Silicon Valley Speaker Series: Business Orchestration: The Next Phase of Integration

Remarks by Michael Risse and Dave Wascha
Silicon Valley Speaker Series
Mountain View, Calif., Jan. 23, 2001

PHIL GOLDMAN: Okay, why dont we get started here? Im Phil Goldman, vice president of TV Services for Microsoft and one of the residents of the Silicon Valley campus here. Thanks very much for joining us today, for braving the elements and power outages, traffic, whatever you overcame to get here today for the fifth speakers series here at the Silicon Valley campus.

Mike Risse, whos the general manager of Microsofts .NET Enterprise Services, and Dave Wascha, whos the product manager for BizTalk Server 2000, will lead a discussion today about the next phrase of integration, called Business Orchestration, and how the companies through BizTalk Server 2000 can help businesses to begin to build the next generation of integration and orchestration solutions. Additionally, theyll show some live demos of BizTalk Server 2000 and theyll provide a technical overview of the product.

Now, Mike has asked me to be very brief in the biographies here, but I do have a little bit to read about these guys so youll know who they are while theyre telling you about Enterprise Server and BizTalk Server 2000. Mike joined Microsoft in 1990, and hes responsible for the strategic planning and market development for Microsoft server applications and tools businesses, including the companys database, e-commerce and integration products, as well as Windows 2000 application services and development tools. And prior to his current role, Mike was director of platform marketing and was formerly group product manager of Visual Studio 6.0 in 97, the lead product manager on MSDN, and Microsoft Office Developer Edition.

Before joining Microsoft in 1990, Mike worked in real estate development in Columbia, Maryland and holds a masters in international management. And I was thinking that if he only had some background in power management, theres no way that wed let him leave this state and go back up to Washington, between the real estate and the power management.

Dave Wascha, who will be up here in a moment, has been with Microsoft for more than three years, and hes a product manager for BizTalk 2000. And prior to his current position, Dave was heavily involved in Microsofts earlier XML work.

I hope that was brief enough. I think youre going to be very excited about what we have here for you. Without further ado, here are Mike and Dave. (Applause.)

MIKE RISSE: Thank you very much. Good afternoon. Just in terms of context, Microsoft is this big company and every three weeks theres a reorg, and its kind of hard for us to track it, much less the outside world. So just for context, where we are in the Microsoft organization — you can speak about Microsoft as a set of organizations combined together, each of which has a product focus and a customer focus. So we have Office, the Office group, headed by Jeff Raikes, which focuses on knowledge workers. We have a consumer focus with MSN, our Xbox efforts, our online efforts, and thats really focused on the home consumer market. We have the development tools group, Visual Studio, Visual Studio.NET thats really focused on developers. We have bCentral, which is a set of on-line services for small businesses to use, and thats focused on small businesses.

Theres a Windows group, of course, which creates operating systems for home use, knowledge worker use, the server, and as an application server in the enterprise. And then theres the last group, and the last group is the group that creates the enterprise products and is really the center of gravity for Microsofts enterprise efforts, along with the Windows Server team and the Tools team. And thats the group that we work in. Other parts of our group include things like SQL Server, Commerce Server, Exchange Server, Host Integration Server, Application Center, and Internet Security & Acceleration Server; really, all of the server applications for the enterprise that Microsoft creates. So thats where were from. And again, our focus is on the enterprise. Thats who were focused on. So, again, welcome, and thank you for joining us this afternoon.

The starting point for what were going to talk about is the integration challenge. And what we mean by the integration challenge is all of the new reasons or the additional reasons why thing one has to talk to thing two. And thats such a simple thing, because were sitting here talking to each other. Were integrating. Were talking English. But the fact is, if each of us was a different system running in an organization, theres no chance in hell any of us would get along, right? Some of you would be on the wrong platform. Some of you would be — not the wrong platform, but maybe a different platform, unless you are on Sun, in which case you would be on the wrong platform. (Laughter.)

But we are on different platforms. We speak different protocols. We were built way before the Web was ever thought of. But we still run, or maybe you still run. Were located in different parts of the company — Minneapolis and in San Francisco, for example. Maybe were in two different companies, right? Making systems talk to each other is actually a huge challenge and a very profitable business, it turns out. Gartner and IDC both estimate that the products for integrating systems this year is about a billion-dollar business, and in two years its going to grow to $3 billion. Its big business getting systems to talk to systems. Never mind the whole system integrator and consultant business on top of the software business. Its all about making two things talk to each other.

So what kind of examples or where do we find examples of this type of challenge? Well, its pretty easy. We need to look at the intranet, right, or
“B2E,”
business to employee. And we could think about a portal for an employee that basically shows their personnel information, while we integrate the Web with the HR system. And maybe we want to show salary information. We have to integrate back to the payroll system. And maybe we want to give them information on the HR handbook. Well, we need to integrate back to a document management system. So within organizations, assembling information and presenting it to the user is a key part of the employee portal strategy.

If we go outside the organization, maybe to our partners — thats called B2B or extranets, or maybe we need to share business documents like a purchase order or a shipping invoice with companies that were trading information with. Maybe we want to buy power and sell power, right? How do we get the agreement between two different places? We go to the governor. But after were done with that, then we would probably need to share documents between places. Or we can go out to the Web, the Internet, the B2C, the G2C. Whats the G2C? Government to constituent, right? We are running, for example, right now, the Web census for the country of Switzerland. Every 10 years they do a census. Windows 2000/SQL 2000 is running the census site for the Swiss government. Thats the government talking to the people who live there. Or e-government would be another name for it, or B2C if we wanted to sell things on the Web. We need integration between the consumer experience on that Web site back into our back-end system.

