Three Guys and a Podcast: Apple News & Analysis
When Apple announced that their new Mac desktop operating system, OS X Mavericks, was going to be free, the audience roared with approval. Just like with iOS, now OS X was a free upgrade.
This news must have driven Microsoft completely nuts. Microsoft’s entire business model consists of writing software and then charging a license fee to each user. For Windows and Office it can cost anywhere from $99-499 per license. The notion that software should be, or can be, free is actually a monster Microsoft created the mid-90's In 1996 a company called Netscape was charging $30 for their Navigator browser. At the time Navigator was the most popular browser on the market. Microsoft was late to the browser game. Therefore in order to make a quick dent in market share Microsoft decided to give Internet Explorer away for free. Explorer became “part” of the operating system. The era of paying for software began to decline.
Fast forward a few years and social media companies like Facebook and Twitter made free software the cultural norm. Google got into the free software game by providing Google Docs online for free. Yahoo! Mail, GMail and others provided free email services. — all advancing the notion that software should be free. Not good news for Microsoft.
While Apple, Google, Facebook and Twitter all have revenue streams outside of software sales, Microsoft’s majority of revenue comes from an older model of charging a fee per user license.
Microsoft has yet to find an answer to this problem. While Microsoft has put considerable effort into generating revenues from the server and cloud markets, it is only a temporary reprieve. As more and more services become cloud based, free will become the norm for calendaring, contacts, sharing of photos — oh wait, that is already here.
Microsoft can only blame themselves for opening the free-software can of worms. Add to these woes the fact that Microsoft completely missed the social media revolution as well as the mobile renaissance. Whoever the next Microsoft CEO is will need to be brilliant in figuring out how to transform a company whose roots still find ground in the early 1980s.
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