Remarks by Steve Ballmer, Executive Vice President, Sales and Support, Worldwide Business Strategy Group
May 31, 1998, New Orleans, LA
STEVE BALLMER : It’s my great pleasure and privilege to have a chance to be here with you this morning.I’m only disappointed that I was unable to keynote our first Fusion event last year, because for me probably the most exciting thing that I get to do in my job at Microsoft is to talk to employees and talk to our solution providers.No matter where I am in the world, no matter where I go, the chance to really sit down, to get feedback, to hear what people are thinking, to get your ideas, to hear your concerns, your problems, it’s really an uplifting experience for me.
It’s been almost six years now since we made a decision to really try to invest in business partnerships with the people in this room and a number of others around the world.We made a decision at that time that it was critical to us, it was critical to our customers, and that there were simply just wonderful opportunities to try to really link out and forge a bond and a partnership.I happen to think that was the single best decision that we’ve made in a sales and marketing sense in the last ten years.
I love our solution providers.Not only do I love talking to you and hearing what you have to say and hearing your feedback, but I love the kind of businesses that you’ve built.I love the success that you’ve had.I love the opportunity to learn from you.And so, it’s just such an excitement for me to have a chance to be here with you at Fusion to give you a little bit of my view of where we are together, what we can do together in the future. And then I’ll have a chance to take from many of you this morning and through today your questions, your comments and your feedback.
At last year’s Fusion event, one of the things that we heard — and, frankly, when the guys first came back and were talking to me about it, I didn’t get it.I was a bit surprised.I was a bit confused. Frankly, I don’t hear much about this in the one-on-one sessions that I conduct around the world.But we heard loudly and clearly last year that in some senses, the industry that you participate in, the industry of providing a wide range of services and hardware and software to businesses small and large, that in some ways you don’t have as clear and well-identified an identity in the marketplace as you’d like.
Why would anybody care about that?Because of when it’s time to go for bank financing, when it’s time to go raise equity capital. Our solution providers last year were telling us, hey, come on,you need to try to help.Give us some tools that explain who we are, what we do, the scale and size of the opportunity of the business in which we participate.That will make us better at working with our local governments to create a climate that is conducive for the kind of business that you do.We should have material that will help us raise the equity capital and the bank financing that lets us continue to grow our business.We need the identity that will help us continue to receive and attract the best technical professionals in the business so that we can continue to build our business.
At first, I’ve got to admit, I just didn’t get it.Our team’s been kind of working on this and was so passionate about the kind of needs that you articulated last year that when we went out over the course of the past twelve months, we did a major study of economic research with the companyNathan Associates to try to really help produce a fair description and some…(inaudible)…to use to help you describe your business, who you are, what you do, and give you the tools that you need, whether it’s to raise money, recruit new people, work with the local government authorities, et cetera.And I thought before I get into some of the challenges I see, I would now characterize what we’ve learned and the kind of tools we hope to give you in this crusade.
The data that I’m going to give you today are all data for the United States.We can extend and run this study now in other markets now that we really kind of understand it, but I’m going to give you the data for the United States today.
What we found is the class of people who we have chosen to call high-tech entrepreneurs, which includes VARS and VAPS and solution providers and small systems integrators — we didn’t include the Microsofts and Compaqs and Unixes of the world.We really wanted to focus in on the category of entrepreneurs, like the people in this room, who started and built and have grown their businesses, not the people who are the largest software companies and the big famous systems integrators.So we…(inaudible)…all that out.We didn’t include any of that.We focused in on what we’re gonna call the high-tech entrepreneurs.
And what we found is in the United States alone, the high-tech entrepreneurs, the systems integrators, the VARS, the VAPS, the solution providers, the custom developers, the small…(inaudible)…did over $300 billion in gross revenue.The companies that you represent and others comprised over 1.7 percent of the entire US economy, 1.7 percent, which is truly stunning.
Of course, the high-tech entrepreneurs are located in every city and every state.It’s funny, you can go — I can still go to places — Atlanta, to Washington DC, to Dallas, places which aren’t sure whether they’re high-tech areas or not, and I can talk about the strengths and vitality of the efforts of our solution providers to the press.And it, frankly, shocks the press.The press has no idea that there are over 20,000 companies in the Washington DC area that are high-tech entrepreneurial companies like the companies in this room that are doing incredible and amazing work.
Throughout the United States there are about 230,000 different businesses that are engaged in high-tech computer entrepreneurial work — 230,000 businesses.We learned more, though.We learned something about the economic impact of what you do.This is important to you, this is important to the people who finance you, and this is important to the people who create a climate in which you do business.
High-tech entrepreneurs — again, throwing out the IBMs and Microsofts, et cetera, et cetera, of the world — employ over 2.2 million people in this country.You pay over $109 billion in direct wages.There’s over 300,000 open jobs. Thatcomes as no surprise to anybody in this room.We all know that hiring and recruiting and training the best talent is the biggest challenge for most of our solution providers.But 300,000 is a mind-boggling number, frankly, when you say it to people in the educational system or in the governmental bodies.People who are dealing with the problems of training young people, people who are dealing with the problems of unemployment, they look at that number and it is staggering, the job growth still to come in your businesses.
The overall contribution to the US economy that says over $134 billion dollars — And I hate to give you some bad news, but you paid over $55 billion of taxes, 99 percent of which is probably trying to regulate us at this time.That’s my only political announcement on our department of justice trials and tribulations.
It is an amazing…(inaudible)…, though, that the high-tech entrepreneur community is…(inaudible)…on American business, and we wanted to make sure that you could really go out and explain that to people very well.
When we dug further, we found there’s really quite a range in the size of the businesses that you and others have started.Fifty-three percent of the companies of the 230,000 companies are under 500,000 in sales.They have an average of just two people, and they average $152,000 in sales per year.Small companies.About 30 percent of the companies are between 500,000 and $2 million,averaging close to a million, with eight people.And only 17 percent of these companies of the high-tech entrepreneurial… (inaudible)…is over two million in sales.Average is $5.7 million and is 35 people on average.
So you have a range.You have people in very small startups.People who have chosen to stay small.People, like many in this room, who have chosen to really aggressively grow and build and develop their business.
