Ground Floor: A few weeks ago I mentioned that Steve Jobs of Apple Computer was one of my role models, as much for the way he dealt with failure as he did with success. Obviously, if I'd been looking for a purely successful role model, in the IT industry at least, I would have chosen Bill Gates, who captured the entire PC market and ensured that Microsoft Windows became the world's dominant computer operating system.

Microsoft built up a critical mass of users which saw off the challenge of Apple Computer and relegated it to the preferred choice of some diehard fans. Meanwhile businesses stuck with Bill and with Windows.

And no matter how much marketing Apple does (and no matter how good its product), Microsoft will always be the leader as far as the PC buyer is concerned. Businesses have too much invested in Windows to make a switch.

Having been unceremoniously beaten in the PC arena, Apple had to turn its hand to other endeavours and eventually came up with a personal music player. And this time Jobs didn't lose sight of the commercial reality of what he was doing. He brought the iPod to the world and has dominated the digital music market.

Since 2001 the company has sold nearly 68 million iPods with sales of 8.7 million in the last quarter this year alone. The $1.6 billion generated by sales as a result is more than the iPod-less company brought in altogether in 2001. It now controls 75 per cent of the digital music market, which is worth about $4 billion. That's critical mass!

Meanwhile there are about 3,000 different accessories for the iPod, some of which are at the very high-end of the market, churning profit for the other companies who sell them and raising the profile of the product still further.

The success of the iPod has shown in the relative performance of the two companies' share prices this year. Five years ago, before the launch of the iPod, analysts were calling time on Apple, as it reported quarterly revenues down by 22 per cent; Microsoft, though hurt by the IT rout the previous year, was still a must-have in any portfolio.

Apple's performance since the launch of the iPod has been stunning and this year it returned 37.25 per cent. By contrast, Microsoft investors earned 8.32 per cent.

Clearly, from the Seattle company's point of view, something had to be done. Vista, the latest incarnation of its operating system due this year, has been plagued by delays and is not now scheduled to ship with new PCs until January 30th. However, the battle of the PCs is already won. Now Microsoft has launched its rival digital music player in time for Christmas. The Zune hit the market this week and chief executive Steve Ballmer reckons it will break Apple's dominance and eventually beat the iPod.

The Zune retails in the US at the same price as the iPod and has similar storage space, as well as an FM radio (lacking in the iPod) and wireless transmission of songs from one Zune to another.

Breaking iPod's dominance won't be easy. At the moment, Ballmer has said he will settle for second place in the market. Analysts would be happy with that too; most of them reckon that anywhere between 5 and 10 per cent would be a good result for Microsoft. Ballmer has urged Microsoft's employees to sell as many Zunes as possible and get great reviews for them.

The key issue for reviewers will be reliability and consumer friendliness, not a trademark of Microsoft in the past. Apple products don't generally freeze at inopportune moments and present you with incomprehensible error messages. But that could be partly down to the seamless integration of hardware and software. Microsoft's software is run on a whole heap of different machines, some of which might not always be ready for the latest update. The Zune won't have that problem.

However, Apple isn't sitting around waiting for Microsoft to whack it for the second time. The company has updated its range of iPods and lowered the prices of some models, while announcing this week that it has reached agreement with six airlines to allow passengers watch videos stored on iPods on the in-flight screens.

This strategic partnership route has made the iPod as a music player as ubiquitous as Windows is a PC operating system. Regardless of Microsoft's size and clout, it is playing catch-up, just as Apple has consistently tried to do in the PC market.

It hasn't mattered that Apple's Tiger operating system, which has pretty much all of Vista's features already, was launched back in 2005 and will soon be updated again with Leopard. People have been using Windows for years and they'll continue to do so. And so Microsoft will have to battle against that same level of consumer familiarity that goes hand-in-hand with the iPod.

One of Apple's biggest problems in the personal computer market has been that they've generally been more expensive than the Windows equivalent. On the basis that you won't be paying more for a Zune than an iPod, the question will surely be, which is cooler?

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