Microsoft 2009 Annual Report Download - page 15

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PAGE 15
DISTRIBUTION, SALES, AND MARKETING
We distribute our products primarily through the following channels: OEM; distributors and resellers; and online.
OEM
We license our software to OEMs for distribution as pre-installed software on new PCs. The most significant part of
the OEM business for us is licensing of the Windows operating system. We also license certain server operating
systems, desktop applications such as our Office productivity suite, and consumer software products and we market
hardware devices, and software as services including our Windows Live Essentials suite to OEMs. We have OEM
agreements covering one or more of our products with virtually all of the major PC OEMs, including Acer, ASUSTek,
Dell, Fujitsu, 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”) 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, Software House International,
and Insight Enterprises. 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), these programs allow
customers to acquire perpetual or subscription licenses and, at the customer’s election, rights to future
versions of software products over a specified time period (two or three years depending on the Open program
used). The offering that conveys rights to future versions of certain software products 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.
Select licensing
Designed primarily for medium-to-large organizations (greater than 250 licenses), this program allows
customers to acquire perpetual licenses and, at the customer’s election, software assurance over a specified
time period (generally three years or less to align to the end of the agreement term). Similar to the Open
program, the Select program allows customers to acquire licenses only, acquire licenses with software
assurance, or renew software assurance upon the expiration of existing volume licensing agreements.