Allison Watson, Corporate Vice President, Worldwide Partners Group; Bob Muglia, President, Server and Tools Business; Steve Ballmer, CEO of Microsoft: Worldwide Partner Conference 2009

ANNOUNCER: Ladies and gentlemen, please welcome Microsoft corporate vice president, Worldwide Partner Group, Allison Watson. (Cheers, applause.)

ALLISON WATSON: We’re going to do this better. I’m going to give you a hug, and I’m giving you a hug.

All right, wow! Wow. Inspiration. How about this, inspiration. I love the word, and you guys inspired us all. You were the highlight of yesterday’s show. So, let’s one more time give it up, everyone, for Playing for Change. (Cheers, applause.)

I don’t know about you, but I was back there sort of getting teary-eyed and reflective on the concept of inspiration, what inspires us. I love their words. I love what Playing for Change is doing. And I got inspired because the power of everyone in this room and everyone around the world who are in partnership with each other and in local communities. Wow, it was just sort of an overwhelming moment.

Today is a day to take our inspiration about the innovation we launched yesterday, and take our game up to a new level. We’ve got exciting keynotes with much more information coming today.

But to reflect yesterday on the opportunity and the feedback I got from you about how Windows 7 is going to fundamentally change and create new opportunities for every business in this room, about how Office 2010 is really going to change the game to productivity and for building business applications, and, of course, the Microsoft Partner Network, designed to help you do a better job with customers and have a great opportunity for partnering with Microsoft.

So, the other thing that inspires us is the stories that you bring. And this year we had an amazing set of award nominations. We had over 2,000 of you submit nominations to be selected as our WPC award winners. These nominations were full of inspiration, hope, but most importantly they were full of saving customers money, and stories of driving great profitability.

I’m pleased today, and would like you to join me in the celebration of welcoming and thanking our WPC 2009 award winners. (Applause.)

ANNOUNCER: Accenture and Avanade, AccTech Systems, AKQA, Ascentium, CA, Catapult Systems, CDC Software, CDW, Client Profile, Client Strategy Group, ComSync, Comcast, Compugen, Content Encode , Corel, Customer Effective, DAQUAS, DataStream (sp), Datatel, Dimension Data, EMC, Enabling Technologies, Ensyst, Epicor, EPM Live, Evolve IT, FullArmor, FullScope , GESFOR OSMOS, Hitachi Consulting UK, IDE, iLink Systems, Informal Software Consulting , Intrinsic Technologie,, Kiandra System Solutions, Knoll Technologies , Knowledgelake, Kerning Solutions , L3, Lalique, MaximumASP, NetApps, Netcampus, Omada , Orion Technology, OSI Soft, Plantronics, PointBridge, Positive Technologies, ProModel, QA, Quest Software, SIS Software, Sistemas de Gestión,(Solva, Spenta Consulting, Spring Wireless, Third Wave, Workgroup, Young & Partners, Zax . (Cheers, applause.)

ALLISON WATSON: Wow. Whoo! Bring it up! (Cheers, applause.) Whoo-woo, that was fun. Congratulations to all of our award winners, and to everyone in the room who builds businesses that inspire me, inspire our customers, and make a difference in every economy around the world.

So, based on your feedback, we also did something different for the first time at WPC this year. And on Sunday we invited partners who wanted to participate with us in something called our First Day of Giving. We went around New Orleans, which is obviously a city that has been devastated by more than the economy for the last several years, and found projects we thought that Microsoft and our partners would want to give back to with their time and their efforts. And we had over 600 partners arrive in early on Sunday to participate with us in helping to rebuild a music school, in helping to open a new charter school, and helping some of our underprivileged children in the market, as well as reaching out to battered women and some of the aging population here in New Orleans.

It was an amazing inspiration, and I personally got to spend some time there. I’m ready to come back and give another 12 hours, and we’ll certainly invite you all to join us again next year.

I do want to show you the clip from that day, and thank all of you who participated with us in this really emotional thing that I think we can all relate to as our day of giving.

(Video segment.)

ANNOUNCER: Ladies and gentlemen, please welcome Microsoft president, Server & Tools Business, Bob Muglia. (Applause.)

BOB MUGLIA: Good morning! Good morning. It’s really great to be here.

I just returned from a family vacation that we did a tour in South America to Peru, and it was a tour group that we went with several other families. It turned out to be a small trip.

And as you might imagine going to Peru, the highlight of that trip is going to see Machu Picchu.

Now, when I had always thought about and heard about Machu Picchu, I always had heard that it was this city that the Incas built 500 years ago on the top of a mountain. Well, it turns out that that is not quite true. It certainly is on a mountain, and it’s quite high, it’s about 7,800 feet, but it’s not actually at the top of the mountain.

And there’s a mountain there called Machu Picchu Mountain, and this family trip I was on had a set of teenagers with it. My daughter, I have a 17-year old daughter, and there were a number of other teenagers with us and on this trip. Very energetic teenagers who, of course, wanted to climb the mountain. And I’ve done my share of Stairmasters at this gym, but this is a different kind of Stairmaster. It turns out the Incas perfected stairs 500 years ago, and there’s a lot of stairs climbing up this 1,800 foot mountain, and I sort of struggled to the top with the rest of the adults well behind the kids that got there first.

But what I found when I reached the top of the mountain is it was an amazing view. It’s an amazing accomplishment to look down on Machu Picchu.

And I thought about this talk and I thought about the times that we’re in, and all of the things that we’re in together as partners, working for our collective customers, and it’s tough times. In so many ways there are big mountains for us all to climb and for our customers and what they face, and yet I recognized that if we work together as partners, the potential for our collective customers is incredible.

Carpe diem, seize the day. It’s a great thought, seize the day. Times are tough. There’s big mountains out there. Seize the day. Because although it’s a difficult time, the opportunities have never been bigger, and the challenges that our collective customers face have never been higher. And collectively there’s so much we can do.

Now, in this particular case, this turned out to be one of the great family experiences we’ll always remember, looking down on Machu Picchu from the top of that mountain. And by the way, both of these pictures were taken by my 17-year old daughter.

And, you know, like many great stories that come out when you do something, when you seize the day, one of the pieces of this is that when I got to the top, I discovered that cell phone coverage, which had been very nonexistent down in the valleys, was actually quite good at the top of the mountain. So, I proceeded to make a business phone call, which my daughter will never let me forget, at the top of the mountain, but that’s part of the story, that’s part of seizing the day. There are many nuances and parts to those stories.

And so times are tough, opportunities are vast, collectively let’s work to seize the day.

And I’m very excited about what we can do for our customers together, because there’s never been a time when there’s been such an amazing wave of innovation coming that will transform the way customers can work with and drive their business. Whether they’re a small business, a medium business or the largest enterprise, the opportunities are vast.

You heard yesterday with Windows 7, Office 2010, all the great innovations. There’s so many great things coming on the enterprise side out of Server & Tools: Windows Server 2008 R2, an amazing product, System Center – I’ll talk a lot about that – a whole new wave of developer tools to make it very easy for people to build applications targeting a wide variety of core business platforms: SharePoint, the Web, building new sets of Web applications with things like Expression and Silverlight. A whole new wave of things which we’ll spend time today on Windows Azure and things that can be done in the cloud, both in terms of innovation coming from Microsoft with Windows Azure but being built and enabling our partners, our hosting partners to also create their own cloud. And, of course, the entire Office wave, the SQL Server that I’ll talk about, and how business intelligence can be transformed.

It’s a great time to help our customers, and, of course, we will do this together as partners.

Now, I want to start today by talking about the cloud and extending into the cloud and the steps to get there, because when people talk about the cloud and what it means, there’s a bit of confusion, and certainly the path to the cloud is not that clear.

You know, it certainly starts with the datacenters and the deployments that people have within the back-end within businesses today. And these are well-known systems, they’re very secure, they’ve reached a point of reliability, of high reliability. They run on industry standard hardware, they’re reasonably cost affordable to run. So, there’s a lot of strong reasons why people have deployed things the way they have for many years.

Now, there are some challenges with the way back-end datacenters are built traditionally. One of the main ones is that they’re not as well utilized as they could be.

We know from surveys that have been done that on average servers run at under 15 percent capacity utilization, which means there’s a lot of capital sitting there, a lot of energy being wasted that’s not as well utilized as it could be.

And one of the reasons why virtualization has been such a phenomenon over the past few years is because it has the ability to drive down costs significantly in the datacenter, raising up the utilization typically to greater than 50 percent, so getting a lot more usage out of the servers, delivering a very fast return on investment, and at the same time doing a set of things that provide a level of flexibility to simplify management.

