We keep hearing bits and pieces of a plan inside Microsoft that could radically change how its most important customers — businesses — buy Windows in the years to come.
But before we share the gossip, we want to be clear: This plan is speculative right now. Microsoft’s formal position is that “our business model is not changing.”
That said, what we’re hearing still makes a lot of sense.
A person close to the company tells us that Microsoft is examining new ways to sell Windows to enterprises that will look a lot like how it sells Office 365, with the basic software being free and an assortment of additional features that a business can add, each at a different price.
‘Dirty little secret’
Our source told us, “The dirty little secret is that Windows and Office are about to get much, much more complex, confusing, and expensive in the coming ‘years’ when Windows and Office become ‘freemium’ with ‘added value’ bundles sold on top of the platforms. You can already see that strategy coming in OneNote being free on all platforms (not just Windows), the free upgrade to Windows 10 for everyone, and how Office 365 Pro Plus is bundled (all or nothing, except Visio and Project [which cost extra]).”
When we asked about this plan, a Microsoft spokesperson told us the speculation about a freemium+upgrade bundle for Windows was “not accurate.”
“Our business model is not changing. We will continue to charge licence fees for Windows through our OEM partners.”
There’s a slight hedge here. The changes we are hearing about involve how Microsoft sells Windows to businesses, not how they sell Windows through PC makers (known in industry parlance as OEMs — original equipment manufacturers).
To explain: Many big companies don’t pay for Windows only when they buy new PCs, which is how most of us do it.
Instead, they pay for Windows about every three years as part of a master deal they negotiate with Microsoft for all the Microsoft software they buy. A lot of them buy an additional warranty deal which gives them extra goodies, especially the right to upgrade to the newest Windows operating system.
These deals are complex. There’s even a whole industry of consultants out there who help companies negotiate them, so companies don’t wind up paying for things they don’t need.
Again, many of these contracts already give businesses the right to upgrade to Windows 10 at no extra cost. But our source says the changes will involve exactly what they get for free, and what they will wind up having to add in as extras.
What Microsoft is saying in public
Last week, speaking at Microsoft’s Convergence conference, Microsoft marketing chief Chris Caposella talked publicly about Microsoft’s freemium plans for consumers, reported the Verge.
Microsoft thinks of it like this, he said: acquire, engage, enlist, and monetise. That basically means give the basic product away for free to get people to use it and then figure out what features they are willing to pay for.
In other words, Microsoft is already thinking about freemium+bundles options as it gives away an increasing amount of software away for free to consumers.
“Windows as a Service”
Microsoft has also started to use some interesting language around Windows 10: “Windows as a Service.”
The “as a Service” terminology means something very specific in the business computing world: A cloud service that you pay for on a subscription basis for which you can add extra features for extra cost.
That’s NOT how Microsoft is using the term right now.
As Terry Myerson described it in January, when Microsoft announced it would be giving Windows 10 away for free:
This is more than a one-time upgrade: once a Windows device is upgraded to Windows 10, we will continue to keep it current for the supported lifetime of the device — at no cost. With Windows 10, the experience will evolve and get even better over time. We’ll deliver new features when they’re ready, not waiting for the next major release. We think of Windows as a Service — in fact, one could reasonably think of Windows in the next couple of years as one of the largest Internet services on the planet.
Remember, a lot of enterprises pay for the right to upgrade to new versions of Windows as part of their contracts. And they have to renew their contracts and Windows licenses about every three years.
In Myerson’s blog, he said Microsoft planned to keep asking them to do just that.
“For our enterprise customers, we’ll continue to support the way many of them work today, with long-term servicing for their mission critical environments.”
Still, enterprises will rightly balk if Microsoft asks them to pay for something that consumers are getting for free.
So in January, Microsoft’s Jim Alkove explained in a blog post that Microsoft will be offering enterprises extra goodies as Windows “evolves to become a service.”
Today we announced a free upgrade to Windows 10 for new or existing Windows 7, 8 and 8.1 and Windows Phone 8.1 devices, for those customers who upgrade in the first year. We think that consumers will be thrilled about this news. For enterprise customers and partners, we will continue to deliver exclusive value and offer extensive flexibility in how Windows 10 is deployed and managed as Windows evolves to become a service. For companies that require these enterprise-grade capabilities, Windows Software Assurance (SA) will continue to offer the best and most comprehensive benefits.
Add it all up, and that’s why we keep hearing a lot of interesting speculation on how Microsoft is radically rethinking how it will sell Windows 10 to businesses.
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