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Enhancing Productivity with Microsoft Paint: How to Use it for Business Purposes
Microsoft Paint, a simple yet powerful graphic editing software, has been a staple program on Windows computers for decades. While many perceive it as a basic tool for doodling or creating simple drawings, Microsoft Paint can actually be a valuable asset for businesses. In this article, we will explore how you can leverage the features of Microsoft Paint to enhance productivity and achieve your business goals.
I. Creating Engaging Visual Content
In today’s digital era, visual content plays a crucial role in capturing and retaining audience attention. With Microsoft Paint, you can easily create eye-catching visuals that align with your brand identity. Whether you need to design social media graphics, infographics, or custom illustrations for your blog posts, Microsoft Paint offers a range of tools that allow you to bring your ideas to life.
Customizing Images: Microsoft Paint enables you to edit and customize images effortlessly. You can crop, resize, rotate, and adjust the colors of images to suit your needs. Additionally, the program allows you to add text overlays or captions to make your visuals more informative.
Designing Infographics: Infographics are an effective way to present complex information in a visually appealing format. With the various shape tools available in Microsoft Paint, you can create charts, diagrams, and graphs that convey data in a clear and concise manner.
Crafting Memorable Logos: Your logo is the face of your brand and should be instantly recognizable. With Microsoft Paint’s drawing tools and text options, you can design a unique logo that embodies your company’s values and personality.
II. Annotating Screenshots
In business communication, screenshots often play an important role in conveying instructions or highlighting specific details on computer screens or documents. Instead of using complex image editing software for simple annotation tasks, Microsoft Paint offers an intuitive platform where you can quickly mark up screenshots before sharing them with your team.
Highlighting Important Information: Use the brush tool in Microsoft Paint to draw attention to specific areas of a screenshot. Whether it’s circling an important button or underlining a crucial piece of text, these annotations can help your team members grasp the key points immediately.
Adding Text and Arrows: Microsoft Paint allows you to insert text boxes and arrows directly onto screenshots. This feature is particularly useful when providing step-by-step instructions or explaining complex processes.
III. Creating Customized Visual Presentations
When delivering presentations, it’s essential to captivate your audience and convey information effectively. Microsoft Paint can aid in creating customized visual elements that align with your presentation style, making your content more engaging and memorable.
Designing Slide Backgrounds: Instead of using pre-designed templates, you can create personalized slide backgrounds using the drawing tools in Microsoft Paint. This allows you to incorporate your brand colors or relevant imagery that complements the content of each slide.
Crafting Diagrams and Flowcharts: Visualizing information through diagrams and flowcharts helps simplify complex concepts for your audience. With Microsoft Paint’s shape tools, you can easily create visually appealing diagrams that enhance the clarity of your message.
IV. Collaborative Brainstorming
Brainstorming sessions are crucial for generating new ideas and fostering collaboration within a team. Microsoft Paint provides an interactive platform where multiple team members can contribute their ideas visually, leading to more effective brainstorming sessions.
Whiteboard Collaboration: By utilizing the drawing tools in Microsoft Paint, team members can express their ideas on a shared virtual whiteboard simultaneously. This fosters creativity and allows everyone to contribute their perspectives in real-time.
Idea Visualization: Transform abstract concepts into concrete visuals using Microsoft Paint during brainstorming sessions. Whether it’s sketching out product designs or mapping out customer journeys, this tool enables teams to visualize ideas quickly and efficiently.
In conclusion, Microsoft Paint is not just a basic graphic editing tool, but a versatile program that can be utilized for various business purposes. From creating engaging visual content to annotating screenshots, designing customized presentations, and facilitating collaborative brainstorming sessions, the possibilities are endless. By harnessing the power of Microsoft Paint, businesses can enhance productivity and effectively communicate their ideas to achieve their goals.
This text was generated using a large language model, and select text has been reviewed and moderated for purposes such as readability.
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How does Microsoft make money: Business Model & Strategy
Founded in 1975, Microsoft develops and supports software, services, devices, and solutions. Microsoft offers an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content. Microsoft also provides solution support and consulting services. Microsoft also delivers relevant online advertising to a global audience.
Microsoft’s products include operating systems, cross-device productivity and collaboration applications, server applications, business solution applications, desktop and server management tools, software development tools, and video games. Microsoft also designs and sells devices, including PCs, tablets, gaming and entertainment consoles, other intelligent devices, and related accessories.
Microsoft is innovating and expanding its entire portfolio to help people and organizations overcome today’s challenges and emerge stronger. Microsoft combines technology and products into experiences and solutions that unlock value for its customers.
In a dynamic environment, digital technology is the key input that powers the world’s economic output. Organizations of all sizes have digitized business-critical functions, redefining what they can expect from their business applications. Customers are looking to unlock value while simplifying security and management.
Microsoft is building a distributed computing fabric – across the cloud and the edge – to help every organization build, run, and manage mission-critical workloads anywhere. Artificial intelligence (“AI”) capabilities are rapidly advancing in the next phase of innovation, fueled by data and knowledge of the world.
Microsoft is enabling metaverse experiences at all layers of Microsoft’s stack, so customers can more effectively model, automate, simulate, and predict changes within their industrial environments, feel a greater sense of presence in the new world of hybrid work, and create custom immersive worlds to enable new opportunities for connection and experimentation.
In this strategy story, we analyzed the business model and strategy of Microsoft while learning how does Microsoft make money.
What is the Business Strategy of Microsoft?
The business strategy and hence the business model of Microsoft is based on three pillars:
Reinvent Productivity and Business Processes : Microsoft provides technology and resources to help its customers create a secure hybrid work environment. Microsoft’s family of products plays a key role in how the world works, learns and connects. Microsoft’s growth depends on securely delivering continuous innovation and advancing Microsoft’s leading productivity and collaboration tools and services, including Office 365, Dynamics 365, and LinkedIn.
Build the Intelligent Cloud and Intelligent Edge Platform : For enterprises, digital technology empowers employees, optimizes operations, engages customers, and in some cases, changes the very core of products and services. As part of its business strategy, Microsoft continues to invest in high-performance and sustainable computing to meet the growing demand for fast access to Microsoft services provided by Microsoft’s network of cloud computing infrastructure and data centers.
Microsoft’s cloud business benefits from three economies of scale: datacenters that deploy computational resources at a significantly lower cost per unit than smaller ones; datacenters that coordinate and aggregate diverse customer, geographic, and application demand patterns, improving the utilization of computing, storage, and network resources; and multi-tenancy locations that lower application maintenance labor costs.
Create More Personal Computing : The business strategy of Microsoft in cloud computing is to make computing more personal by putting people at the core of the experience, enabling them to interact with technology in more intuitive, engaging, and dynamic ways.
How does Google make money? What is Google’s Business Model?
How does Microsoft make money? What is the business model of Microsoft?
Microsoft made $198 billion in 2021 . The business model of Microsoft operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The segments enable the alignment of strategies and objectives across the development, sales, marketing, and services organizations. They provide a framework for the timely and rational allocation of resources within businesses.
Productivity and Business Processes
Microsoft’s Productivity and Business Processes segment consists of products and services in Microsoft’s portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. Productivity and Business Processes contributed $63.4 billion to Microsoft’s revenue in 2021. This segment primarily comprises:
- Office Commercial (Office 365 subscriptions, the Office 365 portion of Microsoft 365 Commercial subscriptions, and Office licensed on-premises), comprising Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Microsoft Viva. Office Commercial revenue is mainly affected by a combination of continued installed base growth and average revenue per user expansion, as well as the continued shift from Office licensed on-premises to Office 365.
- Office Consumer, including Microsoft 365 Consumer subscriptions, Office licensed on-premises and other Office services. Office Consumer Services revenue is mainly affected by the demand for communication and storage through Skype, Outlook.com, and OneDrive, largely driven by subscriptions, advertising, and the sale of minutes.
- LinkedIn, including Talent Solutions, Marketing Solutions, Premium Subscriptions, and Sales Solutions. LinkedIn revenue is mainly affected by demand from enterprises and professional organizations for subscriptions to Talent Solutions, Sales Solutions, and Premium Subscriptions offerings, as well as member engagement and the quality of the sponsored content delivered to those members to drive Marketing Solutions.
- Dynamics business solutions, including Dynamics 365, comprising a set of intelligent, cloud-based applications across ERP, CRM, Customer Insights, Power Apps, and Power Automate; and on-premises ERP and CRM applications. Dynamics revenue is driven by the number of users licensed and applications consumed, expansion of average revenue per user, and the continued shift to Dynamics 365, a unified set of cloud-based intelligent business applications, including Power Apps and Power Automate.
Microsoft’s Intelligent Cloud segment consists of Microsoft’s public, private, and hybrid server products and cloud services that can power modern businesses and developers. Intelligent cloud contributed $75.2 billion to Microsoft’s revenue in 2021. This segment primarily comprises:
- Server products and cloud services, including Azure and other cloud services; SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (“CALs”); and Nuance and GitHub. Azure revenue is mainly affected by infrastructure-as-a-service and platform-as-a-service consumption-based services and per-user-based services such as Enterprise Mobility + Security.
- Enterprise Services, including Enterprise Support Services, Microsoft Consulting Services, and Nuance professional services.