I remember when I was a kid in college and we were all talking amongst our friends about what kind of business could you go start up on your own, what was a good business, and what could you raise money for?And I remember talking about franchises.Wow.We could get a McDonald’s franchise.We could get a Campgrounds of America franchise.What insanity, when we lived in a time when the real entrepreneurial opportunity in the United States is in starting companies that are involved in high-tech services and support.And I want to congratulate and solute everybody in this room for having, frankly, more foresight I guess than I did, and really getting involved in this business.What you’ve done, and what you’ve achieved, is amazing and something that we certainly are certainly very thankful for and appreciative of.So thank you very much.
As we thought about and worked on this project, we did want to give you some tools, as I said, that you could use with the local governmental authorities,bankers, potential equity investors, to explain who you are and what you do.
So we’ve actually produced, or are in the process of producing, some brochures about high-tech entrepreneurs.This brochure material is up on the solution provider Web Site as of this morning.We hope it will help you with whatever set of activities are hot on your radar screens.And we hope what we’re doing here is very responsive to your needs to have tools that help you grow your business more aggressively.
We will be doing more public relations.We will be doing more marketing.We will be doing even more to try to really play up the concept — not only of high-tech entrepreneurs — and really explaining what this, why it deserves more in the way of equity and bank financing, why it’s a good place for young students to go work, but also, and perhaps most importantly to the people in this room, why Microsoft certified solutions providers are the creme de la creme of the high-tech entrepreneurial crowd.
as they say, how do you…(inaudible)…versus the full set of high-tech entrepreneurs that we profiled?First of all, you’re more successful.On average, a Microsoft certified solution provider generates $3.8 million of revenue versus $1.3 million for non-solution providers.You employ more people, on average: 30 people compared to ten people in non-solution providers.Your business tends to be more service oriented, as opposed to retail oriented like the non-solution providers.That is, you provide more jobs, more revenue, more taxes, more opportunities and have greater success than the balance of the population.
We want to make sure you have this data because we hear time and time again that people and money are the two scarcest resources in your business, and we’re gonna do everything we can, of course, to provide you products and training and everything we can from a Microsoft perspective.But I think as an industry, we all need to try and invest to make sure you can go out and recruit the people and attract the capital that you need to successfully grow your business, because if you don’t grow your business, we cannot grow our business.We bet fundamentally, absolutely, completely 100 percent on you.And so it’s very important for us to see you with the resources that you need to drive forward and build your business.
We also asked Nathan Associates, as part of this study, to take a look at what high-tech entrepreneurs in this country really do, particularly with respect to products.So they did the survey, and they asked a number of high-tech entrepreneurs as part of the survey to really tell us what percentage of their business came from, or was derived from, or built around products from different companies, from Microsoft, from IBM, from Lotus, from Unix, from Novell…(inaudible)… Workflow, et cetera, et cetera, et cetera.And you can see here some interesting numbers in the small, the medium-sized, and the largest entrepreneurs.
With the smallest businesses, almost 40 percent of what high-tech entrepreneurs say they do is based on Microsoft technology, compared to under 20 percent for all of our critical competitors combined, IBM, Lotus, Unix, Novell.Of course, we felt good about that, but what we also noticed is there’s so much more going on, in terms of custom development and work with other vendors, that there’s incredible opportunity.
As the size of the solution provider grows, or as the size of the high-tech entrepreneur grows, more and more of what you do is based around competitive products or, frankly, just other vendors in other application categories.So we see a real opportunity here to broaden, to deepen, and to further drive our relationship with high-tech entrepreneurs in general and with people in this room, very specifically.
If I could just have the lights up for just a minute, we’re going to do an audience poll.It will also be my way of seeing whether people are really awake this morning.Lights up over the audience, please.Ahhh, there we go.There’s people out there.Tremendous.
By a show of hands, how many people in this room would say that in some way, shape or form, 50 percent of your business is derived from being built aroundor built on top of Microsoft software in some critical way?Windows sort of doesn’t count, I guess I’ve got to say.And for how many of you would you say business based around Microsoft is under 25 percent?It’s almost an invitation not to stick up your hand, I guess.I didn’t see any hands, but if I did I’d want a chance to meet with you immediately after this session up front.
To give you something of a feel for how (inaudible) we are together, I want to answer the question the other way.What percentage of our business do I think our solution provider community strives for?And if you ask that question, I think the answer is quite clear, that while you may not sell the software, our solution providers are clearly involved in the delivery, the installation and the maintenance of over 50 percent of Microsoft’s revenue.So much the way you are dependent on us, we are equally dependent on you.And, of course, that’s what brings us together here.That’s what makes this a conference that’s well worth the time for us both to invest in and move forward.
There’s whatI like to call a big, huge cycle of growth that occurs between us and our solution providers.We invest in more innovation, we integrate that into our four products, at least for now.That adds value to the product.That drives interest among customers.That enriches the tool sets available to our partners.That gives you the tools to go out and create the solutions to deploy the solutions that can make the customer successful.You invest in learning those things, and we invest, hopefully, in getting you trained and educated and we go to market together to try to drive our mutual sales and profitability.That leads to a level of success, which allows us to invest in more R and D, more training, and it let’s you invest in more people, more training, more success, and the system just goes and goes and goes and goes and goes.
And I think, frankly, together, we can have something of a snowball that’s barreling down the hill and picking up speed and momentum.And while we may have started this thing all together, whatever, five, six years ago, I think we have huge possibilities in front of us.And I’m gonna highlight some of those.I’ll admit to being a little bit parochial.I want to highlight them from the context of our products and our competitors.
I want to start with a discussion of our R and D investments, because that is part of this virtuous cycle.In our financial year, which ends in June, we’ll do about $2.6 billion in R and D.In our next financial year, the numbers aren’t in, and they’re not final, but I’m guessing we’ll spend $2.9 billion, maybe even $3 billion in R and D.You can ask, is that a big number?Well, it sounds big, of course, but is it really big?
The only companies, which are really in another league in the United States, are General Motors and Ford and IBM, although they, of course, spend their money in many other places.But then you get down to a bracket that includes Microsoft, Intel, Hewlett Packard.We’re all spending about $3 billion, maybe a little bit more, in R and D.And that R and D, at least in our state, is really quite broad.
We started out to build a basic research division several years back.That division is now 300 people, and they’re doing interesting work in very large-scale systems, in very high-speed networks.They’re doing research to hopefully let the computer learn to see you, listen to you, learn from you.We’re doing work with handwriting recognition and voice recognition, in natural language, in vision.And the bulk of that $2.9 billion dollars is really going into three boxes: the Windows box, the Office box, and the BackOffice box.That will be next.Over two-and-a-half billion of R and D making those products hopefully more capable, more functional, better tools for you to use, cheaper and simpler to deploy, simpler for you to pick up, and every year we just keep improving and improving and improving.
