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Microsoft Implementing Changes to its Software Strategy

A lengthy BusinessWeek article portrays Microsoft as a very different company than it was two or three years ago. "No longer able to impose its will on the computing world, the Redmond, Wash.-based software giant is scrambling to catch up with all the changes the Web is unleashing," writes Peter Burrows. Indeed, CEO Steve Ballmer has recognized that Microsoft needs to change, as legacy software businesses like Office and Windows face new challenges brought about by cheap or free Web software and communications platforms. Ballmer has said the software giant needs to move towards selling the likes of Office on a subscription basis.

Microsoft has already started offering SharePoint, its collaboration software, and Exchange, its email server program, as a service for a monthly fee-a welcome change for customers tired of using their own resources to maintain these programs on their own servers. It will next look towards offering a free version of Office, supported by online advertising, to customers who don't want to pay extra for the productivity software. There are currently no plans to offer Office 2010 as a monthly subscription service. Instead, Microsoft will charge a normal upfront price, and companies will maintain the programs on their own servers.

Even so, Microsoft is betting that the subscription model will be a lucrative revenue source for the company. It can certainly charge big corporate customers more to rent the software as a service than it could just to buy the programs themselves. The wild card, Burrows says, is how costly it will be for Microsoft to assume the maintenance load. "Hanging in the balance is one of the great profit machines of all time."

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