I would expect that Microsoft will be finding ways to move out from under IIS. I believe Indigo is a path for that, but I am not thoroughly versed in this stuff yet. I am less certain they even see a need out from under SQL Server. I am less certain of that myself. It's getting better, it's competitive, and I expect it makes some money. I don't know much about that either. I'd expect some people somewhere inside that large company are finding alternate paths, though.
But even on the desktop, what's changed?
I have a friend who developed some significant client/server software ten years ago, that had a long fruitful life. He's been considering a rewrite, and lately wondered if much of Longhorn obviated the basis for that rewrite. Was there any value in this software above Longhorn, or would it be trivialized?
We discussed Avalon primarily, but considered most of what was presented at the PDC. And we looked at a picture of what his software does. Clearly Longhorn is not a step backward for his kind of application. But just as clearly it was not a giant leap forward.
A few of the grungiest bits would be easier with Longhorn. The bulk of the application would still require good engineering, and with that would be not significantly more difficult to build, nor less functional to run, on any other major OS platform.
So even on the desktop, what has changed? Not as much as might first appear if you're already building significantly sized applications in a "managed runtime", i.e Java, Smalltalk, or Python.
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