And we’ve certainly invested very heavily in building solutions to enable companies of all sizes to virtualize their datacenter environment, and we’re really seeing that pay off. We are seeing companies adopt Hyper-V and System Center to virtualize.

And what I wanted to do was start and show you what one of our hosting customers has done to help them in their business. Let’s run the Poundhost video.

(Video segment.)

BOB MUGLIA: Poundhost is seeing some tremendous benefits by moving to the Windows platform, adopting Hyper-V and System Center, and System Center Virtual Machine Manager, and of course working together as partners is really key to that.

What I thought I’d like to do now is show you a little bit about System Center, and give you a preview of some of the things that are literally coming in a matter of days here as we get ready to ship Windows Server 2008 R2.

What you see on the screen is the new release of System Center Virtual Machine Manager. Virtual Machine Manager has been out now for about a year. It’s been an incredibly productive tool for IT managers to use to deploy virtualized systems.

And what’s important is it fits as a part of the overall System Center family, and so it’s a complete management solution.

So, focusing on the Virtual Machine Manager and Hyper-V environment, we have a lot, you can create a library of different virtual machines, of all sizes and types for companies. I’ll just go ahead and quickly show you some of the features of creating a new virtual machine. Give this one a name, and there’s a whole set of options that can be used here: amount of memory, the amount of processors. You can see in memory that we have the ability to support up to 64 gigabyte virtual machines with Hyper-V, as well as multiprocessor systems, multiple network adapters, et cetera, so quite a bit of flexibility in terms of what can be created.

In terms of how this fits in to the overall System Center environment, one of the differentiators that System Center has relative to VMware is that it’s a complete management environment. And while VMware requires a separate environment to manage virtual instances, System Center is a complete suite that lets you manage the physical hardware, the virtual environment, as well as the applications, and doing things like configuration deployment as well as operational monitoring.

And so we have built in to System Center as a part of our suite offering Operations Manager that lets you lay out an application and talk about the components and talk about the deployment within the datacenter, providing a whole set of views, as well as providing alerts associated with it. This is the complete solution that System Center provides.

Now, when people have talked about what Microsoft is offering, what they’ve looked at when they saw Hyper-V is they saw an incredibly robust, rock solid implementation that from day one just worked for customers. Easy to deploy, very effective, very, very reliable and stable.

But one of the things everybody says is, geez, there’s this feature that VMware has called VMotion, which allows you to move a virtual machine from one physical machine to another. So, one of the features that we’ve added in Windows Server 2008 R2, which by the way we’ll be releasing to manufacturing at the same time as Windows 7 later this month, available to our partners in the weeks following that, and then generally available for our customers through VL licensing in September, we’ve added what we call Live Migration, which is the same essential feature that VMware has for VMotion.

So, let me go ahead and show you this. And, of course, the way to do this is to take a virtual machine that is running a streaming video, and in this case I’ve got a video up here in one window and then I’ve got it’s running off this streamed server, and what I’m going to do now is migrate that virtual machine from one physical machine to another.

System Center provides me a set of best choices of machines to migrate it to. I just choose next and move. And you can see that as it’s moving along here, it is going ahead and migrating the virtual machine. It’s still running on the one machine. And then as the migration continues, no time is lost here. Yep, there we are, we’re done, and you see the video kept streaming. So, there’s no effective down time through that.

And the important thing that System Center is doing is it’s providing the features, the key features that the vast majority of customers need in a much more complete and holistic way, in a way that is easy to understand because it’s part of Windows and it’s a common management product, and it’s doing that for a fraction of the cost of what VMware is charging. So, for literally something like 3, 4, 5x is what VMware charges relative to what System Center and Windows provides, and so it’s an incredible value that we expect to grow tremendously.

We’ve seen phenomenal growth. This has been a year, this last fiscal year has been an amazing year of growth for System Center, and we expect in the next fiscal year that growth to just accelerate, and we also expect commensurate with that tremendous opportunities for our partners to participate, because every customer is interested in virtualization, and System Center and Hyper-V are the way to do it, the most cost-effective, easiest way to do it, and it’s great for our Microsoft partners to be able to engage in that. So, it’s a huge opportunity that we’re looking forward to. (Applause.)

So, as we think about the evolution towards the cloud, I said that virtualization is really the first step in that evolution. It’s step one. And it’s an important step because it’s really a required part about what you need to cloud computing.

But as we move forward into what I might think of as the true cloud, we move to a world where we have a pool of computers that are working together with the system actively managing it.

You notice that in the previous demo I migrated the virtual machines myself as an administrator. Well, in the cloud world the system would take care of those sorts of administrative tasks itself based on the needs of the application. So, you’ll have a pool of resources. Applications can, based on their capability, move from machine to machine automatically based on resource requirements, and then also if they’re designed to do so scale out to take advantage of a broader set of resources provided by the cloud.

Now, what this means is that much of the work involved in system administration can be handled automatically, and the overall cost of system administration can go down fairly considerably in a cloud environment.

But to fully take advantage of that, applications will need to be built in a way so they can scale out as a part of the cloud. And most apps today are not built that way. So, there’s a great opportunity as we move to the cloud to build applications that take advantage of the scale-out, and it’s a large part of what Microsoft does.

One of the key differentiators for Microsoft in the cloud world is that we will work to help developers and help our partners build these next generation scale-out applications. It’s one of the things we do.

It used to be hard to write graphical apps. We created Visual Basic and made it easy. As we move to the cloud and the cloud environment, its hard today to build these scale-out applications. We’re building the capabilities into the Windows System Center and Azure platform to enable people to build scale-out apps, and also of course into the tools in Visual Studio to make it possible.

So, the cloud is not just an infrastructure play, it’s the combination of the infrastructure plus the applications, and Microsoft brings those things together.

Now, we see a tremendous opportunity for people to build clouds inside their own datacenters, and many customers will choose to focus on this. This is an important deployment characteristic of building what we talk about frequently as private cloud, which is a set of machines running within a customer’s on-premises datacenter.

And Microsoft is committed to providing our customers, and of course through our partners the tools to do that. Windows Server, System Center, Visual Studio, as well as servers like SQL Server and SharePoint, all of those things will participate in private clouds.

And one of the key differentiators of Microsoft is this continuum starting with the existing datacenter, virtualization, the enablement of the private cloud environment, as well as the enablement of public cloud environments.

Now, the distinction between a private cloud and a public cloud is, is the cloud running on-premises on the customer or is it running someplace out in a hosted datacenter. And that hosted datacenter could be run by one of our many thousands of hosting partners or perhaps it could be run by Microsoft.

Now, there are advantages to the hosting environment. There’s a whole set of things that customers get. They get the ability to have somebody else manage many parts of that infrastructure. They get the ability to request capacity on-demand, and depending on the hoster potentially to get global reach, so there’s no need to build datacenters in far-reaching parts of the world, because they can rely on a partner to help enable those sorts of things.

One of the key attributes our customers look to today is how can they change their cost basis. Instead of having to outlay lots of money upfront for capital expense to build datacenters, build datacenter environments within their existing buildings or add servers, they can just expense these things as operation expenses as their needs extend.

So, there’s a lot of advantage to the hosted public cloud environment, and much of the same capabilities that customers will want internally they want in a public cloud.

Microsoft is completely committed to taking the technology that we’re delivering to enable cloud development and providing that to our hosting partners. So, that’s a key part of what we’re about, and we’re working hard to take all of the innovation, everything we’re learning about building clouds, and bringing them into Windows Server, System Center, Visual Studio, to enable our partners to build these public clouds.

And one of the things we’re announcing today is an alliance associated with the cloud, the Dynamic Datacenter Alliance, which is enabling a wide set of partners, hosters, system integrators, OEMs, IHVs, et cetera, to go ahead and build these cloud-based systems.

And one of the things we’ve done is we’ve built some technology that sits on top of System Center and Windows Server and Hyper-V to make it easy for our partners to build these public cloud environments, and we call that the Dynamic Datacenter Toolkit.

So, if you could bring up the demo here, the DDC, could you bring up the DDC, please?

So, what we have, this is a toolkit that we’ve put together. It’s just a sample application. One of the attributes about System Center is that System Center is built through extensions to PowerShell, which makes it very easy for people to write scripts to drive the specifics of their environment.

Everything I showed in Virtual Machine Manager is all done through Hyper-V scripts. Literally the UI calls Hyper-V scripts, calls PowerShell scripts.

So, those PowerShell scripts can be modified by our partners, and we built a little UI to help our partners take a look at this, and set up their own cloud-based environments. And this is really just a sample that drives Hyper-V and Virtual Machine Manager.

