Eleven for ’11 – My Favorite Moments of 2011

Every year at this time there’s a glut of “year in review” and “best of” lists that come out. Last night I was reading the Rolling Stone “best songs/albums/movies” issue, and was gratified to note that some albums/artists/movies I saw and liked made the list. I feel relevant. :-)

Of course, there also tends to be year in review lists about the tech industry as well. Sometimes I agree, sometimes I don’t! This year, I thought I’d try my hand, and publish my own “Microsoft year in review” thoughts, and a slide show list of my favorite Microsoft moments of 2011. I was having trouble narrowing my slideshow down to a top-ten list, so on the advice of my old friend Nigel Tufnel, my slide show goes to 11.

While competition gets more intense every year, and we’ve got work to do in some areas, 2011 was a pretty successful year for the company. For FY11, we had record revenues of nearly $70 billion, a 12 percent increase from the prior year and a whopping 176 percent increase over 2001. We made some bold moves, like our acquisition of Skype and our partnerships with Nokia, Facebook, and Twitter. We’re kicking butt in a lot of areas, and in the areas where we do have challenges we’re seeing good progress, with solid plans, good execution, and a clear path to success.

The Microsoft Office Division is an example of where we are kicking butt and taking names. Office 2010 continues to be the fastest-selling version of Office in Microsoft history, with over 100 million copies sold, and continued strong financials. One of my favorite moments of 2011 was June 28, when we launched Office 365, taking Office to the cloud. Some people said we’d never do that, that we were too invested in our traditional Office business, but we view the cloud as a huge new opportunity for our customers and our bottom line. Office 365 has generated great reviews and strong customer adoption. Customers are adopting Office 365 eight times faster than our previous service, and Office 365 is on track to become one of our fastest-growing offers in Microsoft history. To those who told me pigs would fly before Office was in the cloud (and you know who you are), my only advice is watch out for airborne porkers!

Server and Tools is another area where we’re seeing huge growth and traction. Twenty years ago, people said Microsoft would never succeed in the Enterprise. Ten years ago, they were still skeptical. Today, our Server and Tools Business generates $17 billion in annual revenues, and it’s been growing by more than 10 percent each year for the past five years. One of my favorite moments of the past year was September 13th, sitting in the audience of our //build/ conference and hearing the collective gasp of excitement from developers when we previewed Windows Server 8. At the time, Rich Fichera of Forrester Research blogged that Windows Server 8 will “offer major benefits to both conventional data centers as well as providing a foundation for a transition to cloud-based architecture. Microsoft has grasped the fundamental truth about the transition to the cloud.”

There’s no doubt Xbox and Kinect are taking the gaming and entertainment world by storm. Xbox has been the #1 selling console in the U.S. every month this year, and Kinect has racked up lots of accolades. But one of my favorite moments came on Oct. 31 when the Xbox team pulled together all of the unexpected ways that Kinect is being used to address huge societal challenges like education, healthcare, rehabilitation, and accessibility. It’s what we call the Kinect Effect.

Elsewhere, that steady drumbeat that you hear, getting closer every day, is Windows 8. Another of my favorite moments was at CES in January, when Steve Ballmer and Steven Sinofsky showed off our vision of Windows 8 running on both x86 and System on Chip hardware. Things got a whole lot clearer for a lot of industry-watchers at that moment! We followed up in June with the new Windows 8 user interface, in September with the developer preview running on touch-enabled hardware, and last week, when we unveiled the Windows Store, with its superior economic and creative opportunities for developers.

Another area where we’ve made great progress against a challenge is in phones. At this time last year, Windows Phone 7 had just launched to generally positive reviews, and people who tried our phone generally loved it, but distribution and differentiated hardware needed to improve. Today, it’s a whole different ballgame – Windows Phone 7.5 is getting rave reviews, we’ve got 40,000 quality apps and we’re adding an average of more than 100 new titles every day, our hardware partners are delivering stunning phones, and the buzz is building. One of the key steps on that comeback trail was February 11th, when Nokia announced it was focusing all of its development work on the Windows Phone platform. Adding Nokia’s hardware innovation, global reach and marketing muscle to our already strong team of partners like Samsung, HTC, Acer and others is truly game-changing.

