Remarks by Orlando Ayala, Kevin Johnson – Microsoft Worldwide Partner Conference 2003

KEVIN JOHNSON (Group Vice President, Worldwide Sales, Marketing and Services Group): I’d like to now transition into the small and midmarket segment and on Thursday Orlando talked about forty million small and midmarket businesses out there, 39 million of them small business, and according to IDC they’re leading the economic recovery. Please join me in welcoming Orlando Ayala to talk about our small and midmarket segment. Orlando! (Applause)

ORLANDO AYALA: Thank you, Kevin.

KEVIN JOHNSON: Your not feeling well, are you?

ORLANDO AYALA: From Russia with love.

KEVIN JOHNSON: Stay away from my water.

ORLANDO AYALA: OK.

KEVIN JOHNSON: Orlando, we’re investing a significant amount of resource in the small and midmarket segment and I thought it might be helpful for you to frame once again how we see that opportunity.

ORLANDO AYALA: Well, I hope we have succeeded throughout the last three days and I want to take it where kind of Simon left it a few minutes ago. We succeeded in really conveying the fact that we struggle with customer pain in everything we do. These scenarios that we’re building, without a doubt we have to push ourselves to understand them really well, to create this level of effect, which means resolving a customer problem with great technology and ultimately provide the opportunity to the partner to realize that value. That basically is what it is all about. GTM is exactly the mechanism, because you can talk about this high level, okay, let’s be very focused on customers, but we have to land it, as you said, let’s make it very operational and GTMs are the element that will deliver that for us.

KEVIN JOHNSON: Well then clearly Simon Witts talked a little bit about the transition too from product selling to more solution selling and I think certainly in the small and midmarket segment that applies as well.

ORLANDO AYALA: Yeah, absolutely and I’m thinking in here there’s one important element. I just spoke, forty million customers that we aspire to serve makes Microsoft quite different from any other player in the marketplace. So given that, I think the challenge in this space is all about the scale. When you think about scale, it’s a scale in partners, about 800,000 of those partners, 35,000 certified, and then customers, 40 million, you’d better think of scale, you’d better think technology. So the structure is quite similar, it’s really quite similar.

Now, we really need to think through how we innovate on reaching out very broadly and effectively with predictability to both customers and partners, again in a very broad scale. So, the base is quite similar, we have the same products, although I already said I think for our marketplace the next 18 months are going to be very exciting because we are bringing to the market true products targeted to the small and medium businesses, the Small Business Server, Business Contact Manager with Office, I mean, all of this from CRM are great products.

KEVIN JOHNSON: You know it’s been fairly well received already.

ORLANDO AYALA: Very well received. I was kind of checking with the press and the reaction from the press this week and I was very excited to see the positive articles around the products really fitting the market. So that’s there.

Then when you move up on this slide here, we have decided to invest a lot of our resources around self-help for partners in two areas. One is sales and marketing and the other one is support. On the sales and marketing side I want to call these resources the Partner Campaign Center, where basically every single partner can log in and find about the details of the GTM itself: how we’re thinking of it, how do we go-to-market with that.

Then Launch Central provides our resource, again all Web based, our resource to our partners to go and learn about product launches: what are we doing, what are their elements to be able to launch that product effectively?

Then associated with that you have partner guides, which is all the benefits that our partners get out of the subscriptions that come with being basically a Microsoft member of the program.

And then you have the product project guides that really help them think through how to do the deployment of those GTMs.

Then, last but not least, I think there’s a very important investment we are making in marketing templates. So not only about us communicating to our partners what the elements are of understanding a GTM, it’s giving them a cure that can customized with their own logo so they can go-to-market basically with their own proposal without extending the money on all that marketing.

Then the other element of the scale for us that is very important is the expert assistance. It’s really providing our partners the capability to reach out to Microsoft, especially in competitive challenge situations where they may need assistance. And there we have several things, and I would say I would call out the online concierge, basically a chat-based service where our partners can call in and basically have somebody guide them through the large amount of resources that Microsoft has. We had actually feedback here and saying sometimes hard to coordinate all the resources, I don’t know where to go. Well, this is your answer. Go to the online concierge. That person has the responsibility to guide the partner to the right resource to ensure that we do effective work out there for them and for our customers.

