Microsoft

It is difficult to find a business template to compare to the success and sheer domination of Microsoft Corporation. Begun as a kind of small-time business by two college dropouts in New Mexico in the late 1970s, the corporate reach of Microsoft, in part from its remarkably talented pool of computer wonks and in part from its savvy positioning of itself in the burgeoning computer software market, has emerged as a model for the new age of global corporate success, controlling and directing a worldwide market for computer goods, software, and tech services that revolutionized both business and homes. That reach was unprecedented.

Microsoft Corporation occupies a particularly grand place within the popular culture of American business mythos. It is at its most fundamental level an American-based international conglomerate that since the mid-1970s has overseen the development, manufacture, and licensing of a wide variety of cutting-edge goods and services related to computer programming. But it is so much more than that. It is one of the most successful American business enterprise of the past century. From modest beginnings to its current status, Microsoft is a giant within the computer software industry, employing tens of thousands of people worldwide and generating annual revenue of approximately $211 billion in fiscal year 2023. Its stock alone has created more than 12,000 millionaires.

The company has survived court challenges to its supposed position as a monopoly while controlling the majority of the market for computer operating systems and for office software—at a staggering, indeed unprecedented level of international market control that reached 90 percent for years. It has seen success in other areas, including video games, its internet search engine, and digital services. Although the 2010s saw Microsoft's once near-total dominance diminish with the emergence of new computer technologies such as smartphones and tablets, the company remains a global phenomenon and the leading provider of desktop computer operating systems and office software.

Overview

The history of Microsoft has become the stuff of American business legend—in 1975, two savvy amateur computer programmers, Bill Gates and Paul Allen, recognized the potential of developing a universal programming language, dubbed BASIC, and together sold the idea to the manufacturers of a computer programming system already in production, Altair 880. Allen coined the name Microsoft by simply combining the terms microcomputer and software. But neither Gates nor Allen were content—they recognized the potential for personal computer (PC) systems and, relocating to Washington state, began to develop in earnest computer software that would introduce the speed, efficiency, and organization potential of computerized data systems to both businesses and individual consumers. Over the next decade, Microsoft attracted some of the best and the brightest among a new generation of computer software engineers and quickly established a market presence for programs that were deemed cutting edge for introducing new tools for computer work that greatly enhanced the attractiveness of computer software.

In 1981, Microsoft firmly established its presence by negotiating a massive deal with IBM to produce the first operating system, called DOS (or disk operating system), for business data compilation and retrieval. It was a worldwide success, and two years later Microsoft introduced a similar computer software application designed for home use. In 1985, Microsoft ventures took off with the introduction of the first Microsoft Windows program that included word processing, cutting-edge spreadsheet capabilities, and what was considered massive database storage capability. Shortly after the introduction of Windows, Microsoft went public with its stock and nearly overnight became one of the leading giants in American business. Programs such as Microsoft Excel, Word, and Powerpoint, parts of the Microsoft Office software suite, would come to dominate business computing as well as home PC use.

Over the next decade, Microsoft pioneered an increasingly sophisticated family of computer programming systems for both businesses and personal computers. By the mid-1990s, Microsoft Windows and its successive evolutions had become the most widely used operating systems in the world. Despite intense and often acrimonious court challenges by rival computer software corporation Apple that cited Microsoft as a monopoly and sought to break up the company in order to break its market dominance, Microsoft persisted. Even after being sued by the United States, the company used a variety of legal maneuverings as well as a battery of high-priced legal counselors to survive a nearly four-year court challenge (court rulings found Microsoft abusive in its market dominance but ultimately the company was not held to any significant dissolution proceedings) to remain the dominant computer software corporation in the world.

By the mid-1990s, visionary founder Bill Gates recognized the potential of the emerging reach of the Internet, and subsequently Microsoft began developing its own program software that would incorporate the convenience, the information, and the data reservoirs of the Internet. It is one of the few missteps in Microsoft’s business success that, despite a succession of Microsoft Windows programs that each vastly improved the efficiency and look of document preparation and data storage, that it grasped the import of the Internet relatively late, but Microsoft quickly established its presence by linking computer data processing to access to the Internet. It also expanded by taking over other companies, as in 1997 when it acquired Hotmail, a free email provider.

