Microsoft Business Model | How Does Microsoft Make Money?

Microsoft Business Model

Microsoft has a variety of business divisions that each contribute to the company’s profitability. Some of these divisions or subsidiaries include Microsoft Cloud, Windows, Xbox, Surface, and LinkedIn.

Microsoft also offers Microsoft 365, a suite of services that includes Windows and Office products, and has many additional companies that they have acquired.

Microsoft is a company that offers software for personal computers, mobile devices, and gaming. This software ranges from operating systems (Windows) to word processors to Skype. They also offer office software for various devices.

Microsoft also offers server software (in the cloud) as well as console software for gaming. They also offer a gaming service called Xbox Live. They have produced a series of web services (Azure).

Microsoft Azure is a cloud computing platform, which allows developers to build, deploy and manage applications using Microsoft technology.

The platform’s main focus is to enable developers to deliver highly scalable solutions on the cloud, which can then be accessed with ease and in real-time while also enabling integration with Microsoft’s own software and services.

Microsoft has also acquired many companies to offset their weaknesses and to offer a variety of products. Some of these companies include Skype, Linked In, Mojang (Minecraft), and GitHub.

Microsoft has a well-diversified business model with several different ways they generate revenue. This is both the result of Microsoft’s efforts as well as the growth and popularity of technology.

Microsoft started in Bill Gates’ garage and grew to what it is today due to its efforts and being at the forefront of technology and adapting along with it.

“Microsoft’s Business Models”

Microsoft has a variety of business models that they use to generate revenue. These include:

Software Sales

The most widely used business model by Microsoft is the software sales model. This model includes the sale of software like Windows or Office directly to consumers, businesses, governments, and the internet.

These sales do not include hardware but rather the software itself. This model has many benefits because Microsoft does not actually have to sell any products. Microsoft makes huge profits because they do not have to pay for inventories, overhead, packaging, shipping, or even certain R&D costs.

The software sales model could be considered the ‘true’ business model of Microsoft. It is what they use to generate most of their revenue and what most people associate with them.

Licensing

From time to time, Microsoft may acquire companies that are developing software for other companies that give them their inventions and ideas. Once a licensing agreement takes place, Microsoft will use the ideas to create their own products that they can sell. This is another way that they generate revenue.

Microsoft owns several patents that are used in their software, many of which were acquired when Microsoft bought other companies. They do not sell these patents but rather license them to other companies. License royalties are one way that Microsoft makes money off of their patents.

Microsoft uses both of these models at various times for different reasons. Many of Microsoft’s products are developed in-house, while other software companies develop others.

Third-Party Sales

There have been various partnerships that Microsoft has made that have led to third-party sales. The first major example was the release of Windows for the Mac in 1985.

Another partnership with Apple and Motorola resulted in Windows CE, which was released for several mobile devices and Windows 98 and including the Xbox. This is another way that Microsoft is able to generate revenue from their software.

Licensing to System Integrators

Microsoft has numerous partners that license their software, patents, and even some of their hardware technology. This includes the licensing of Windows XP to system integrators that have trained technicians to install and set up the software for large corporations as well as small businesses.

These partners also receive technical support from Microsoft for any issues or problems they might encounter. In return, Microsoft gets a percentage of the revenue from these installation-based services.

Microsoft continues to use this method as a way to transition from one business model to another.

Support Services

Microsoft has four methods of gaining revenue from support. The first is a support account that includes email, phone, and online support. This type of support provides customers with the most up-to-date information about Microsoft products and services as well as the latest updates.

It also provides them with any technical assistance they might need. The second is a premium level of support that involves Microsoft engineers contacting customers directly to assist with any issues they are having.

The third is an emergency support service that provides customers with the highest level of technical support when they need it most. The last is a pay-per-incident method in which customers may pay for any issues they need help with afterward.

Microsoft also offers additional training and development services for both individuals and businesses. Customers can take part in this training and earn certifications if they pass various tests at the end of the classes.

Other Revenue

Microsoft also has other revenue streams. They make money from the sale of advertising on their websites and apps. This is because consumers opt into these ads and are satisfied when they see them.

Microsoft also makes money from sales of online services like Office 365 (subscription-based). They also have an Xbox Live service for gaming (subscription-based) as well as a separate streaming service called Mixer (paid subscription).

How Does Microsoft Make Money?

Microsoft has a variety of business divisions that each contribute to the company’s profitability. These divisions or subsidiaries include Microsoft Cloud, Windows, Xbox, Surface, and LinkedIn.

They also offer Microsoft 365, a suite of services that includes Windows and Office products, and many additional companies they have acquired.

Microsoft is a company that offers software for personal computers, mobile devices, and gaming. This software ranges from operating systems (Windows) to word processors to Skype. They also offer office software for various devices.

Microsoft also offers server software (in the cloud) as well as console software for gaming. They also offer a gaming service called Xbox Live. They have produced a series of web services (Azure).

Skype, like Facebook, allows Microsoft to earn money by placing advertisements on the site that Skype users view. Microsoft also owns the Xbox and Windows operating systems, which are both profitable and have helped Microsoft make money over the years.

To summarize, Microsoft makes money by providing software for users.

Microsoft Azure

Microsoft Azure is an online cloud computing platform that enables businesses to develop, test, and deploy applications in a secure environment. Azure has the ability to host various software that is either on-premises or hosted in the cloud.

Services and Software on Azure include windows azure on-premises Server, Active Directory, SharePoint Online, Office 365 (previously called Microsoft 365), Exchange Online (previously known as Exchange Server), Skype for Business (previously called Lync), Dynamics 365 (formerly known as CRM Online) and more.

Office 365

Office 365 is a web-based service suite of software products from Microsoft that businesses use to do their day-to-day work. Office 365 combines Microsoft’s desktop Office software and cloud-based services with Skype, SharePoint, and Yammer.

The deal includes offering all new customers free use of Office software on various devices, including Windows, macOS, Android, and iOS.

Microsoft Office

Microsoft Office is a set of productivity software developed by Microsoft for the Windows family of operating systems and macOS. The name of the software suite refers to the fact that it is bundled with Microsoft Word, Excel, PowerPoint, and OneNote. It is also bundled with the Microsoft Suite on PCs.

The Office suite being provided has been expanded from its original focus for PC use and includes a web-based version called Internet Explorer 11 (formerly known as Windows Explorer). It also allows access via apps on mobile devices.

Microsoft Revenue Breakdown

Microsoft generated $46.4 billion in revenue from its performance and business processes segment in its fiscal year 2020 and another $48.37 billion from its intelligent cloud segment.

2020 proved to be the company’s most profitable year ever in terms of annual sales, with the overall figure exceeding one hundred billion dollars for the second time in the company’s history, thanks in part to rapid growth in these two sectors.