Every recent article on Windows 10 looks at features, the UI, the privacy policy, update mechanisms, etc. But no one is ready to speak about the main changes to Microsoft’s business model.
This silence even extends to Microsoft. Even though they have made major changes in the way they make money, they keep most of these details below the radar.
The bottom line is: The cost of Windows for OEM’s is down. The price which they charge large OEM’s for Windows is secret, but it has fallen over the last few years. For some prices like tablets, the OEM price is zero.
Customers are still purchasing PC’s, but the rate of sales is falling every year. Fewer PC’s are being sold, and revenue per unit is falling as well. This has dramatically lowered the overall revenue for Windows 10 licenses attached to PCs.
But the cost for developing, distributing, and supporting isn’t falling. To maintain margins, Microsoft is looking at new ways of convincing users to spend on products or services.
This is not something sudden either. It is a continuation of many trends which have been in the making for years. Revenue from OEM licensing dominated the balance sheet of Microsoft at one point. But today, it isn’t even among the top three businesses at Microsoft.
For enterprise users, this isn’t new. For consultants and enthusiasts who work with smaller businesses, these changes are unwelcome.
Traditionally, their revenue for Windows comes from a couple of sources, OEM and enterprise licenses. For most of their non-enterprise users, the cost of a license is bundled into the cost of a new computer. You do not think about it as a separate expense.
An important source of revenue here are upsells: the sale of apps and other services like Microsoft Office. The other source is edition upgrades, from Home to Pro, etc.
The upshot to all of these changes is being able to push people who may have previously been happy with the Home edition to upgrade and encourage similar upgrades from Pro users to Enterprise.