Windows 10 revenue model kicks off new Microsoft era

Email @ Jun 29th, 2015 in News
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Delivering Windows as a service has resulted in some accounting gymnastics from Microsoft. The revenue traditionally collected by big three yearly OS version upgrades will now be found in smaller sized software updates spread over two to four years.

Commenting on this new model, a PowerPoint presentation (which I spotted via VentureBeat) released by the company says: "Microsoft will provide new features and functionality over time. We will continue to keep it current for the supported lifetime of the device." This will result in "deferral of revenue" for Microsoft shareholders.

Some of you may be wondering what all this "Windows as a service" or WaaS is about. The idea is that Windows will transition away from being a typical product that sees periodic major releases. Instead, it will become a product that's continually updated and refined in the background. For example, Microsoft can improve the Mail functionality by rolling out an updated Mail app via the Windows Store.

It can only be assumed that if they aren't charging for OS upgrades, then connected services such as Office or OneDrive will make up the revenue deficit. The image below illustrates how the deferred revenue will be carried over to the next year.

Multi-year view of revenue recognition

With Windows 10 and new innovations, Microsoft believes customers will be more productive and "have more fun". The PowerPoint lists a number of things that will remain:

  • Software licensing business model and the associated method or timing of customer billing or cash collections.
  • The method for revenue recognition and reporting.

This new approach to selling Windows will "create a new generation of Windows for the 1.5 billion people using Windows today in 190 countries around the world." With Window 10, Microsoft wants to deliver on their vision for more personal computing, "defined by trust in how we protect and respect our customers' personal information, mobility of experience across devices, and natural interactions with Windows, including speech, touch, ink and holograms."

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