Corporations desiring Microsoft® software will typically purchase a volume [license] entitled "Licensing 6.0" (as of 2004). These licenses are the beginning of software-as-a-service purchasing. It's designed to create a more steady revenue stream for Microsoft while also getting more money from customers. Customers are spending from 33% to over 100% more for Microsoft [software] compared to before Licensing 6.0 began.
Licensing 6.0 also includes an option to purchase something known as Software Assurance (SA), basically allowing customers to purchase future upgrades in advance to avoid paying full price for new versions later. Unlike the software licenses themselves, this maintenance program is non-transferrable. If a corporation sells part of its business, including Microsoft software licenses under Licensing 6.0, the SA maintenance plan can not move with the licenses.
"Microsoft has not seen evidence of consumers tiring of OS upgrades," said the [Microsoft] spokesperson, pointing out that more than 46 million copies of Windows XP have been sold through OEMs and retail outlets since the software's release in October 2001.
OEMs (Original Equipment Manufacturers) sell Microsoft Windows XP due to lack of options. If a manufacturer wants to sell Windows as the operating system (OS) on new computers, Microsoft will only sell them Windows XP (except of course for contracts continuing sales of prior OSes; contracts which are soon replaced). Second, some manufacturers, such as the largest, Dell, have a clause in their contract which requires them to bundle a Microsoft OS with every new computer. To be fair, Dell sometimes gives away FreeDOS to those that ask for certain computer models with no OS so as not to break Microsoft's strict requirements. It's easy for a desktop monopoly to say it's all or nothing to a company relying on desktop computer sales. If they didn't bundle Windows, Dell sales would drop drastically.
As for retail outlet sales, many consumers are also left out of a choice, just as OEMs. Try to get help for a Microsoft Windows 95 problem. The same old documents are available, but old problems will never be fixed. If you were to run into a bug in Windows 95 which provents you from doing something critical, you are forced to buy Microsoft Windows XP if you want to retain Windows and get around the [bug]. [Support] for Windows 98 has been dropped, and no [patches] for Microsoft Windows 2000 have been released for quite some time, even though there are still hundreds of reported bugs.
At least within the United States software licenses for Microsoft® Windows™ and Microsoft Office cost more than the hardware required to run them. Over decades hardware costs have dropped due to standardization and genuine competition. A computer from one manufacturer can generally be easily replaced by a similar computer from another manufacturer. And the hardware itself can run for many years. The same is not true of software. The price of software continues to rise even though there is no limited supply (copying basically costs nothing). With the artificial price of software becoming the dominant cost in small computers there will come a threshold above which customers will no longer be willing to pay.
Until 2004 Microsoft generally sold software for the same price in every country. Facing pressure from corporate and government customers migrating to [Linux] they sometimes negotiate lower prices. With defections from Windows becoming more common, and [Linux] getting many users in developing nations, Microsoft will begin to adjust prices based on the cost of living. Facing increased competition they will likely find less revenue in the future, especially outside the United States.