Example: Drugstore.com uses a Windows front end and an Oracle database. They have to integrate their Web front end with an Oracle database where they track their prescriptions and their orders. Mary Kay Cosmetics needs to take all of the orders from their sales people off of their Web site, go through a host integration system, and then back into the mainframe to make their B2C site work. So the integration challenges we can find if you look out onto the Web, if you look out onto the partners, or even within organizations.

Another data point: If youre building a supply chain, right, a supply chain integration system, anybody want to guess how many systems the average supply chain integration system touches? Anybody? Thats a question. Somebody give me a number between zero and 100.

AUDIENCE MEMBER: Thirty-five.

MIKE RISI: Thirty-five. Thirty-three. Are you in the supply chain business?

AUDIENCE MEMBER: No.

MIKE RISI: No. Okay. (Laughter.) You got — I mean, its a mess, right? Its all of these different systems, like the trucking system and the warehousing system and the payment system and the inventory system and the need system, right? You touch lots of systems. And the best part is you get to deal with all these wonderful protocols. You get to deal with open standards. You get to deal with proprietary standards. You get to deal with mainframe dialects. You get to deal with database dialects, right? Oracle isnt SQL Server isnt DB2 isnt Informix isnt Sybase and is not an IBM or a flat-file database, right? So whatever type of system, youre going to have to deal with some level of integration or some level of technology.

The marketplaces are another example of this. Ariba has a definition for how it takes catalogues into Ariba marketplaces. Its different from Commerce Ones, which is different from I2s, which is different from Oracles, right? Four different systems, four different XML-formatted documents to work on those different marketplaces. Youre going to stay very, very, very busy just making your system work with those four marketplaces, much less all of the other things that are on this map.

So its an integration challenge. Its a big business. Its getting bigger. And the drive towards the digital economy and integrating these systems is going to make it a bigger business and a bigger challenge and a bigger opportunity.

Now, to date, primarily all of those different systems have fallen along a couple of different lines, right, and a couple of different approaches. One is along the line of Enterprise Application Integration, EAI. Theres an acronym for everything — EAI. Whats EAI mean? It means I have one Enterprise system, SAP, and another Enterprise system, Seybold, and I need them to talk to each other. So what I need to do is create a pipe, a dedicated pipe that has hooks at both ends to talk to both of those systems. And thats an EAI system. Companies like IBM, with MQ Series, Tipco, STC, those companies make these pipes that connect systems within their organizations.

Another example might be EDI, or Electronic Data Interchange. If we have a very tight supplier-purchaser relationship, I want to send you a purchase order, I want to get it invoiced, and we both use different systems, of course. And maybe were geographically distributed, so Im in Minneapolis; youre in San Francisco. I buy aluminum; you sell aluminum. Were going to create literally whats called a VAN, a value-added network. Thats just a very thin pipe that goes between our organizations, hooks on both ends, and does document conversion for us. It takes my purchase order format and turns it into your purchase order format. It takes your invoice format and turns it into my invoice format. Again, big, hard challenge; companies like Harminger and Sterling play in this space today.

Now, the newest approach to this is B2B; all kinds of things going on in this space. This is where you assume XML is a document format. Now, in EDI you dont assume XML. You assume maybe its an EDI standard document; maybe its something proprietary. In the B2B space, you really do assume, or tend to assume, its XML.

Now, from XML you get to all the flavors of XML. I was on a bus with a guy from Ralston-Purina who was on the Universal Commercial Code standards body for defining XML schemas. Maybe theres an XML schema for cat food, but thats what he was on the schema thing for, he was on the schema committee for. And we started talking about the schemas for XML; Rosetta.net and Oasis and BizTalk and the W3C and the Universal Commercial Code, and on and on and on. His answer was,
“You know, the best part about standards is there are so many of them.”
But most of those standards fit into the B2B space.

Companies in this space, many new companies on display — Web methods, new offerings in this space from IBM, which theyve announced but have not shipped; from DEA, which just announced Web Logic Process Integrator; from Oracle, something theyve alluded to called Integration Server, but I dont know that theyve shipped it; new companies like Marquest, which is a focus on getting your catalogue into these different market places; lots of movement in the B2B space. Again, the assumption there is that youre going to be using XML.

And then, finally, theres been some business process automation tools. And what that basically means is theres a superset or a layer on top of this integration sub-space. These are people who try and organize the integration connections. Companies like Vitria play in this place. Candle sits on top of MQ Series. IBM makes MQ Series Integrator. These are tools that, again, sit on top of the integration layer and try to organize the flow of information between different systems. So theres all of these different approaches to solve that core integration challenge.

Now, whats happening today is that theres a lot of convergence and movement between these different companies. If youre the kind of person who likes watching marketplace dynamics, this is a pretty fun place to watch, because you can watch Web method to B2B system by Vitria or you can watch IBM partner with Neon, which has adapters, or Extricity, which is another example of the business process automation tool. Or you can watch Vignette, more of a B2C play, by On Display, which is more of an integration choice, so that they can give or deliver from your Website back into this integration technology, into your back-end system.

So theres been a lot of new entrants into this space and theres been a lot of movement as people have aligned partners, purchased other parts of the story to develop this comprehensive offering of services, technology, support and so forth. So its been a very interesting marketplace to watch as its grown and morphed over the last couple of years.

