Speech Transcript – Kevin Johnson, Microsoft Worldwide Partner Conference 2003

KEVIN JOHNSON: Good morning, New Orleans. I am delighted to see you out here today. You are the committed, the brave and the strong.

Day three of the Worldwide Partner Conference, the morning after the regional party, and here you are. In fact, Steve Ballmer opened Thursday’s session saying that last year at Fusion he presented on the third day of the conference and he said many people had left. Well, I look and say I think a 9:30 start is a lot better than a 7:30 start. Does that work for you? (Applause.)

Now, this session is about our partnership, winning customers together. There’s a saying, there’s a saying that goes, “Politics is local.” Well, the same could be said of sales and marketing engagement; it’s local, it happens in the geographies between your teams and Microsoft and how we win customers together. Today’s session is about how we do that, how we help you win customers together.

Now, I know many people may be feeling a little groggy today after the great parties last night. What did you think, good parties last night? (Cheers, applause.)

Great. So some of you may be feeling a little bit groggy this morning. I actually have just gotten back from a two-week tour in Asia and I’m feeling a little big groggy, a little big jet lagged myself, but part of my travels around the world, my grogginess this morning isn’t totally related to the jet lag and it’s not related to the parties last night, but, well, rather than me tell you let me show you the story.

(Video segment.)

(Laughter, applause.)

KEVIN JOHNSON: But, you know, with jet lag, the parties last night, our 9:30 start I think this is a great opportunity for us and I’m excited. You know why? Because we have opportunity, opportunity to succeed together.

Let me just take you on a little bit of this evolution of history. From 1980 to 1995, IT spending increased at an average of about 8 percent per year. From 1995 to the year 2000 it accelerated to a 16 percent year growth rate annually. Why? The dot-com bubble and Y2K. After the year 2000, there became some challenges, global economic challenges, and customers with the overinvestment they made in the last part of the decade of the ’90s, they began to tighten up IT spend. So we saw declines in IT spending through 2001, 2002. This last year, 2003, has been relatively flat.

I know this has been challenging for all of you as partners and it’s been a real roller coaster ride, but I want to take this opportunity to personally thank you for your commitment to this partnership. (Applause.)

Now, the tide seems to be turning. There are signals of the global economy strengthening and many analysts are predicting growth in IT spend.

As I travel around the world, I hear it from customers. Customers are interested in making investments in technology that helps them lower their cost to operate and manage the infrastructure. They’re interested in making investments that unlock the next wave of information worker productivity gains.

Over the last few years their application backlog has increased. Customers are looking for investments to help them deliver on that backlog, whether it’s applications from ISVs and our partners or it’s custom developed solutions around .NET.

There is opportunity out there. There is customer demand.

Now, winning customers together: Well, throughout this conference, we started on Thursday talking about the customer and customer focus. I think Steve and Orlando both articulated this point. We’re putting the customer first. We’re focusing on how we deliver customer value, how we differentiate ourselves from competitive alternatives and deliver value to our customers.

It’s about customer and partner satisfaction and customer care, and Steve outlined the set of things, actions that we are taking as a company to help focus on this industry-wide issue of security. This is a great opportunity for us.

Now, Allison extended that and talked about our investment in our partnerships. The launch of the new Microsoft Partner Program: Many of you told us how difficult it was to get a hold of someone at Microsoft. We’re investing so that every certified partner has at least a tele-management partner account manager that’s available for them at all times and will help you as a partner engage with the field.

Now, if you don’t call us, we will call you. What do you think? Is that a step in the right direction? (Applause.)

You also told us you need help with pre-sales support. I’ve heard from many partners that said, they, they were trying to win a particular customer opportunity and they needed some additional pre-sales assistance from Microsoft; so the launch of Pre-Sale Support to help you from our tele-sales center, to help you close business and win customers. What do you think about that, another step in the right direction? (Applause.)

This is all based on your feedback. It’s based on the communication that you send to us and the dialogue that we have together, strengthening the partnership.

Innovation: Our business group executives have talked about integrated innovation and the work that’s going on with the launch of Office System 2003 and how integrated innovation is unlocking the next wave of information worker productivity gains through team productivity and organizational productivity.

The launch of Microsoft Small Business Server and focusing on the small business segment and the platform we have there.

The growth we’ve seen in Web services, the good work in Microsoft Business Solutions around CRM and all of the integrated innovation, but it’s not just the innovation we do, it’s the innovation that you do and we do together that makes us so strong.

Now, how do we tie all of that together? Well, it comes down to how we execute in the field and something we focus on called “excellence in execution.” It’s how we make things happen in the field, and I think there’s three elements to this. It’s about the fundamentals of sales, marketing and services execution. It’s about orchestration, the business processes that we have to coordinate from within Microsoft and with our partners out to our customers. And it’s about being systematic and repeatable.

Now, one of our partners had a great quote. Gordon Eubanks, the founder and former CEO of Symantec, says, “Strategy gets you on the playing field but execution pays the bills.” So that’s really what we want to focus on.