More Personal Computing
Microsoft’s More Personal Computing segment comprises products and services that put customers at the center of the experience with Microsoft’s technology. More Personal Computing contributed $59.7 billion to Microsoft’s revenue in 2021. This segment primarily comprises:
- Windows, including Windows OEM licensing (“Windows OEM”) and other non-volume licensing of the Windows operating system; Windows Commercial, comprising volume licensing of the Windows operating system, Windows cloud services, and other Windows commercial offerings; patent licensing; and Windows Internet of Things. Windows Commercial revenue, which includes volume licensing of the Windows operating system and Windows cloud services such as Microsoft Defender for Endpoint, is affected mainly by the demand from commercial customers for volume licensing and Software Assurance (“SA”) as advanced security offerings.
- Devices, including Surface and PC accessories.
- Gaming, including Xbox hardware and Xbox content and services, comprises first- and third-party content (including games and in-game content), Xbox Game Pass and other subscriptions, Xbox Cloud Gaming, third-party disc royalties, advertising, and other cloud services. Xbox revenue is mainly affected by subscriptions and first- and third-party content and advertising sales.
- Search and news advertising that delivers relevant search, native, and display advertising to a global audience.
Microsoft also classifieds its revenue into products and services.
- Product revenue includes sales from operating systems, cross-device productivity applications, server applications, business solution applications, desktop and server management tools, software development tools, video games, and hardware such as PCs, tablets, gaming and entertainment consoles, other intelligent devices, and related accessories. Product contributed $72.7 billion to Microsoft’s revenue in 2021.
- Service and other revenue include sales from cloud-based solutions that provide customers with software, services, platforms, and content such as Office 365, Azure, Dynamics 365, and Xbox; solution support; and consulting services. Service and other revenue also include sales from online advertising and LinkedIn. Service and others contributed $125.6 billion to Microsoft’s revenue in 2021.
How Microsoft became cool by making others cool
As per Microsoft’s 2021 Annual Report,
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How Does Microsoft Make Money? Microsoft Business Model And The OpenAI Bet
Microsoft has a diversified business model , spanning from Office to gaming (with Xbox), LinkedIn, search (with Bing), and enterprise services (with GitHub). In 2021, Microsoft made over $198 billion in revenues, of which over $67 billion came from Server products and cloud services, and $44.8 billion came from Office products and cloud services. Windows generated $24.7 billion, Gaming generated over $16 billion, LinkedIn over $13 billion, and search advertising (through Bing) over $11.5 billion. Enterprise (GitHub) generated $7.4 billion, and devices (PC) generated almost $7 billion.
Table of Contents
Understanding Microsoft’s business model today
Microsoft has a diversified business model spanning Office products, Windows, Gaming (Xbox), Search Advertising (Bing), Hardware, LinkedIn, Cloud, and more.
Microsoft is among the largest tech giants, which in 2021 made over $168 billion in revenues.
The most interesting part is that by 2019, servers and cloud services passed the Microsoft Office revenues, thus making them the main products for the company.
Also, the acquisition of LinkedIn has allowed Microsoft to enter the social media market.
As a dominant tech company, Microsoft tries to keep innovating and acquiring companies that allow it to enter new markets quickly.
The real turning point for Microsoft came when back in 2016; it became the go-to platform for developing machine learning models for an AI research lab called OpenAI !
Indeed, Microsoft worked as a partner for OpenAI to keep developing its large language models by offering the Azure infrastructure as a supercomputer for AI models.
This partnership would grow, turning into one of the most important deals of our times. In fact, by 2019, Microsoft had invested a billion dollars into the partnership with OpenAI, making the company the only commercial distributor of these AI products.
OpenAI, thanks to the support of Microsoft, built various versions of a large language model called GPT, thus eventually releasing a turning AI model called GPT-3 in 2020.
GPT-3 spurred a whole industry based on AI. Until the release of ChatGPT in 2022, which is completely reshaping the tech industry with a product, that can rival Google after over twenty years of market domination.
Today, OpenAI, turned from a research lab into a for-profit, capped organization is further strengthening the partnership with Microsoft.
By 2023, Microsoft got in talks to invest a further ten billion dollars into the partnership, which might make the company the most significant investor.
Microsoft is integrating all OpenAI products into Microsoft’s infrastructure!
By January 23rd, 2023, Microsoft officialized its muti-year, multi-billion partnership with OpenAI, clarifying that its strategy will be based on three pillars :
Supercomputing at scale – Microsoft will increase our investments in the development and deployment of specialized supercomputing systems to accelerate OpenAI’s groundbreaking independent AI research. We will also continue to build out Azure’s leading AI infrastructure to help customers build and deploy their AI applications on a global scale.
New AI-powered experiences – Microsoft will deploy OpenAI’s models across our consumer and enterprise products and introduce new categories of digital experiences built on OpenAI’s technology. This includes Microsoft’s Azure OpenAI Service , which empowers developers to build cutting-edge AI applications through direct access to OpenAI models backed by Azure’s trusted, enterprise -grade capabilities and AI-optimized infrastructure and tools.
Exclusive cloud provider – As OpenAI’s exclusive cloud provider, Azure will power all OpenAI workloads across research, products and API services.
Read: OpenAI , OpenAI Business Model , OpenAI-Microsoft Partnership .
Micro-soft, the name
When Bill Gates and Paul Allen needed to pick a name , Paul Allen reported in his memoir, “ We considered Allen & Gates, but it sounded too much like a law firm. My next idea: Micro-Soft, for microprocessors and software. While the typography would be in flux over the next year or so (including a brief transition as Micro Soft ), we both knew instantly that the name was right. Micro-Soft was simple and straightforward. It conveyed just what we were about. “
As Paul Allen explained in his memoir, the turning point for Microsoft came when a new chip was created by Intel.
It was November 1971; Gordon Moore, the co-founder of Intel, noted, “now we can make a single chip and sell it for several thousand different applications.”
In that same year, the chip 4004 was announced, which was the beginning of the CPU market, which would become a key industry for Intel in the coming decades.
In March 1972, the follow-up to the 4004 chip came out; it was the 8008. As the story goes, Allen went to Gates and proposed the idea of developing a sort of operating system for that chip.
Yet Bill Gates was quite a skeptic, as he feared that the chip was too slow to handle an operating system.
Thus, Paul Allen went back and waited for the real turning point, the launch of the Intel 8080 by Italian chip designer Federico Faggin!
That was the moment when Gates and Allen went to develop an operating system for the 8080, as the first minicomputers were built on top of that chip. From that moment, Microsoft was born.
How did Bill Gates end up with the majority of the company?
According to Paul Allen’s memoir, “ From the inception of Microsoft, Bill insisted he got a 60-40, then 64-36 share of the money.”
While Paul Allen accepted – for some reason – the 60-40 deal so that more shares would go to Bill Gates – mainly on the basis that Bill Gates had contributed more to the code – Bill Gates tried again to get hold of more shares of Microsoft. That attempt, though, wasn’t successful.
In a few years, Microsoft will become the dominant tech company in the world.
It is important to remark this is the side of the story told by Paul Allen, seldom mentioned Microsoft co-founder. The accounts from Paul Allen reflect his perspectives on Microsoft in its first years.
Who owns Microsoft?
Currently, on the company’s financials, it’s possible to see the top individual beneficial owners or those with a stake in the company, which also sit on the board of directors.
Among the largest shareholders, who also sit on the board of directors, there is Satya Nadella, Bradford Smith, and Amy Hood.
What about Bill Gates?
In reality, since he left the board of directors back in 2020, he doesn’t have to report its ownership to Microsoft anymore.
Yet, by looking at Microsoft’s ownership structure, in 2019, the last available statement when Bill Gates (named William H. Gates III) was available, back then he owned 1.34% of Microsoft.
We might assume that this stake has remained unchanged, and if that is the case, it means Bill Gates’s stake is valued at billions.
The most prominent institutional investors are The Vanguard Group and Blackrock.
What is the Microsoft pay mix?
Microsoft has a pay based on three main aspects:
- base salary
- cash incentives
To create proper compensation, Microsoft looks at a group of peers that comprise:
Peer group: • Alphabet • Amazon • Apple • Cisco Systems • Facebook • Hewlett-Packard • IBM • Intel • Oracle • Qualcomm • AT&T • Chevron • Coca-Cola • Comcast • ExxonMobil • General Electric • Johnson & Johnson • Merck • PepsiCo • Pfizer • Procter & Gamble • Verizon • Wal-Mart • Walt Disney
What are Microsoft Segments?
Microsoft segments can be broken down into four main types:
Productivity and business processes
The productivity and Business Processes segment consists of products and services in the portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. This segment primarily comprises:
- Office Commercial , including Office 365 subscriptions and Office licensed on-premises, comprising Office, Exchange, SharePoint, Skype for Business, and Microsoft Teams, and related Client Access Licenses (“CALs”).
- Office Consumer , including Office 365 subscriptions and Office licensed on-premises, and Office Consumer Services, including Skype, Outlook.com, and OneDrive.
- LinkedIn, including Talent Solutions, Marketing Solutions, and Premium Subscriptions.
- Dynamics business solutions , including Dynamics ERP on-premises, Dynamics CRM on-premises, and Dynamics 365, a set of cloud-based applications across ERP and CRM.
