Businessmodel of Microsoft

Customer Segments

With a variety of services and products, Microsoft targets a range of customers that can typically be divided into commercial clients and general consumers.

It primarily offers software and cloud computing solutions through its productivity suite Office 360, email platforms Outlook and Exchange and online calling platform Skype, which are utilised by both end users and businesses. Microsoft’s server management, IT support and consulting services are aimed largely at corporate clients, while its products and services pertaining to its mobile phone and video game platforms target the mass market.

Microsoft also attracts advertising agencies and big brands with its available advertising opportunities, presented primarily via its MSN portal and Bing search engine, and serves developers with its suite of development tools.

Value Propositions

Microsoft has established a reputation as a reliable provider of software solutions and is regarded as a market leader. Many of the Company’s products are available free of charge and can be accessed either via the MSN portal or through the Company’s various apps. Content housed by Microsoft’s products can also be synced across multiple platforms, including the Company’s own brand of phones.

This compatibility is a big draw for Microsoft, particularly within the business community where its operating system and suite of Office 360 products are widely considered the tools of choice. The Company is a trusted source of expertise and support for its consulting customers, while its advertising partners benefit from the Company’s large user base.

Channels

Much of Microsoft’s products – including Outlook, Office, OneNote, OneDrive and Skype – are available online via its MSN web portal at www.msn.com. The Company also has a number of separate desktop, Apple iOS and Google Play apps for its products.

Some of the Company’s products must be downloaded and installed directly on to user computers in order to be accessed. Many of the Company’s other services – including its consulting and customer support services – can be accessed via Microsoft’s sales and marketing team.

Customer Relationships

Microsoft’s various customer segments require differing levels of communication with the Company itself.

Its software and hardware products are largely self-service and do not require any significant personal interaction with sales and marketing representatives. The provision of enterprise productivity services, however, requires a greater degree of personal assistance in order to properly fulfil the individual needs of each client.

Similarly, direct collaboration with Microsoft representatives is necessary in providing consulting and support solutions and advertising services. Microsoft also interacts directly with its customers via social networking profiles on Facebook and Twitter.

Key Activities

Microsoft develops, licenses and supports a range of enterprise and consumer software products and services. This includes operating systems for personal computers, servers and phones, server applications and management tools, and productivity applications.

The Company also designs and sells hardware products, including PC accessories, mobile phones and video games consoles and accessories; and delivers online advertising solutions. In addition, Microsoft provides ancillary IT consulting and product support services to clients across multiple sectors.

Key Partners

Microsoft manages an extensive network of partnerships, organised under the Microsoft Partner Network, with the aim of enabling tech companies to build their businesses around Microsoft technologies and to provide services on the Company’s behalf. This network comprises companies that provide systems integration, application development, digital advertising, data analytics, manufacturing, marketing, distribution, telecommunications, data management and internet hosting services, in addition to authorised resellers and independent software vendors.

In return for their participation Microsoft Certified Partners receive support and tools directly from Microsoft, and are provided access to products at a discounted price. Partners can achieve gold and silver partnership competencies, with gold partners – those considered to be best-in-class – receiving additional benefits such as free access to Microsoft tools. Microsoft has recently launched partnerships with software company Jasper, venture production studio ConsenSys, Chinese electronics manufacturer China Electronics Technology Group, and gaming software firm Valve VR, among others.

Key Resources

Microsoft’s key resources concern to its intellectual properties and proprietary technologies, relating largely to its server management and software products. This also includes its physical data centres and servers.

The Company’s personnel, particularly within its research and development teams, are key to maintaining Microsoft’s market position, hiring only the most qualified candidates after an extensive vetting process.

Founder Gates himself, viewed within the industry as an innovative and forward-thinking leader, can also be considered a key resource. As one of the world’s largest companies by revenue, Microsoft has significant sums of cash on hand, allowing the Company to be flexible in its approach and focus.

Cost Structure

As a diversified technology company, much of Microsoft’s costs relate to research and development operations, this includes the retention of expert personnel. In addition, the Company also accrues cost in relation to the maintenance of its secure data centres and servers.

Microsoft also has a substantial marketing budget and a large sales team in order to remain competitive in an increasingly saturated field. Microsoft’s numerous regional offices incur significant fixed costs, including office rental and utilities.

Revenue Streams

Microsoft maintains diversified revenue streams and is routinely ranked among the world’s top 100 companies organised by revenue. The Company’s revenue is divided into three principal segments:

• Productivity and Business Processes
• Intelligent Cloud
• More Personal Computing Revenue attributed to Microsoft’s Productivity and Business Processes segment includes that generated by the sale and licensing of its various software products and cloud services across a range of devices and platforms. This comprises commercial and consumer licensing of Microsoft’s suite of productivity products and cloud services, including those pertaining to the Office 365 suite, email platforms Exchange and Outlook.com, content management tools Sharepoint and OneDrive, and call services provider Skype.

Microsoft’s Intelligent Cloud segment comprises all revenue generated by its server products and cloud storage services, including the sale and licensing of Windows Server, Microsoft SQL Server, Visual Studio, System Center and Microsoft Azure services to commercial clients and general consumers. Revenue from the Company’s support and consulting services – which aim to develop innovative IT solutions for businesses – are also grouped into this segment.

Microsoft’s More Personal Computing segment relates principally to its products and services that provide cross-platform utilities to end users, developers and professionals on multiple devices. This includes licensing of Windows operating systems, Microsoft patents, and Windows phones; the sale of Microsoft devices, including mobile phones and PC accessories; and the sale of licenses and products relating to the Microsoft Xbox gaming platform, including Xbox Live subscriptions, transactions, third-party video game royalties and advertising. Search advertising revenue generated by Microsoft’s Bing search engine and display advertising revenue from the MSN portal are also included in this segment.