Now, we had our field sales force here in New Orleans two months ago for our Microsoft Global Briefing, and we talked to them about how we set a balance in our priorities, a balance in the stretch goals, if you will. And we used the analogy of competing to win for the Americas Cup, a very prestigious yacht race and what does it take to win the Americas Cup.

Well, we said, look, it takes innovation. You innovate to design the yacht, the boat. You design it for structural integrity and you design it for speed, so innovation is important.

You also need a great crew, a crew that works as a team and that is constantly on top of all the tuning and changes that need to happen on the yacht.

Three, you need to be aware of the external conditions, changes in the wind shift, where the competitors are positioned and how you’re maneuvering through the course.

Now, it’s very similar to our businesses. Innovation is important to us as well. It’s the innovation that we do together in our partnerships and how that delivers value to the customer.

The crew: It’s the teamwork that we have between our Microsoft sales and marketing organization and our partners in the field and having a well coordinated team in terms of how we’re taking that innovation and delivering it to customers.

And it’s about being aware of external conditions, the competitive situation, the market trends, the sets of things that customers need.

It’s very, very similar to winning the Americas Cup.

Now, if you get out of balance on any of those things, bad things can happen. I’ve got a little example here. This is a boat from 1996 Americas Cup called One Australia. And it just kind of tells the story of what happens if you get out of balance if you’re not focused on innovation or you’re not focused on the customer or you’re not focused on the teamwork and the collaboration and the crew.

Let’s go ahead and take a look at the video.

(Video segment.)

So here they are sailing along, everything is fine. Uh-oh, what is that, a crack in the boat? Is that lack of innovation or lack of focus on the customer? What does the crew do now? How bad could it really be? Oh dear. It’s pretty bad.

So what happens if you don’t have the right balance? Certainly the outcome is not what we would want.

(End video segment.)

So we use this analogy, when we talk to setting the goals for our field we set goals in terms of balance. We set specific stretch goals around winning customers and winning customers by focusing on the customer’s need, the customer opportunity and how we deliver value.

And we face significant competitive challenges in the marketplace, certainly Linux and other Open Source software alternatives. We have to be more focused on the customer and through integrated innovation we have to deliver more value. That’s something that we share together and we have an opportunity to win customers.

Driving satisfaction: We set stretch goals for the field around driving satisfaction, both customer satisfaction and partner satisfaction.

A significant change this year: We changed all of the goals for sales, marketing and services to include a business objective for every professional in sales, marketing and services around customer and partner satisfaction and we’ve changed the compensation system throughout sales, marketing and services so that people are compensated and recognized for their good work driving customer and partner satisfaction. That is a priority.

The third area, growing our business: We set some specific aspirations in terms of our revenue growth. Now, we believe if we focus on the customer in the right way and customer and partner satisfaction we will grow the business, and at the core is promoting innovation, innovation that comes from Microsoft and our partners and how it helps the customer.

That’s a key point that we’re making throughout the goals that we’ve set for the sales force and we’re making a number of other changes to help position us to deliver on those.

The first is we’ve just gone through a significant transformation throughout the field organization. We’ve created a field blueprint because at the core in order for us to achieve excellence in execution we have to get our resources aligned in a way where we have the right connections, the connections to our business groups, the connection to our customers and the connection to our partners.

Now, this field blueprint, there’s a few key elements of it I want to highlight for you. The first is in every subsidiary around the world we’ve established what’s called the business and marketing organization. Within the business marketing organization is a set of business group leads. This is the connection from our business groups. So whether it’s server and platform, information worker, Windows client, mobile and embedded devices or Business Solutions, there’s a clear link from our business group executives and their teams out to our field teams. Now, that connection is important. That’s how we get our customers and our field teams much closer to our business groups and our business groups much closer to the customer.

From there you go to the customer segments. Now, one thing I’ll mention, from the business groups are defined these go-to-markets and these go-to-markets are what link to the competencies that we’ve rolled out in this new Microsoft Partner Program. So the go-to-markets and the competencies we have linked on a global basis to the set of things that we’re doing in our business groups that is based on first of all customer need, customer opportunity, the value proposition we have and how we can have a go-to-market campaign that gets everyone around the world focused on a clear set of priorities.

Then we go into the customer segment, the small and mid-market segment, 40 million small and mid-market customers around the world, and the enterprise segment.

Now, in order to make the connection to our partners we’ve established these Partner Account Managers. Now, we know we have Partner Account Managers that align either by the small and mid-market or align by the enterprise but you as a partner will have a lead Partner Account Manager, a single point that’s going to coordinate across the different organizations within Microsoft to help make sure you are engaged and connected in a way that aligns with your business, the way you work and the competencies that you are focused on.

They are also the link into our Microsoft services team. So when there’s opportunities, let’s say, in the enterprise or in small and mid-markets that involve our services opportunity, we’re connecting through these Partner Account Managers the services and the work that you bring to the table, along with the Microsoft services and blend those in the appropriate way to solve the customer problems.

