• All of the processing is done remotely, allowing the customers to store their documents and software away from their hardware, allowing for less potent hardware and access to the data everywhere;

   

• The security issues one might have by storing everything on a local computer/server are reduced as the security budgets of these big companies are way higher than those of a small company or single person;

   

• The clients don’t have to pay huge amounts of upfront cash for the software licenses, deferring these costs over time by paying a monthly fee. Although in the long term this option might be more expensive, for companies, especially for the smaller ones this is a very important progress;

   

• With this model, the software can be tweaked  and adapted to the client’s needs so the provider is seen as a collaborator rather than someone who is selling you a finished product. This tweaking and close relationship will in turn lead to higher switching costs;

• As the company solves a big problem for a client, it is able to sell additional products creating a vicious cycle on a land-and-expand model. 

All of these (and more) are fueling Microsoft’s incredible growth.