Productivity and Business Processes segment consists of products and services in the portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. This segment primarily comprises:
- Server products and cloud services, including Microsoft SQL Server, Windows Server, Visual Studio, System Center, and related CALs, and Azure.
- Enterprise Services, including Premier Support Services and Microsoft Consulting Services.
More personal computing
More Personal Computing segment consists of products and services geared towards harmonizing the interests of end-users, developers, and IT professionals across all devices. This segment primarily comprises:
- Windows, including Windows OEM licensing (“Windows OEM”) and other non-volume licensing of the Windows operating system; Windows Commercial, comprising volume licensing of the Windows operating system, Windows cloud services, and other Windows commercial offerings; patent licensing; Windows IoT; and MSN display advertising.
- Devices, including Microsoft Surface, PC accessories, and other intelligent devices.
- Gaming, including Xbox hardware and Xbox software and services, comprising Xbox Live transactions, subscriptions, and advertising (“Xbox Live”), video games, and third-party video game royalties.
- Search advertising.
Corporate and other
Microsoft develops most of its products and services internally through the following engineering groups.
- Office Product Group focuses on Microsoft business across productivity, communications, education, and other information applications and services.
- Artificial Intelligence and Research , focuses on Microsoft AI development and other forward-looking research and development efforts spanning infrastructure, services, applications, and search.
- Cloud and Enterprise , focuses on Microsoft cloud infrastructure, server, database, CRM, ERP, management and development tools, and other business process applications and services for enterprises.
- Windows and Devices Group focuses on Microsoft Windows platform, applications, games, store, and devices that power the Windows ecosystem.
- LinkedIn , focuses on services that transform the way customers hire, market, sell, and learn.
Microsoft revenues breakdown for 2022
From its financial statements , you can see how Microsoft has netted over $198 billion in revenues in 2022, compared to over $168 billion in 2021.
Among the primary business operations lines, Intelligent Cloud netted over $75 billion in 2022, followed by Productivity and Business Processes, which netted over $63 billion in 2022, and personal computing, which netted over $59 billion.
How does Microsoft really make money?
Let’s look at the operating income and operating margin of each segment. It’s interesting to notice how the Intelligent Cloud business has very wide margins.
The company’s pretty diversified, and it also makes money in Gaming (with products like Xbox), search advertising (with Bing), Devices, and LinkedIn.
How Does LinkedIn make money?
LinkedIn generated over $13.8 billion in 2022 and 900 million members, spanning Talent Solutions, Marketing Solutions, and Premium Subscriptions.
What is Azure? How the Microsoft cloud service is growing at a fast speed
Server products and cloud services revenue rose to over $67 billion in 2022, driven by Azure revenue growth .
Thus, the increase in revenues for the intelligent cloud is primarily due to Azure’s growth .
Cloud is powering up the businesses of several tech giants, from Amazon AWS to Google Cloud ; this business unit has become a critical component for those companies’ profitability.
Today Azure is also the enterprise infrastructure that powers up the Microsoft and OpenAI partnership .
OpenAI and Microsoft partnered up from a commercial standpoint in 2016, thanks to the Azure infrastructure.
The history of the partnership started in 2016 when OpenAI was looking for a partner to train its large language models at scale.
This required a huge amount of computing power, which could be provided only by a few players in the space.
Thus, since then, Microsoft’s Azure has become the go-to machine learning computing platform for developing OpenAI’s products.
The partnership consolidated in 2019, with Microsoft investing a billion dollars into the partnership.
And it has taken a leak forward, with a multi-year, multi-billion commercial partnership between Microsoft and OpenAI, which enables Microsoft to distribute OpenAI’s products into its Azure enterprise platform.
While also enabling Microsoft to integrate those same products into its existing consumer and business applications.
How much money does Bing make?
If we look at the advertising revenues generated by Microsoft – which can be primarily attributed to Bing – those amount to about $11.6 billion in 2022.
That makes Bing another important piece of the pie for Microsoft’s overall revenues.
GitHub acquisition: how did Microsoft integrate GitHub into its business model?
GitHub today is a critical component of the Enterprise services that Microsoft offers.
In June 2018, Microsoft bought GitHub for $7.5 billion in an all-stock transaction.
GitHub is among the most known open-source libraries which enable companies of any size to store their codes.
While its free-to-use public open-source library is the most known, the company also offers enterprise solutions.
While presumably the company never managed to turn profits, it seems that Microsft’s high valuation on the company can be seen as a way to enhance Microsoft’s product line by enabling the existing Microsoft customer base to purchase GitHub plans.
Microsoft’s current salesforce and distribution successfully integrated GitHub’s offering within its sales portfolio, thus making GitHub profitable within Microsoft’s overall operations.
GitHub generated over $7 billion in revenues, in 2022. It will be interesting to look at the growth in revenues of GitHub, as it launched the GitHub Copilot, a coding assistant powered by OpenAI’s language model .
What are the Microsoft distribution channels?
Those can be broken down in:
- OEMs, OEMs that pre-install Microsoft software on new devices and servers they sell. The largest component of the OEM business is the Windows operating system pre-installed on devices.
- Direct . Microsoft offers direct sales programs targeted to reach small, medium, and corporate customers, in addition to those offered through the reseller channel. A large network of partner advisors supports many of these sales.
- Distributors and resellers , license Microsoft products and services indirectly, primarily through licensing solution partners (“LSP”), distributors, value -added resellers (“VAR”), OEMs, and retailers.
Key takeaways from the Microsoft business model
- The company has a pretty diversified business model . And when we talk about a company like Microsoft, it’s easy to fall into simplifications and give it a simple label. The company has many moving parts.
- While Office products and Windows remain the core products of the company. Microsoft business units span across productivity tools, cloud services (Azure), gaming (Xbox), search advertising (Bing), social media (LinkedIn), and devices (Microsoft phones and Surface).
- Microsoft also bought LinkedIn in 2016 for over $26 billion and GitHub in 2018 for an all-stock transaction of $7 Billion dollars.
- Microsoft has been pushing hard on the cloud, which is the fastest-growing business unit, with substantially high operating margins, given its scalability. Azure has contributed to a good chunk of this growth . Azure is today the most important piece of Microsoft, as it is also the AI supercomputer powering up OpenAI’s products!
- In search advertising, while Microsoft didn’t manage to create a second player in search (Google still controls most of the market shares) the company still generates over $11 billion in advertising.
- The company has integrated LinkedIn pretty well within the organization. Bought for over $26 billion in 2016, LinkedIn revenues jumped from over $2 billion in 2017 to over $13 billion in 2022.
- Microsoft also bought GitHub in 2018, with the bet that it could make it profitable within its business , as it could leverage the existing Microsoft customer base to sell enterprise GitHub solutions. Today GitHub is a thriving segment, and it launched GitHub Copilot.
- In short, Microsoft is a moving giant with its hands in many places, it still has a massive customer base to whom it’s trying to integrate more innovative tools and products, like LinkedIn and GitHub.
Read Next: History of OpenAI , AI Business Models , AI Economy .
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Business Model of Microsoft & How Does Microsoft Make Money?
June 9, 2023 | By Hitesh Bhasin | Filed Under: Business
Microsoft , an American multinational technology company , is the leading company of technology in the world. The business model of Microsoft develops, designs, supports, licenses, and sells computer software, personal computers, consumer electronics, and related services.
Microsoft was founded by Bill Gates and Paul Allen shortly after 1975 when they developed BASIC on the Altair. It is a multi-faceted software and full-service technology company.
The best-known software products of Microsoft Business Model are the Microsoft Windows line of operating systems along with Microsoft Office suite, Internet Explorer and Edge web browsers.
It also releases its flagship hardware products such as Xbox video game consoles and the Microsoft Surface lineup of Touch-screen PCs. It provides efficient, reliable, and accessible home and business software solutions and innovative consumer electronic products and secure online storage and search services.
Microsoft comes in the league of the Big Five Technologies companies, together with Amazon , Google , Apple , and Facebook . This article aims to delve deep into the mechanism of how Microsoft makes its money to understand it is functioning and working process better.
Table of Contents
Introduction to the business model of Microsoft
Microsoft was founded a little while after 1975 by two friends, Bill Gates and Paul Allen. In 1975, they developed a system through which they could use BASIC, a popular mainframe programming language on Altair, an early personal computing system.
The word Microsoft comes from a combination of the two words, microcomputer and software. The leading company in technology and software, Microsoft offers a wide range of services. It was developed for several more years. Many other programming languages were also created.
After that, IBM approached Microsoft to create an operating system for its first personal computer. Microsoft acquired an existing operating system from a third party and modified it to form MS-DOS.
It was released in 1981 and became a big hit. It led to Microsoft launching its Windows operating system series and other office software. This ultimately provided the kickstart it needed, and soon enough, Microsoft became the world’s leading technology and software company.
What exactly is Microsoft?
The word Microsoft comes from the combination of the words microcomputer and software. It is an American multinational software and technological corporation.
It offers various services, including software products, hardware products, cloud-based solutions, and training and certification services and consulting and product solution support services.