In search, we’ve continued to grow month after month. Bing is now up to 14.8 percent share in the U.S., and Bing accounts for nearly 30 percent of U.S. searches when you include our partnership with Yahoo! And people are finally starting to see that Bing is more than just a stand-alone search engine. Bing is a strategic asset that makes so many products and services across Microsoft stronger. Bing is a key ingredient in our Xbox and Windows Phone businesses, and the lessons we learn in Bing help improve a wide range of enterprise products and services. And Bing continues to lead when it comes to search innovation. One of my favorite days was Sept. 23, when we launched the first Bing homepage with HTML5 video. I think that Stephanie Horstmanshof, managing editor of Bing, has one of the best jobs in the world. The beautiful images and videos her team picks each day sure beat a hermetically white homepage and 10 blue links…

I’ve heard rumors that I’m somewhat competitive. :-) So it’s not surprising that a few of my absolute favorite moments in 2011 came when Microsoft stood up and delivered a blow against one of our competitors with a little panache and even humor. The Gmail Man video reminded the world that Google makes you sacrifice your privacy and security when you use Google Apps. Tad the smarmy VMlimited salesman with the rocking van and awesome mustache reminded customers about the shortcomings of some virtualization approaches. And I enjoyed sparring with Google as its top lawyer tried to explain why they were whining about us licensing Novell’s patents, after we had specifically offered to have them join us in licensing those patents jointly, but they had turned us down. We’ve now licensed our IP to companies accounting for over 50% of all Android devices, including Samsung, HTC, and Acer, showing that licensing works.

When I look back at 2011, three key themes emerge – people, partnerships, and persistence.

Across the board, from our unique approach to mobile phones to our cloud offerings, our approach is more people-centric than our competitors.

And while Google and Apple seem to want to go it alone and keep all the marbles for themselves, Microsoft has unveiled a series of blockbuster partnerships that will advance both our business success and the success of our growing ecosystem. It seems like every week Google announces plans to try to compete with some new competitor (often someone who was a partner just the day before, or even <cough> on whose board you sit) — whether it’s Facebook with Google+, Amazon with Google Wallet, Groupon with Google Offers, or even Firefox with Chrome. By contrast, we have announced partnerships with Facebook and Twitter to bring social signals into Bing search, with Yahoo! and AOL to create a stronger advertising market, and with a wide range of daily deal companies for MSN Offers.

In an era of great competition, persistence is a must. And we are persistent. In an era that can sometimes feel defined by the buzz of the moment or the drive for cool vs. sustained, we take the long-term view and invest our time and resources accordingly. In a world where it is often easy to be seduced by a winner-take-all mentality, we see a bigger market as something our partners, our customers, and we ourselves all benefit from. That’s how we slowly built our enterprise muscle over the past 20 years. That’s how we came from nowhere in the gaming market 10 years ago to #1 today. And that’s how we will keep gaining ground in mobile, search, and tablets over the coming months and years.

Of course the past few years have had their challenges for us, often well documented. And as a result, we have:

  • completely rebuilt our strategies in mobile;

  • challenged ourselves to reimagine what Windows needs to be going forward;

  • and recognized that in order to succeed with consumer products, we would need to build new muscles around design, usability, and marketing.

These rebuilding efforts have been underway for some time, and they are now starting to come together.

There is a saying that three data points make a trend. But to get a really full picture of a company of our scope and scale, it takes more than three points – that’s why my slide show goes to 11! So what do these points add up to? They add up to a company that’s as passionate about changing the world today as the day it was formed. They add up to new opportunities for Microsoft, and for our partners. They add up to new breakthroughs in the cloud, in search, in how we communicate. They add up to a company driving hard, learning from its successes and its mistakes, and relentlessly optimistic about the future.

Enjoy the slide show and my key moments from 2011. And 2012? Better watch out… here we come!