson, who has been eloquently picking apart Microsoft's new direction for weeks. "Your services will forever be paying a strategy tax to support your devices."

That tension is an opportunity competitors are only too happy to exploit. Just look at Apple, which is now giving away its iWork suite to fill the void left by Microsoft's decision to ignore the iPad. Why? Because Office is a key differentiator for Windows 8 tablets. On the other hand, Skype continues to be ubiquitous because it's everywhere. Finding the balance between these two approaches will be the key challenge for Microsoft's new leadership.

Few companies have ever embraced fundamental change the way Microsoft is doing now, and few CEOs have ever pursued that change as aggressively as Steve Ballmer. But Ballmer won't be around to execute on that change, and whoever steps in will have to make a number of tough decisions — all while making sure Microsoft's investors stay happy. But step one is finding the right person.