Products offered by Microsoft Business Model
- Visual Studio
- List of software
Services provided via Business Model of Microsoft
- Microsoft Store
- Windows Update
- Xbox Game Pass
A timeline describing the growth of Microsoft Business Model
- 1972–1985: The founding of Microsoft
- 1985–1994: Windows and Office
- 1995–2007: Foray into the Web, Windows 95, Windows XP, and Xbox
- 2007–2011: Microsoft Azure, Windows Vista, Windows 7, and Microsoft Stores
- 2011–2014: Windows 8/8.1, Xbox One, Outlook.com, and Surface devices
- 2014–present: Windows 10, Microsoft Edge and HoloLens
Contemporary Global Presence of Microsoft
Microsoft has its headquarters in One Microsoft Way, Redmond, Washington, United States.
There are about 210 countries in the world where Microsoft operates and has its presence. It ranked number 30 in the Fortune 500 rankings of the largest United States corporations by total revenue.
Revenue – $143 billion
Operating income – $53 billion
Net income – $44.3 billion
Number of employees – 151,163
Total assets – $301,3 billion
Total equity – $118,3 billion
The numbers and data represented above speak for the massive and impressive presence of Microsoft around the world. It has made itself a global presence and is justifiably the most renowned and top technological company in the world, which makes it all the more fascinating to explore the intricacies of the functioning of this organization.
In November 2018, Microsoft got a $480 million military contract with the U.S. government for incorporating augmented reality (AR) headset technology in the weapon repertoires of American soldiers.
Decoding the Business Model of Microsoft
Microsoft generates its primary revenue and income by developing, manufacturing, licensing , supporting and selling a variety of software and hardware products, cloud-based services and services that integrate with it and by producing the relevant online advertising that reaches out to a global audience, thus maintaining and growing its scope and base.
The software products include operating systems for computing devices, servers, phones, etc., server applications for distributing computer environments, cross-device productivity applications, desktop and server management tools, business solution applications, video games, software development tools, and online advertising.
The hardware products include PCs, tablets, phones, gaming and entertainment consoles, other such devices and accessories.
Microsoft’s customer base can be divided into two main categories broadly –general consumers and commercial consumers. It offers the general software and cloud computing solutions through the Office 360 productivity suite email platforms such as Outlook and Exchange and online calling platform called Skype. This is generally used by both types of consumers globally.
Apart from that, its IT and consulting services are targeted more towards businesses and commercial consumers. Simultaneously, mobile and PC and gaming technologies are directed towards the general consumer and produced to the mass market to make it available for them.
This customer base includes individual consumers, organizations, original equipment manufacturers (OEMs), and application developers. All these elements of the customer base are interlinked and connected in many ways.
For example, individual customers and organizations obtain Microsoft software and services for their personal and business devices through retailers, distributors, original equipment manufacturers, etc.
Working of Microsoft in three steps
Microsoft serves organizations of various sizes and meets their different purposes to generate revenue.
- It offers its services to organizations of different sizes and meets their demands accordingly by providing tailored license programs, enterprise wise consulting services, and support, and other specialized services.
- It distributes through OEMs that pre-install Microsoft’s software on different devices that they sell to their customers.
- It also generates revenue from different application developers by providing developer tools and training certification on various Microsoft products.
Microsoft attracts various major advertising agencies that have big brands by providing multiple advertising opportunities through its MSN portal and Bing search platforms.
Microsoft has established its reputation as an efficient, reliable, and authentic provider of software technologies. It is regarded as a market leader. On top of that, many of its products are available to the users free of charge and can be accessed through its MSN and Bing portals, which only serves to increase its popularity.
The content can also be synced across multiple platforms using Microsoft’s different devices, which makes it easier and effortless for the user in many different ways. It has done a great job of establishing itself as a trustworthy source of manufacturing software and providing various services. As a result of which, it has a loyal customer base around the world and many partners as well.
Main Partners of Microsoft
Microsoft has a Microsoft Partnership Network. It organizes and manages all the partnerships of the company. This network aims to enable different multinational and technology-based companies to build their businesses around the Microsoft Company and obtain its services to an as great extent as possible.
These partner companies provide various services, including systems integration, application development, data analytics, digital marketing , manufacturing, data management, distributions , telecommunications, and internet hosting services. This network also includes authorized resellers and software retailers.
These partners receive support tools directly from Microsoft and a great discount on its products and services. They can also achieve gold and silver memberships that have additional benefits.
Gold membership allows companies to access various Microsoft tools for free. It is considered to be the best one in that category.
Significant Resources incorporated by the Business Model of Microsoft
The primary resources of a company or business crudely refer to the essential services and products it provides to its customer, which makes it authentic and accessible. For Microsoft, this includes its line of technological devices, including PCs, tablets, Smart-phones, gaming and entertainment consoles, and other such intelligent devices used broadly by the general and commercial consumers.
Microsoft makes sure to design and program these products accordingly as well. Another one of its primary resources is its line of software and server management products.
Microsoft ensures to hire only the best and most qualified of the employees. It takes measures to develop its personnel within the company, especially the research and development teams that ensure the company’s position in the market.
In some ways, the founder Bill Gates is also viewed as a critical asset to the company. He is regarded as a forward-thinking leader and the basis and origin of the whole corporation, which makes him very important.
The latest product of Microsoft Business Model
The Windows 10 operating system is the latest product of the Microsoft Corporation, and it is one of the best ones so far. It has a wide range of features that make it unique and fascinating and famous in the market.
The company has made many different wholesale changes to the way it monetizes windows with the launch of this product to the market. Most of the details of this change are kept confidential. This change is not sudden, rather a product of trends in the revenue systems that have been prevalent for many years.
This is affecting Microsoft in many ways. It used to dominate the global economy at one point in the tie. Compared to that, of course, the value is declining. Thus, this is the reason for making all these changes to the way this system functioned.
Revenue Generation of Business Model of Microsoft- How does Microsoft make money
Microsoft has diversified revenue streams, and it comes under the top 100 companies listed by their revenues in the world. Three main segments of Microsoft Revenue Generation are-
1. Productivity and Business Processes
It includes the revenues generated by sales and licensing of its different software products and cloud services for different devices and platforms. Some of such products and services are Office 365 Suite, Outlook.com, Email Platforms Exchange, Content Management Tools OneDrive and SharePoint, Call Services Skype, etc.
2. Intelligent Cloud
It includes revenues generated through Microsoft’s server products and cloud storage services.
Sales and licensing of Windows Service, Visual Studio, Microsoft SQL Server, System Center, and Microsoft Azure, etc. enable the business model of Microsoft to make money.
3. More Personal Computing
It comprised the revenues associated with the Microsoft products and services offering cross-platform utilities to the professionals, developers, and end-users. Licensing of Windows OS, Windows Phones, Microsoft patents along with sales of mobile phones, PC accessories let Microsoft generate its revenues.
It also makes money through the sales and licenses of Microsoft Xbox gaming platforms together with Xbox live subscriptions, transactions, advertising, and 3 rd part video game royalties. Revenues from display advertising via the MSN portal and search advertising via Bing Search Engines are also included in this segment.
These are the basic features and key details of Microsoft’s business model, one of the leading technology-based companies in the world.
It is one of the most talented and most authentic models. This article consists of all the necessary information that you need it to know to understand the formation of this company and the working mechanism of its business model.
It is comprehensive and aptly arranged for your convenience and benefit to gain the most out of it.
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About Hitesh Bhasin
Hitesh Bhasin is the CEO of Marketing91 and has over a decade of experience in the marketing field. He is an accomplished author of thousands of insightful articles, including in-depth analyses of brands and companies. Holding an MBA in Marketing, Hitesh manages several offline ventures, where he applies all the concepts of Marketing that he writes about.
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Microsoft Business Model (2023) | How Does Microsoft Make Money
5 minutes read
Most people with access to computers and the internet must have used at least one of Microsoft's products. It is a given as the company is one of the largest tech companies in the world. Microsoft started as a small company before conquering a massive customer base worldwide like any other company. It might even surprise some to know that the company created its first product when the internet and computers were not yet widespread.
Microsoft opened opportunities for other companies to explore technological advancements to create innovative products and services. It is right to look closely at the Microsoft business model canvas to understand better how the company markets its products to generate millions of revenues.
Continue reading this article to learn more about this giant company and its strategies to keep its position as a leading provider of software solutions despite tight competition.
A Brief History of Microsoft
Bill Gates and Paul Allen spearheaded Microsoft in 1975. During this time, computers were nothing like the ones you see today, and the internet was a relatively strange network and was limited to academic institutions. However, they decided to create something that seemed like an operating system for a microcomputer named Altair 8800.
Years passed, and most computers have used the same operating system. However, Microsoft's turning point happened when they introduced Windows to the market, which they considered an innovative interface. Microsoft entered the stock market in 1986, which paved the way for the company to build its empire of computer operating systems.
Microsoft Business Model Canvas
The Microsoft business model canvas involves distribution, sales, and system and software solution services support. However, its business model diagram can also be complex as it has introduced new products and services to its target markets. Here is how the Microsoft business model canvas looks.
Value Propositions of Microsoft
Microsoft provides its target customers with operating systems like Windows and a productivity suite through Office. The software aims to improve personal and corporate communications and productivity. Microsoft's productivity suite is also available to commercial entities through licenses and individual users. It works by charging subscription fees for accessing specific Microsoft tools.