It is pretty amazing that for, literally, a couple hundred dollars a year for a personal computer you can buy $2.5 billion of R and D, for just $200 to us and an appropriate set of services to our partners to go deploy and manage and get that R and D investment productive inside that organization.So $2.5 billion just in this four set of products:Windows, Office, and then…(inaudible)…Exchange, and more of the Back Office products.We think that’s the fundamental reason why we sit here together.We sit here together and you’re interested because we’ve had success together, because we’re continuing to invest in our mutual future, and we worked well to build business together in the past.
The next twelve months are, frankly, I think the hottest time we’ve ever had together bar none.We’ve got great new stuff coming, and it’s almost a little hard to believe.It starts with Windows NT5.Stan talked a little bit about that yesterday.Frank…(inaudible)…group who’s in the Windows NT5 development group is gonna talk to you about that some more this morning.
But NT5 is a unique opportunity, perhaps even more so, in fact, certainly more so than Windows 95.It’s one of those opportunities to fundamentally revamp and restructure the infrastructure inside our mutual customers, to leave them with an environment that is both more functional and, significantly with NT5, lower cost to them to own and manage and run on a go-forward basis.
We have our new release of Office because — Everybody yesterday called it Office 9.I’ll bet you by the time we’re done, we’ll call it Office 2000.I’ll bet.That’s not a schedule prediction, that’s marketing.Can you imagine coming out with a product called Office 99?Whoa.(Inaudible)…but I don’t know how.So let’s talk about Office 2000.
Office 2000 — and we’re just starting now — I think over the next couple of weeks you’ll all have your hands on the beta release of the product.I don’t know.Maybe some of you already have it and decided to experiment.But Office 2000, while being a great upgrade for individual users, is also a phenomenal tool for…(inaudible)… productivity and for your development and integration of custom applications, the way we extend access, the way we…(inaudible)…in the client-side version of People Server, the way we build in the HTML…(inaudible), the way we build in web browsing collaborations and…(inaudible).
As fundamental features of Office 2000, we’ll create opportunities, not just to sell a little Office and get it installed, but for you to customize and build applications that really bring dramatic value very quickly inside the organizations you serve.
People Server 7 has taken a long time for us to get done, but it is really a quantum step forward in salability and ease of use and ease of management and ease of development from People Server 6.5.We’ve reworked our engine.The data base engine in People Server 7 is really a foundation for the next decade.You’ll see the big…(inaudible)…vendors, the big workflow vendors, thebig vertical market application developers pounce on People Server 7, not only for the middle market, but I think instinctively you’ll also see it in the largest enterprises in the world.And it’s an opportunity that I would be remiss not to highlight for you here today.
Site Server 3 is a product that we just — By a show of hands, how many people here have any experience at all with the Site Server products, either standard or…(inaudible)?Okay.More hands than I would have thought, and probably more hands than we deserve.
Site Server’s a wonderful product.It really is.A superb product.That’s what I’ve been hearing from solution providers for the last six months.And all the people want to tell me, why don’t you market it more?Why don’t you tell the story of Site Server louder and clearer and more compellingly to our joint customers so that we can go forward.(Inaudible).
Exchange.We have a new release of Exchange that will come out shortly after NC Server 5.Not only will it lock up and use the active directory and the new security infrastructure of NC5, but it also offers a phenomenal set of new collaboration and workload capability.
And, of course, Visual Studio 6, we’ll talk about at quite some length here …(inaudible)…over the course of the next several days.
In this…(inaudible)… of new products, we, together, have to go forward and win key customer solutions.The dialogue that we are all having with our customer, I think, is consistent over the course of the last few years.
I was talking to Tom Bamberger from Sequoia, who will come out and speak to us here in a minute.He’s one of our solution providers in the Detroit area.He was making the point in many discussions nowadays, the dialogue has shifted from being pure features, checklists, technology, to which vendors are capable vendors and which vendor — which vendor product set can really be quickly mobilized which can deliver the solutions that we’re interested in.And that’s why you hear us talking about digital nervous systems concept, which probably is a little harder to understand than I wish it was.You’ll hear us talk about how you do analysis and tracking and commerce and collaboration and messaging on top of the Microsoft platform of products.And we’ve got good competitors.We have competitors like Novell with Netware in the infrastructure stage, (inaudible)…particularly in analysis and tracking, but also a line of business applications.IBM with Lotus and some of their other stuff coming after us with…(inaudible)…and collaboration.Or maybe I should say we’re going after them.Probably I should say we’re all trying to…(inaudible)… this category to really make it happen.But together, this is the new…(inaudible).We need to learn together how to payoff on this demand for solutions.
I just came from Seattle where we had a group of 120 CEOs, really from the largest companies in the world, from Boeing, from Johnson & Johnson, from The Gap, from GTE, from US West, the largest businesses across the world.And we talked to them about IT, what IT can do for their business.We talked about electronic commerce.We talked about the digital nervous system.And what was the magic question that we got after kind of talking a little about this…(inaudible)… demonstrations, what’s possible and what’s capable.We got the magic question from a CEO.How do I go build a digital nervous system?What do I have to do, and, specifically, who do I talk to?
We’re not very good today at Microsoft, and I actually don’t think we’re very good today in partnerships, in talking to those line of business decision makers, to the CEOs, to the VP of marketing, to the people who are trying to think through these solutions.We’re gonna have to continue to improve.Not each and every one of you, but those of you who accept this new challenge.We’re gonna have to really improve how we engage in that dialogue, because there is a mound of opportunity for us together to satisfy another set of needs with our product sets and your services inside these kinds of organizations.
I want to give you some examples from some of our solution providers of how we have started to break through both competitively and break through in terms of solutions.So I’ve asked today, and they’ve agreed, three of our solution provider partners from around the world to come on up and join me to tell you a little bit about themselves, how we got involved together, why they got involved with us, and what the impact has been on the success in their business.
The first person who will join me is Jeff Crawford.He’s VP of technology for the Macro Group in Minneapolis, Minnesota.We got to know Jeff really quite recently as part of our efforts to reach out to people who have traditionally focused in on high-tech entrepreneurship around the Oracle platform.Jeff’s firm has about 30 people, $6 million dollars in revenue.And if you will please join me in welcoming Jeff Crawford from the Macro Group, we’ll hear a little bit of Jeff’s story.
