Speech Transcript: Orlando Ayala at Fusion 2002: Fusion 2002: “Partnering to Realize Potential”

Fusion 2002

Partnering to Realize Potential

Remarks by Orlando Ayala, Group Vice President, Worldwide Sales, Marketing and Services Group, Microsoft Corporation

July 14, 2002


ORLANDO AYALA : Good morning. It’s a real pleasure, it’s an honor to be here. And my name is Orlando Ayala. I am the Group Vice President for Worldwide Sales, Marketing and Services. And I didn’t want any big voice to announce me. And the reason why I didn’t want that big voice is because the last thing that I want to do today here is to stage any presentation. I hope by the end of my talk today we see this more as a dialogue, a dialogue from Microsoft with you on how can we come together and truly help customers realize their potential.

I’ve been reflecting about this event this year and I’ll tell you what I told my people, I told my peers this is going to be by far the most important Fusion we have ever done as a company.

You may ask why, why is this event different? I’m going to tell you why. We have nothing guaranteed as a company. That’s the reality.

Times are changing dramatically and in our company we believe that we have to set up basically a direction that can truly take us not just through the next two years but truly for the next 25 years.

You probably heard in the press that we changed our mission statement as a company and we did it because we believe that in the end it’s all about people. That’s what it is. It is people. Absolutely technology matters, but it is all about people.

That’s why our team came together and really spent a lot of time thinking in what business are we as a company.

Yes, we are in the technology business and yes we’re a company that loves software, but in the end unless we use that technology, unless we use those $5 billion that we invest in research and development this year, and that 20 percent of our revenue that we’re committed to invest for the next few years in enabling people and businesses around the world to fully realize their potential, if we don’t do that, I think we are not really fulfilling where we would like to be as a company.

We are discussing very deeply which things we need to change as a company. I’ll tell you it has been very hard to realize after 27 years in business, that after all we don’t have all the answers. Not that we thought we did, but sometimes perhaps we didn’t listen carefully about the things we needed to change as a company, and that’s a dialogue I want to have with you this time.

Steve Ballmer recently published a memo. This memo went basically to our employees in the company. I know this memo somehow got published also in the press. But I just wanted to say that today we as a management team are spending a lot of time reminding ourselves what are the core values of this company, the ones that we believe deeply on.

And I’m not going to go over the fine detail of every one of these values, but I just wanted to put this in front of you because every single thing we do will basically raise the bar to make sure ourselves again what you’ve just seen on this screen.

We’re very proud of the people we have hired. I think that we have people with great values. Well, we want to be sure that in every single thing we do as a company we behave exactly with those values at the front. We want to share them with you so you know how we are going to use these values to measure our people. You see it right there with point number four, the broad customer-partner connection. Somehow I think we lost that connection. Somehow we’re still doing fine, but somehow we will need to step up to the next level where we used to communicate with our partners and our customers, and that’s part of what we have to do moving forward.

There is no doubt in my mind, at least. I am 45years old, about to be 46, and I cannot remember a harder year looking back; very tough, tough in many fronts. I don’t want to walk through all the fine detail, but it was a very hard, difficult time, I think, around the world in many aspects.

And clearly the need for change is critical. It’s critical in many aspects and in our case, of course, as I said before. Establishing a road that will really put at the center customer and partner centricity is the only answer for success in the next 25 years.

I said this year was very, very hard. You know that the so-called dot-com times went really bad. We’ve lost a thousand companies since January 2000, market cap, $2.5 billion lost in 2002, the telecoms, basically $1.6 trillion, layoffs close to a billion, 1.3 billion layoffs around the world.

And one of the toughest parts for us was the fact that suddenly the PC industry stopped growing. You see the numbers right there. It says PCs growing basically negatively, in the negative territory, 5.2 percent. Even servers went into negative territory, minus 3.5 percent. And for the most part the world of consulting and services also was impacted in a major, major way.

So everything is coming together and I think many of us, players in the marketplace, want to think deeply about how we’re going to challenge ourselves to really take the next rung of value to you and to your customers.