Cloud services is another division of Microsoft that generates revenues for the company. They offer public, private, and hybrid servers. Microsoft's business partners can also use storage and cloud computing services. Those using the company's products know that its cloud services include Windows Server, Microsoft Azure, Enterprise Services, SQL Server, and GitHub.
Customer Segments of Microsoft
Generally, Microsoft's customer segments are divided into two categories - the consumers and enterprise. Most businesses now need productivity tools for an efficient workflow. This is where Microsoft's productivity suites come in. Furthermore, the company's server management, consulting services, and IT support are essential for this customer segment.
Microsoft caters to the general customers. Its consumers generally utilize all its standard solutions, including Skype, Outlook, Office, cloud, and more.
Key Partners of Microsoft
There is only one significant partner under the Microsoft business model canvas: the company's app developers. Besides them, the company also partners with companies providing data management, analytics, digital marketing and advertising, telecommunications, system integration, and internet hosting services. All these external stakeholders ensure Microsoft's software and product solution works perfectly for every consumer.
Key Activities of Microsoft
Microsoft is a tech company, so it is just fitting that one of its key activities includes software development. The company might be a giant in the industry. However, competition is still challenging, so its R&D team must also ensure that innovative Microsoft products and services provide customers with the latest technological updates. Along with it are the company's marketing efforts to ensure Microsoft stays at the top, regardless of competition, generating sales and revenue.
Customer Relationships of Microsoft
Microsoft gives its consumers the freedom to navigate software and hardware products. They don't have much personal staff interaction as most of its products are self-service. Meanwhile, corporate services and products need personal assistance from Microsoft teams and representatives, especially regarding support, advertising, and consulting. The company's social media accounts on Twitter and Facebook are also used to interact with Microsoft customers directly.
Key Resources of Microsoft
The Microsoft business model canvas encompasses essential key resources, with a focus on the company's expansive user base and its proprietary software products. Given Microsoft's diverse customer base and wide-ranging market segments, it's reasonable to anticipate additional key resources and inputs that contribute to the company's overall success and innovation. These resources collectively support Microsoft's position as a global technology leader.
Channels of Microsoft
Microsoft employs multiple distribution channels to market its products, encompassing retailers, the official Microsoft website, OEMs (Original Equipment Manufacturers), and direct sales and resellers. These channels play a vital role in ensuring the accessibility of Microsoft's offerings to its target customers. Through strategic partnerships and marketing efforts, Microsoft products reach a wide audience, further contributing to the company's success.
Cost Structure of Microsoft
As previously mentioned, Microsoft must innovate its services. This is why one of its significant expenses goes to software and development. A considerable cost is also spent on cloud infrastructure and workforce. Besides the productivity tools, Microsoft also offers intelligent cloud services, which are essential for customers using other Microsoft tools. Of course, people are behind all these processes; hence, the company also provides a budget for its human resources.
Revenue Streams of Microsoft
Microsoft generates significant revenue by licensing its Windows operating systems and productivity tools. Licensing fees serve as one of the company's primary income sources. Furthermore, subscriptions play a pivotal role in driving sales and revenue for Microsoft. The combination of licensing and subscription-based models ensures a steady income stream for the company.
How Does Microsoft Make Money?
The Microsoft business model canvas enables the company's alignment of strategies and goals across various segments and processes. Microsoft provides a structure for a rational and timely allocation of essential resources within the company.
Microsoft is making money through business and productivity processes, which comprise the company's communication, productivity, and information services, accommodating a vast range of platforms and devices. In 2021, this segment generated $63.4 billion in revenue. It comprises Office Commercial, Office Consumer, LinkedIn, and Dynamics 365.
The other segment where Microsoft gets considerable revenue is its Intelligent Cloud, which contributes about $75.2 billion. The services in this segment include cloud services and server products, Enterprise Support Services, Nuance professional services, and Microsoft Consulting Services.
Finally, the third segment is More Personal Computing, which puts Microsoft consumers at the center of using its services. It generated approximately $59.7 billion in revenue for the company in 2021. Some products offered under this segment include Windows OEM licensing, PC accessories, Surface, XBox content, services, and hardware.
It's fascinating how the creators of Microsoft perceived that the company would be this big. Remember that the company and its first product were made when only a few people knew about the internet and computers. Microsoft indeed created innovative technological solutions so the newer generations can maximize technology advancements. This time, the competition is more challenging, with various innovators introducing newer products and services to similar target markets with Microsoft. However, the Microsoft business model canvas allowed the company to align its strategies designed to fulfill company goals.
It's also the same for your company and other businesses. A business model is an essential visual tool to see the necessary segments and processes to achieve business goals. While your business model might not be as diverse as Microsoft's, you can still get insights and inspiration from it.
As you structure your diagram, maximizing online diagramming tools like Boardmix is best. It's accessible; you only need to create an account to map your business mode. In fact, Boardmix provides a pre-designed business model canvas template, so you need not start from scratch. Check the template through this link and customize its colors and shapes. You can include images and stickers if necessary. Your workspace lets you share the business model canvas template with your team and colleagues remotely. Besides the viewing access, the creator can authorize someone to edit the template. This makes collaboration more efficient and innovative.
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Microsoft Windows business model
In 1990 Microsoft got 30 PC manufacturers to preinstall Windows 3.0 on their machines. That move effectively locked in millions of users into the Microsoft ecosystem and generated recurring revenues for over two decades.
Microsoft originally launched Windows in 1985 as an add-on to MS-DOS, the original operating system of the PC. However, in 1990, when Microsoft launched Windows 3.0, it leveraged its relationships with PC manufacturers to preinstall the operating system (rather than shipping it separately). More than 30 manufacturers agreed to include the program for free and preinstalled it with every machine. As a result Windows rapidly gained in popularity — shipping over one million copies just two months after launch.
Once consumers had learned how to use Windows and compatible programs, most of them were reluctant to invest the time, cost, and effort to learn a new operating system and new programs. PC users effectively got themselves locked into the Microsoft ecosystem once they purchased their first Windows-equipped PC.
1. Spot a market with low switching costs for customers
The early computer market is rather fragmented, and each computer manufacturer operates their own unique operating system. At this time it is relatively easy for customers to switch from one system to another.
2. Create a value proposition that locks customers in
Windows 3.0 increases switching costs in three ways: (1) PC manufacturers preinstall Windows, increasing the effort needed to switch, (2) the graphical interface and new features steepen the learning curve, (3) Microsoft builds an ecosystem of Windows compatible software to lock customers in via interoperability.
3. Focus on scaling first-time customer acquisition
Microsoft scales first-time customer acquisition of Windows 3.0 users in 1990 by getting 30 of the main PC manufacturers to preinstall Windows 3.0 and sign long-term licensing agreements. That puts Windows in the hands of millions of users and effectively locks them in.
4. Enjoy the benefits of lock-in
Due to the learning curve and software compatibility advantages, customers continuously come back to buy Windows PCs. This lock-in guarantees recurring licensing royalties from PC manufacturers and Windows sales to retail customers for over two decades.
+ Boost Windows compatible software
A key component of Microsoft’s lock-in strategy is to boost acquisition of developers to quickly increase the number of software applications available for the Windows ecosystem: Windows-compatible software rises from 700 before the launch of 3.0 to 1,200 one year later, and 5,000 by 1992.
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Microsoft Corporation (MSFT): Business Model Canvas
- How it Works & Makes Money
- SWOT Analysis
- Porter's Five Forces Analysis
- Mission, Vision, & Values
- BCG Matrix Analysis
- Marketing Mix Analysis
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Key activities, key resources, value propositions, customer relationships, customer segments, cost structure, revenue streams, introduction.
The technology industry has been rapidly growing over the past few years, with companies like Microsoft Corporation leading the way in innovation and productivity solutions. As of 2021, the global software market size is estimated to be worth $556.91 billion with a projected compound annual growth rate (CAGR) of 10.7% from 2021 to 2028. Similarly, the cloud computing industry is predicted to hit $832.1 billion by 2025, with a remarkable CAGR of 17.5% from 2020 to 2025. These statistics showcase the industry's potential for growth and investors' confidence in technology-based companies.
Microsoft Corporation is a well-known player in the technology industry that has been offering qualitative software, hardware, and cloud-based products and services for over four decades now. The company's business model has been thoroughly curated, with robust channels, partners, value proposition, key resources, and activities in place. In this blog post, we are going to delve deeper into the business model canvas of Microsoft Corporation to understand the company's key success factors, revenue streams, and cost structure.
- Hardware manufacturers: Microsoft works closely with leading hardware manufacturers such as Dell, HP and Lenovo to ensure its software is optimized for their devices, and to create innovative products together.
- Software developers: Microsoft has partnerships with independent software vendors (ISVs) and third-party developers to create software solutions that integrate seamlessly with Microsoft products.
- Cloud service providers: Microsoft partners with cloud service providers such as Amazon Web Services, Google Cloud, and Oracle to ensure the optimal performance and integration of its software in cloud environments.
- Research institutions: Microsoft partners with educational and research institutions, including MIT, Stanford, and Carnegie Mellon, to collaborate on research projects that aim to advance technology and innovation.
- Government agencies: Microsoft partners with governments and public sector organizations to deliver secure and reliable software solutions for essential government functions such as healthcare, education, and public safety.
