but it's not as fun to be in a business like that

Q: About the commoditization of software and software innovation and what I was wondering was how do you see Microsoft kind of fitting into a world where software is cheap and produced at very low cost and what do you have to say to your current and prospective fleet of software engineers?

Bill Gates: Software has this interesting property that, unfortunately, it never wears out. And so when we sell somebody a copy of Windows and Office, they can just use it forever. And they don't owe us a dime - it's theirs, they get to use it. And so all we get paid, ever, it's not like Coke where they get thirsty again - that's a good business - but it's not as fun to be in a business like that, all we get paid for is our breakthroughs. We have to come up with a version of Office that's worth licensing, worth installing, worth learning, worth dealing with some effect it might have or it might change things. And that's our economic proposition. Versus all the free software that's out there, all the installed base of our best work of the years past that's out there and people aren't gonna have to pay us a thing for. We have to innovate enough that it's worthwhile to license.

Now there's another way to look at it though. Which is if you take a knowledge worker, most anywhere, even in Bangalore and Hyderabad. They're making $40,000 a year, they've got an office, they've got phone bills, they've even got paper clips. What we're saying to people is "Hey! Pay us less than $100 a year for the right of that person to have the very best software - the very best software to communicate, create, collaborate, organize their things." So it's a percentage of what it costs you to have that information worker to have the very up-to-date, the very best software. Is it worth something less than a $100 dollars a year to do that? And when we hire people we say, "Hey, if you don't think we can do that, you shouldn't join." Because that's what the standard we're held to every year. And so far we've done okay.

And certainly the customers, when I meet with customers I've never been in a meeting where they say "You're done... you're done...", they say "Hey! Your stuff isn't easy enough to administer, it's not secure enough, it doesn't do this feature, it doesn't let us do this customization that we need." So the need for better software and the impact of better software is super super high. And the fact that we've created this high volume low cost model works very well. The fact that once we saw workflow, there's hundreds of millions of people who will benefit from that. Once we get this spreadsheet up to this modelling level, hundreds of millions of people will benefit from that. It's a model that has worked and that I believe in.

- Bill Gates, Software Breakthroughs: Solving the Toughest Problems in Computer Science