And here we have technical service called coordination. Frankly, this is targeted just to the Gold partner, the Gold Certified partner and here we are actually coordinating situations like upgrade, support with initial deployment, support-related issues and so on. We have pre-sales support. In case you are competing with any of our competitors you should be able to reach out and basically get support from our people. And professional support: This is one that I really encourage people to take advantage. We’re investing millions of dollars providing our partner the opportunity to have actually critical server down type of situations that they can reach out for free and get support from us and then they fight back. Which I don’t know how many partners are using this, but it’s a free opportunity for them to go and track incidents, get incidents served by Microsoft, so a big investment here. It’s all about scale.

Then at the top, of course, solutions are very important, which means that probably go-to-market we heavily rely not only on our own products but really in partner solutions that can come and complement this.

So I would expect to see our own GTMs being enhanced by hundreds of additional value provided by ISVs for our partners to create even stronger go-to-markets to resolve those customer pains.

KEVIN JOHNSON: So clearly a number of things to much more tightly integrate the marketing and sales work that goes on between Microsoft and our partners and do it in a more innovative way.

ORLANDO AYALA: And enabled through technology.

KEVIN JOHNSON: And all focused on the customer.

ORLANDO AYALA: Absolutely.

KEVIN JOHNSON: Give me an example.

ORLANDO AYALA: Well, a good example of these — again, I’m not going to comment about the first three layers; we already talked about that. But one that I’m very excited about is the one that we have done with Scala in Europe in which they have taken our horizontal value of CRM and they have created their own go-to-market with enhanced value with it. This is very, very exciting I think because, again, it provides the opportunity to lever even better value to customers. It’s very exciting to see that about 100 ISVs have taken on CRM to increase the value of this product in different scenarios for customers. This is very, very powerful.

KEVIN JOHNSON: So again creating a super rich offering by extending some of the innovations we are doing with their own innovations.

ORLANDO AYALA: Absolutely. One more element on this just to close on this go-to-market that we call connected customer, which is about CRM, is the fact that we have these other opportunities for them, especially for ISVs, that we call channel-builder. This is all about helping Scala use and connect with our reseller channel, so they can use our channel to sell their solutions. In fact, we have provided actually an opportunity of incentives that if we find a good connection between an ISV and one of our services partners, we will take the investment, we do the investment to create some great reference cases and document them and use them to go actively out there, so again a good example, a practical example of how this is working out there.

KEVIN JOHNSON: That’s great. So describe for us how the go-to-market engagement happens and what partners should be taking away as a sort of call to action on how to get involved.

ORLANDO AYALA: Here’s the call to action. First of all, again, we have invested a very large amount of money already in setting up all this GTM, so familiarize with them. There is the first segment in the enterprise segment, in my segment, we have basically per go-to-market detailed initiatives that you should really familiarize yourself with.

Here is the campaign center Web site where they can go and you can learn a lot about it. Again, use the marketing templates that I described before. We have been very focused on getting velocity on how we sale. And a way to get that velocity is package as much as we can so when you go to market, so you can take advantage of that.

Sell the solutions, as I said. This Scala is a very good opportunity. Take the opportunity to just get that package and enhance that value. So again, you can differentiate yourself in the marketplace.

And again, the project guides also, use them. They are all targeted to help you in deployment of the GTM. A satisfied customer is not satisfied until they are using the knowledge to impact the business.

KEVIN JOHNSON: That’s right.

ORLANDO AYALA: Deployment, you and I and Simon and others are very, very focused on ensuring that if a customer buys a product, that product better get deployed. Right?

KEVIN JOHNSON: Absolutely. Absolutely. Now clearly all this stuff touches upon connected marketing and how it translates into lead generation in small and mid markets. Perhaps you would like to comment a little bit about how the lead generation process works in small and mid markets.

ORLANDO AYALA: Lead generation is a very important part of the strategy for us, because in many ways I think the realization of value for our partner will come with more business. This is a very, very, very, very pragmatic to say that.

We will do a lot of co-marketing, a lot of kind of activities, the ones that you see here: direct mail, the activity that our own channel partners do, e-mail, print ads, seminars. All this information comes, in many case, which is what would customers do in seminars. And it really comes to our database in which we basically work very hard to deliver especially to our certified partners, deliver very concrete ideas.

And here actually we’re using a great practice from our MBS team. They have been actually very good at this for a long time and they are doing actually 3,000 very well qualified leads. They have a very high hit rate on the quality of those leads.