We’re used to seeing our company grow very, very fast and I’ll tell you I know that our people worked very, very hard this year and besides the decline on PCs, which is a very key element for us, the company managed to grow through Q3 about 13 percent. (Applause.)

The only reason we’re able to pull off this I know, of course, the products count. We need to continue to innovate and actually our products in general did relatively well, considering the slowdown in the marketplace, from Windows to SQL Server and other products we did actually quite well. But in the end it was basically the focus of our people working with you, our partners, to be able to pull off such a result.

At this time I would like to get the lights up, if that’s possible please, on the floor, and I would like every single Microsoft employee to stand up, please. And I want all of us, all of us, to give a huge round of applause to our partners for the amazing work they have done for us. (Applause.)

Again, thank you very much. This company was built on the ability to be able to expand our reach through partners. It has been that way for 27 years. We just cannot make it happen without you; that’s the reality.

Last year I was here, and I was talking about what are the big bets for Microsoft. What are they? And we talk about enterprise agility and PC experience and so on. For the most I believe this was the right bet that we set out for our field force in the marketplace.

One of the things that I wanted to change a little bit is to provide more continuity on what we do and how we measure our people moving forward. Therefore, and considering that in the last fiscal year, this bet was the right bet, we have signed up to basically give a lot of continuity to the goals of our field force in the marketplace. Continuity is the name of the game here.

The slide has changed, as you can see in the right hand side. We talk about the information worker, called last year the PC experience. I hope you like the presentation that was made by Jeff Raikes. It is all about that. It’s really about the information worker. And we care deeply about that one because we believe that’s a huge source of opportunity for improvements in productivity around the world and we want to be the company that helps customers achieve that goal. We’ll talk about this a little bit later.

In the next three slides I wanted to share with you some of our internal materials. The next slide was the slide that I used about three months ago to discuss with our people how we’re going to approach our goals in fiscal year ’03, which started the first of July. I didn’t want this slide edited, although that was a controversial discussion. People said, “Hey, why are you going to share this slide?” I said, “Because I’m the boss, so I’m going to do it.” And I decided to do it and I did it. And that’s what I’m going to do next.

We basically spoke about the need to go systematically through a series of elements on how we execute in everything we do. Great leadership, I keep asking our people, “Do we have the right people in the right jobs.” I keep asking this over and over and over again because, as I said, at the end it’s all about people, leadership. And then we need to get ourselves to be very good about certain key core things we have to execute against, marketing, evangelism, really do great selling, great service, great support.

And in the end, as you can see out of that point, we told our people we just cannot deliver to the marketplace unless we get partners deeply ingrained in every single thing we do.

We thought about the fact that the health of the channel not necessarily is the best these days. I listed a lot of Microsoft products, how are we going to push ourselves to ensure that that gets addressed.

I know Allison and her team are working pretty hard on that. A lot of the investment we are making next year is all about that, are we asking ourselves, “Is the channel making money?” Yes or no. People are not in business just because of charity, although sometimes that’s where we want to do that. But people are in business to make money. We want to be sure that we are a company that provides that opportunity to every single one of our partners.

I want to go through the detail of the four bets that I described before, quickly. I’m not going to go through every one of these different elements. And I would like to start with the enterprise. Nobody should be confused. There’s no way this company is going to be able to hire all the people that can go and sell our products to a very large number of customers. Partners basically extend our sales force and we’d better understand that.

Solution selling was something that we started about a year and a half ago. It was very hard. Mike Sinnick talked about just not product features; it’s what is the real value for the customer, so the solution selling is something we have been evolving and I believe the growth of service this year, which exceeded 40 percent on the server category, really speaks to the fact that we have to start to take traction in terms of selling solutions together with our partners, so a very important factor here, how we’re going to extend that approach to the marketplace in such a way that we spend more time selling solutions and less time just selling features and products as individual units.

Another important part of this strategy on the enterprise has to do with what Mike just presented. And I hope you were excited about Mike’s presentation because internally I think this is one of the most important things we need to do is ensure that in every single opportunity in services we can extend our value to our customers by engaging partners in a deep, deep way.