Well, rather than show you this sample, I think it might be better to invite one of our partners up whose done this work, partner of the year, MaximumASP. I’d like to invite Dominic Foster up to come join me and show you what they’ve done with the Dynamic Datacenter toolkit and Hyper-V and System Center. (Applause.)

Dominic, good morning!

DOMINIC FOSTER: Good morning, Bob.

BOB MUGLIA: Great to have you here.

DOMINIC FOSTER: Hey, purple looks great on you, by the way.

BOB MUGLIA: Oh yeah, thanks. It looks great on you, too.

DOMINIC FOSTER: So, what I’d like to show you today, everyone in here, what we’ve developed with Hyper-V and System Center, we’ve built a truly dynamic datacenter with this product. It enables us to provide low-cost, virtual dedicated servers that we can quickly provision that are out of the gate highly available, instantly scalable, and they’re managed by our customers. We can take a look at that in a second, if you’d like.

BOB MUGLIA: That’s great. I know you guys have done some great work, partner of the year and everything.

DOMINIC FOSTER: Absolutely, absolutely. We’re really proud of that.

So, let me give you a little bit of background about this product we have here. Most of our customers need high availability in the Web sphere, but they can’t really pay for it. It’s out of their budget or it’s too complex to set up. They don’t want to mess with clustering. So, just out of the gate we make sure it’s taken care of for them, without putting in that high cost.

Also our customers, about 20 percent are systems administrator. Everybody else is not real technical. So, on this page right here you can see at a quick glance all this data that we’re giving them but we’re distilling it down. At first you’ve got things from Virtual Machine Manager, we’ve got Operations Manager, and at the bottom you can see information from Configuration Manager. So, they get a single pane of glass that they can see an overview of their server.

Now, if you did have someone that was a little bit more technical, you could dig into that great performance data that we’re pulling back from Operations Manager. It’s going to pull performance data so that you can get historical trends. It’s great for troubleshooting. Also what it’s really good for is capacity planning. A lot of people don’t know how much their servers are actually using, so they don’t know if they need to buy more. So, that’s perfect for this.

Likewise, we’re also pulling in information from the event viewer, and also Windows Update.

Since we’re a Web hosting provider, we’re really concerned about security and patching. So, let’s take a look at Windows Update. So, on here at a quick glance we can see a few things. Our headquarters is in the U.S., but 30 percent of our customers are outside of it. So, we needed to set a maintenance window that was customizable to our overseas partners.

BOB MUGLIA: So, this is an example of how your company has some specific needs for their customers, you’ve built this UI, customized to meet your specific customer needs, and it’s all behind it is driving PowerShell and it talks to things like Virtual Machine Manager underneath to actually provision and do things.

DOMINIC FOSTER: Absolutely. On this particular page right here all the information you see and all the settings we’re making is done through Configuration Manager. So, when I go in and I change the maintenance window to reboot and patch a server when the system wouldn’t disrupt a session that a customer might have, that’s done through Configuration Manager. I can go in here and audit and see when patches were installed and what patches through Configuration Manager.

The last piece of the System Center suite we used is Data Protection Manager. It really fills a need that our customers have. Backups are extremely complicated for most people. They don’t understand what it takes to back up a server. All they want is a quick and easy way to restore their files from multiple points in time over multiple days.

BOB MUGLIA: So, what are your customers telling you?

DOMINIC FOSTER: Well, our customers run the gamut. We’ve got customers that are huge Fortune 500 companies, and we also have small mom and pop shops. But the majority of them are independent developers, marketing agencies, and also ISVs. They’re not real technical. They want to make sure that it’s always up and running, and not worry about what technology is running behind the scenes.

One of the features I’d love to call out that our customers rave about is rapid server provisioning. With this they can get a server and have it instantly in their hands. I’ve got one particular ISV that would offer services. Before on physical hardware it would take him three days to set something up and give it to the customer. Now it takes him 30 minutes.

BOB MUGLIA: So, this idea of having customers be able to provision their own servers and potentially having that happen automatically, that’s really a step towards building a public cloud, right? You guys have done that.

DOMINIC FOSTER: A perfect example of the public cloud. So, in this particular instance let’s say I’m that ISV. All I have to do is go to devices, I can see a list of all my devices that are virtual currently running. I go in and request a new image, and from here I can pick the particular plans that would suit my needs. I hit go, and it sends a PowerShell script to talk to VMM, and I start provisioning that server immediately.

BOB MUGLIA: So, is this the specific offering that you have, and customers can choose this and get that server up and running almost instantly.

DOMINIC FOSTER: Absolutely.

BOB MUGLIA: That’s great.

So, we appreciate you, you’re a great partner, we appreciate your business together. What are the advantages you’ve seen in working with Microsoft?

DOMINIC FOSTER: Well, we’re a long time partner of Microsoft. We’ve been with the company nearly 10 years now. With virtualization we wanted to evaluate all the vendors out there. We didn’t want to just pick Microsoft because we always have been with them. We found that the total cost of ownership for Hyper-V and the full System Center suite just made sense to us. We had the small jump in costs of Hyper-V – it’s free – and then we had…

BOB MUGLIA: Very small.

DOMINIC FOSTER: Very small. And we have System Center, which is a common set of tools that we can use for both physical servers and also virtual. So, we’ve got that familiar interface for our engineers, and they absolutely love it.

BOB MUGLIA: Great. Well, I thank you very much. I can see why you’re partner of the year. I appreciate that. Thanks!

DOMINIC FOSTER: Thanks a lot, Bob. (Applause.)

BOB MUGLIA: So, the great work that our partners do, again it all comes down to what our partners do to enable these solutions for customers, and it’s a great example. We saw all the great partners of the year earlier with Allison today, and it’s just great to see the sort of work.

And it’s also great to see these leaps forward of our hosting partners taking and building on Microsoft technology to build their own public cloud environments. It’s something we’re very committed to supporting in the months and years ahead.

And we’re doing a whole set of things to help our hosting partners to drive that forward. One of the things we’re doing is we’re making it simpler to do licensing around hosting. Our SPLA licensing is a bit complex right now, and it’s beyond the reach of some smaller hosters. So, later this month, we’ll be rolling out a new licensing program called SPLA Essentials that’s essentially a click-to-download Web site to get a license for SPLA, and this will sit next to our existing SPLA licensing that so many partners work on very successfully, but is meant to reach a broader, smaller set of partners, and again to simplify the process of licensing.

So, I talked about this virtualization and the steps starting from a traditional datacenter to a virtualized datacenter, enabling our customers to build with on-premises their own private cloud, and then enabling hosters to build public clouds, and we saw an example of what MaximumASP and many, many other hosting partners are doing to build their own public cloud environment using Windows Server, Hyper-V, and System Center as core technologies as the basis of that.

But we’re also working to build our own public cloud environment that we call Windows Azure, and it’s an important step for us to take because by doing things ourselves we can learn a lot. We’ve learned a whole set of things running Bing and running our MSN properties, and running our online properties. We’ve learned a whole set of those things, and we’re building that learning into what we’re going to be delivering in our own public cloud environment called Windows Azure. But we’re also bringing that back, that technology and those ideas back into Windows Server and System Center to enable our partners.

So, to show you and to talk a little bit about some of the announcements associated with the Microsoft public cloud environment, the Windows Azure platform, I’d like to invite Doug Hauger on to talk about that. Doug? (Applause.)

DOUG HAUGER: Good morning, Bob!

BOB MUGLIA: Good morning. Welcome.

DOUG HAUGER: Thank you. Thanks very much.

So, as we roll out the Windows Azure platform, what I wanted to do was to first start with really talking about the opportunity. So, Gartner has come out with a study recently that shows that the cloud services business today is about a $46 billion business opportunity. This is all up. So, this is the hardware, the systems integration, the services.

BOB MUGLIA: Includes the hosters today, right?

DOUG HAUGER: Includes the hosters today, includes all that business running today.

And what they’ve found in this study is that looking out three years, so to 2013, this is potentially $150 billion opportunity for the marketplace.

Now, as you know, most of our revenue from Microsoft comes through you, our partners. Ninety-five percent of our revenue comes directly through you. And so we really see this as a significant opportunity for you to reach out and to drive moving forward in the years ahead.

BOB MUGLIA: So, almost all that revenue, that $150 billion will be made by our partners.

DOUG HAUGER: Absolutely, absolutely, 95 percent of that will be coming through you.

So, when we look at that, it’s just an absolutely massive opportunity, and we want to make sure we’re enabling it for you with really four key pillars as we roll out with the Windows Azure platform: Simplicity, efficiency, focus, and agility.