Besides that, we have about 500 telemarketers, all of them they aligned by GTM, trying to find out how to create those leads. Today we are generating about 8,000 leads out of that engine and we’re bringing these engines together now.

KEVIN JOHNSON: Eight thousand per month.

ORLANDO AYALA: Per month. Yea, per month. I believe that’s a good clarification. And, we really aspire, we truly aspire to be able to be the best of this. This is not perfect science I know. We’ve got to learn about, you know, being very good at qualifying these leads. So we are very committed to ensure that as part of being a Microsoft partner we are helping we deliver more opportunity for you. That’s what the aspiration is really here.

KEVIN JOHNSON: And so part of it with connected marketing too is how partners do their marketing and generate their own leads, but part of it is how we’re working to help enhance the lead generation work that we do that then connects to partners.

ORLANDO AYALA: Absolutely. In the end, you know, one of my dreams frankly is we get this to a very strong sign that says, hey, this year we’re able to deliver per partner, of course, this many leads are actually closed and really increase business.

KEVIN JOHNSON: Now, partner satisfaction is a key objection and you and I both have compensation linked to customer and partner satisfaction. So perhaps commenting on what we are doing to really help drive partner satisfaction in a much deeper way.

ORLANDO AYALA: Yeah. There are four elements here that I think are very, very targeted to ensure that we maximize the satisfaction of our partners. And again we will not be satisfied until we see that trend really going up, up, up.

Deeper relationships: The investment we are making in account management absolutely we believe that that is translating to better satisfaction for our partners.

Allison announced on Thursday the fact that about 35,000 certified partners as a minimum tele-management will be available to them. There will be certain level partner that we’re going to have a lead PAM assigned to them, but as a minimum we’re doing tele-management of this.

So these deeper relationships are very important. We are also using tools to get this done, but again the fact that we are managing them very directly is important.

The new partner program is all about satisfaction. And I’m so excited about it because finally we have got to a point where we have these competencies clearly identified on how partners can relate to Microsoft and how on top of that they can enhance how they deliver value in the marketplace and that’s translating to some very concrete business engagement models with them.

So we do believe again the new partner program for Microsoft is not about necessarily going and just making more money, which, of course, we all want to do. It’s really all about finding a way of engagement that is very predictable in which our partners, hopefully feel about a lot more satisfied with their relationship with Microsoft.

Then targeted resources and here I know Allison is working very, very hard in ensuring that through the Web we really provide a lot of assistance to our partners. I think the next partner portal that we’re going to bring into market in the next few months is going to be a very important resource. The security stuff that Steve discussed yesterday, these are really targeted resources to help our partners do a better job in the marketplace around the core issues with customers.

So we’re investing targeted resources. The portal is a good example for partners and many other initiatives are targeted to help our partners do a better job with their customers and therefore be more satisfied.

Then last on the culture side I am so glad that it’s not only you and I that are on point to deliver on satisfaction for partners and customers. As you well know, we have been working very hard together with Simon, you and I and others in really trickling down these elements of compensation all the way down to the PAM and the people that relate every day with the partner. And rest assured, we’re going to be incredibly accountable, not only are our level, but the level of the resources that deal with you ever day to ensure that in the end that’s one of the major components of compensation. We are putting a lot of accountability in the system.

On top of that tools. Tools are also a very important element of what we’re trying to do here. We are working very hard. Allison is working very hard on the PRM system, the Partner Relationship Management system to really allow us to track the relationship just as we do with customers, so PAMs and other people can track the relationship with the partner and we can use that system to feedback to us a lot of activity on how well we are doing with partners.

Now, I know that you have been very, very involved on establishing a lot of infrastructure to satisfy customers. There are some pretty good ideas there, so now it’s time for me to ask questions. How are you doing? Are you making progress?

KEVIN JOHNSON: Let me just comment on one of the things that we launched last year. We started with a situation where people in the field may see that there’s a customer satisfaction problem but they didn’t know where to turn within the company. Perhaps they would e-mail somebody in Redmond and try and get a response and you know how challenging that was.

We launched something called our Customer Care System where we set up a central group, a customer care team, a small group that basically has links into every one of the business groups, links into every part of our company and we enabled the Microsoft Field Team if they identified a customer sat issue, instead of trying to figure out where to send it they send it straight into that customer care team, that Customer Care Team has goals and metrics and links into the Business Groups to follow up and respond to that field issue.