Because when I’m doing business I’m really very excited about this, because when you think about Microsoft this company actually was started selling mostly into the consumer, actually into the small business estate. It was not started by selling into the enterprise.

I think we have great things coming with, say, getting back in the game with the channels.

And again I spoke about several things. I said channel help, reach, communication, connection with the channel. I want us also to push very hard to ensure that in every one of those elements we are best partner for you.

Small Business Server. You heard from Bill Veghte and I hope you are excited about the programs we have with the Small Business Server. This product actually is quite effective today in the marketplace and I think the new releases of the product really took it to a point where people are very excited about it.

The investments we made in Great Plains and Navision. I’m very glad that Doug Burgum, the CEO of this business, will be talking to you tomorrow. I know there have been many questions around this. I’m not going to take his speech here, but the bottom line is this investment of about $2.5 billion that we did as a company is an investment to create another ecosystem similar to the one we created with Windows. It’s an ecosystem that provides the opportunity to deliver value to the marketplace not only from Microsoft but also by you our partner be extending this offering with services and support. It’s very important and again we’re going to have the opportunity to do Q & A on this front, but Doug is going to be here.

I said this is the most important Fusion we have ever done. The reason why: We have made a series of investments, we’re making a series of investments not only in our core business but we’re extending our business and I want to be sure that it’s crystal clear why these investments were made. And as I said, it’s all about creating a new ecosystem of value that extends to customers and partners in a major way.

Here we’re making major investments, and you heard from Allison about that. We are investing this year about a billion dollars. That’s the base investment. And in fiscal year ’03 it’s very exciting because I think we are going to actually use a lot of that incremental investment of $500 million you already heard about to ensure that we execute in every single part of the world against the strategies we have set for this space.

Here’s the third bet and we call it the information worker. We’re very excited about this, again because I think that we set up an important base when we sold in an effective way products like Office. We don’t think we have reached the potential here. You saw it from Jeff’s presentation with the tablet PC the next frontier on how we want to take the use of this product.

It’s not about the spreadsheet and the word processor anymore; it’s about information-worker scenarios that will be served with very concrete solutions built by us and by you to deliver that next wave of value to customers. We’re very excited about this.

And here we’re making a very important investment this fiscal year. We created a new role in the field that we call the Business Productivity Advisor. There will be about 250 of these people and the goal of these people is not necessarily to deliver record growth in revenue. That’s not their main goal, although, of course, we want to see Office growing and so on. The main goal of these people is to ensure that they are in the marketplace talking to people that care for information-worker solutions, meaning for the most part people from the IT departments. These people will be talking to the sales VP of an organization, to the human resources VP of an organization.

And quite frankly our sales force has been focused for the most part in the IT box. It doesn’t mean that it’s not important to still talk to the CIO of an organization. Of course it is. There are many solutions that we’re putting in place that are for the enterprise at the infrastructure level. But with Tablet PC and the other investments we’re making in solutions in this space we’re moving from that space to ensure that we go out there and talk actually to the line of business managers that could actually make great use of these solutions, so this is a very important step for us, again taking the whole Office paradigm to the next level. And as I said we don’t want to talk about Office per se; we want to talk about these great, exciting information worker scenarios and solutions that will be the base for you to be able to extend into the market.

And now last but not least, and, in fact, when you think about the four bets, I mean last year I think we made some progress with .NET. I have started to see great momentum happening in the marketplace. Already customers are using some real solutions here. But this is the year for us. We’re betting the company on this. When you think about what will be in many ways a key, key dependency for us to succeed, it’s people looking at the next wave of development to be basically .NET or not. With this I am not necessarily excluding Java. I know that the world is going to be multi-platform for a long time. But we want to be the company that’s going to create the next programming paradigm, and that’s basically .NET, very, very important for us.

We are adding about — we didn’t have this before — we’re adding about another 250 evangelists in the marketplace, in the field. Again, these are people that are going to measure against how much revenue they produce from tools coming from developers. These are people that are going to be entirely focused working with you and with customers to do the design wins we have to make to ensure that we make .NET real; very important here.