JEFF CRAWFORD: Hi, everybody.This is a little smaller room than I’m used to working…(inaudible)…little nervous…(inaudible).Macro Group.Minneapolis, Minnesota, that’s where we’re based.That’s where we do all our work.We’re about 40 people, as Steve mentioned.Planning on six million in revenue this year.I’m one of the co-owners of the business.We provide a wide range of services in Minneapolis.We do development.We do a whole life cycling development services.
But I think what brought us onto the radar for Microsoft, and what has engaged and has done very well in our partnering with Microsoft, has been our specialty in database technologies.We have done a lot of Oracle work.We have done a lot of…(inaudible)…work, a lot platforms.I could go on and on and on.
Our staff is a collection of people that average about 15 years of experience.They have worked on mainframe client servers.All of our…(inaudible)… two or three or four languages under their belt.All of our DBAs have worked on two or three or four platforms.So we’ve been…(inaudible)…quite a bit of competitive knowledge — competitive knowledge about the platforms.And I think it’s that imperative knowledge, that credibility that we bring to our clients that really puts us in a big competitive position.
STEVE BALLMER: …(Inaudible)…we said, wow.Look at the capability of that Macro Group.And I don’t know exactly what percent Jeff would say we were doing together a year ago, but it could round to zero, couldn’t it?
JEFF CRAWFORD: Well, it would be pretty close, you know. It’s been a little more than that.
A couple years back, Microsoft really came on to our radar in terms of our technology and our focus in database — When People Server 4.2 was — I don’t know if any of you remember that — we didn’t really crack the shrink wrap on that one.Sorry, Steve.
STEVE BALLMER: The truth is the truth.
JEFF CRAWFORD: When 6.0 hit the market — (inaudible)…because we thought, now there’s something we can do.When 6.5 came out, we were in certification training.We…(inaudible)…this is the technology to be deployed.
Over the last twelve months, we’ve done about — been involved in… (inaudible)…warehousing projects specifically.Out of those seven, four of them are …(inaudible)…projects.They are all currently deployed on 6.5.All of those customers are very excited, and they’re wondering about what’s coming next.
Last November, we were invited out to the database summit in Redmond.I went from being sort of nonreligious about Microsoft, because that’s our business — objectivity — and not religion.(Inaudible).I got a little bit of religion.I didn’t mean to.It just — That’s Microsoft.
I think there’s a slight market…(inaudible)…that we are trying to deal with because of credibility, and I think Microsoft…(inaudible), like I have something I can challenge Steve on.
One of the things that I think we found in our local area is that I don’t think Microsoft believes People Server is as good as we believe it is.
STEVE BALLMER: (Inaudible).
JEFF CRAWFORD: We’ve done some really amazing things, from… (inaudible)…warehousing, to…(inaudible)…on People Server.And…(inaudible)… Microsoft folks that say, you really did that?You really did that with People Server?
STEVE BALLMER: (Inaudible)…one of those products we need to be marketing a little more aggressively?
JEFF CRAWFORD: (Inaudible)…Steve.Thank you.
STEVE BALLMER: I know that…(inaudible)… a good marketing company.But for most of our solution providers I tend to get this opinion, like on People Server and in Site Server, that we may be a little better technology company than a marketing company sometimes.
JEFF CRAWFORD: So…(inaudible).We’ve been pushing hard. Microsoft has really stepped up in terms of their credibility.And we’ve tried to combine that in our partnering relationship with our credibility to go in to customers and say, this can work.It does work.We have a couple of specific examples that I’d like to cite for you, if I could.
One of them is a company — It’s a…(inaudible)…company, Floridian.Some of you may be paid by them.They are a very large…(inaudible).
STEVE BALLMER: They’d be, like, right up there with ABC?
JEFF CRAWFORD: ABC. They produce 125 million payroll checks a year, so that’s a few.Forty thousand customers — They… (inaudible)…customers.They started a year ago on a data warehousing effort.(Inaudible)…methodology…(inaudible)…trying to figure out what to do with this field-of- dreams effort.(Inaudible).They had an early recommendation for someone… (inaudible).(Inaudible)…one of the senior people in the group.He went in, talked to him, sat down, and essentially said — looked him in the eyes — you don’t need to go there.You’re already an NT system server shop.You’ve got lots of…(inaudible)…in other ways.NT People Server will do your data warehousing.Simply pile it up.They are now committed to that.(Inaudible).It’s running.They have their long-term direction centers and…(inaudible).Part of the sale on that is their enthusiasm about People Server version 7.It’s gonna make a big difference.It’s gonna make my life a lot easier and a lot more profitable.
STEVE BALLMER: That’s great.And if we were close to a zero percent of you guys’ business a year ago, where would that be now?
JEFF CRAWFORD: We’re talking — Well, if I include database and… (inaudible)…close to half and we’re moving up.
STEVE BALLER :Well, we sure appreciate it very much.Thanks to Jeff. Thanks to the Macro Group.A round of applause.Thanks, Jeff, very much.
I hope we give you a little bit of food for thought in these discussions. 125 million.That’s what Jeff said, 125 million payroll checks a year at Floridian, and all of the information to be warehoused in its People Server database.Jeff’s company is not a company, he said, where we’ve had a real close relationship, but we’ve built the kind of real bond that we think it’s important for us to build with our solution providers.The Macro Group brought a whole new set of skills to the party in terms of our relationship and the kind of things that we can do together in the marketplace.I hope it’s brought some thoughts about opportunities potentially for those in this room and some of the opportunities the database field and the development field in People Server 7.
The next area of food for thought is in the area of infrastructure.We need to think about network…(inaudible), putting in the intranet, a wide-area network, how can this stuff work.The partner who we’d like to join us on stage in this area is John Bamburger.He’s president of Sequoia Diversified Products in Auburn Hills, Michigan.They have about 200 consultants.They’re $30 million in revenue, about $20 million based upon Windows NT.And up to two-and-a-half years ago, they were 100percent focused in on Netware.We got involved, and their business has shifted fairly dramatically.I thought it would be interesting to have John come up and tell the story of Sequoia, how they built their business, how we built our business together.So please welcome John Bamburger, president of Sequoia Diversified Products.John.