But the question is, where is it going to go? All of this integration focus sort of needs to go someplace, right, because we know were going beyond manual re-keying. Were going behind these EDI documents. We know that weve got a set of different types of challenge between integrating what we have, which is EAI, integrating with marketplaces in our partners, which is B2B, and then somehow adding this business value on top, which defines how we work with those different systems. And thats really where the market is going to be going.

The aspect of where the market is going to go — there are a bunch of them. One, more and more systems mean what? Mean lower prices, mean lower bars to entry. Most of these systems and products Ive talked about have $100,000, $500,000, million-dollar price points. They are only accessible to the very largest organizations. But as the prices come down and as more opportunities are available, more and more companies, small, medium and large, will be able to buy into this integration marketplace.

The second thing is that you really get a transition for where the hub of your business is. If you can define your business process, right, that business process, which integrates these different systems, starts to look at the hub at the center of a bicycle wheel. And each of the spokes is going out to the different systems that youre touching, either inside your company, outside your company, with your partners. So you get the business processes being the real center of gravity for what youre thinking about, because thats where youve defined the set of relationships and integration points that you have acquired to run your business. So the business process and definition is going to start being the hub of activity, or what you basically watch as an IT manager, because thats what tells you where you are in your process. That is what defines what youre trying to accomplish.

Let me give you a simple example. When you click the Buy button on your favorite B2C site; when you buy books, you buy tennis shoes, you buy something, what happens? You check the credit card. You check inventory. You check the database and see if theres something you can cross-sell that person on; a personalization engine. If they bought shoes, sell them socks. You tell shipping to ship one of these products. You process the credit card, and then you tell the customer,
“Yes, we received your order and itll be shipped.”
Usually you do that and you get that after the fact, because thatll be sent once all of this other stuff happens.

Now, thats a business process. Youve defined a business process. And so you want to watch that little thing that happens when somebody hits the click button. You want to know how many people hit the click button, how many credit cards didnt get authorized, how much inventory didnt we have today, how much money did we make because we got the credit cards through, how many things will we be shipping tomorrow. Right, thats a business process and that definition becomes very central to how you run your business of selling things on the Web.

In terms of the number of times that youre going to hit this situation, theyre going to go up. Theyre going to go up dramatically, because youre going to be building these systems as systems. And so more and more transaction load is going to be going through a defined process system. And so theres many, many more systems today that will be hubbed and hooked in than there were yesterday, and certainly more than there were a few years ago.

The growth of new marketplaces, right, nobody — I love this part. Who heard of a marketplace five years ago, right? Today theres all sorts of focus on marketplaces. Theres all sorts of focus on getting people into marketplaces. Every one of those marketplaces, as I said a minute ago, has a different XML document format. Youre going to have to play with each of those different XML document formats, plus youre going to have to take it out of the system that you have. To play in a marketplace is going to require, by definition, integration with your inventory system and integration with all of these different types of marketplace definitions. I mean, its an integration challenge from the get-go. And yet every exchange, every marketplace is going to require this kind of work.

The last thing thats going to happen is really the standardization of the XML formats and of the approach thats going to be taken, right? Theres going to be more of these transactions. Theres going to be more companies. Customers are going to push back and say,
“I want this in the same format so I can make sure I integrate these pieces.”
And so theres going to be a set of standards for how these things talk to each other.

So when we look at whats happening, what has happened, what is happening, what we expect to happen in terms of standards, in terms of transaction volume, in terms of marketplaces, the name for that model is orchestration. Right, orchestrations the level on top; its the business value on top.

I actually have one of my wonderful bad analogies. Right, in the mid 80s we connected a lot of people together. What was connecting and integrating people called? It was called email. Everybody had email. We could all email each other on a variety of systems.

And then people realized that, hey, we can put some value on top of that email infrastructure that actually defines the way we do things between people. And that was called groupware or collaboration.

So one part was having all of us have mailboxes. Another part was defining the way in which we integrate or the way in which we email each other according to a particular business process we wanted.

So email is to groupware or collaboration as integration is to orchestration. It assumes that integration is there, but it builds a business value, a process definition on top of the plumbing layer. And that integration, that business value you can get basically defines how it is youre going to run your business.

So orchestration, it assumes the integration substrate. If you cant have two systems talking, you cant have them coordinated in how they pass information back and forth. What it lets you do is rapidly build and define a business process. The example I gave with the click button and then all the things that happen, right, thats defining a business process and then running a business process. And it lets you do that very quickly.

And what I mean by coding a level above, most of you are familiar with three-tier computing, right? Three-tier computing: client, business logic, database. Thats three-tier computing. Have you heard of four-tier computing? Whats four-tier computing? You take the business logic and you break it apart, and you say this is my process logic and this is my computational logic, but by breaking out the process logic what can I do? I can change it overnight. I can stop trading with this person today; I can start trading with that person tomorrow just by redefining my process.

And so its coding at a level above. Its raising up the level at which programmers work. Instead of always writing the code, they can get to the process and put things going in a different direction.

That lets them change things incredibly quickly so they can react overnight, they can respond to a competitor, they can deal with a merger and acquisition. One of the companies I visited actually in Australia had, through mergers and acquisition, nine different ERP systems, nine! Ouch, right? Most people have none. They have nine. So how would they be able to get one system that actually talked to all of those nine different systems in a coordinated way? That was their challenge.

A key part of this has to be leveraging existing investments. If we say that orchestration or the if the industry says,
“Orchestration is the new thing, everybody go; and by the way, throw away everything you have,”
that doesnt tend to play very well. So a key part of this is the hooks that we provide and that are provided into the systems that people built, either that they bought — in the last ten years everybody bought systems. They bought ERP. They bought CRM. They bought manufacturing. They bought payroll. They bought accounting. But 20 years before that, they built them. Right, they built their own homegrown systems, many of which are still working. We need to work with both sides, and we need to work also with where were going around XML.