On the simplicity side we have a lot of partners who are already working on the Windows Azure platform, and we have a key partner, OpenText, who’s one of the leaders in document management around the world with their solutions that they’re rolling out. They’re building on the platform today, and they’ve said, hey, our developers were positively surprised by how easy it is to put solutions onto the Windows Azure platform. You know, it’s good, you get a little surprised with simplicity from Microsoft bringing things onto the platform.

BOB MUGLIA: Well, and it comes back to what I said earlier about one of our focuses is to enable people to develop these new scale-out cloud applications, and making it easy to move from on-premises onto the cloud, as well as to build these new apps.

DOUG HAUGER: The second pillar is efficiency, and you’ve been very clear with us in saying as we roll out this solution, we need to make sure that it really saves people money.

We’ve done a study on a set of applications running on a traditional datacenter, non-virtualized and then virtualized, and then moving over onto the Windows Azure platform, and we found that you can save as much as 65 percent in the total cost of ownership over a three-year period by moving applications onto the platform.

The next one is focus. You have been very, very clear and said, look, you have to get us focused and help us enable us to focus on our core competence, our core business, so we can drive revenue. Don’t bother us with having to build datacenters and build this infrastructure. And you saw with Dominic talking about how our hoster partners are providing huge value in that space, in addition from a Windows Azure perspective, being able to move things onto the platform.

EMC Consulting has come out and said, look, we can get our solutions onto the platform quickly out into the marketplace and it’s all about the interoperability and the ease of focus on what we do. And then the fourth aspect is agility, really focusing on quick time to market, making sure you deliver solutions very, very quickly.

We’re going to talk later in the value keynote that I have upstairs about West Monroe Partners. So they developed a solution for Taste of Chicago, got it onto the platform, and they did it in less than two weeks. And they had over 3 million unique users that went out and used that application.

BOB MUGLIA: And, again, this is the learning that we’ve had about how to build these large datacenters at large scale. How can we incorporate that and make that available to a wide variety of our partners and then ultimately to our end customers.

DOUG HAUGER: Absolutely. So what we’re announcing today is the availability of the Windows Azure platform. It will be available at our Professional Developers Conference in November for pay and as of today, it’s free, open, available to everyone out there.

BOB MUGLIA: So it’s available now essentially for people to use.

DOUG HAUGER: Absolutely.

BOB MUGLIA: It’ll go commercial in November.

DOUG HAUGER: Absolutely. (Applause.)

BOB MUGLIA: So what this says is now is the time to build Windows Azure applications.

DOUG HAUGER: Yeah, and that’s one of the questions people say, OK, so you’re announcing now and then you’ll start charging people after the Professional Developers Conference in November. And the reason is really to build the market momentum for all of you as partners to start learning the skills, building the applications, getting on top of the platform, building your services practices and really understanding how it integrates with your business.

So there are really three ways that you can consume the platform. And we’ll be going into a lot of detail on this in the value keynote afterwards. The first one is consumption. This is pay as you go. So it’s really going out, paying for the resources as you use them and growing your business along with that.

The second one is subscriptions. So we’ve had very clear feedback, people saying, hey, look, we want pay as you go. But we actually want predictability and we want low cost. So we’ll come out with a set of fixed-price offerings that are available for you to be able to predict how you’re paying for the platform over time.

And then finally, we will be integrating this into our volume licensing. The clear feedback from customers in particular was they said, look, we have enterprise agreements with you, Microsoft, we want to make sure that we can integrate our access to your cloud platform into those agreements. So we’ll make sure that we have it integrated there as well.

BOB MUGLIA: So we’re really trying to do a simple licensing approach that provides the flexibility that customers need. Everything from pay as you go to ultimately working with the volume licensing agreement. And we have some very special programs we’ll be talking about for partners.

DOUG HAUGER: Absolutely. And as members of the Microsoft Partner Network as well, all partners will receive a discount in the way that they pay for it. So you get a discount. We will bill you, and then you’re free to build solutions and charge your customers whatever you want on top of the platform. So really enabling you to drive your business model the way that you want to drive it.

BOB MUGLIA: Great.

DOUG HAUGER: So with that, I just wanted to close here with a video from your colleagues in the partner community about momentum that we already have on the Windows Azure platform.

(Azure Partner Video.)

DOUG HAUGER: So in closing, I just wanted to encourage you to come to the keynote afterwards upstairs. We’ll go through all the details on SLA, on the packaging, on the pricing, and what we think your opportunity is as partners.

BOB MUGLIA: We’ll have a long keynote where he’ll give you all the details that you want to know.

DOUG HAUGER: Absolutely.

BOB MUGLIA: That’s great. Thanks so much.

DOUG HAUGER: Thanks, Bob.

BOB MUGLIA: Thanks. (Applause.)

So please join Doug and his team at 11:30, I think it’s a great opportunity to learn about this important new platform.

And in that context, the important thing to realize is Microsoft is your partner in moving to the cloud. And one of the distinguishing characteristics that Microsoft brings to this picture is the power of choice, enabling you and our collective customers to choose the deployment environment that they want. Whether they want to run on their own datacenter and take advantage of virtualization in that, whether they want to build an on-premises cloud environment for their own environment, a private cloud, and take that as a part of their datacenter, ultimately a very large part of their datacenter to run their business applications on premises.

Whether it’s to enable hosters to take technologies such as Windows Server and System Center or Visual Studio to build their own public cloud environment, and of course Microsoft Windows Azure environment that we’ll be providing to build public clouds.

Our goal is to take the learning that we have in enabling these cloud-based deployments and to bring them back and forth. So everything from on premises through to Windows Azure takes a learning from Windows Azure and bring it back into Windows Server and System Center, take the learning from Windows Server and System Center and put it in Windows Azure and then enable our partners to help drive forward and deploy these environments for our customers. So again, the power of choice.

It’s a great example of a changing time, a time where there are some challenges, but a time where there’s some great opportunity. It’s a great opportunity to seize today.

Moving forward, one of the key attributes about this is the developer platform and the components associated with it. And as we look today in terms of what can be enabled for our business customers, there’s never been such a rich portfolio or suite of technologies that can transform the way they operate their business. Whether it’s SharePoint and deploying collaborative and portal solutions and building business applications against that, SQL Server and BI and all of the things that are associated with bringing data to end customers, Web applications, changing and building great new client applications that work with the cloud and with the Web, all of these are components that are knitted together in an important way. And one of the characteristics that Microsoft is committed to is providing a consistent multi-layered platform that enables developers to build incredible solutions for their end customers and to really differentiate themselves in the marketplace. So a very complete platform that is cohesive and consistent from the client all the way to the server and the cloud, from on-premises into the cloud environment, all of these dimensions focusing on a great deal of consistency and simplicity of development.

And with that, what I’d like to do is invite Jason Zander to come out. Jason is going to spend a few minutes talking to you about our developer platform and some of the great innovations that are coming there. Jason, welcome.

JASON ZANDER: Hi, Bob. (Applause.) Thanks a lot, I appreciate it. Hi, everybody. Great to be at WPC here. I’ve had a blast talking with a number of software developers and looking at some of the solutions that you’ve built.

What I want to do is talk about how we’re enabling partners to build and realize the vision that Bob was just talking about.

In particular, we’ve put together a very powerful combination starting with the breadth of the platform. You heard Bob go through what that looks like. Anytime new platforms are added or created, new form factors, we’re going to make it easy for you to target those.

In addition to that, we want to help your engineering staff be able to get those things to market quicker, or that involve a consistent programming framework and tools, things that allow you to target the new platform, write those applications, get them tested, and out there. And that leads to monetization opportunities and we have several.

For example, if you happen to be one of our partners working in the developer ecosystem, adding COBOL onto the Microsoft platform, or you could be targeting some of the new waves that are coming out, Windows 7, awesome release, getting your software ready for that. All these things together create a unique opportunity on the Microsoft platform that will help you grow your business.

Now, as Bob mentioned, software has changed a lot over the last 10 to 15 years. We have new things on here like phones are ubiquitous and data, the Web as well, and then the cloud, which we just spent a bunch of time talking about.

Now, we want to make it easy for your engineering staff to be able to target that. So we created the .NET framework at the bottom. We created a set of APIs so that you can get through each one of these. In particular, if your development staff is able to learning a programming like C# or Visual BASIC, or they’re able to target the .NET framework, they’re able to use Visual Studio tools, then those skill sets will apply to new areas.

