Revealed at the company’s annual software developer conference in San Francisco, this new OS is called Windows for Internet of Things, and Microsoft will license it for free when hardware makers use the software on devices with screens smaller than nine inches. The door is still open for the company to charge Windows licensing fees for PCs, tablets, and other larger devices, but Microsoft will compete head-on with Android — Google’s free mobile operating system — on smartphones and wearables.

It’s a big, bold move, but it’s one that Microsoft needed to make. Because the code behind Android is open source, anyone can use it without paying a penny, and that has made life difficult for Microsoft in recent years, as the company continued to charge manufacturers about $10 for its Windows Phone operating system on each smartphone and tablet. In a world where Apple is also pushing operating system prices towards zero, Microsoft must forgo its licensing fees just to get Windows onto a more substantial number of devices.