And finally, since this hub, this business process hub is where things are happening, we need to provide the ability to look into that hub and figure out whats going on. How many outstanding loans do we have? How much outstanding credit do we have? How much outstanding something else do we have? So a key part of orchestration is learning whats going on in that business process at any given time, looking into it, checking the statistics and moving on.

So this is orchestration, and its built on top of, or is a step beyond the integration market. And Microsoft will have an offering into this space, and well compete with a number of other companies that I mentioned; incredible growth and transition in this space. Well be in that space. Other companies will have orchestration offerings as well.

The Microsoft offering to the orchestration market is BizTalk Server 2000. It released to manufacturing just last week, and Id like to update — well, actually to sort of drill into and demonstrate what it does and how it does it.

MR. WASCHA: Okay, so as Mike just said, we shipped the product actually a little bit more than a week ago. Its actually available in the retail channel today. Were really excited about that. It was several years in the making. The product team is very excited. Theyre already hard at work on the next version of the product.

Mike set the stage for what the environment looks like, and I want to show you how were actually making that a reality. Now, Im here to talk specifically about BizTalk Server, but all of those other products that Mike mentioned, we have RTMd, save one, I think. Application Center is the last one to go out the door. Weve shipped more products since September 21st of this year, you know, weve shipped seven .NET Enterprise Servers at one time, than we have in the entire history of the company. We are very aggressively, very assertively moving into this enterprise space.

I like to call BizTalk the lead dog. I think the SQL people might disagree with me a little bit.

But I want to show you how BizTalk makes some of the things that Mikes talking about when he talks about orchestration, how BizTalk makes that a reality.

Now, what we are looking at here on the screen, Ive actually brought an automated supply chain on my laptop. We have a proof of concept lab back in Redmond, and we go out and we practice what we preach. Weve purchased inventory systems. Weve purchased manufacturing distribution control systems from Accue. Weve purchased ERP systems from JD Edwards. And we have installed all those things on machines, and weve orchestrated a supply chain together with BizTalk.

So I replicated that on my laptop. Ive got a lot of things running on here, so please I apologize if its running slowly. But I want to show you how we use BizTalk Server to build an automated supply chain.

And again thats just one example. I think today thats one of the most palatable examples for people, because its relevant. You know, I understand that when I push
“purchase”
on a book on Amazon.com that a lot of things happen after that goes on. But this is equally applicable to filing an insurance claim with an insurance company or working with a digital marketplace; anywhere where there is a process and there are a lot of systems involved is where an orchestration technology or BizTalk Server is applicable.

So another kind of added feature of this demo is that were using Web Services. And Mike didnt go into what Web Services are. I think most of you have probably heard us mention them and you may not understand exactly what they are. Web Services are just that; they are exposing a service on the Web. Functionality that today might run only within your company, you can expose it on your Web site so that other people can go out and use it.

So today if I need to validate a credit card I need to go and dial up a modem and I need to dial into Visa, you know, use a dedicated line into Visa and I need to do my interaction with them. And when Im finished, we end the phone line, okay? So we have a dedicated dial-up line to Visa.

But one of the things that American Express is doing today, one of the things that Visa is also doing, is theyre starting to expose that validation functionality as a Web service, so that I as a developer can go and when I get to the credit card validation piece of my business process, I dont have to go to that telephone line. I dont have to dial up and do a lot of interactions over the phone line. I can do it all over the Internet. Im doing the same thing, right? Im sending them a credit card number. Im getting back whether its valid. Im sending them an amount that I want to debit. But Im doing it over the Internet. Im doing it programmatically. Im programming the Web. And its very easy for them to expose that functionality.

They dont have to do a lot of work to take what they have and expose it so that people can take advantage of it on the Web. Thats one of the things that the next version of Visual Studio, Visual Studio.NET makes very easy to do. It makes it very easy to take these systems that you have, these systems that youve invested in, and expose them on the Internet so that people can program to them, going over the Internet directly from their systems.

So we have an example of BizTalk Server here managing or orchestrating the interactions between a lot of different systems in the supply chain, and as an example of a customer who is accessing some of the elements of that supply chain via a Web service.

So Im going to place a quick order here, and then Im going to just kind of walk you through the process were going to go through.

Now, what weve done — we are Worldwide Suppliers — and what weve done is we have exposed a couple of things as Web services for our customers: First, placing an order. Now anyone sitting anywhere can program — when I want to place an order with Worldwide Suppliers, I know because they have a Web service exposed, they showed me the interface that I need to send them XML in, in order to place an order, that I can do that very easily over the Internet.

So this is an example of Duluth Mutual. They have built a Web site that takes advantage of that Web service for ordering things from Worldwide Suppliers over the Internet using a Web service.

The second place where weve exposed a Web service, and this will become more apparent in a minute, is checking the status. Weve exposed the status of an order from all of these systems — manufacturing systems, distribution control systems. BizTalk is keeping track of where the order is in the order process and, using Visual Studio, is exposing that status on the Web so that people can send a packet of XML and get a status report back via XML over the Internet.

So thats how these Web services and Visual Studio.NET and BizTalk are playing together in this scenario.

