On pace to earn $6.3 billion in annualized subscription revenue this year, Microsoft’s migration to cloud-based software subscriptions is proving successful, said CFO.com last week. Like other companies, this newer revenue stream is a departure from a time when users purchased one-time licenses for a particular version of software like Microsoft Office and Azure.Instead of purchasing CDs for a one-time licensing fee, users of Microsoft products download the software for a monthly subscription fee, which includes software updates and cloud storage. Using this strategy, in the last year, Microsoft has expanded its subscription base – betting on the long game – by offering free mobile versions of Office 365 and software bundles like its Work & Play Bundle which combines Office 365 Home with Skype and Xbox products for $149/year.Microsoft has also leveraged its relationships with computer manufacturers to offer Office 365 for “free” for one year with the purchase of a laptop, for example. After the free year, users have to convert to a paid subscription to retain the software as a service.For now, the Windows operating system is still sold with a one-time license, but Microsoft plans to change that soon. It will give away Windows 10 upgrades to existing individual and corporate customers. The goal with this strategy is to increase customer loyalty and retention and to get users to accept the concept of cloud-based subscriptions and products. We imagine some day soon Windows will also be available via subscription.Insider Take:From the outside, it is easy to criticize Microsoft as a software behemoth that individuals and companies are beholden to, but we can’t argue with the company’s business sense and strategies. Microsoft has cornered the market on work and productivity tools with Office 365, and they’ve made it available on every type of device, even making it free for tablets and smartphones. While the company might be losing a little money up front, Microsoft will make up that revenue exponentially with subscriptions over time.Because software updates are frequent and necessary, it makes sense to provide products that are continually updated, and it is helpful to have a consistent interface across devices. For example, Microsoft has made its 0ffice 365 subscription useful, widely available, and affordable with prices of less than $7/month (as of 5/4/15).Microsoft is also smart in making incremental changes to see what works in terms of products, services and price points. It is sensitive to its customers’ needs while preserving the company’s long-term financial future. It tries a strategy, evaluates it, and either tweaks or expands it.Last November, for example, when Microsoft decided to make Office 365 free on mobile platforms, it realized it needed to make things right for subscribers. For those who qualified, Microsoft issued subscription refunds. The key is that the company adapted quickly.Granted, Microsoft has the reputation and financial backing to support such adaptable strategies like this, but it is something we can all emulate on a scale that fits our individual businesses, providing us with consistent income and improved customer retention.