JOHN BAMBURGER: Howdy.As Steve said, two years ago we were a Novell shop, and we were 100 percent Novell.We had the opportunity, for a wide variety of reasons, to make a progression to Microsoft.And we went gung ho at it.Our customers were saying to us, we’re worried about the viability of Novell.We’re worried about the long term.We’re worried that they’re not gonna spend $2.5 billion dollars in R and D.We’re worried about what’s gonna happen next.We want to get on a totally integrated system.And our customers told us to do it.Microsoft was there to support us with education opportunities, and we embraced it.We went from, as Steve said, about 70 C and E’s and now have over 250 Microsoft certifications and are growing at about… (inaudible)…people a month.
STEVE BALLMER: But it must have been kind of cataclysmic for you to make the leap.I mean, your business is based largely on Novell, and then all of a
sudden — I don’t know.I’d say a little bit like death.You kind of held your breath and took the plunge.Were there some — what should I say — uneasy moments there when you wondered whether you placed a good bet?
JOHN BAMBURGER: No.
STEVE BALLMER: We didn’t rehearse that one.I’m glad I had the right answer.
JOHN BAMBURGER: No.We weren’t worried.We had customers that were waiting in the wings.And what this did was when we embraced this technology, we became a market leader, and we…(inaudible)…in something…(inaudible), we became a market leader with Microsoft in…(inaudible).And then we got to transfer that to adding more and more companies…(inaudible)…platform, and we got to grow because we had a…(inaudible)…than we started with two years ago.And it just — It exploded.
STEVE BALLMER: And you’re saying in a sense, then, that when the market is still — when the opportunities — the…(inaudible)…is still in an early phase, making the investment then has allowed you to really stay absolutely the market leader —
JOHN BAMBUGER: Absolutely, and we continue to do that now.I mean, as you guys release something new or some new opportunity, we try to be — I mean, we try to treat our technical people like rock stars.They want to be trained.They want to be challenged, and they all want to work on the new things.And so we work on implementing that system and implementing your stuff as early as possible.And when we do, our technical people are happy.They’re satisfied.They’re working on the new stuff.And then when the customers are ready for it, we’re ready to go.
STEVE BALLMER: See much opportunities in NT 5?
JOHN BAMBURGER: Incredible.The opportunities are endless for us.We just have to keep keeping our kids at work in our company, you know, about the technology, and we’ll go from there.
STEVE BALLMER: What’s your expectation?Are you gonna see a lot of customers interested early in the cycle in NT 5, or do you think the customers… (inaudible)…and wait a little bit longer…(inaudible)?
JOHN BAMBURGER: I think the smaller customers will be ready to jump with the features and benefits right away.And the larger companies, it takes a lot longer time for them to make the economic decisions to make the migration, at least –and the larger companies — the stuff’s that coming out in NT 5, as you said yesterday, is the stuff that the large companies really need, and so they’ll be jumping.As soon as we’re ready, you know, we’re ready.
STEVE BALLMER: Do you have any particular customers you want to tell us about?
JOHN BAMBURGER: Yeah.One of our big wins was…(inaudible) …with Microsoft…(inaudible)…from Novell and…(inaudible).Now…(inaudible)…is a typical large corporation, and they grew astronomically in the last four or five years through acquisition and so forth, consolidation.And they made a decision that —
STEVE BALLMER: I think John told me last night…(inaudible)…maybe a few hundred million —
JOHN BAMBURGER: It was $500 million dollars in 1990.
STEVE BALLMER:$ 500 million?
JOHN BAMBURGER: And now they’re close to $10 billion.
STEVE BALLMER: They went from $500 million to $10 billion.
JOHN BAMBURGER: And they went from 200 workstations to 10,000 workstations.And they decided — They were mostly Novell until three years ago, and that’s when we did all our work.Three years ago we made the decision with them to move to NT.They said, now’s the time.Let’s go.And now we’re in the…(inaudible)… of four years, implementation all over the world implementing NT and NT on their workstations.And it just takes time to do that kind of work.
STEVE BALLMER: Any feedback for us of things that we could do to help you better…(inaudible)?
JOHN BAMBURGER: Training, training, training.For my people and my salespeople, that’s what we need.That’s what makes us different.And keep supporting us like they have.They’ve done a great job for us.
STEVE BALLMER: Super.Thanks very much.John Bamburger.
Nobody should have been surprised by the infrastructure opportunities, but I, frankly, was impressed and surprised with the kind of entrepreneurship in risk taking that John and these guys showed when they took the plunge on NT several years ago.I’m delighted with that kind of entrepreneurship, leadership and risk taking that I think have created the kind of opportunity and success that we’ve seen among high-tech entrepreneurs, where there’s companies like Macro pursuing opportunities in database, data warehousing, data analysis, or the kind of opportunities that John and his team in the Detroit area…(inaudible)… of infrastructure.
The third partner I’d like to bring out today has had a little…(inaudible) …with us.I’m going to bring out Mark Tubby, who’s president of…(inaudible) …Corporation, with offices in a number of cities throughout the United States.They are about $16 million in revenue and a hundred and 40 consultants.We have an interesting relationship with, I would say, with…(inaudible).(Inaudible)…is a company that we started courting very aggressively in the early days of Windows NT.They’ve done a lot of work with Lotus Note.So we pursued them aggressively to articulate the wonders and advantages of Microsoft Exchange.But they are a partner that I think have found their own way, their own opportunity, and their own formula for taking our R and D and sales efforts, blending it with their services on Microsoft products and others, and really building a winning company.So please join me in welcoming Mark Tubby,president of…(inaudible)…Corporation to tell you his story.Mark.
MARK TUBBY: Thanks, Steve.Yeah.(Inaudible)…is one of…(inaudible).I like that report that you guys did.I mean, because we’re one of those that now that we’ve made the move…(inaudible)…technology, we have seen that type of growth.Although I think I — You know, we had pretty good…(inaudible).We started early, and we’re gonna get into this area and really do something.
I’ve got to say…(inaudible)…when we decided to join Microsoft.For us it was a situation of really looking at how we can take customer problems and apply technology to it.And in that time, we’ve been able to go from focusing on high service…(inaudible)…and collaboration solutions to now moving into…(inaudible).We have offices in Chicago.(Inaudible).We also have offices in Seattle, San Francisco andNew York.