So if you have developers that know how to write ASP.NET applications, they can write SharePoint Applications. They can also take those same skills and they can apply those into the cloud all using .NET framework and Visual Studio. And we also recognize that you’re going to be working in heterogeneous environments as well. So from that perspective, we invested heavily in interoperability with things like SOA protocols. Once again, built into the framework, easy to go write, easy to be able to target.

Now, this translates into a number of opportunities for you across client, enterprise and the Web. As an example, I can write business logic and put that on the back end of the enterprise and I can take that same code and I can move it over to the client running in Silverlight to take advantage of Windows 7, touch, sensors, new support with many-core, things like that. You can also build differentiated Web experiences.

Now, that’s a framing piece of this. What I’d really like to do is invite Danny Kim, the CTO of Full Armor, one of our partner of the year awards for technology innovations, and let’s show how we can actually go use this. Danny.

DANNY KIM: How are you doing, Jason? (Applause.)

JASON ZANDER: Hi, Danny, thanks a lot.

DANNY KIM: Thank you.

JASON ZANDER: What have you got here for us?

DANNY KIM: I wanted to show you one of our products and kind of the journey we took developing on top of the .NET platform. What you see here is the picture of the children’s hospital. We developed this four and a half years ago in partnership with Microsoft. We created a technology room where sick children can actually go in and stay in touch with their parents and friends. And there was actually research done that said that children actually healed faster.

The big problem here was, how do you manage these machines remotely? And so at the time, there wasn’t the cloud concept. And so it was the Internet. So we actually created this product called Policy Portal that allowed us to manage it across the Internet. This was actually the product that we developed on the .NET platform four and a half years ago using ASP.NET.

This was great. We signed up a ton of customers and we were really getting going here. And we kind of hit a road block because we couldn’t scale this application without having to scale our own datacenter. And we’re not a datacenter provider, and so we were really looking for a platform that would allow us to expand our services to the cloud.

And so we actually looked at multiple cloud scenarios at the time. We even looked at SalesForce.com, even Amazon, but we wanted to use a platform that leveraged our .NET knowledge and .NET experience. And so we really were jazzed when about a year and a half ago we were one of the early adopters in the Windows Azure platform. And as luck would have it, as soon as we did these first quarter or the first development experience, actually one of the things that we did was we just brought up Visual Studio, took our code from four and a half years ago, and we just hit F5, compile, to see what happened. And 80 percent of the code compiled.

JASON ZANDER: Wow.

DANNY KIM: And so we were really excited. And within a couple months, we had a migrator product and the service running.

JASON ZANDER: That’s a heck of a lot better than having to go back and rewrite it all.

DANNY KIM: Oh, definitely. Now, as luck would have it, and there’s a saying that luck favors the prepared. And obviously we were prepared and had the right timing. One of our first customers was actually in Africa, and specifically in Ethiopia. We had a partner that we worked with that was doing the training and systems integration on the project. And what they were doing is going to each region in Ethiopia and connecting the teachers together.

And one of the value points here is when you connect the teachers together, you can actually upgrade the education quality of the country. And so one of the big problems that they had was how do we scale this application? How do we scale management of hundreds of thousands of teachers, potentially? And the picture that you see here is actually the datacenter in the government offices in Ethiopia.

And, you know, I have to say, without being cheeky here, but I think I have a more powerful set of servers in my home than they do over there. And with rolling blackouts and bad Internet connectivity, a cloud-based solution was an ideal thing for them.

JASON ZANDER: Yeah. It’s definitely not going to support 100,000 teachers across the entire country.

DANNY KIM: Barely 100. And when I was there, there were rolling blackouts constantly. Now, this is the application that we ported onto Windows Azure using .NET, ASP.NET, and now Silverlight to really start to visualize the environment.

What you see here is a Virtual Earth environment that actually I’m drilling down live into the machines in Ethiopia.

JASON ZANDER: And so this front end you have right here is a combination of both Silverlight and HTML running in one case?

DANNY KIM: Exactly.

JASON ZANDER: Posed together.

DANNY KIM: Exactly. And it’s allowed us to really start integrating some of these latest technologies in together. One of the value points here as well is that we’ve integrated in with the latest features in Windows 7 that allows us to get using the sensor platform, get GPS information. And for the machines that don’t have GPS chips, we actually use what we call IP Resolver technology from Windows 7 allows us to get the actual relative location of these machines and look at the devices.

JASON ZANDER: Kind of like cell phone triangulation, only it’s your IPs?

DANNY KIM: Exactly.

JASON ZANDER: So that’s the new sensor API in Windows 7, then, so just kind of like I have to go write printer drivers that would need to go figure out each and every device, now you have the opportunity to let Windows do that for you. And with the device here, you can actually see, well, where’s my inventory, where are these teacher machines?

DANNY KIM: Exactly. And the other value point is we can actually start focusing on the feature, not the API levels of programming. So one of the things that we added was this concept of a geo fence that allows us to create a virtual fence around a country or a certain area. So I’m actually going to put a geo fence around this area of Ethiopia.

One of the problems in the African countries, Ethiopia, I’ve actually spoken to a lot of delegates from Nigeria and other countries is it’s a high theft area. So a lot of the countries in Africa, people make less than $1 a day, and so when teachers are carrying these laptops around, it’s like them carrying Lexuses around, and it’s a high theft target.

So one of the things that they’ve asked us to do is, hey, can you track these machines and then put a fence around it so that if a machine comes up in actually country somewhere, I want the data wiped. The government wanted the ability to have their data secure, their sensitive data. And so that’s one of the things that we provide, actually. You can see once the fence is here, I didn’t ask the Ethiopian teachers to start running across the country, so you can’t see it move. But that’s one of the features that we were able to put in.

JASON ZANDER: Yeah. And I get the sensor support, and it’s updating your service in the cloud as well and you can track it. That’s cool.

DANNY KIM: So we can also deploy documents. We virtualized group policy so we can deploy security policies, powershell script. And then when we start getting into software installation, really we started looking at how do we virtualize support. How do we reduce the support for the teachers? And one of the things that we do is we actually then created another series of services on top of Windows Azure that allows us to virtualize the application using App-V technology and deploy it out to the teachers.

So I’m actually going to sign in here. And what you see is this is a Silverlight application again. I want maximize this. And what you see is now an app store, app portal, allowing the teachers to be able to select an application that they want and say, hey, you know what? I want that calculus app, and they can actually press “download” and actually stream the virtual applications to their desktop and auto install it.

JASON ZANDER: That’s great. So with App-V support, then you’re able to help with a whole bunch of the software administration support. That’s awesome. (Applause.)

DANNY KIM: Yeah. Now this is actually is the admin UI, so what I’m going to do is this is the experience the administrator would have. So instead of going to some console-based tool, I can actually as an administrator upload a new app.

And so I’m going to select an App-V application that we’ve already prepackaged. This is Microsoft Math, which is highly relevant in the education market. I’ll select some of the default options here. And I’ll just say we’re doing a demo so that the teachers don’t start downloading this.

Now, the other thing we can do is I can actually put box art in here so that the teacher can kind of see, hey, what does this app look like. And then one of the features we’ve added that I specifically requested is, hey, why don’t we put some screen shots in here so that they will know what the application will look like before they actually download it. And so I’m going to resize this, and you can kind of see what the application will do and the teachers will say, oh, you know what? That’s exactly what I want and be able to download it.

JASON ZANDER: That is a cool view you added. You know, that’s definitely a different user experience there. How long did it take you to put that preview in there?

DANNY KIM: So that’s a good question. It’s a Silverlight feature. And one of the things I did, I asked the developer, hey, I need a preview environment. I was expecting a day or two for them. Developers never do it on time or early. The guy actually called me in a couple hours and said, “OK, it’s done.”

JASON ZANDER: Wow, a couple of hours?

DANNY KIM: Yeah. It was completely shocking because then we can focus more on the feature set of the product.

JASON ZANDER: Built right into Silverlight, you can just take advantage of it, that’s great.

DANNY KIM: Yeah. So I’m going to go ahead and while that’s uploading to the cloud, I’m going to actually switch over. This is a Windows 7 virtual machine. This is a typical environment that the teachers would have. And this machine is purposefully off the network because I want to show you that all the applications that we deploy and the policy deploy will run locally using App-V and group policy technology. And so the teachers can take their laptop off the network and still use the environment.

JASON ZANDER: That’s great. So now you’ve got App-V up and running.

DANNY KIM: Yes.

JASON ZANDER: Be able to execute.

DANNY KIM: So the application ran, so again, the teacher, all they see is an icon on their desktop and they’re able to run it.

JASON ZANDER: Pull it back out. OK, that’s awesome. Thanks a lot, Danny.