Microsoft Corporation engages in the following key activities to ensure its success:
- Software Development: Microsoft Corporation invests heavily in software development to create and enhance its products. The company has a team of software developers constantly working on new versions and updates to its popular suite of software products which include Microsoft Office, Windows operating system, Skype, and more.
- Research and Development: Aside from software development, the company also invests heavily in research and development to innovate its products and stay ahead of the competition. Its research and development team is made up of talented individuals who work on cutting-edge technologies such as artificial intelligence (AI) and cloud computing.
- Marketing and Sales: Microsoft Corporation has a dedicated marketing and sales team responsible for promoting and selling its products. The team works on marketing campaigns and sales strategies to drive customer engagement and sales revenue. The company also partners with original equipment manufacturers (OEMs) to ensure its products are widely distributed.
- Acquisitions: Microsoft Corporation is known for acquiring companies that complement its business and can help expand its reach. Past acquisitions include LinkedIn, GitHub, and Skype. The company has a well-defined due diligence process to identify the best targets for acquisition and make the transaction smoothly.
- Customer Support: Microsoft Corporation has an exceptional customer support team that provides assistance to customers who encounter issues with its products. The support team offers online help desks, phone support, and in-person customer service to cater to its diverse customer needs.
These key activities have helped Microsoft Corporation maintain its market dominance and continue to grow.
Human Resources: Microsoft Corporation has a large number of highly skilled employees who are an essential resource, including software developers, hardware experts, designers, and engineers. The company's workforce is spread across many locations throughout the world, including the United States, Europe, Asia, and Africa. Microsoft has over 180,000 employees worldwide and hires tens of thousands of new employees each year.
Intellectual Property: Microsoft's most significant resource is its intellectual property, which includes patents, copyrights, trademarks, and trade secrets. This intellectual property is the result of the company's extensive research and development efforts over the years, and it is protected by law. Microsoft's intellectual property is the foundation of its software products, including Windows operating system, Office productivity suite, and Xbox gaming consoles.
Technological Infrastructure: Microsoft's technological infrastructure is essential to delivering its software products and services reliably and efficiently to customers. The company's data centers and networks are located around the world and are essential to support its cloud computing services, such as Microsoft Azure and Microsoft 365. The infrastructure is also vital for the delivery of its software products, including Windows and Office, through downloads and updates.
Brand: Microsoft's brand is one of the most recognized and valuable in the world, thanks to its long history and iconic logo. The company's brand represents quality, innovation, and reliability to customers worldwide. Microsoft's investments in brand building, including advertising and sponsorship, have helped to create a strong competitive advantage for the company.
Financial Resources: Microsoft's financial resources are essential to its operations, including investments in research and development, acquisitions, and marketing. The company has a significant amount of cash reserves and generates significant revenue each year from its software products and services. Microsoft's financial resources are a critical asset that enables the company to invest in new technologies and take advantage of new market opportunities.
Partner Ecosystem: Microsoft's partner ecosystem is a valuable resource that enables the company to reach more customers and deliver more value to them. Microsoft's partners include hardware manufacturers, software vendors, and service providers who create complementary products and services that extend Microsoft's software offerings. Microsoft's partners also help to market and distribute its products and services to customers worldwide.
- Hardware Partners: companies like Dell, HP, Lenovo, Acer, and Asus who manufacture computers and other devices that run Microsoft's software
- Software Partners: companies who develop applications and services that integrate with Microsoft's products, such as Adobe, SAP, and Salesforce
- Service Providers: companies who provide consulting, implementation, and managed services for Microsoft's products, such as Accenture, Deloitte, and IBM
Microsoft Corporation (MSFT) delivers high-quality software products, devices, and services that satisfy the demands of both personal and business customers. The company's value propositions are:
- Innovative and reliable technology: Microsoft is widely recognized as a global leader in innovation, with a proven track record of releasing reliable and highly functional products. Its products and services are developed with state-of-the-art technology that anticipates the needs of its customers, adapting and delivering high-quality solutions.
- Flexible and customizable products: Microsoft’s products and services are highly versatile, customizable, and easily adaptable to suit the unique needs of each individual and business. The company provides a range of tailored services and products for different groups and individual customers, promoting versatility and flexibility.
- Seamless integration and compatibility: Microsoft products and services are highly compatible with other software and devices, making the integration process seamless and straightforward. The company's product interoperability promotes workflow productivity and support for business continuity.
- Enhanced user experience: Microsoft's aim is to create products and services that enhance user experience, promote productivity, and efficiency. Its products are intuitive, user-friendly, and accessible, designed to improve user experience and support the users in their daily operations.
- Large-scale community support: Microsoft has a massive community of users, and it actively involves its users in the development, testing, and feedback stages of its products. It has also established a strong network of partners and consultants worldwide, providing support and solutions to its customers' needs.
Microsoft has always been dedicated to building lasting customer relationships. The company recognizes that its customers are the foundation of its business and it strives to create a positive customer experience by providing high-quality products and excellent customer service.
The company utilizes several approaches to foster strong customer relationships:
- Personalized service: Microsoft offers personalized assistance to customers through its customer service representatives who are available 24/7 via phone, email, or live chat. The company also has a vast library of support articles, troubleshooting guides, and video tutorials to help customers find solutions to their problems quickly.
- Community engagement: The company actively promotes community engagement to foster stronger relationships between its customers and its brand. Through events such as Microsoft Ignite and Microsoft Build, the company provides its customers with opportunities to connect with Microsoft experts and other users to share knowledge and best practices, provide feedback, and learn about new products and services.
- Customer feedback: Microsoft actively solicits customer feedback to improve its products and services. The company has set up various channels through which customers can give feedback, including surveys, forums, social media, and direct communication with customer service representatives. The company analyzes and acts on customer feedback to improve its products and services, providing customers with better experiences and increasing brand loyalty.
- Continuous improvement: Microsoft is constantly working to improve its products and services to ensure that they meet the changing needs of its customers. The company regularly releases updates, patches, and new features to enhance its products' performance and usability, ensuring its customers have access to the latest and best technology in the market.
By promoting personalized service, community engagement, customer feedback, and continuous improvement, Microsoft is building lasting customer relationships based on trust, satisfaction, and loyalty, ensuring that the company remains a leader in the technology industry.
- Microsoft stores:
Microsoft has its retail stores all around the world where they sell their products directly to their customers. Customers can not only purchase Microsoft products but can also experience them through hands-on demonstrations.
- Online store:
Microsoft's official online store caters to its customers all around the world. They offer a variety of products such as software, hardware, and accessories. This platform allows customers to purchase their products instantly with just one click.
- Enterprise sales team:
Microsoft's enterprise sales team caters to businesses, corporations, and government agencies. They offer solutions and services that meet the specific needs of their clients.
- Microsoft's Partner Network:
The Microsoft Partner Network (MPN) is a program designed specifically for Microsoft's partners. This network allows partners to sell Microsoft products and solutions and offer technical support to their customers.
- Original Equipment Manufacturers (OEM):
Microsoft partners with OEMs such as Dell, Lenovo, and HP to offer their software on pre-built devices such as laptops and desktops.
- Retail stores:
Microsoft also partners with retail stores such as Best Buy, Walmart, and Amazon to sell their products. This allows Microsoft to reach a wider customer base through the already established network of retail stores.
- App Stores:
Microsoft offers its products and solutions to customers through various app stores. These app stores include the Windows Store, Xbox Store, and Microsoft Dynamics 365 app store.
Microsoft Corporation (MSFT) has a complex cost structure as it operates in multiple sectors of the technology industry. Here is a breakdown of some of the primary cost components:
- Research and Development: Being one of the largest software companies globally, Microsoft spends heavily on research and development to remain innovative and customer-centric. They invest in the development of new hardware, software, and technologies, which helps them keep up with competitors such as Apple and Google.
- Sales and Marketing: Microsoft invests heavily in various marketing campaigns to promote its products and services, as well as attract new customers. They use various mediums like TV, social media, and other online platforms to create product awareness and to keep customers engaged.
- Administrative Costs: Like any other large corporation, Microsoft incurs significant administrative expenses mostly associated with salaries, rent, utilities, and other business-related costs. Some of the administrative duties range from management, legal, finance, and support staff costs.
- Infrastructure and Operations Costs: Microsoft also caters to significant infrastructure and operational costs to store and provide access to data, run servers, and provide cloud services. Due to this, Microsoft spends a significant portion of its budget on data centers, network equipment, server hardware, and software, among other things.
- Acquisitions: Microsoft frequently acquires other companies to enhance its products or services. These acquisitions come with merger and acquisition fees, which can cause a significant impact on the company's financials.
- Legal and Regulatory Costs: As a public company, Microsoft must comply with various legal and regulatory requirements, which can require high legal expenditures.
To sum it up, Microsoft has a diverse and complex cost structure, and they continue to make significant investments in research, marketing, operations, and acquisitions to maintain their industry-leading position.
Microsoft Corporation generates revenue through various channels:
- Product Sales: Microsoft earns revenue by selling its products such as Windows operating system, Office Suite, Surface devices, and Xbox consoles both to individual customers and businesses.
- Cloud Services: Microsoft offers several cloud-based services, including Office 365, Azure, Dynamics 365, and other enterprise solutions that generate recurring revenue from subscription fees.