So what I want to do here is just create a simple order, and Im generating the XML just for the purpose of demonstration. This is what were sending over the Internet to the Web service thats sitting at the Worldwide Supplier site. Its just XML. It could be coming from any platform. It could be coming from any application anywhere. We dont care. With Web services everything is a black box. Regardless of platform, regardless of application, if you can send XML over the Internet you can use Web services.

So in this case I have created this XML order and Im going to send it to Worldwide Suppliers.

So let me talk about whats going to happen now that we have sent that. That hub that Mike talked about, that process hub that kind of is the puppeteer for the entire process, thats going to be BizTalk Server. So were going to send this order from Duluth Mutual. Were going to send it over the Internet through the Web service interface, exposed via Visual Studio, into BizTalk Server. BizTalk Server is then going to manage the routing of that information to the appropriate systems, doing the appropriate transformations. Well talk a little bit more about the details in a second.

So if I place my order, it should show up that Ive placed my order now. Now were using the Web service that exposes the order status. So again were just sending a
“please tell me what the status us”
in XML over the Internet, and from the Web service exposed of Worldwide Suppliers were getting the status back. So thats how we know that weve placed an order.

So lets go to our ERP system. BizTalk Server has taken this order from the Web service, handed it to our internal ERP system, our order fulfillment system. In this case its JD Edwards. So were going to look for order 51181, and well see that down here weve received our order for our Microsoft paper clips, and its in our ERP system.

So once its in our ERP system, the next thing we have to do is actually go ahead and build the paper clips. Were going to go to a simulation of a manufacturing facility. And this is actually a UI that companies will supply to their customers that allows you to watch whats going on in a manufacturing facility and to see where something is in the process. This is something that people actually use. This is not just a silly little graphic.

So were going to go and get our next order. Youll see that weve gotten order 51181 and weve started to build our paper clips up here.

And if we go back to our Duluth Mutual page, theyre watching the order status being updated by a Web service. Theyre sitting off we dont know where over the Internet and using that Web service to check for the order status. Were watching, if you look down here, every time it updates its watching the number of built paper clips go up there.

So we can speed this up. We can make things fly around. So were going to go ahead and skip watching it build a thousand paper clips, unless anyone wants to do that, and were going to go to the end. Weve built a thousand paper clips, and again if we just skip back really quickly to the order status page that is continually updating, we see that its been built.

So now once its been built we need to deal with getting it to the customer — and this means getting it from the manufacturing facility to the warehouse, and then getting it from the warehouse to the customer. Again, this is all a part of our process that people go through every day. But, remember, BizTalk Server is handily moving this information around from all of these disparate systems, potentially running on different platforms, running remotely in different places.

So if we go ahead, and were going to do an order query for our warehouse management system — and again this is a McCue warehouse management system — this is something that McCue builds today — they are very successful in the warehouse management space, and actually Im running this on my laptop.

So we have a new order, and we see its from Duluth Mutual, and we want to go ahead and we want to allocate this so that its picked in our warehouse. Now, on the left-hand side of the screen here you see this is a remote picking system — its by B-Squared. They do — they work with McCue to get inventory from McCue — we get it pick, packed, and on the way to the customer. So they have these remote devices that people have, they get orders sent to them. It shows the location, it shows what they are picking, how many they need, where its going. So its on the system here.

If we go ahead and pick it — so we walk down the aisle, we found the items we need. Weve put them in a box, we put them on this line, we hit — okay, we picked that — send me the next order. Okay?

Well go back to the inventory management system and well see that the order has been updated as
“picked.”
And, again, this is an example of where an internal system is taking advantage of that Web Service. Okay? It doesnt need to just be over the Internet. This internal system is using the order status Web Service internally to watch the status of the order as it moves through this process from purchase to customer.

So we see that its been picked. And if we go back and look at our order status, its in the warehouse right now. And if we go back and we say,
“ship the order off to the customer,”
we get a thank-you message. Well go back and in a second when it updates it should say that its been shipped off to the customer. So there you have it.

So, again, this customer is using the order-status Web Service, via BizTalk Server, to track the status of their order.

So, thats an example of using BizTalk Server as the kind process hub. It sits in the middle of an automated supply chain.

What I want to do is show you how we did that with BizTalk Server. Well delve a little bit into the technology. Im happy to go into more depth later, so I dont put a lot of you to sleep. I am happy to take questions afterwards, and you guys can come up here and look at what we are doing with the system.

So, lets jump over back to the slides here for a second. BizTalk Server really does three things, and you saw these three elements in this demonstration — and Mike talked about these three spaces where there are a lot of people bringing systems together. We have a complete offering in a single product, a single point of sale, a single point of support. BizTalk Server offers functionality in all three of these places. Now, you saw that we also have support for EDI, but we dont consider that to be a major functional area. But we have support for EDI systems, so that people that are using EDI today dont have to throw those systems out. They can Web-enable their EDI systems, bring them forward.

There are three layers — I just want to jump into a little more architectural detail than what Mike talked about. There are three layers to this factor. There are three layers to the complete solution that people need to achieve the speed in time to market, the speed in making updates, responding to competitive pressures and what customers want, learning from your business, learning from the data moving through your business. There are three layers to it. The first is the communication layer. Today we kind of take that for granted, this kind of the TCPIP layer, the Internet, the intranet, et cetera.

The second layer is the integration layer, and this is where those companies like STC — and SeeBeyond actually is the name of STC — its companies like that make their bread and butter today in kind of the EAI space, or helping applications talk to other applications internally. So when McCue, that order inventory management system, was talking to the remote picker, that was an example of an EAI interaction.