And for us it really is the capability to go out, listen to customers’ needs, listen to the public, and really figure out how to apply the technology.(Inaudible)…the technology that’s available today from Microsoft and from other vendors.I mean, it’s really, really exciting.So often we see a lot of noise, a lot of stuff about what can be done.But, in addition, take a look at it.There’s guys spending hundreds of millions of dollars on new business.But when it’s time to say, okay, that’s nice, how do you build your business? You show them Microsoft Solution and…(inaudible)…to that point.
STEVE BALLMER: You mean IBM is doing hundreds of millions of dollars on free advertising for Site Server?
MARK TUBBY: Site Server…(inaudible).But, I mean, it really is.(Inaudible).Here’s what we can do.(Inaudible).I mean, Microsoft technology — You look at the…(inaudible), you look at the progress…(inaudible), you look at the …(inaudible)…transactions technology that ties all this together, and Microsoft’s got…(inaudible).I mean…(inaudible).
STEVE BALLMER: But are you finding that in many ways when you come into a customer and talk about…(inaudible), is that a more sort of motivating and overwhelming focus for the business people than even some of the client server development or infrastructure of the past?
MARK TUBBY: Yeah.When I look at what…(inaudible)…client server, you’re looking at database…(inaudible)…and how to do that, but it really didn’t get the business people excited.When we go in and start talking about new business, how they can…(inaudible)…the Internet to enhance…(inaudible)…particular customer, to provide information to the customer that the customer couldn’t get before because they couldn’t get it out there — (Inaudible)…a new channel.It’s a way to lower the cost of doing business.It’s a way to…(inaudible)…around the customer and…(inaudible)…like they never have before.Let me give you an example.
We had a customer who…(inaudible).And so basically he basically ran the business off of a…(inaudible).Now this customer is a fleet management company.And what they really focused on was being able to solve — (inaudible)…a large corporation.
STEVE BALLMER: Fleet management means they lease company cars for their employees?
MARK TUBBY: Yeah.Something like — Take a company like Coca-Cola.They have, you know, employees all around the world.A certain type of manager can go in and have a certain type of car that’s available to him.So if you’re a mid-level salesperson, district sales manager, you have your type of car that you’re gonna get.It can either be a Chrysler version or GM version or Ford version.And you can then — say I’m on the road a lot.I’m…(inaudible)…CD player.I’m gonna put a six-player — a six-disc CD player in the trunk because I’m gonna buy the car afterwards.I’m gonna buy…(inaudible). I’ll pay that part out of my pocket.
STEVE BALLMER: You’re saying you guys put that in place, then, to kind of…(inaudible)?
MARK TUBBY: Well, they have that in place for…(inaudible).They could call up on the 800 number and talk to these people individually, but they didn’t feel like they were interacting.So the customer started saying, why can’t we just come to you and do it ourselves, open it up for our employees to select their own cars instead of having on-site…(inaudible)…managers, who calls…(inaudible).Why can’t we contact …(inaudible) instead of a sales rep.Go to this Web Site, fill in this information, pick your own car.Look at the options.Look at the prices.Do it yourself.Open it up so that they can just basically go through either our Internet or directly through the Internet and get that data.
And what really inspired us — If you think about it, this is…(inaudible). (Inaudible)…change the way we do business.So…(inaudible)…looked at it, and they said, wow, that’s…(inaudible)…our IBM reps.(Inaudible).If you can do this, we can do that.We can put this…(inaudible)…here, we can put this functionality there, we can put…(inaudible)…here, and they introduced this big new edition hardware and software and stuff like that.(Inaudible)…wait a minute.I don’t want to get all the new IF stuff.I want to simplify my…(inaudible).So we went and started looking at different companies.
(Inaudible)…an understanding of the Microsoft technology…(inaudible)… technology, they…(inaudible)…have a way of going in and understanding what my problem is and how to apply the technology.
For us, they went in, they looked at it…(inaudible) in the way…(inaudible) …it’s clearly Microsoft.Here’s what we’ll do.(Inaudible)…information on the 400.We’ll bring it onto People Server.We’ll put Site Server around this.We’ll set up the IF capability for somebody to go in with a web browser…(inaudible)…Internet, get out there, get the data, do the transaction, all real time, and…(inaudible)…yourself.It gave the customer more control.And there’s…(inaudible).The customers are now feeling tight, one-on-one with them, and…(inaudible)…customer satisfaction…(inaudible).
STEVE BALLMER: Where’s the transaction being handled now, then, on the system server or back on the…(inaudible)?How’s that being handled?
MARK TUBBY: The transactions are being handled on the system server with all that information being…(inaudible)…and then just spitting up to the 400…(inaudible)…usually nightly.
STEVE BALLMER: So it sounds like that 400 is getting as much work as it used to.
MARK TUBBY: Yeah.Its times are limited ,I think.
STEVE BALLMER: There you go.I think it’s a very, very exciting thing. Mark knows I’m gonna keep trying to do everything we can to get him the technology to make more and more of what he does based upon Microsoft.Mark’s the kind of partner that goes out and really finds the customer solution.I thought the fleeting example was really wonderful, in terms of how to dimensionalize some of the exciting ways in which …(inaudible)…can develop, and I’m pleased we were able to help.
MARK TUBBY: One thing — I think, also…(inaudible)…look at Microsoft.I mean the technology and all that stuff is really good.But one of the things that we found being a partner is the importance of being able to go from beyond… (inaudible)…to interacting with the local office.I mean, for us it’s kind of… (inaudible)…working, like in Chicago…(inaudible)…New York…(inaudible).And, I mean, for us, it’s that relationship to be able to say, hey, here’s what we’re looking at… (inaudible).They have access to information that — for us — I mean, we’re talking about that type of thing of how you’ve been able…(inaudible).It’s that access of information.It’s that being able to help accelerate…(inaudible)…that really has made our business grow dramatically.
STEVE BALLMER: Thanks for the feedback, and thanks for joining us today.Mark Tubby from…(inaudible).Thanks, Mark.
I know the opportunities of…(inaudible)…are amazing, whether you’re talking about customer service businesses like leasing, whether you’re talking about financial services businesses, insurance businesses, publishing, knowledge management businesses, the telecommunications companies, the new cellular companies, manufacturing businesses looking to change the way things look up and down.This is it, baby, as they say.This is the next big new growth opportunities in terms of solutions,and, frankly, one in which we all have the opportunity, as I said earlier, to get more in front of the business people, to really add more fundamental value to your services and our software.