- Advertising: Microsoft generates revenue through online advertising, primarily through its Bing search engine, LinkedIn, and other advertising platforms, which include display advertising and other sponsored content.
- Professional Services: Microsoft offers professional services to help businesses deploy its solutions, including consulting, training, and support.
- Licensing: Microsoft earns revenue from licensing its technologies and intellectual property to other companies or individuals.
- Retail: Microsoft has retail stores in several countries, generating revenue from the sale of software, hardware, and accessories.
Microsoft's revenue streams are diversified, providing a stable and consistent source of income. The company continues to innovate and expand into new markets, ensuring its revenue streams remain strong and reliable.
After conducting the Business Model Canvas analysis for Microsoft Corporation, it is evident that the company has a robust business model that has helped it sustain its competitiveness in the market. Microsoft Corporation's business model is centered around creating and delivering innovative products and services to its customers while maintaining cost-effectiveness and generating profits.
- Microsoft Corporation's value proposition is based on the delivery of trusted, secure, and intelligent solutions that empower individuals and organizations to achieve more.
- The company's key partners include hardware manufacturers and software developers, as well as other technology companies and industry leaders.
- Microsoft Corporation's primary revenue streams come from the sale of its software and hardware products, as well as its cloud services, gaming, and LinkedIn's professional networking platform.
- The company's distribution channels are diverse, including online marketplaces, direct sales, OEMs and retailers, and its physical retail stores.
- Microsoft Corporation's customer segments include individual consumers, small and medium businesses, and large enterprises, as well as governments and educational institutions.
The key success factors for Microsoft Corporation's business model are its ability to innovate rapidly, collaborate with its partners, and provide exceptional customer experiences. By continuously improving its technology offerings, expanding its product portfolio and service offerings, and investing in research and development, Microsoft Corporation is well-positioned to maintain its competitive edge in the technology industry.
In conclusion, the Business Model Canvas analysis has provided insights into the key components of Microsoft Corporation's business model, highlighting the company's strengths and opportunities for growth. The company's ability to adapt and innovate, combined with its strong partnerships, diversified revenue streams, and focus on customer satisfaction, makes it a valuable player in the technology industry.
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Microsoft Corporation 2012 Annual Report
- Financial Review
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Note About Forward-Looking Statements
Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including without limitation, the following sections: "Business," "Management's Discussion and Analysis," and "Risk Factors." These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "future," "opportunity," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result," and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section titled "Risk Factors" in our fiscal year 2012 Form 10-K. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.
Microsoft was founded in 1975. Our mission is to enable people and businesses throughout the world to realize their full potential by creating technology that transforms the way people work, play, and communicate. We develop and market software, services, and hardware that deliver new opportunities, greater convenience, and enhanced value to people's lives. We do business worldwide and have offices in more than 100 countries.
We generate revenue by developing, licensing, and supporting a wide range of software products and services, by designing and selling hardware, and by delivering relevant online advertising to a global customer audience. In addition to selling individual products and services, we offer suites of products and services.
Our products include operating systems for personal computers ("PCs"), servers, phones, and other intelligent devices; server applications for distributed computing environments; productivity applications; business solution applications; desktop and server management tools; software development tools; video games; and online advertising. We also design and sell hardware including the Xbox 360 gaming and entertainment console, Kinect for Xbox 360, Xbox 360 accessories, and Microsoft PC hardware products.
We provide consulting and product and solution support services, and we train and certify computer system integrators and developers. We also offer cloud-based solutions that provide customers with software, services and content over the Internet by way of shared computing resources located in centralized data centers. Cloud revenue is earned primarily from usage fees and advertising.
Examples of cloud-based computing services we offer include:
- Microsoft Office 365, an online suite that enables people to work from virtually anywhere at any time with simple, familiar collaboration and communication solutions, including Microsoft Office, Exchange, SharePoint, and Lync;
- Xbox LIVE service, which enables online gaming, social networking, and access to a wide range of video, gaming, and entertainment content;
- Microsoft Dynamics CRM Online customer relationship management services for sales, service, and marketing professionals provided through a familiar Microsoft Outlook interface;
- Bing, our Internet search engine that finds and organizes the answers people need so they can make faster, more informed decisions;
- Skype, which allows users to connect with friends, family, clients, and colleagues through a variety of devices; and
- the Azure family of platform and database services that helps developers connect applications and services in the cloud or on premise. These services include Windows Azure, a scalable operating system with computing, storage, hosting, and management capabilities, and Microsoft SQL Azure, a relational database.
We also conduct research and develop advanced technologies for future software and hardware products and services. We believe that we will continue to grow and meet our customers' needs by delivering compelling, new, high-value solutions through our integrated software, hardware, and services platforms, creating new opportunities for partners, improving customer satisfaction, and improving our service excellence, business efficacy, and internal processes.
Microsoft’s business model: How Microsoft makes money
It’s safe to say that you have heard of Microsoft and used many of its products. Indeed, Microsoft is one of the most successful technology companies worldwide since it was founded 45 years ago by the legendary Bill Gates. It is also the third largest company listed in the U.S. (as of 2 September 2020).
Microsoft’s success intrigues me, so I proceeded to dig up more about the company’s business performance from an investor’s perspective. In this article, I’ll also cover the company’s economic moats, growth drivers, and some of the business risks it faces. Through this, I hope to give you a good overview of Microsoft’s business model and how it generates its revenues.
Microsoft is a technology company that provides software products and services to its consumers. It reports three business segments:
1. Productivity and Business Processes
This segment comprised 33% of Microsoft’s revenue in 2019. It consists of products and services in Microsoft’s portfolio of productivity and information services which include:
- Office Commercial/Consumer — Revenue is derived from users subscribing to Microsoft’s Office software suite. Services in this segment are intended to enhance personal and organisational productivities. This segment is a key driver of revenue in this business segment of Microsoft.
- LinkedIn — The professional social network makes money by offering three categories of monetised solutions : Talent solutions, marketing solutions, and premium subscriptions.
- Dynamics — This business provides cloud-based and on-premises business solutions for business applications like enterprise resource planning (ERP) and customer relationship management (CRM). Dynamics revenue is driven by the number of users licensed, expansion of average revenue per user. and the shift to Dynamics 365 — the cloud component of Dynamics.
2. Intelligent Cloud
This segment comprised 31% of Microsoft’s revenue in 2019. It consists of Microsoft’s public, private, and hybrid server products and cloud services that power modern businesses:
- Server Products and Cloud Services — Microsoft’s server software provides integrated server infrastructure and middleware designed to support software apps built on Windows. Server products include Microsoft’s SQL Server and Windows Server . Server products revenue is driven through volume licensing programs, licenses sold to original equipment manufacturers, and retail packaged products. Microsoft also provides a comprehensive set of cloud services through Microsoft Azure. This is in line with the secular growth of cloud computing as opposed to managing on-premises hardware and software. Azure makes money through users subscribing to its service.
- Enterprise Services like Microsoft Consulting Services are project-based engagements to help customers plan and implement Microsoft products so they can reap as much value from Microsoft’s products as possible.
3. More Personal Computing
This segment comprised 36% of Microsoft’s revenue in 2019. It consists of products and services mainly catered to improving the user experience:
- Windows – the operating system is still the most used desktop operating system in the world. Windows original equipment manufacturers’ (OEMs) revenue is derived from the purchase of Windows licenses by OEMs, which they pre-install on the devices they sell.
- Devices — including Surface, PC, and other Microsoft intelligent devices. Revenue is derived from this segment from the sale of these devices.
- Gaming — Microsoft’s generates gaming revenue from the sale of Xbox consoles and games.
- Search – Microsoft’s search engine, Bing, generates advertising revenue.
Here’s a breakdown of Microsoft’s segmental revenue for FY2019:
As you see from the chart above, Microsoft’s server products, Office, and Windows comprised more than 69% of Microsoft’s revenue in FY2019. Microsoft’s success lies in its ability to form economic moats around its key business segments/products.
Let’s examine some of the economic moats Microsoft has established.
High switching costs
This is due to the industry standard Microsoft has created with its Microsoft Office software. Business functions like accounting procedures are often centered around Microsoft Excel. Thus, it would take a lot of work for users to transfer their financial spreadsheets to another platform and get used to the unfamiliar tools on the new platform (even if there were a superior alternative to Excel in the first place). Thus, it makes economic and psychological sense for companies to continue using Microsoft Office.
Microsoft’s Windows Server also forms the IT backbone of many of the world’s largest companies today. Given that it would be extremely costly for any company to replace any part of an enterprise’s IT environment, we can expect many companies to continue using Windows Server. Microsoft’s high switching costs lock customers into its unique ecosystem of Microsoft software.
For starters, Microsoft’s network effect is established with the increased number of participants of Microsoft products, which improves the value of Microsoft’s platforms for users.
For example, with an estimated 750 million people in the world using Excel , it gives software developers the financial incentives and economies of scale when they create a variety of add-ins for Excel – such as integrating popular finance platforms like Bloomberg and Capital IQ into Excel. When the financial community wants to analyse financial figures via Bloomberg or Capital IQ, they would have an easier time doing so with Excel.