Now, let me give you an example. We have one customer that purchased 10,000 keyboards from us, Orlando and you know what it said. It said in order for them to retain the warranty on those keyboards they had to keep the box. (Laughter)

Now you can imagine that creates a little bit of a sat. You can either rent a warehouse to store 10,000 empty boxes or the account manager goes to the customer care team and says, “How do we deal with this?” Within 24 hours they turned around not only a response to address that one customer situation but we said, wow, that was not what we intended to do for our customers who buy lots of these. We changed the overall policy for the company, so that we fixed the problem for other customers as well.

Likewise, we’ve had many customers saying they wanted a simpler way to step up from Standard Edition Server SKUs to Enterprise Edition SKUs. That came from our field into the customer care team, into the Business Group. The Business Groups have since made a decision for Software Assurance customers to have an easy step-up to the Enterprise SKU.

So this has been in place now for the last nine months or so and we’ve been seeing more and more traction behind this of providing our field teams the ability, when they have a customer complaint or a customer issue, a single place to turn to get that result. What do you think?

ORLANDO AYALA: So this could be, like, you are in a party out there and you find a friend or somebody that is not very happy with something like such issues. That happened to me flying down. The person next to me needed some help. I said I know Kevin Johnson will give me one of those incidents and I’ll help you.

KEVIN JOHNSON: Right.

ORLANDO AYALA: That’s a good thing to do. I’m very excited about it. That sounds very exciting. I think we should open this up for partners. What do you think?

KEVIN JOHNSON: I don’t know. Partners, what do you think? Should we open up Customer Care? (Applause)

ORLANDO AYALA: So what are the plans here?

KEVIN JOHNSON: Well. Over the next 12 months we’re planning to open up the set of linkages so that you as a partner, when you’re out there in the field and your customer has a complaint or issue that you need help from Microsoft, then you have a single way to get into this Customer Care Team, just like the Microsoft Field Sales Team does to help get the response and help you solve that customer satisfaction problem.

To start off with we’re asking you to all use your Partner Account Managers today for that link and your Partner Account Manager will feed that into Customer Care and help make that connection for you. But we’re going to make it more simple using the Web, using —

ORLANDO AYALA: So eventually partners can actually log in to complain directly themselves?

KEVIN JOHNSON: That’s right, so the partners can go directly into the customer care team. We want to make it super, super easy for partners to solve customer problems that need our involvement and our help and we need the feedback and we want the feedback.

ORLANDO AYALA: Talk about satisfaction, that’s what is going to change the name of the game.

KEVIN JOHNSON: Hey, I’ve got another idea. You know, we set these sales contests for our field.

ORLANDO AYALA: I love those contests.

KEVIN JOHNSON: What do you think, we have one for the field around customer satisfaction.

ORLANDO AYALA: I think we should have one with our partners. What do you think?

KEVIN JOHNSON: I think so, too.

ORLANDO AYALA: Okay, let’s do it.

KEVIN JOHNSON: All right. Driving satisfaction: We’re going to announce the Customer Experience Award that we’re going to give to partners. This year we’re going to pick 35 of the top scenarios that show partners delivering exceptional customer service, our partners that have created processes or programs that are leading to breakthroughs in customer satisfaction. We’re going to do local PR with them, the ones that win, with our Microsoft team. We’re going to have a special awards recognition at next year’s partner conference, a plaque and we’re going to give them some additional funds as part of their partner award, some credit towards partner awards? What do you think?

ORLANDO AYALA: What do you think? (Cheers, applause.) This is great. I believe this is going to be not only great for partners but frankly it’s through partners that eventually we will change the customer satisfaction challenges that we may have today.

KEVIN JOHNSON: That’s right, and it goes back to the analogy of the crew. It’s our field sales team and our partners and our crews need the same tools and the same recognition to help us together drive value and deliver satisfied customers. Great. Any final comments then, Orlando, in terms of winning in small and midmarket?

ORLANDO AYALA: I started my presentation back on Thursday talking about it’s all about customer value. I really wanted to start with that, because in the end that’s how we’re all going to pay the bills is get that customer happy and I think bringing that just not to a few customers but to a very large group of customers, this is the company. Together we are partners that will make that happen. Correct?

KEVIN JOHNSON: Great. Thank you very much, Orlando.

ORLANDO AYALA: You bet. (Applause.)