So I want to summarize, and as I said before we cannot do this alone. Absolutely. I took also the liberty to use parts of my memo to put in as part of this slide, and in that memo that I sent to the field around the world, 20,000 people, I wanted people to understand that not one of these things can succeed without us getting relentless and super focused on working with you to make them happen. It’s all about engagement, how can we produce tools that can help you get this excitement we have on those bets to be more successful in the marketplace.

So those are basically the overarching goals for the field for the next 12 months, very important ones. We are providing some continuity. We are investing I think significantly. But again this taking these bets to the next level will require a lot more engagement with you, and I believe that’s the key theme for all of us to do.

But let me go back a little bit on how I started. Somehow updating you about the priorities next year is fine, but I want to talk about the long-term, the long-term viability of this company, the long-term viability of the relationship with you. And I have to say that last year was a very hard, tough year not only because the environment was tough, because in many ways I think our company in some instances failed to recognize some things that we needed to do different.

I just put in front of you some headlines, and I’d call them painful to stand up here and talk about, it hurts but I failed that. There was no other way around it. It would be crazy for me to stand up and not accept that there were issues that we needed to deal with. And I’d say, did we ask enough questions. I told my people, I don’t want revenue anymore at expense of customer and partner satisfaction. I don’t want it.

And I want to tell you how I’m going to put the accountability behind that. I think for the most part the direction in licensing was right, but did we ask for the course of the timing on how to explain to customers why this thing was good for them. I would say I give myself a D on this stuff. We have to do better.

My talk about this conflict between Microsoft and the channel, services, this was also very hard. You know, after 11 years with the company I said, “Well, after all I think I can take a sabbatical.” I took a sabbatical in October, came back in November and I’ll tell you, I was wrong. No, you cannot take a sabbatical. I found when I came back that we had this huge pressure of the company. I said, “My God, what happened?” It was just 60 days I was out, and things started just looking so bad.

So this is another area where we need to react faster and quicker. And we are getting out of a strategy what are the questions we are asking, are we really reacting to the right time, because timing counts.

So if you see us confused, please let us know. I’ll be the first one to stop whatever I have to stop to ensure that we address this core issue. We’ve got to get that health back in a major way with our channels.

Security: You heard we’re taking some serious steps in this area. Steve Ballmer and Bill Gates and the Windows team are spending a lot of time behind this. In fact, the memo that Bill sent to all of us clearly stated unless we make this Trustworthy Computing initiative real, this company has no future.

Well, let me tell you, we are here confronted with a unique challenge. And it is unique because I think when you think about security and you think about privacy, these things used to be looked as separate things. The reality is that not any more that’s the case, especially because of the security events that happened in the last few months.

People in the past said, “Hey, I don’t want my privacy to be compromised.” Well, today I think the challenge that all of us, the providers of technology have is to really help the marketplace in general how to deal with this issue.

I saw one statistic that’s quite interesting. That statistic says that this year the number of unmanaged devices connected somehow to the Internet is going to surpass the number of managed devices. And guess what, in the world of Web services, no company has the option to ignore that. You’d better expose yourself, your services to be able to interact with a lot of devices that not necessarily you manage and control.

So when you think about security a few years ago, well it’s quite different to the level of challenge we have in front of us if we want to make real this world of Web services.

So it’s not only about Microsoft fixing the code of the products, and you heard that, we’re taking every single developer to major stringent training around this, but it’s also how we take a leadership approach to try to crate a framework in which Web services are going to be enabled in a major way, thinking through these issues that need to be answered.

And last but not least I put another one here is the CRM discussion, as I said before, and I’m sure that Doug is going to have the opportunity to stand up here, I’m sure you’re going to be excited on how we’re taking an approach with this investment in CRM to be a real great ecosystem of support for our partners.

So we have been really looking deep about the issues and how to work on that. And I hope at this point you have a sense of how excited we are around ensuring that we take this investment that I described before and really put them to work for you, not only here in the United States, but all around the world. We need to take this to the next level in terms of solutions. That’s really point number one at the top, knowing the customers and their needs. This came clear out of the survey we made, trying to understand where the major issues were. It’s, how can we package base solutions that you can’t extend in a major way for customers?