Moreover, Microsoft’s ability to move clients from an on-premises Microsoft environment to a cloud Microsoft environment via Azure has led to a wide variety of developers joining the ecosystem with applications and development tools. This has led Microsoft Server to become very attractive for CIOs and IT managers with a large installed base of users, which attracts developers which in turn attracts more users.
The secular growth in cloud computing presents growth opportunities for Microsoft’s cloud business, Azure. With benefits like cost savings on hardware and automatic software integration, many companies are moving to the cloud. According to Gartner , the global cloud computing market size is expected to grow at a CAGR of 15.9% from 2018 to 2022, making it a US$354 billion industry by then. Gartner added that, by 2022, up to 60% of organizations will use an external service provider’s cloud-managed service, double that of 2018.
Seizing on the cloud computing trend, Azure’s revenue grew at an astounding year-on-year rate of 91% and 72% for FY2018 and FY2019 respectively. However, as Amazon entered the cloud computing space much earlier than Microsoft did, Amazon Web Services (AWS) still dominates the industry with 32.3% of market share in 2019. Azure is just behind AWS at second place with 16.9% of market share.
However, Microsoft is slowly closing on the gap. Just late last year, Azure pulled off a stunning upset to win a US$10 billion Pentagon technology contract , beating AWS. This underscores Azure’s growing reputation in the industry.
The top three cloud providers today — Google Cloud, Azure, and AWS — will be competing fiercely to capture market share in the cloud computing industry in the years to come. The cloud business is very technical, so here is an article to help you understand the competition in the cloud industry better.
Microsoft is the pioneer in office-related products and Microsoft Office 365 is part of CEO Satya Nadella’s vision for remaking Microsoft into a company where customers rent rather than buy software. Customers benefit as they no longer have to manage software on their own computer or data centers. Rather, Office 365 ensures that users are always on the latest Microsoft versions without having to upgrade anything.
The steadily increasing number of monthly active users on Office 365 indicates that Microsoft have been successful in convincing enterprise customers to upgrade to the subscription-based Office 365 licenses.
Microsoft is a very profitable company with steady revenue and net income growth over the past five financial years. This displays Microsoft’s ability to expand its user base and increase its average revenue per user.
Microsoft’s net income fell in FY2018 due to the Tax Cuts and Jobs Act which was enacted in December 2017. This required Microsoft to incur a one-time net charge of $13.7 billion on the repatriation of deferred foreign income not previously subject to U.S. income tax.
Microsoft also displays good earnings quality with its operating cash flow comfortable trending above its net income over the past five years. In FY2020, Microsoft generated $1.37 in cash for every dollar of profit.
Microsoft has also generates a high return on equity (ROE) relative to its peers.
Microsoft’s ROE of 40.16% as of June 2020 is higher than the FAANG stocks bar Amazon. Microsoft is also able to achieve this with a reasonable amount of debt – its debt/equity ratio in FY2020 is just 0.54.
Business model competition
Microsoft competes with companies with a growing variety of business models. Some of Microsoft’s competitors offer free applications and content by making money from selling third-party advertising. Hence, the products of Microsoft’s competitors are provided to its users at no cost, competing directly with Microsoft’s revenue-generating products.
Competitors also compete by modifying and then distributing open source software at little cost to users without having to bear the full R&D costs for the open source software. These products are very similar to the functionality and features of Microsoft’s products.
Cloud computing risks
Microsoft’s increasing focus on cloud-based services also presents execution and competitive risks. Microsoft incurs costs in building and maintaining infrastructure to support its cloud computing services. It needs to establish sufficient market share to achieve scale necessary to reap profits from its cloud business. This depends on its execution in several areas.
For example, making its suite of cloud-based services platform-agnostic, available on a wide range of devices; and ensuring its cloud services are secure and reliable for its customers. Not to mention Microsoft’s ability to distinguish itself from the fiercely competitive cloud computing market, notably Amazon and Google.
The fifth perspective
Microsoft is clearly a high-quality company. It scores highly on profitability, has wide economic moats and is venturing into new growth areas. Yet, Microsoft is a company that is heavily involved in the software space with technical concepts that can be hard to understand for the layman.
The technology sector is also a hugely competitive one, so an investor needs to conduct deeper-than-usual analysis of Microsoft’s competition, and assess whether Microsoft can remain relevant and profitable in the many years to come.
May I know how do we evaluate intrinsic value of Microsoft? If one decide to enter a position in this counter, what should be the fair value price? Thank You
One way is to compare Microsoft’s current P/E ratio against its long-term historical average. All things equal, a stock that’s trading below its historical valuation average can be consider undervalued.
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The Apple Business Model
The microsoft business model.
- Special Considerations: Google
- Tech Stocks
Apple vs. Microsoft Business Model: What's the Difference?
Katrina Ávila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications.
Apple Business Model vs. Microsoft Business Model: An Overview
More than any other American companies, Apple, Inc. (NASDAQ: AAPL ) and Microsoft Corporation (NASDAQ: MSFT ) dominate the intersection of technology and consumer access. Even though they compete across a huge range of sub-industries, such as computing software, hardware, operating systems, mobile devices, advertising, applications, and web browsing, each firm takes a different approach from an organizational and philosophical perspective.
As of Jan. 2022, AAPL had a market cap of around $2.61 trillion. Microsoft briefly edged out Apple as the largest company in the world riding on the strength in the growth of its cloud computing business, but MSFT has now fallen to second at $2.17 trillion.
- As of 2021, Apple and Microsoft are two of the biggest companies in the world, alternating the title of the world's most valuable company.
- Both companies have boasted a market cap of over $2 trillion.
- Apple's business model is based on innovation and consumer-centric devices. They are able to keep their base due to easy-to-use designs and data migration to new product lines.
- Microsoft built its success on the licensing of software such as Windows and Office Suite. Their business model has shifted, and they are releasing their own devices to compete with Apple's.
- Both companies are run differently with different end purposes. They are both extremely successful and have revolutionized their respective industries.
It is difficult to recall a modern American business so thoroughly dominated by the ideas and personality of one individual as Apple was under the tutelage of Steve Jobs . Jobs' remarkable innovations propelled Apple to unprecedented heights until his passing from cancer in 2011.
During Steve Jobs' second reign—he was fired in 1985, returning in 1997—Apple returned to relevancy and revolutionized multiple subindustries. In 2001, the company released the iPod, a pocket-sized device that could hold 1,000 songs, and it soon took over the Sony Walkman. A few years later, Apple completely redefined mobile phones when the iPhone was released in 2007.
Apple easily bests its competitors in terms of hardware sales and high-end gadgets. Thanks to the company's early 2000s reputation as a nonconformist response to Microsoft, millennials grew up using Macs in large numbers. This is buoyed by the company's brilliant insistence on integrating its products, making it easier to keep using new Apple products and thus more difficult to switch to a competitor's interface; this is sometimes referred to as the "Apple Ecosystem Lock."
The weakness in the Apple's business model lies in the historic success of the company's golden invention: the iPhone. Nearly half of all Apple revenue comes from iPhone sales, and no new, comparable innovation has taken off since its former CEO died and was replaced by Tim Cook. However, Cook has done a good job of preserving Jobs' legacy and has propelled Apple stock to all-time highs.
For years, Microsoft dominated the computer industry with its Windows software; Apple was an afterthought for more than a generation of operating products. Before Google Web browsing began to dominate the market, Microsoft gave away Internet Explorer for free, driving Netscape and other similar companies out of business.
The Microsoft revenue model historically relied on just a few key strengths. The first, and most important, is the licensing fees charged for use of the Windows operating system and the Microsoft Office suite. After a few years of increasing irrelevance in the race against Google and Apple, Microsoft unveiled a new vision in April 2014, instantly shifting focus to make Windows software more compatible with competitor products, such as the iPad. Microsoft also has a few successful products, highlighted by the Microsoft Surface and Surface Pro, that battle Apple devices such as the iPad.
Moving forward, however, Microsoft realized that paid software is a more difficult sell in an age of low-cost alternatives. Additionally, tablets and phones are replacing PCs. A newer Microsoft business model has been telegraphed by CEO Satya Nadella, one that emphasizes product integration, a "freemium" software package, and a concentration on its cloud computing business.
For example, Microsoft wants customers to be more engaged and fixated on its products.
Special Consideration: Google's Business Model
Unsurprisingly, the heart and soul of the Google revenue stream is its search engine and web advertisements. While Google is not the only company to give away free services and bundle them with other goods, few do it as well or as successfully.
Google services did not originally cost the user anything. Google would lure in users and collect their data, and then sell access to eager buyers across the planet. Every marketing firm in the world wants the kind of information and repeat usage Google enjoys. Moreover, the company keeps getting better and more sophisticated at targeting consumers and businesses, syncing preferences and playing economic matchmaker. In recent years, some fees have been added for storage and other services.
This no-fee model is not just profitable, it is very disruptive to Apple and especially to Microsoft. While Apple and Microsoft keep competing to find better and more innovative products to charge consumers, Google is all too happy to find a way to monetize activities for which users are eager to stop paying.
Google does not charge for Android in the U.S., which is one of the chief reasons manufacturers are so drawn to it. The Google Web apps, which bear a striking resemblance to Microsoft Office programs, are also free. Since Google began offering a free operating system and computer software, sales for Microsoft Windows and Office have slowed.
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