The Subscription-ization of Microsoft Windows
For decades, Windows was the cornerstone of Microsoft’s business. It was one of the company’s first software applications, taking the mantle from MS-DOS, the very first. Years ago, it was the operating system for nearly every personal computing device in the world. Microsoft’s licensing programs even assumed, and still do, that all PCs start with a copy of Windows.
Times have changed for Microsoft. With the staggering growth of smartphones, tablets and other mobile devices, Windows was no longer the only game in town, and Microsoft was forced to develop its software and services to run on iOS and Android in parallel with Windows.
More recently, Microsoft has re-aligned itself to become what it calls a “devices and services company,” focusing on cloud-based services and devices designed with cloud computing in mind. Office 365 was the cornerstone of this new cloud-based service model, and after some hiccups in the beginning, the model has matured such that it is no longer a “new thing,” and is working well for Microsoft and their customers.
Microsoft offers several options for subscribing to Office 365, from consumer-oriented personal and home subscriptions to those favored by large enterprises, complete with sophisticated business intelligence features and a new PBX in the cloud. Microsoft loves this model, because it creates a regular payment from the customer, and allows them to roll out new features and services on their own timeline.
So it shouldn’t have been too much of a surprise to learn that Microsoft is moving one of its oldest products, Windows, into the Office 365-style subscription model. Previously, customers could make annual payments to Microsoft in order to stay on the newest in Microsoft technology. But more often, customers were content to limit their Windows spend to replacing their PCs every four or five years. Even when Microsoft rolled out a new version of Windows, often with great fanfare, their customers only invested in every other release.
But now, that era is over. Microsoft has promised that Windows 10 will be the last major release of Windows, and beginning this month, Microsoft is now selling Windows as a cloud subscription service. Consumers can still buy Windows 10 with new machines, or move to Windows 10 by purchasing an upgrade. But businesses can now purchase a Windows Enterprise E3 subscription for devices or users, and can upgrade to an E5 subscription, which includes an additional service called Windows Defender Advanced Threat Protection.
I fully expect that this model will fully replace the OEM-and-upgrade model for all businesses and consumers as well. Customers will subscribe to Windows in the same way that they subscribe to Office – using user-based subscriptions that allows users to download and run a copy of Windows that Microsoft keeps up to date.
And choices will expand, with consumers getting a Windows service built for them, and larger enterprises a service created with them in mind. Likely, there will be a few options in between. Microsoft will enjoy regular annuities for Windows too, and will not be pressured to release a new version in order to build revenue in the Windows space.
Will customers be hurt? Probably not, as long as Microsoft releases new technology with useful features on a regular basis. And it looks like they will, as they are certainly doing for other services like Office 365 and Azure. The ability to run these new features will be limited by the strength of the device, which will lead to an interesting result. Consumers and enterprises will find themselves buying new devices in order to keep up with the Windows operating system. So the Windows OS will drive device sales, rather than the other way around.
It took more than thirty years, but Microsoft Windows is growing up.
Joe Benik