And there are a number of challenges that developers run into today at this layer, at the integration layer. The first and foremost is the data transformation. Mike talked about there being four different formats for all the digital marketplaces, and 80 different XML schema. How do you make it so that those things are speaking the same language? Well, no one is every going to agree to use the same schema, so you have to sit in the middle and do a transformation — take that data format from one end and turn it into what the other party is expecting on the other end. And Ill show you how we do that in BizTalk Server in this automated supply chain example.

A number of other things at this layer: You have to worry about security, encoding, encryption, compression. You have to worry about all of those proprietary transports that Mike was talking about, and all the protocols, Rosseta.net, EB XMLs, TPA XML — theres a bunch of them out there. Some of them have been around for a long time; some of them dont exist yet, but they are on the drawing board, but there are some out there that you need to keep track of.

Theres a lot of different things you need to worry about at this integration layer. The first functional part of BizTalk Server is the BizTalk messaging layer, and that is the layer, the piece of the product that takes care of all those problems.

The second layer, or the top layer, is the orchestration layer, and this is the technology that we are excited about in BizTalk Server. As Mike said, in the new orchestration vision, the integration technology is there too. They become a commodity. They just expect that they will be there; everything can talk to everything else. You need that as a first step. Its necessary, but not sufficient, to building a complete solution.

The top layer is where things start to come together, the orchestration layer — how you tell everything thats connected, you tell it what to do. You tell it what to do if something goes wrong. You make changes to that layer so that you can change your business process, so that you can react to what competitors are doing or what your customers want. Thats the orchestration layer, and thats what we call BizTalk orchestration. Those are the functional pieces of the product. Theres talk messaging for all those integration pieces; and then the orchestration layer for managing the business process.

Those two things together comprise what comes in the shrink-wrapped box, of BizTalk Server, when you walk into Egghead Software. You probably wont actually go into Egghead to buy BizTalk. Its a little too pricey for them. Its the first product at Microsoft where the product is more expensive than the car you drove over to Egghead to buy the software.

So, on top of those two pieces of functionality we have a number of tools. And these tools map to the process the developer would have to go through to build these systems today. All of these tools — there are some common design points. One, you dont have to write any code. If you want to very quickly build these systems, very quickly make modifications to them, if you are adding thousands of suppliers in a month, writing code doesnt scale. It doesnt let you do things as quickly as you need to do them to stay competitive. So all of these tools are either Wizard-based or graphical or WYSIWYG tools. They are accessible to the non-developer. They are accessible to the IT staff. The point being that when you design one of these projects that today would take three years and cost millions of dollars, you could really scale that down both in the time it takes to get to market and the cost of the system.

Ill talk about some customer examples at the end, but we had one of our early adopter partners, Health Access. They are a company that has to take insurance requests for quotes over the Web and integrate with dozens of insurance carriers and nine different back-end mainframe systems. And they have to do all of that in real time. They use BizTalk Server to offer that service, to aggregate all of those different insurance carriers and back-end systems together into a single offering. In their first pilot project they took something that took them about 6,000 lines, 5,000-plus lines of code to build. They redid it in a matter of days, in under a week with BizTalk orchestration, what I am about to show you, and they were left with 100 lines of code. So that just gives you an idea of the unparalleled productivity that this product is giving people today.

So, I want to talk about the orchestration design and then one other tool. Lets take a look at this process that we built here. This is the actual BizTalk orchestration designer tool, and this is the actual process that we just went through, from receiving that order from the Web site, straight through to shipping it out to the customer. That entire process is designed here now. This is it. This is the entire process. That probably represents between 10 and 20,000 lines of code if you were to write that by hand today. You could do this — once you understood the process you can do this in a matter of weeks or days — in less than a week.

If you can see, we can really quickly walk through this. This is where we received that purchase order. This is where we sent it to the JD Edwards system. If it was successfully received by the JD Edwards system, we send that acknowledgement back to update the order status in the Web Service, and so on and so forth, moving through the manufacturing system, et cetera.

Now, this tool represents a new way of looking at designing these. Mike talked about separating your process logic from your computational logic. Its very important. Its very important that you have a visual representation of your business process. Because today these things are spread out across eight systems and three platforms, and your, you know, subsidiaries in Europe. And its hard to point at something and say, Thats my business process, thats the thing I want to change, thats the thing I want to optimize. Its hard to do that today, because those things are so spread out and hidden in four different languages, et cetera.

BizTalk does two things. Its orchestration designer does two things for the developer. One, it brings that business process into a single place. And, secondly, it separates the business process from the stuff thats doing the work. We dont care what platforms its running on. We dont care what database it is. That really isnt relevant to the core business process. So on the left-hand side of the screen, we designed this abstract business process. This says submit to ERP system — it could be JD Edwards, it could be somebody else — we dont care, right? All we know is that at that point in the business process the order needs to be submitted to the ERP system.

On the right-hand side of the screen is where we start to hook up this business process to the things that are doing the work. Its where we say,
“What I mean if I submit to the ERP system is actually: Go find the instance of JD Edwards, call this method on this component with this document, and insert it into the ERP system.”
And to do that we use the adapters on the right-hand side of the screen. These are the things that allow that business process — its where the rubber meets the road.

So you can imagine, number one, we can build this process very quickly. But, number two, if we needed to make a modification, we could also do that very quickly without writing any new code. If we wanted to insert a new point in our process, we could really quickly delete, we could add a new action — say that Mike wants to get an email every time someone needs an order — we can add a new action that says,
“Send Mike an email”
— connect it to that. And if we drag the email component on the screen and hooked it up, then the next time I compile this, and the next time I walk through that process of placing orders, Mike would get an email — I have changed my business process — it was that easy.