We hear a lot from you in terms of what you need from us.I want to try to give you a quick recap of what we think we’re hearing and then talk a little about what we really think we need from you.
What the first three people stated quite clearly is the product.We need the new product.We need NT 5.Are you really going to ship the beginning part of next year?I really think we’re gonna hit the beginning part of next year.
People Server 7.When is that beta test gonna complete?The answer on that?The day it’s ready.People Server 7 has to be perfect.And whether it’s October or November or December, we’re gonna have the performance and the salability in addition to the tools and the reliability so that that product comes to the market really in a verystrong, strong shape.
We hear the same about Office.We hear the same about the Visual Studio test.We hear from people that you want us to do more marketing.As Jeff talked about People Server, as many of our partners talk about Site Server.You need to hear a louder message from us about electronic commerce and electronic business and about the Site Server products specifically.
From many of you I hear a lot about…(inaudible)…cooperation.Sometimes it’s about a lack of…(inaudible)… cooperation.But we certainly know it is not our business to provide end-end services for our customers.We are investing and continuing to grow our consulting capacity so we can provide for the largest customers in the world a level of architectural consulting that, frankly, many of them do want to be able to get from us directly.
But I think it’s a big deal if we have more than one or two consultants involved in an account.The goals and measures and methods of our consultants are really how much product revenue they drive and how effectively they bring our solution providers into the account to solve the customer’s problem.So we’ll continue to work on getting tighter integration between your efforts and the efforts of our…(inaudible)…consultants.
People pushed us and said, we not only need training from you, Microsoft, we need the training materials available earlier in advance of product shipment so we can get our people there and ready to jump on a new opportunity earlier and earlier in the product life cycle.
Well, I think we’ve had a pretty rich dialogue on technical issues and…(inaudible).We keep hearing from solution providers that you want more.So this year we’re making a major new investment to try to have regular technical briefings and technical discussions, not only for the owner of our solution providers, but also for the bulk of technical people who do want to make sure to keep current on what’s possible and what exciting things other solution providers are doing.
And, of course, you continue to want us to help generate leads.And as Mark said…(inaudible)…to help engage the customer.We think we’re very good in the largest accounts for helping open doors for you and helping close doors.In between that time, we think you like to take care of the customer, to manage the customer, to own the customer on your own.We think many of you like to be the account management interface, particularly for the media…(inaudible)…customers where Microsoft doesn’t have as much direct presence.So we want to make sure we engage with you appropriately, letting you manage and own the customer when you should and having us help make the openings and help with the closings in the biggest customer.
What we need from you is very simple.We need your ongoing passion.We need the entrepreneurship and energy and drive that has helped build the incredibly successful businesses that you’ve built today.We need your feedback on our products, our services, our approach to the market.If you need more tools to help you raise capital, if you need tools to help you hire the people that you want to hire, let us know how we can help, what we can do.Your business problems nowadays are our business problems.We are bound together in a very tight way, and we need your very direct feedback.
We need you to continue to be dedicated to putting the — making your people’s time available to be trained.If we don’t, together, get your people trained on the newest technologies, if we don’t keep their skill sets relevant and current and fresh, we will do a disservice to our customers.
At the end of the day, there’s only…(inaudible)…of our joint success:your revenue and profitability, our revenue and profitability.But both of those are subordinate to our customers’ — our mutual customers’ satisfaction.
As we’ve gone and done some surveys over the last three or four or five months, it is quite clear to us that our customers are not as satisfied as we would like them to be with the products and solutions and services that they are putting in place around our product line.We take a hundred percent responsibility for that customer satisfaction.But we know in order to do that, we need to work even more closely together to make sure we’re more effectively engaged, that we’re hearing better from you, that we’re training you better, that your people are up to speed, that they’re able to execute the way we both want them to, because together, we need to make sure that we continue to improve the satisfaction customers have with the products and services that we put in.And all of our measurements today show a great opportunity for improvement.
And so I think next year at this Fusion conference, the topic won’t — will not be necessarily on high-tech entrepreneurship.The topic I think we’ll all want to talk about is customer satisfaction.Where are we, what improvements have we made in twelve months, and how does Microsoft do the right set of things for you to allow you to continue to drive and improve our mutual customer satisfaction.That’s got to be job one for all of us at the end of the day.We certainly know we have many, many, many areas in which we need to improve directly, and we need to improve in our service of our solution providers.
This is a time in the world of great opportunity.There’s opportunities to do electronic commerce, digital nervous systems, reduce cost of ownership, drive Windows NT 5, change infrastructure, put in electronic communication systems.There’s great opportunities to hire people, to train people, to grow your business.There’s great opportunity to innovate, to do great new R and D’s.The hardware engine that we get from Intel and others, the communication engine that the Internet gives us makes this a time of unprecedented opportunity.And if all of you high-tech entrepreneurs had 20 percent growth last year, this is the year, if you want it, 20 percent more growth.
So we are excited about the opportunities in front of us.We are committed to growing our business together.We feel honored to have such a… (inaudible)…partners accounting for 50 percent of our business, and we look forward to moving together to capture customers, win them, convince them we’ve got the right stuff together in satisfying them absolutely, 100-percent wholeheartedly.
Thanks very much for your time this morning.And I welcome your questions and comments…(inaudible)…we’re done.Thank you very much.
I’d like to take questions.And even though this is a big room, if we could have the lights up.(Inaudible)…to join me.Lights up over the audience, please.We have microphones at the front of the room.They’re in sort of nice, green spotlights.I’d like to take a few questions, comments, input, if you have them.Please turn the lights up so the people don’t trip getting to the mic.Mics up a little bit more, please.The gentleman here in the center.
STEVE BALLMER: The gentleman asked, how will…(inaudible)…more with members in engaging?We don’t have a very formal system today for… (inaudible)…engagement at the member level, and that’s part of the distinction, I guess, between members and partners.
The key things I think at the member level — One, we need to stay out of your way.That’s very important to me.If you ever, ever, ever, ever think that we are competing with you for business as opposed to complimenting you, it’s
Both of us read our mail directly.Give us that feedback because that’s certainly not the intent.
I think the right way to engage is if you see a…(inaudible)…in which we are coming together where we both have some kind of a presence, the right thing to do is to flag that with a local Microsoft solution provider team and let them help you navigate through, and we’ll figure out per customer the right engagement model.