And also I said connection is very important. We lost our connection, so access to Microsoft in a broad basis is going to be very important.

The great news, and I said these are the most important times of change for Microsoft. I look back and I cannot think, perhaps the other major bet we made a few years ago with Windows was such. This year we are making this major bet in moving to solutions and ensure that our value is very, very clear.

And Steve, working with the rest of the management team, has decided to do something that I think is quite clever, and it’s to ensure that not only the field people, because this is my team, by the way, not only the field people in Europe, in Asia and everywhere are responsible to ensure that they do care about customer and partner satisfaction and how we sell solutions, but the important move that Steve made was to create this huge accountability internally around seven businesses. Every one of these businesses has a CEO, and every one of these businesses has a PNL.

So we have moved to work internally in ensuring that every single resource we approve around the world gets done in the context of how these PNLs produce both revenue and profitability but also, as I said before, ensuring that the accountability framework in terms of customer satisfaction goes hand in hand with this PNL.

You know most of these individuals, I think. Doug Burgum right at the top where it says business solutions, Jim Allchin in charge of the Windows PNL, Jeff Raikes was here, in charge of what I call the I-Worker’s PNL. Then we have Robbie Bach and the other people that without a doubt are going to be very important in terms of how we architect the products from the ground up to think about this issue of customer satisfaction.

So I wanted to share this with you. I don’t know how many of you picked this up to the press. When you speak with Steve tomorrow, you’re going to have the opportunity to talk to him about this, but it’s a very important change for the company internally on how we’re trying to put the accountability back all the way where the products get produced.

As I said, one of the very important things we’re going to do in fiscal year ’03 is the level of investment that we’re committed. Even though I was for a couple of months out in a sabbatical, when I came back I went and spent a lot of time in the field, visited about 30 countries this year, did hundreds of meetings with partners and customers. And I’ll tell you that was very useful to try to set up the best possible framework in my head in terms of how we should invest next year.

And I’m very excited and I’m very happy, and I’ll tell you why. I’m very happy because in the 11 years I’ve spent with the company, I cannot recall any other year we have decided to invest at this level. It’s going to be about 1,200 people that we’re going to add to our force in general, sales force, marketing evangelism, and it’s about $1.2 billion also of incremental investment overall for the company.

And not only it’s interesting to me that we’re doing that, but perhaps the most exciting part of that incremental investment is how much we’re going to invest in the SMB space; as I said before, $500 million incremental over the next two years, on top of the $1 billion base that we already have. This is very, very significant. And quite frankly again I don’t remember a time when we decided to invest at this level.

I had the opportunity to go back and read your feedback forms and thank you very much for taking the time for your feedback and I hope you keep doing that. We’re pushing ourselves on trying to act on every one of those. And one of the things that I noticed when I read the feedback so far on the past two days is, hey, we have heard this before: Where are you going to put the accountability? Right. Sounds good. That’s good money, but show me where the accountability is.

So job No. 1 at my level, and at the level of the senior leadership team in the company, is that. It’s precisely that, make ourselves accountable and do what we said we were going to do.

Again, a couple of quotes coming out of my memo, my internal memo to the people around the world, and we’re translating this into something very concrete. We have internally something called the general manager’s scorecard. This is very important. This is how we measure the general manager in every location around the world.

And this is the year that for the first time we have been looking at customer surveys and partner surveys, but this is the year that for the first time we have decided to include as part of this whole context a very significant part of the GM compensation will come against this satisfaction happening in every one of the organizations.

This is going to be not only for the general managers. Steve Ballmer is also working very hard at the level of the VP base in the company on ensuring that we do exactly the same thing.

So I am excited about this. I know that people do care about this. As part of how we do reviews, performance reviews every year we have included the discussion around how we’re making real this customer and partner satisfaction moving forward.

Besides that, of course, we also have some exciting plans in terms of growth. And I don’t know if it’s going to be possible or not. The projection of growth for next year, and this is a projection, which is look at the marketplace, work with Intel, look at our OEMs, work with Hewlett-Packard and others, and we try to figure out our best bet of growth. And we’re seeing that for the next 12 months the PC growth is going to be about 4.8 percent and actually server growth rebounding to 12.5 percent.