Microsoft also eventually developed a reach into the lucrative market of video gaming, then dominated by Nintendo and Sony, by developing the game console Xbox in 2001. Along with its successor the Xbox 360, introduced in 2005, the console took the game market by storm, selling more than 40 million units to outsell Sony’s perennial top seller PlayStation.

Microsoft successfully expanded into other areas as well, such as with its search engine, Bing, introduced in 2009 and its $8.5 billion acquisition of video chat company Skype in 2011. However, as the computing world shifted to mobile technologies in the late 2000s and 2010s, Microsoft's once seemingly impregnable hold over the market began to waver. Again late to the game in the smartphone market and the tablet computer market (both dominated by rival Apple with its iPhone and iPad, respectively), Microsoft introduced its own Windows Phone OS and Surface tablets with less than dominant results. By 2014, by the company's own estimate, it controlled only 14 percent of the total market for operating systems across all potential devices, though it retained its 90 percent hold on the desktop PC market.

In 2014 Steve Ballmer, who had replaced Gates as CEO in 2000, stepped down himself and was succeeded by Indian American executive Satya Nadella, who had previously led Microsoft's cloud and enterprise group. He continued the company's push into the burgeoning field of cloud computing, mainly through its Azure cloud computing service. This culminated in 2019 in Microsoft beating out Amazon to win a $10 billion cloud computing contract with the US Department of Defense, a project known as the Joint Enterprise Defense Infrastructure (JEDI). However, the following year, the company lost a bid for the US operations of the popular video-sharing app TikTok. At the same time, reports indicated that its Teams communications app had acquired an even larger number of users and its cloud computing business had grown as more workers shifted to remote work during the coronavirus disease 2019 (COVID-19) pandemic. In March 2020, Gates announced his departure from Microsoft's board of directors, citing a desire to spend more time focusing on philanthropy.

In January 2022, Microsoft announced that it was in the process of acquiring video game publishing giant Activision Blizzard, known for video game franchises such as Call of Duty, and World of Warcraft, for an estimated $68.7 billion. The acquisition was completed in October 2023. The same year, Microsoft announced an investment deal with developer OpenAI. The company explored artificial intelligence (AI) in other ways as well, including with the 2023 release of Azure Quantum Elements, which includes a language model tool based on GTP-4 called Copilot, and investments into building AI centers around the world.

In July 2024, Microsoft machines crashed after a faulty update by CloudStrike cybersecurity. Less than two weeks later, a Microsoft outage was caused by a distributed denial of service cyberattack. The outage affected Microsoft 365 products used by airlines, banks, and medical services, among others, and lasted for almost ten hours.

Impact

It is difficult to conceive of the reach of Microsoft Corporation. Bill Gates was himself worth over $100 billion as of 2020 and has become one of the most admired philanthropists in the world (named as one of Time magazine’s Persons of the Year in 2005). Hyperbole comes too easily—Microsoft basically invented the Computer Age, making accessible computer technology that was seen in the 1970s as a novelty available only to the very wealthy or to businesses. Microsoft redefined computer access and in turn created a mass market, a need, for technology that each year made obsolete the cutting-edge innovations of the year before. It is tempting to see Microsoft as one of a succession of American entrepreneurial success stories that, like the Ford Motor Company or US Steel, emerged from modest and unheralded beginnings to unprecedented, even historic success, and in turn to represent the very heart of the American Dream—how scrappy and daring entrepreneurs can become market-dominant players.

By largely maintaining its position as a cutting-edge developer of software fundamental to both business and home computer usage, Microsoft has become arguably the most successful American business enterprise of its era. Despite its challenges in the evolving world of twenty-first century computing, Microsoft remains the world's largest software maker and continues to be one of the world's top companies in terms of market capitalization.

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