DANNY KIM: Thank you. (Applause.)

JASON ZANDER: I really like that demo that Danny had because it demonstrates all the things that we talked about here. First of all, it is using the breadth of the platform from Windows 7 on the client, it’s also using the Web. You can run on premise in addition to the cloud.

Also, because Danny’s team had the skill set of building ASP.NET, he was able to very quickly get his application up and running on Azure. And when it came time to do a differentiated client experience, they were able to move over to Silverlight as well and be able to get that up and running quickly. And that’s led to new opportunities for him, in this case with this technology that he’s got, he’s got other governments that are interested, he’s got other markets like the United States now. So brand new opportunities there as well. An excellent demonstration of it.

Now, if you look across the wave of innovation that we have, this is absolutely huge. Getting started with this is going to be very simple. First of all, Windows 7, we all know awesome release, it’s a great time for you to just be able to target that, get it out there. If you’re an ISV, make sure your application’s ready and take advantage of the new features as you saw Danny was there as well.

We have the new server waves coming out with R2 that Bob just talked about. We have an opportunity for you to get in there and add new functionality around all of our Hyper-V, the support of the management.

And then the differentiated experience you saw with Silverlight. We just launched Silverlight 3.0 just last Friday, including Expression Version 3.0. We have a tremendous uptake on Silverlight itself, and you can see the really cool things you can build with it.

Finally, we’re making a huge investment in Visual Studio and .NET framework. We have Visual Studio 2010 and .NET framework 4.0, both of which are out for public beta right now, you can download those. So as a partner, lots of opportunity there either helping us resell the tools so that your customers can also write custom applications for these form factors, or being able to target all the ecosystem we have.

We’ve got everything down from typing in code up through the CIO tracking projects and making it go. If you’re an ISV, excellent opportunity to get on board with that.

So I can’t wait to see what you guys are going to build with this technology. I hope you have a great Partner Conference, thank you. (Applause.)

BOB MUGLIA: Thank you, Jason. The developers are really at the core of enabling our customers to build solutions and applications that differentiate themselves in the marketplace. And it’s really never been a better time to build these great innovative applications.

Whether it’s SharePoint, which is exploding around companies, enabling collaboration, and then enabling sharing of information, business data through the portal. It’s a tremendous opportunity for our partners to build solutions, SharePoint solutions for our customers.

Whether it’s SQL Server and building SQL Server applications and Web applications, client apps, think of the things that are coming with Windows 7, all of the exciting new things in Windows 7, touch, the location-based information, a wide variety of new applications and solutions that can be developed, tremendous opportunity for our customers, great, great opportunity for all of our partners to build these new solutions and support our collective customers.

So the last thing I want to talk about today is some change and opportunity around the way business intelligence will be done in the years to come. Once in a while, there’s a technology shift that is truly transformative in the way people work. And this is one of those great times. There’s the combination of very low-cost memory, low cost of PCs, together with some clever software is going to enable our end users in businesses around the world of all sizes to begin working with information in ways that they’ve never been able to work with it before.

We’re in an era where there’s a vast amount of business information that is being generated and collected. The business systems that you have deployed for our collective customers are generating a vast amount of business information, and there’s an amazing amount of insight that can be achieved in marketing people, engineers, those scientists, all of the different kinds of folks within our customers can actually tap into that information and get access to it and do so in a way that doesn’t require specialized training.

Now, people have been deploying BI solutions for a while, but they’re very expensive, they require special-purpose tools that require a whole set of training, and in general, they become available to only a few users within an organization. And those users have to have this special training and it’s not generally available to the broad set of users that work with information, in fact, what you really need to do is to be able to put this in the hands of end users with tools that they really understand, tools like Excel.

And so what I’d like to do now is show you a demonstration of what’s coming in Excel 2010 together with SQL Server and SQL Server Analysis Services, it’s really the combination of these two things that unlock what we call “self-service business intelligence” enabling end users to work with business data really in a way they’ve never worked with before.

So let me start by going ahead and getting some data in here. And what I have here is a set of tables, a set of information that was pulled from a business system. And this particular example is an example of a company that sells online movies. And their back-end business system collects a fair amount of data. And, in fact, if you take a look here, you can see that I’m working with 100 million rows of information. OK? 100 million rows. This is on a laptop, I’m working with 100 million rows of information. (Applause.)

And I can page back and forth through this. I can go ahead and do things like sort on pricing. Go ahead and just do a sort here. And I get instantaneous results associated with that. I can go ahead and do a filter against this. And I’ll go ahead and just take a look at just all of the things from Canada. And, again, the results are instantaneous. That’s working against 100 million rows of information all in memory, all on a standard, in this case, literally a portable device.

Now, when we ship this next year, all that information will fit very, very easily into a 2-gigabyte portable that will send well under $1,000 and that will be in the hands of end users, the ability to work with that information through Excel, the combination of Office 2010 Excel and SQL Server 2008 R2 brings those sets of things together.

And the interesting thing is when you’re able to work with this kind of information, you can change the way people can work and build applications themselves. And you know, I use the example here of getting data from a business system, but sometimes there is a lot of other information that people want to collect and bring into that. And so what I’m going to do is go ahead and take a look at a report that was generated.

This is a great opportunity where partners can add value in here because one of the things people are doing today is using SQL Server and SQL Server Reporting Services to build reports. And as we move forward with the next version, pulling data in from any report that’s been generated, in this case it’s SAP data, is as simple as clicking on a little icon that will be available for end users. And taking that and saving it. And then I just go through this little wizard and the data is right there.

So getting data out of a report that’s been generated, bringing it in as an end user, and being able to take all this data together.

Now, the interesting thing is, OK, great, I’ve got this data in the system, how do I wind up working with it? How do I work with that information? And, again, the way you do this is Excel. We’re just working in Excel. So I’m going to go ahead and create a pivot chart. And I’m going to do a four-chart application here. And in this first chart here I’m going to put “purchases” a couple fields in here to create the chart. It’s a simple as drag and drop. So purchases, purchase count. Set my values. Media. Rating. Access. I’ve got a chart there.

I’m going to go ahead and quickly build several other charts. I’ve got a little macro to help me do that for this demo purpose.

OK, so now I’ve got several charts. One of the features of Excel 2010 is in building BI applications. It’s often interesting to be able to get slices and views of data. And so one of the new features of Excel 2010 is something called slicers. And what I’m going to do now is put a couple slicers in here to create what I can really think of as a BI app. So take media category, make that a vertical slicer. Media success, make that a vertical slicer. See those appearing down on the side there. And then the date. A couple more fields here.

OK, so what I have now is essentially a BI application that as an end user, I put together in just a few minutes.

Now, it’s very common that if you want to take today and build an application like this, what’s required is IT has to set up an OLAP tube and those things have to be configured and it often takes weeks or even months to put an application like this together. But with these new self-service BI tools, the combination of Excel 2010 and SQL Server, I have a BI application that I built in literally six minutes. And I can go ahead and get different views of data. So, for example, how did comedies do in 2007? So I put together a BI application. That’s empowering end users to do things they’ve never been able to do before, putting the capabilities into the hands of people to make better business decisions. And this is the kind of thing that as our partners, you’ll be able to enable people to do that’s quite transformative. (Applause.) Thanks.

Now, of course, looking at and building an application is great, but one of the things that you might want to do is also be able to share this application with other colleagues and co-workers. And so in order to do that with self-service BI, what do you do? You publish it to SharePoint. And then all of a sudden, instantly, the combination of SharePoint, Excel Services together with SQL Server makes this new BI application that an end user put together available to colleagues instantly.

And here’s a view, a standard SharePoint view. We’ve done some enhancements to those views. We have a couple of other views that we’ve built. So here is a view of a list of applications, and here’s a different view of that. Let’s take a look at this slightly differently. This is a Silverlight view that we have that we put together of that, and here’s another Silverlight view of that. Here’s the application that I just built. I can go ahead and open this application and what it’s doing is this is a business application that’s ultimately stored inside SQL Server now, it’s stored inside SharePoint, but it’s available to any other end user. And the same facilities, the same capabilities that I had before are still available to me now.

So, for example, if I want to look at the different results by country, if I want to look at U.K., I can just go ahead and take a look at that and see the results that, again, are being generated off the server and are being made available to other users.

So this is enabling end users to do things, to build business applications in a matter of minutes that used to take months. It’s putting power in the people’s hands, and it’s something that provides phenomenal opportunity for you as our partners to go out and enable your customers to change the way they do business. It’s a great opportunity for you to seize the day. (Applause.)