In BizTalk orchestration designer the picture is the process. And, again, thats a hard concept to get across, because when I go out and Ive talked to literally tens of thousands of people in the last year about the product, they think,
“Oh, thats just Visio — thats just — you know, Ive got to go print that out, I have got to go hand that to my developers, and then theyre going to screw everything up.”
Thats not the case. In the case of the orchestration designer, the picture is the process. We actually compile this visual representation into an XML representation of the process that is then run at a runtime by the orchestration engine. So when you make a change to the picture, you recompiled it, and literally the process is changed, and it was that easy.

Now, another example — I showed you those six tools of the product. Another example of one of those tools is the BizTalk Mapper. This is a tool that allows you to let one thing talk to another thing when theyre not speaking the same language. And its — again, this is one of the most popular tools in the product. People have asked us to break it out and just sell it stand-alone. This is where we are taking — for example, this is an example of what a small company in New Jersey, Aircast, is doing. Aircast is using BizTalk Server to take XML orders off of the Web from a medical marketplace and insert it into their EDI order fulfillment system. Now, initially — you know, theyre a small business — they made this investment in their EDI order fulfillment system — and they cant just turn on a dime. They dont have the money to rip that out, throw it away, and build something new to Web-enable it. And when they talked to a lot of vendors, thats what they said that they were going to have to do. So they — you know, they downloaded the evaluation copy of BizTalk Server, and they said,
“Lets see if we can get BizTalk to do this for us.”

And what we are doing here is we are actually taking for Aircast that XML order from the medical marketplace over the Web, and we are transforming it into the EDI that they need it to be in to insert into their system. So they are Web-enabling this EDI system for a very low price, something that they could very easily afford.

Now, we are literally building the transformation here. In a lot of cases you are just going to do a straight pass-through — we want first name in here to go to first name over here. But, more often than not, you are going to need to do something to that data. You are going to need to do something to it before you do the transformation. Thats where the little macros, or what we call
“functoids”
— and I didnt come up with the name — what we call
“functoids”
— they play that role. You can do a monetary conversion from dollars to francs. You can do a date conversion if youre working with mainframe systems. Obviously theyre case sensitive, you need to do a lot of string manipulation. We have a library of about 60 of these
“functoids”
today. You can build your own.

Again, this is an example of where we take something that today this is very difficult to do, you have to do by hand, the higher developers to go build it in code, and we turn it into a tool thats exceptionally easy to use. And again people are seeing unparalleled productivity with all of these tools.

One other point to make about this tool is that when we compile this visual representation, we dont compile it into a proprietary format, which is common among a lot of these types of products. We actually compile it into XSLT, which is the W3C standard for building transformations between two disparate file types or file specs.

So wherever possible throughout the product, and throughout all of our products, were using W3C, IETF and ECMA standards. And thats really been a theme thats been handed down from on high as the direction that were going with all these products, how you get at them. You get at them through open standards.

So, I talked about customers. One of the requirements we have for shipping a product is that all of our early adopters say,
“Yes, its ready to ship.”
They literally have to sign on the dotted line saying,
“Im happy with the product. Im in production. Its doing what I want it to do”
before we can ship the product. We had 15 of those early adopters, ranging from Ford to Verizon to the small companies like AirCast that I talked about. The product is just now becoming available in the retail chain, but weve already got it out there. This is actually two weeks old, this slide; its probably closer to 200 people by now that are using the product in production today.

Mike talked about the assumptions, and one of them is the assumption that you have integration technologies. But if you take a step back, there is a lower-level assumption; these are what we call the abilities: Is the thing running all the time? Is it reliable? Is it easy to manage? Things like that. Is it scalable? You know,
“Today, I have 5,000 people come into my website a month, but hopefully a year from now there are going to be 100,000.”
So can the underlying infrastructure support that kind of growth?

We have made a ton of headway with Windows 2000, with Windows 2000 Data Center Server and Advanced Server, into showing people — and the best way to talk about this is to show them our customers — into showing people that, yes, this underlying platform that BizTalk sits on top of can support all of these abilities. So we have a number of very large customers: EuroClear, the NASDAQ for Europe — actually, it should be on this list — is a company thats doing huge amounts of transaction volume. Theyre having great up time, what we call five nines — 99.999 percent up time. So those are what we talk about when we talk about the abilities.

Moving forward, kind of the forward-looking elements of what a company is going to need to be successful, we talk about the agilities. Okay? These are things like how quickly can you build something, how quickly can you make a modification to something, how is your technology going to change the way you do business fundamentally? We talk about this when we talk about the agilities.

I already told you about the Health Access and AirCast examples. Phonetrics is another example. Phonetrics is an ASP, or an applications service provider. These are people that run an application and offer it as a service on the Web that you access typically via a Web browser. Theyre the only company that has an ASP license for SAP on the planet. They use BizTalk Server to take SAPs functionality and make it available to people via the Web.

And again, theyre another great story of the price performance of BizTalk Server. They went out and they actually tried to build — they tried to build a system with Web Methods first, and they spent four months on it, and they couldnt get it to work. And they said,
“Oh, by the way, if we could get this to work, what would it cost?”
And they were quoted about $2.3 million. They got the first pilot project — when we approached them with BizTalk, they got the first pilot project with BizTalk running in four days, and the ultimate cost of the system was $200,000 to build the same system that they were trying to build with the Web methods products.

So, being able to build something quickly, being able to do it cost-effectively, being able to fundamentally change the way that youre doing business, these are the things that we talk about when we talk about the agilities. And we have a number of great stories already, you know, even before the product is available in the retail market, with BizTalk Server and Windows 2000.