SAM JADALLAH: The other point I think is very important is we’ve actually worked with…(inaudible)…to document and create these service guides that …(inaudible)…mentioned yesterday.And a key part of the strategy is to take all of that…(inaudible)…information and technical guides and give — for instance, makes those available on the web sites so both members and partners get full advantage of the knowledge and learning that…(inaudible)…creates.
STEVE BALLMER: Your question and the applause serves as feedback, which is valuable, very valuable, actually.It seems like it’s more of an issue for a number of you than I would have anticipated, frankly, so I think…(inaudible).
I will say, on a general basis, that it is important for us to do a little bit of both, to both recruit people with new skills, recruit people with big skill sets that we’re not tapped into, and at the same time continue to develop and support our existing partners.Let me give a couple of quite different examples, and I’ll be curious of the audience reaction.
In the case of database — the development of database applications, relative to the demand that we help to create around People Server 7, we do not think we have enough skills in our solution provider community.And it is very important to us to try to recruit people who have skills in other technologies, not at the exclusion of our partners who have…(inaudible)…skills, but we don’t think there’s a way to get from here to there without recruiting new skills for the…(inaudible).
In the case of networking and infrastructure, the discussion we have internally is quite different.We are not putting much effort into — Maybe we should be, some of us wonder.But we’re not putting much effort into recruiting people anymore who have Novell skills.We first got to know John Bamburger two, three years ago.We think at this stage we have a strong…(inaudible)…of solution providers who have NT skill sets.We think the right way to go at this stage, quite frankly — If people haven’t wanted to join us at this stage, we can work with our existing partners to systematically evolve a remaining Novell business and convert it to NT with our existing partner sets.So we’re in quite different positions in the — let’s say the database world and the infrastructure world.And some of the other opportunities are someplace in between.
But your feedback implies clearly to me that we have something of an issue in that area that Sam and I will make sure to review those plans.
STEVE BALLMER: Well, I guess I do know about it, and it doesn’t surprise me.(Inaudible)…partner means something beyond the word
and that is truthful.And you could say we would hope that many of you who are members — For some of you it doesn’t make any sense.You don’t want any of the benefits of partnership.But for those of you who are members and have desires for some of the benefits of partnership, it is possible to run an excellent business without being a partner.It’s not some kind of a mandatory.We do — we do want to make sure it’s clear to you what criteria we’re using and how we’re thinking about that partnership level to try to involve you more in the work of that.I think when that’s done, there’s still an opportunity for us to do more engagement locally with the members.And I’ll make a note to that effect.But I don’t want to discourage those of you who aspire to partnership.Continue to work hard on that.
SAM JADALLAH: Let me be clear.Our model for the partnership is very locally oriented.There’s been — Other programs often have a certain form or certain levels.That’s not the way we’ve operated with the solution provider effort.It’s all about…(inaudible)…a lot more local engagement.So what we’ve encouraged the members to do, get with the local team…(inaudible)…office, understand what are the skills they need?What are the skill their customers are asking for?(Inaudible)…digital partners?And really make sure that…(inaudible)…the stuff they need to plug in so you can understand what they’re looking for in partners.That’s certainly the first step, I’d say.
STEVE BALLMER: I hear your point.We also need to provide a clearer view of what’s important and a clearer form for you to get with our people and figure out what the appropriate route of…(inaudible)…engaging is.And that’s good feedback.
STEVE BALLMER: I’m sorry.Start again.They didn’t turn the sound up.I apologize.
STEVE BALLMER: I actually think in the…(inaudible)…class we have quite a bit on visual basic…(inaudible).I was going through the books myself and taking a look at it.Probably the best thing to do is grab me right after, and I’ll make sure to point you to the right sessions that I think are very good at that.If I knew them off the top of my head, I’d share it with everybody.The visual basic…(inaudible)…is a very important product in and of itself and as it relates to People Server 7.So just grab me right after, and I’ll make sure we get someone to point you in the right direction.
The gentleman here, and then the gentleman in the center, and then I guess we’ll have to wrap.Yes?
STEVE BALLMER: Do you think if we did a lot of promotions it would actually help drive demands?I do think there’s a different — what should I say — there’s a different psychological makeup between developers and the kinds of systems engineers that go for the…(inaudible).And I love them both very dearly.But the psychology is quite different.
We’ve learned that just in the training area, that people are far more willing — (inaudible)…are far more willing to sit for training, for example, than developers are.Do you think if we were to do some of the kinds of promotions we did for the…(inaudible)…program it would really make a difference?
STEVE BALLMER: Show of hands.How many people here, your firms do a reasonable bit of software development?Show of hands.Leave ’em up.And for how many of you — leave your hand up — if you agree this is an important issue?All right.That’s good input.Thank you very much.
SAM JADALLAH: Let me be clear.We’re actually — With the launch of Visual Studio 6, we’ve specifically designed the…(inaudible)…certifications.So we’ll be launching a whole new set of tasks really focused around…(inaudible)… really focused around developing multitiered exhibited applications.We’re very excited about the new work.We just announced it, actually, at this conference.
We also announced the new certification…(inaudible)…I’m sorry… (inaudible)…site builder certification for web developers.So we’ll have two… (inaudible)… developer certifications.We’ve got a commitment from the developer… (inaudible)…that all of the advertising around the developing tools will highlight these three as a fundamental component to help you learn and get educated in…(inaudible).(Inaudible)…a lot more certification…(inaudible)…over the next three to four months.
STEVE BALLMER: Gentleman here in the center.
STEVE BALLMER: I want to talk to the advertising guy.I don’t want to make them overload the ads.But something that is reinforcing — It’s probably a pretty good idea.Let me advise the ad guys, and hopefully a year from now you guys will be applauding because you like what we’ve done not what we haven’t done.So thanks for the feedback.
Okay.I guess — One last question…(inaudible).
SAM JADALLAH: (Inaudible)…from Zimbabwe here.
STEVE BALLMER: Okay.(Inaudible)…and something like that I didn’t know about.Also good feedback.
I want to again not only say thanks, but I want to say how exciting it is and how excited I am and how exciting it is for me to have a chance to be here.The most fun I’m gonna have — is the way you guys are gonna bang me around for the next day or two. Tell me what you need.Please buttonhole me.I’ll be out meeting with a number of you during the course of the day.Thank you, thank you, thank you.I appreciate it very much.
SAM JADALLAH: Thanks, Steve.