So we talked about a lot this morning. There’s a lot we couldn’t cover in the period of time. I didn’t spend a lot of time on Windows Server 2008 R2. I showed you some of the features there with Hyper-V, there’s so much more there. I didn’t spend a lot of time talking about all of the things that can be done around SharePoint and SharePoint development. There’s a ton that can be done there.

I didn’t drill into in depth on all of the new things that are coming with Visual Studio and enabling people to simplify the creation of development projects. But there are all sorts of opportunities for you that we talked about this morning. It’s a subset of what’s possible. But I just showed you how you can go and enable your customers to redefine the way they do business analysis with self-service BI.

We talked about the great opportunity to lower cost for customers with virtualization and Hyper-V and System Center. There fact that there are now incredibly complete, great solutions that are a fraction of the price they used to be, a fraction of the price of what VMware charges that you can deploy for customers that will solve their problems faster, easier, and much more integrated, much more complete way than they’ve ever had before.

The ability to take that and make it available to mid-market customers. One of the things I didn’t mention is that we’re taking Virtual Machine Manager and a product we call System Center Essentials, which is a mid-market-targeted management product and we’re bundling those two things together as a promotion now so that for smaller customers with a smaller number of servers, there’s a phenomenal deal. Very, very inexpensive to go out and enable them to do virtualization at a fraction of the price of what they previously had to pay.

And later this fiscal year, we’ll have a version of System Center Essentials that builds in Virtual Machine Manager and all the capabilities. So, again, enabling mid-market customers.

We talked about the cloud. We showed how our partners are using Microsoft technology to build cloud solutions. We talked about how Windows Azure will provide new opportunities. It’s time to start working on that and think about how you can utilize the cloud for your customers.

And then of course Windows Server 2008 R2, shipping with Windows 7. It will be available to you, our partners, within a matter of just weeks, something that you’ll be able to get your hands on. Great new product, great new capabilities.

Jason came up and talked about how you can electrify developers, the things that can be done with Visual Studio, with building Windows Azure applications, creating SharePoint applications, lighting up the Web with Silverlight and Expression, these are great new tools, great new platform capabilities that are in your hands to do things for customers.

So it’s a great opportunity, it’s a great time. It’s a time when we have challenges, there are many mountains to climb. And yet at the same time, there’s never been a better time for us to work together as partners to help our customers. You can count on Microsoft to be your partner. We’ve been your partner for many years, we’ll be your partner for many years to come and we’ll be with you as you go out and seize the day. Thank you very much. (Applause.)

ALLISON WATSON: All I can say is, wow, so much innovation coming online today for our partners live at the conference. We have plenty of Twitter feeds buzzing around about what we heard. Our partners are talking about Microsoft free, not Linux, complicated free. The Maximum ASP and the Full Armor demos were totally awesome. Partners are raving about essentials to enable our smaller hosters to get online with us, and Azure, wow, availability at PDC, but partners starting to use it today free at no charge, what a fantastic announcement.

And finally, BI for the masses. 100 million rows, yay. That’s some of our feedback coming in from Twitter.

Now, Rick, we talked about while this is going on, you all are a good Microsoft partner, but also a good VMware partner. So let’s see, what is it that we talked about this morning that’s going to convince you to sell a little bit more Microsoft and sell a little bit less VMware?

PARTICIPANT: Well, as you say, we are a VMware partner, but there have been so many exciting announcements today. But like everybody here, it’s key that we deliver best value to our customers. And whether it’s from the entry level, the cost of entry or the cost of management, there’s a hugely compelling argument for what Microsoft provides on Hyper-V and their virtualization platform.

ALLISON WATSON: Excellent. You’re going to be one of many partners in the room I think taking that step today.

All right, so Doug. How about that BI stuff?

PARTICIPANT: I think that was really exciting to see bringing business intelligence to the masses. In this economy, making sure that you understand where you business is and what’s driving your business and identifying trends. And really importantly that I can take those tools to my management so they can figure out my bonus. (Laughter.)

ALLISON WATSON: Good. Well, I know we’re all working hard to get our bonuses this year. So let’s do some BI about how we’re going to sell more stuff. All right. OK, so quickly, I want to highlight the innovation we saw today and yesterday comes out of the innovation work that Microsoft does in our commitment to R&D. Tomorrow morning, one of our partners’ favorite segments, it really talks about the future and the innovation is the A List. We’ll be doing that tomorrow morning for partners who want to get here and make sure they get the glimpse of the future as well.

So now I want to get back to our program. We have some partners who have a little Bing excitement.

(Bing video segment.)

ANNOUNCER: Please welcome Microsoft’s Chief Executive Officer, Steve Ballmer. (Cheers, applause.)

STEVE BALLMER: I’ve got to say, I was kind of getting into it backstage. (Sings Bing song.) Thank you to the partner – what is it called? The partner tone chorus for a fantastic job. (Applause.)

It is a real honor. I say this every year. Show of hands before I start. How many people have been to a Worldwide Partner Conference personally? You personally, how many people have been here before? Show of hands. High percentage it looks like to me, maybe a third, maybe a half.

And I say the same thing every year, and I think it’s important for me to say a couple of things every year. Maybe a little bit different, different tone, different style, different body English, but the most important thing I think I’ll do in my entire time with you today is have a chance to say thank you. Our business has been built and will continue to be built entirely on the notion of partnership with a variety of other companies and businesses in the information technology industry that really brings our core technologies to life for our customers, developers, OEMs, systems integrators, ISVs, resellers, LARs, people who do infrastructure deployment, hosters, Web designers, Web agencies, Dynamics partners – and the list goes on and on.

But our commitment and our focus and our strategy which says that these partnerships that we’ve formed with your companies are fundamental to our success, that’s something that has been proved since essentially the founding of Microsoft, and will continue to be true for the next whatever that would be, 35 years. It’s the only way for us and you to succeed together and for this market to continue to flourish and thrive the way that it really has.

Now, over time, the nature of our partnership and relationship is every dynamic and ever changing. What you do and what we do is different than it was five years, 10 years, 15 years ago. And yet the joint opportunities for our company with all of your companies will continue to grow as long as we continue to invest in the relationship and the partnership together. And I want you to know that you can count on us to be true to that core principle. That’s super important.

The second thing I want to just remark a little bit about is what I’ve heard since I arrived here in New Orleans from some of the partners and some of our folks observing partner reaction to yesterday’s set of sessions. I have to say the Microsoft team came in to see me, oh, maybe a month or so ago, little apprehensive. They said, “Steve, you know, it’s a down economy.” I said, “Yeah, I’ve heard that.” They said, “We might not have as many attendees as in years past.” And I said, “I hear that, but I don’t accept that.” They got here, they told me not only did we get as many attendees, we got sold out, standing room only, everybody seems to want to come. And I said, “Well, that’s good news.” They said, “But we’ve got even better news for you.”

We expected kind of a real – what shall I say? – a real kind of pale to be over the audience because of the tough economy. But after day one of this conference, at least our folks and the partners I talked to said, “Wow.” There was a palpable sense of energy and optimism and kind of excitement about the future. Not taking anything away from the present, not taking anything away from the fact that this is the toughest market that any of us have ever worked in. Our folks felt a sense of optimism and energy from our partners, and I heard it from the partners I had a chance to talk to. That’s No. 2.

Third thing for me. I got to tell you a little bit about why the partner conference, to me, is one of the highlights of my year. I’m not sure why individually each and every one of you come. Some I’m sure come to learn new things. Some come to network with other partners. Some come because it’s a nice trip to New Orleans in the middle of the muggiest weather I’ve ever been in in my life. Some of you probably come for a variety of other reasons.

But one of the things that I certainly get from this myself and I hope and I think many of you get out of this conference is you get kind of a renewed sense of energy. It charges me up, it excites me, it fires me up to come here to talk to you, to hear your feedback, to hear what’s on your mind, your concerns, your criticisms, your input, your feedback. That is, for me and for all of the Microsoftees here, certainly one of the most vibrant and important parts of this session.

And last, but certainly not least, Kevin Turner is going to get a chance to talk to you before this wraps up. He kind of understands what our goals, what our field plans are for the year, our quotas, and hopefully he’ll help get us all on the same page so that as we go forward for the next 12 and 18 months, you know where we see very concretely the opportunity and what that means in terms of how every day in front of the customers, we can work very successfully together to grow our mutual business.

So to all of you, I start with, first, just my deepest thanks. It’s been a tough year. You’ve stood with us. We’ve got a lot of opportunity. I think you’ve seen some amazing products and we will certainly move forward together very much in the spirit of partnership.

