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WHAT'S BETTER THAN FREE?

Microsoft’s smart ploy to turn the next generation of startups into customers

Microsoft CEO Satya Nadella
AP Photo/Ted S. Warren
Are startups on board now?
By Alice Truong

Deputy editor

This article is more than 2 years old.

With the enterprise market getting more crowded, Microsoft is courting startups to choose its software and services from the get-go. The company said today that it will offer $500,000 in credit to its cloud storage service, Azure, as well as three years of Office 365 and direct support from Microsoft’s engineering teams, to startups in the winter 2015 class of Y Combinator, the accelerator that incubated the likes of Dropbox, Airbnb, and Twitch.

It makes sense why Microsoft is willing to give away its products for free. Though the company has a stronghold in the commercial market—commanding 75% of the market’s spending in enterprise email alone—its dominance has been mostly contained to large, established companies. In an analysis of email hosts last year, Quartz found that the overwhelming majority of Y Combinator startups host their email with Google—the trendier, feature-filled alternative to Microsoft Exchange.

What smarter way to overcome Microsoft’s reputation as a solution for stodgy companies than by powering the next generation of hip startups? By getting cash-strapped startups building on Azure’s stack—over Amazon Web Services or Google Cloud Computing—Microsoft is betting on generating plenty of value for years to come.

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