I don’t know if this is going to happen or not in terms of the numbers, because this year we got a big surprise. Let me tell you, our regional plan didn’t call for PC world shrinking or server growth shrinking. Still, we believe that at the minimum we should be able to grow our business double-digit again.

Again, nothing is guaranteed but I believe that the fire that we have and the aspiration that we have, and we want to do that because we want to push ourselves to ensure that that also represents opportunity for you. If we are growing double growth I hope you are growing even faster than that.

So this is a good combination of things we are doing I think internally to ensure that we create a level of accountability internally.

As I said, I’ll tell you a lot of that will come basically from people at the high level really asking the questions. I said, and I don’t know how many of you read an article in Business Week around Steve, and one of my quotes at the end said some of us deserved to be fired. And I said that. And I said that not because I think people are intentionally doing bad things, but there are just so many mistakes you can make. We weren’t asking the right questions when we said this is good revenue, but what does this mean in terms of the customer experience, what does it mean in terms of the partner experience. We have to ask that question systematically in every single thing we do: Changing the personal approach, changing the way we do licensing, thinking about how products get taken into the marketplace, are we asking the question besides making money. Are we making our partners and our customers better as a result of that?

And I’ve got to stay here thinking and talking about this for a long time, I know. Time will tell. I’ll tell you internally this has been an intense, intense debate and soul searching we have done for the past 12 months.

The thing that makes me excited is when this company gets truly focused on something. We have an excellent track record. We really do. And just by seeing that memo coming out from Steve Ballmer makes me feel that I have been rehired into this company. I feel excited about this. I think we will make it happen.

But again you will be the judge, and I hope a year from now when we are here we have the opportunity to hear from you and you will tell us how much progress we’re making.

A year will not get us there, I know that. This is going to be a journey. Mike Sinnick talked about changing behavior. I truly believe in that also. It’s going to take hard work but the important thing is that you are seeing clearly what we do every day out there and that next year that we are making some progress against this goal.

If I needed to boil down to what’s very important for us really living those values and ensuring that as a company we’re delivering that mission of empowering people and allowing them to realize potential, I will basically boil it down to one word, and it’s called predictability. After 45 years as a human being, there is something that is very clear in my mind: Relationships break, personal, family, for one single reason usually, just stop being predictable. And when you are not predictable you start breaking trust. And when you break trust it’s very hard to get it back.

In our business this is no different. How do we do our solutions and products? Are we informing you well in advance on how we’re doing and what’s the value that you should get from it? Are we telling you in advance what resources are available to you? Are those resources doing what they were supposed to do? We talk about our partner engagement framework. Are we executing that partner framework? Are we getting the connection we have to make with you, all this investment we’re doing in support that Mike was talking about, being able to direct you to support in a more effective way. We’re ready to invest the money but are we doing what we said we were going to do?

I hold people accountable and myself, and I said if we don’t make progress I told people I’m ready to fire myself. Bring somebody else that can make it happen but let’s just do it.

And in the end it’s all commitment. If we get this done, I know I don’t need to worry. This is not about standing up here and bashing our competition and their products and their leaders. We’ve passed beyond that stuff. It’s all about customers. It’s all about people. It’s all about how we use that technology to make people great. That is our allegiance. That is the one that we’re going to sign up for, for the next 20, 30, forever. That’s what it should be.

I know — I know if we do this the outcome is what it should be. We will get growth. We will be just not a good company, we’ll be a great company.

With this said, I want to thank you very much for you spending the time. I was very concerned because I said, well, things are very hard out there. How are going to get our partners here? And I really appreciate the fact that you have made the commitment. I hope that the past few months have given you an indication of challenge. I’m sure of that. At the same time I hope that the past few days we also have been able to communicate to you more in a dialogue way how we’re planning to move forward and make you an integral part of how we see success.

With that said, the last word here is I hope you join us in driving this dream forward and let’s just come together and realize our potential.

Thank you.


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