I’ve touched on it a little bit, and I’m just going to give you a little bit more of our context on the economy. As a number of folks now do, I refer to what we’re going through globally, frankly, as an economic reset — not a recession and not a depression. Literally, the world economy got overheated. People borrowed, businesses and consumers, borrowed too much money. That money fueled a lot of purchasing that in some senses was false because it really couldn’t be afforded. When the debt came out of the system, the level of economic activity has to come back down.

It doesn’t have to come down and go back up, it really needs to come back down – at least here in the United States. Debt as a percentage of GDP was almost 300 percent before this reset. And even before the depression in 1929, it was only 150 percent of GDP. So the economy is going to reset to a lower level. That’s going to happen, it’s inevitable, and we all have to – and I know we are all taking actions that are consistent with that kind of planning.

In this environment, what I would tell you and what I have told our own people for our business is there are still things that we can all drive and control. We can’t control precisely how this year’s revenue compares to last year’s revenue. You can’t do it. The economy is resetting. But you can control your market share. You can control the level of customer satisfaction and the relationship that you build with your customers.

And so I think even in what I might call this time of economic turmoil, there’s certainly even more premium for every one of your businesses and for our businesses to say, “How do we grow share and how do we make sure that we’re giving our customers an absolutely beautiful experience with every product, with every service, with everything that we do collectively?” That’s something that we can drive in a monotonically increasing fashion, even if revenue and profitability is going to be more problematic.

The key to renewing economic growth in the economy at large is actually going to be growth in productivity. Since debt is not going to fuel economic growth, it’s going to have to come from productivity, and the best form of productivity advance in society and the economy is innovation.

And ironically, for all of us, that means there’s even more premium today on IT as a business than ever before. If you ask what industry will do more to generate productivity and innovation improvements in the world economy over the next ten years of the industry we’re all in, there isn’t one. This is going to be an IT-driven renewal of growth. And that gives us all fantastic opportunities. And not just IT as an industry itself, but also what IT does for other businesses.

Scientific exploration needs to move faster in energy, in the environmental science, in the biological sciences. Boom. IT is the source of that improvement.

We need great efficiency in financial services and other service-based businesses. Boom. Information technology is the opportunity.

So despite the fact that this is an interesting economy time, our industry more than any other, more than any other, we have to all step up and drive this next level. And certainly – and I hope you share some of this after seeing all the demonstrations. I am more optimistic about the opportunities and the innovations that we’re going to drive in our company and in our industry today than any other point in time in history. The things that are possible because of the Internet, because of advances in user infrastructure technologies are amazing.

We talk about the cloud with Azure and our Live and online technologies coming to the fore. We talk about bringing intelligence to phones, to big screens. At home, you call a big screen a TV. At work, you call a big screen a conference room monitor. And we’ll bring intelligence to those devices.

User interface will continue to be much more natural. We’re starting to really use voice recognition, touch screens. If any of you had a chance to see the video of the new Nital technology that we showed in Xbox, we literally have now camera technology that recognizes you and what you’re doing and people around you and your gestures.

We’re starting to see real advances for the first time in natural language technology where the computer recognizes what you mean. Get me ready for my trip to WPC. That means something to my secretary, but it means nothing to my computer. And yet, every day in areas like search, we allow the user to type in what they’re interested in, and we may not always do what they want us to do, but at least we’re starting to talk the language of the human being instead of just the language and menu structure of today’s information technology system.

So the opportunity to innovate in form factor, in the use of the cloud, and in the user interface, and I am so optimistic that innovation still on this platform and the innovations in these areas from Microsoft, they will help drive the next generation of applications that improve human communications and productivity, business efficiency, business innovation and productivity. As long as your companies and our company drive this forward optimistically and with a long-term view of the future.

As a company, behind this vision, Microsoft is basically investing in eight different areas. We’re investing in Windows and Internet Explorer, the client-PC. And you can see we spend a lot of money, $5.1 billion per year behind that business.

Windows Mobile and the phone. Office, SharePoint and the whole communications and productivity value proposition that every day you’re delivering to our joint customers.

The server and datacenter management infrastructure. SQL Server and enterprise application infrastructure. Search and advertising, entertainment and television, and then we have a set of other businesses, most notably for this group, our ERP business that helped drive and support the rest of these opportunities.

We believe we’re investing despite the economic downturn, we will keep our R&D spending flat next year $9.5 billion in aggregate, which is more than any other company in the world spends on R&D. It is a testament to our belief and our optimism about the future.

We’re going to invest in continuing to attract new customers despite the economic downturn, and we’re going to keep what I would call the same old Microsoft approach, long-term, tenacious, and partner-centric, long-term, long-term, long-term.

Look, you come here, and partly I know what you have to do. You have to sit there and say on anything they’re doing well, are they going to keep it up? And on anything where they’re not doing well today, are they just going to keep at it until they get it right? We don’t go home. We just keep coming and coming and coming. Tenacious, tenacious, tenacious, tenacious.

Virtualization, you’re seeing some tenacity out there today. Unified communications? Voice? Video? Boom. You’ll see tenacity out of us. Security, boom, we just keep coming. Management, keep coming. Keep coming. Keep coming.

And I think our track record of having our tenacity turn into success is quite high. And that’s why I think many of you keep coming back because today we can’t turn our great ideas and tenacity turns into success, you’ll go sit at somebody else’s partner conference. So you can count on us for that.

If ever there was evidence for that, it’s the Bing itself. Man, oh, man, have we taken a lot of abuse. And we’re still just an itsy, bitsy, little piece of the market. But man, we got a little mojo. We got a little innovation. We’ll keep going and going and going and going and going and going.

And you might say, “Steve, what does this have to do with us? Bing, search, it’s not the center of most of our partners’ world.” Well, it has two things to do with you: No. 1, it’s as good a demonstration of our tenacity and commitment as anything you’ve ever seen, including Windows 1.0, I’ll put it on the list. And No. 2, it’s my chance to tell you you should set your default search provider to Bing.com.

Before I have a chance to sit with Geoff Colvin and hear some of your questions and comments and thoughts, I want to just kind of give you my own body English on everything we’re taking about at the conference under the general umbrella of let’s go grow our businesses together. We can’t change the economy, as I said, but we can innovate, we can grow market share together, and we can go satisfy customers.

This is absolutely the most phenomenal year we’ve ever had for new technology releases. And I’ll leave out Bing and Project Natal for Xbox. Windows 7, IE8, Silverlight 3.0, Office 2010 – and you’ve really only seen what I would call the tip of the Office 2010 iceberg. Despite the fact that I think we showed you some awfully cool things yesterday, there’s more down there – SharePoint, OCS, Exchange in addition to Office itself.

Windows Server, Live Migration, the new SQL Server R2, Azure, Windows Mobile 6.5. But that’s kind of the product view. If you take it from the customer view and you say what does this amazing collection of innovation allow you to do for your customers and give us the opportunity to grow together – BI, search, portal. I put those together because I’ll tell you, when I’m out with our customers and with our partners, still the most frustrating question I get – not from CIOs, but from CEOs is: Steve, I know IT is important and I know I have to spend more than I think I should, but I do want to understand why is it it’s still too hard for me to find the information I need to make the decisions I make every day running my business?

The opportunity with enterprise search, SharePoint, with the SharePoint Portal, with some of the BI stuff that Bob talked about, it’s an amazing opportunity.

I was with one of the four remaining big U.S. banks in the last few weeks. And we literally spent the better part of two hours talking about how they get a standard infrastructure in place in this area just to have information be discoverable for their employees.

Communication, voicemail, e-mail archiving, audio and Web conferencing. Together, we can deliver this year on all those scenarios.

SQL, enterprise application development, rapid application development with SharePoint and Office. The new stuff we’re doing with CRM and ERP, that’s a value proposition and a set of scenarios that we can go together to the market with and drive.

Web site design with the new things in IE8 and Silverlight and the way they tie to Windows 7 new features is very powerful.

Virtualization, I think Bob said it all in that area. And we don’t even talk much, but we’ll have some of the most important releases ever for client-side management and client-side security this year.

So there’s a lot we can do together to help our customers realize their potential, to help them drive innovation and productivity, and to help you and we build our businesses together despite these types of tough economic times.

I’m excited to be here, I’m appreciative of all of your energy, of all your support. I know that each and every one of you makes a decision about how to spend your time and your people’s time. Microsoft, our product set, I think it’s a great place for you to invest your time. But even more importantly, I basically will tell you it’s going to be the best place for you to grow your business and grow it strongly. Bet on us, we’re going to bet on you, let’s move forward aggressively together. Thank you all very much. (Applause.)