Bill Gates will ease into retirement today by stepping back from his full-time role as chairman of Microsoft, two years after he announced his intention to go.

Although he will remain as chairman of the software giant, it will be on a part-time basis, working one-day-a-week. He will turn most of his attention to the philanthropic projects supported by his Bill and Melinda Gates Foundation.

However, the business he built up from scratch in 1975 with Paul Allen faces some huge challenges that chief executive Steve Ballmer will now have to overcome.

Although over 90 per cent of the world's desktop computers run Microsoft Windows and almost all of the world’s word processing documents and spreadsheets are created on Microsoft software, it has serious rivals.

Apple ownership is beginning to gain momentum and there is the ongoing battle with Google for dominance of the internet.

Microsoft's software-licensing business model is also fast being eroded by cloud computing. This involves companies offering software through web browsers either free or for a monthly subscription.

Microsoft's latest operating system, Windows Vista, has also been a flop, with many Microsoft customers clinging to XP. Even the promises of better security have not wooed consumers.

Bill Gates will remain the company's largest single shareholder, but it remains to be seen how Microsoft will cope and develop without its best-known figurehead at the helm.