Microsoft 2008 Annual Report Download - page 14

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deliver end-to-end experiences that connect users to information, communications, entertainment, and
people in new and compelling ways.
Software plus services. Underlying our opportunities in all of our businesses is a company-wide
commitment to embrace software plus services. The ability to combine the power of desktop and server
software with the reach of the Internet represents an opportunity across every one of our businesses. As
we continue to build out our services platform, we will bring a broad range of new products and service
offerings to market that target the needs of large enterprises, small and medium-sized businesses, and
consumers.
Expanding our presence on the desktop, the server, and with developers. We believe we are well-
positioned to build on our strength with businesses of all sizes and with developers. Fiscal year 2008 saw
widespread adoption of Windows Vista and the 2007 Microsoft Office system and the launch of Windows
Server 2008, SQL Server 2008, and Visual Studio 2008. We will continue to focus expanding adoption of
these products in fiscal year 2009, and in providing additional value in security, messaging, systems
management, and collaboration. We also continue to focus on developers with the release of new tools
such as Silverlight. We will continue to pursue new opportunities in high-performance computing, unified
communications, healthcare, and business intelligence. Emerging markets are also an important
opportunity for us.
DISTRIBUTION, SALES AND MARKETING
We distribute our products primarily through the following channels: OEM; distributors and resellers; and online.
OEM. Our operating systems are licensed primarily to OEMs under agreements that grant OEMs the right to
build computing devices based on our operating systems, principally PCs. Under similar arrangements, we also
market and license certain server operating systems, desktop applications, hardware devices, and consumer
software products to OEMs. We have OEM agreements covering one or more of our products with virtually all of
the major PC OEMs, including Acer, Dell, Fujitsu, Fujitsu Siemens Computers, Gateway, Hewlett-Packard,
Lenovo, NEC, Samsung, Sony, and Toshiba. A substantial amount of OEM business is also conducted with
system builders, which are low-volume, customized PC vendors operating in local markets.
Distributors and Resellers. We license software to organizations under arrangements that allow the end-user
customer to acquire multiple licenses of products. Organizations license our products primarily through large
account resellers (“LARs”), direct market resellers, and value-added resellers (“VARs”). Many organizations that
license products through enterprise agreements transact directly with us, with sales support from our Enterprise
Software Advisor channel partners. These Enterprise Software Advisors typically are also authorized as LARs
and operate as resellers for our other licensing programs. Although each type of reselling partner reaches
organizations of all sizes, LARs are primarily engaged with large organizations and VARs typically reach the
small- and medium-sized organizations. Some of our distributors include Ingram Micro and Tech Data, and some
of our largest resellers include CDW, Dell, Insight Enterprises, Software House International, and Software
Spectrum. Our Microsoft Dynamics software offerings are licensed to enterprises through a global network of
channel partners providing vertical solutions and specialized services. We distribute our finished goods products
primarily through independent non-exclusive distributors, authorized replicators, resellers, and retail outlets.
Individual consumers obtain our products primarily through retail outlets, including Best Buy, Target, and Wal-
Mart. We have a network of field sales representatives and field support personnel that solicits orders from
distributors and resellers and provides product training and sales support.
Our arrangements for organizations to acquire multiple licenses of products are designed to provide them with
a means of doing so without having to acquire separate packaged product through retail channels. In delivering
organizational licensing arrangements to the market, we use different programs designed to provide flexibility for
organizations of various sizes. While these programs may differ in various parts of the world, generally they
include:
Open licensing. Designed primarily for small-to-medium organizations (5 to over 250 licenses), this
program allows customers to acquire perpetual licenses and, at the customer’s election, rights to future
versions of software products over a specified time period (generally two years). The offering that conveys
rights to future versions of certain software product over the contract period is called Software Assurance.
Software Assurance also provides support, tools, and training to help customers deploy and use software
efficiently. Under the Open program, customers can acquire licenses only, or licenses with Software
Assurance. They can also renew Software Assurance upon the expiration of existing volume licensing
agreements.