Now, this move into the enterprise space is more than just a product effort. Its an entire Microsoft-wide effort. And it goes far beyond the product. Were changing fundamentally the way Microsoft does business. Not only are we shipping more reliable, more scalable products, were, you know, applying much more rigor to the development process, but were also changing the way we sell those products. We need a much larger sales force. We need a sales force that knows the enterprise. We need a sales force that understands the problem of the enterprise. We are making those structural changes to the company. A lot of you probably read our VP of sales Orlando Ayalas column. Actually, Becky Buckman is here tonight. She wrote the column in the Wall Street Journal. He is the vice president of sales and he is the man that is in charge of changing that structure.

We also are changing the way we support the product. Today, Microsoft is not known for support. Were known for selling the products and were known for building the products, but were not known for supporting the products. And these are, again, enterprise requirements. When an enterprise buys software from a company, they want to know that if they have a problem, that they can call a number and someone will be there to help them. Steve Ballmer has mandated to the entire company that we will provide enterprise-level support. We have a program in place, or just about to be in place today, where anywhere on the planet if you buy Windows Datacenter server you can make a phone call and someone will be on site to help you within four hours. Thats the level of enterprise level support were talking about, and that the whole company is moving towards.

So we also have in the building space — because, you know, today we have a lot of individual developers, we have developers in the small business space, but these enterprises need large systems integrators to come in and build these products. We are working with thousands of Microsoft-certified professionals. Were working with Accenture, which used to be Andersen Consulting. Were working with Avenade. We have legions of people, tens of thousands of people, around the world, from Compaq Global Services, Avenade, Accenture, KPMG, et cetera, that are ready to go out and build this BizTalk solutions on the Microsoft platform for customers. Thats globally.

Now this is just to give you a quick overview of all the products that I mentioned in the beginning. All of these products ship this year, save Applications Center. We can go into more detail in the question-and-answer period, if people would like. But this is a coordinated effort to solve the problems of the Enterprise, to allow them to build their systems more quickly, build their systems more cost-effectively, and change the way they do business by offering a solution in every area where they have pain. Biz Talk Server is just a piece of that puzzle.

We have Commerce Server, which allows you to very quickly build Web sites, for selling things on the Web and for doing B2B interactions and catalogue interchange with these digital marketplaces.

Obviously, SQL Server — its our database — but weve done amazing things with the business Internet and Linux and the OLAP services in BizTalk Server. So you can learn from your data more easily.

We have Host Integration Server. We talked about leveraging your existing investments. You have AS-400s, you have DV-2, you have tick systems, right? Those dont go away. Youve spent too much money on them to throw them away. And they work, but you need to move them forward into this orchestration realm, and thats what Host Integration Server is for. Its for allowing you to get data out of those systems, those legacy systems, and do something with it, and then insert it back in at the end of the day.

ISA Server, the longest-named product in Microsoft history, Internet Security and Acceleration Server 2000 is the firewall product for the company, and its also our inbound and outbound caching server to allow you to scale your Web site traffic more easily.

Exchange Server is obviously our email collaboration system. Exchange is doing some amazing things in the collaboration space to go out and let us compete with Lotus Notes in that area.

And then we have Application Center, which is the infrastructure for managing these Web farms that you have. When you want to scale out, you add more servers to meet the demand of the volumes of people coming to your website or transactions that your company has to provide. Application Center is about managing those Web farms — very quickly adding machines, monitoring machines, monitoring the health of machines, keeping track of them, replicating them, et cetera — all of those tasks.

Last but not least, Mobile Information Server 2000. This is about taking advantage of your Enterprise data, your Enterprise functionality, on small devices, WAP-enabled cell phones, PDA devices, et cetera. This is not a product thats shipped this year — actually, I should call it Mobile Information Services 2001 — itll ship near the end of this year. Those are all of the .NET enterprise servers. Its a coordinated effort to solve the problems of the enterprise going forward.

So with that, a quick summary and then well go on to the Q & A.

One, very quickly, these integration technologies are becoming assumed. If you dont have them now, people are going to look to start to look to investing in these today, to thinking about their infrastructure, to thinking about how they architect their enterprise to make use of these systems so that everything can talk to everything else.

Orchestration is that vision. Once everything can talk to everything else, how do you tell it what to do very quickly and very cost-effectively?

BizTalk Server 2000 is at the forefront of our orchestration efforts, but its built on a very solid and reliable platform, Windows 2000 and SQL 2000. And the business opportunities here are many. They span the gamut from solutions providers who can now go out — you know, Ive talked to our solutions providers, this is our kind of second-tier integrators. I say, were going to give you a bulldozer for the price of a shovel. You can get into accounts that you could never get into before because you didnt have the expertise and the ability to go in and build an EAI system because they cost $5 million. So now, they have business opportunities there. They have these business opportunities for entire new business models, some of which Mike mentioned.

You can imagine, at some point in the not-too-distant future, everything being exposed as a Web service, everything from order fulfillment to shipping to purchasing, and aggregating all of those things together over the Internet, using BizTalk Server. You have a virtual company. You dont own anything, you dont ship anything, you dont do anything. But you own that business process. And that all lives on BizTalk Server sitting out in the Internet.

Those are just a couple of examples of some of the new opportunities that this new market of increased transaction volumes, this new market where these integration technologies become assumed are going to allow people — BizTalk Server is one of the things that we are really excited about as a company going forward thats going to allow people to do that.

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