Throughout Nadella's tenure, there's been an assumption that "Windows first" was the silent third phrase of the "cloud first, mobile first" mantra. That might still be true--Microsoft isn't going to throw Windows overboard in any fashion. But by slashing license fees and making Windows 10 a free upgrade, Microsoft seems to be preparing for a world where its products are funded by services, rather than one-time purchases. Microsoft would much rather you pay them $100 or more per year for a suite of services that run best on Windows, rather than a few bucks in license fees every time you buy a new PC.
Can Microsoft afford to make Windows free?
Microsoft has already begun the process with smaller tablets, where the company eliminated Windows licensing fees for tablets under nine inches last year. The Windows Store, Bing, and Xbox gaming apps are all things that will replace Windows fees to monetize these smaller tablets, Nadella said, generating revenue alongside Microsoft-branded devices like the Surface and Lumia phones.
And with Microsoft offering Windows 10 as a free upgrade to those who own a Windows 7 or Windows 8 PC, that money you paid to Microsoft for either OS is just going to be diluted further over not one, but two operating system lifetimes. Depending on how long you've owned a PC, it's possible you haven't bought a Microsoft OS in more than a decade.
Microsoft also continues to make noise about offering Windows as a service, which inspired a brief Twitter debate between Greenbot's Jason Cross and ZDNet's Mary Jo Foley over whether Windows would ever be universally free. I think they're both right: Microsoft intends to keep enterprises paying for support, patches, and updates as long as possible, while slicing the cost of its consumer Windows OS as deep as it can to attract more customers. Microsoft hasn't said how it plans to do that, though.
So what will this mean for you? More offers that are too good to refuse, I'd bet.
Think about Microsoft's Work and Play Bundle, which basically paid for itself with a terrific deal of Office 365, Xbox Live Gold, Xbox Music, and Skype. Or the cheap tablets that offer a $70 Office 365 Personal subscription as part of the bundle. Or the new Windows 10 touch-based Office apps that will be bundled within Lumia phones. All of these are entry points into Microsoft devices, with bundled services that just happen to be on whatever other devices you own. And even at the "full" price of $199 per year, Microsoft's Work and Play Bundle is the equivalent of your paying Microsoft for a new PC every single year. That has to make Microsoft chief financial officer Amy Hood drool.
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