Now, we know there’s still work to be done here. We know that, for example, in the United States we have different industry verticals, each vertical has a set of go-to-market things they’re working on with their partner account managers. We know there’s still work to be done to simplify this for you and we’re going to take some actions to continue to improve on that. We want to mask the complexity within Microsoft from you so that you’ve got a single point of contact with this lead partner account manager and we can do the appropriate planning and work in the geography to help engage in an appropriate way.

Now, last year you said you wanted alignment of product strategy from marketing to you. This is the first step, product strategy from the business groups, then looking at the customer need and customer opportunity. They map the go-to-markets. The go-to-markets then link to this business and marketing organization, which links into the subsidiaries with our partner account managers by segment, small and mid-market and enterprise. That’s one step.

The second step is something we call connected marketing. Now, connected marketing is really about focusing on the customer opportunity, it’s about being more predictable and systematic and it’s about connecting our marketing efforts to sales.

Now, last year we got feedback from you that said you as partners want to tap into the Microsoft marketing machine and in order to do that that you needed to know when we’re going to launch certain marketing campaigns and what they’re going to be about. You also told us we need to be more systematic and predictable.

Well, this connected marketing approach is driven by your feedback to help us do that together. It starts at the very top with brand awareness, brand awareness for the company overall around our mission, enabling people and business around the world to realize their full potential. We are running the TV ads of realizing potential in 29 countries around the world to help establish the Microsoft brand, strengthen the Microsoft brand and ensure that we let customers in those markets know that we are about realizing potential.

Within that is a set of brands, whether it’s Office System, Windows Server System, Microsoft Business Solutions. We have the other brands. They too will do a set of brand awareness advertising.

From there is comes down to the go-to-markets. Now, these go-to-markets get decided based on the customer needs and opportunities in the marketplace and the set of value proposition that together with partners we can deliver to the market.

So when you pour in the go-to-markets into this funnel and you start with broad brand awareness, you then begin to move down the funnel and say, okay, let’s do some demand generation for those go-to-markets.

The demand generation can come in many forms. It could be demand generation from a print ad that directs a customer to go to a Web site. It could be demand generation in terms of some seminar that they attend. It could be your seminar that they attend. It could be demand generation through some direct marketing activity.

Now, that demand generation creates awareness and out of that comes interest. So, for example, let’s say you run a particular set of seminars around these go-to-markets. We want to be able to take your seminars and advertise them on the Microsoft.com Web site so that if a customer reads a print ad about some specific go-to-market it directs them to the Web site, they go to the Web site, they might see there’s a series of seminars being conducted in their geography on that topic. Some of those seminars would be your seminars, which they could register for and enroll in.

Now, as people go to seminars you then track coming out of those seminars what’s the call to action and what level of interest does the individual have, is there some desire for some trial.

Now, that becomes something we call a Marketing Qualified Prospect. Now, some of those will be generated by your marketing machine, some of those will be generated by the Microsoft marketing machine, but the more we connect those the more we are leveraging the investment that we’re making broadly in brand awareness and demand generation around the go-to-markets and around product launches and out of that comes leads. And that’s what we all need from a sales standpoint, leads. Leads turn into closed business, winning customers, which turns into revenue and the opportunity to drive satisfaction.

So this field blueprint is one step that’s very important. Connected marketing is the next step.

Then you say, okay, let’s move into the various customer segments. We know we have significant opportunity in the enterprise. In fact, Simon Witts I think on Thursday highlighted his view of the opportunity in the market in the enterprise segment.

So to help describe how we do joint sales engagement with our partners in the geographies, I’d like to introduce Simon Witts and invite him to join me on stage for a discussion about joint engagement in the enterprise. Simon. (Applause.)

Well, Simon, clearly I talked about the field blueprint, connected marketing. Now, as partners have leads and our sales teams have leads in the enterprise, help me frame how you set the priorities for the field in terms of our focus in the enterprise.

SIMON WITTS: Good morning. The focus is actually quite clear. Picking up on what Steve said on Thursday about our industry and our company’s need to innovate and also yesterday how we saw the integrated innovation come through in the products, I think the core goal of the enterprise team with you is to innovate in our customer relationships and for my business that does mean starting to innovate with you.

So the example Kevin gave there of the go-to-markets, that to me is a breakthrough in terms of the richness of the solutions you can provide but also a stack through which we can engage.

The innovation of the lead PAM, I think together these will change the dynamics of the relationship we can have with you.

KEVIN JOHNSON: So clearly within the enterprise you are focused on the go-to-markets just like we are across the company. This lead PAM becomes a central point in how we engage.

Now, much of the transition we’ve been focused on over the last few years has been a shift from more product sort of selling approach to more of a solution selling approach. Can you describe how we’re approaching that specifically in the enterprise segment?

SIMON WITTS: Yes. Kevin, our approach to solutions has always been through partners and will always be through partners. And the way I think of it again is how do we do more than just the product to help you build great horizontal and industry aligned solutions and then how do we do solution selling better together.

The way I’d like to describe it, and let’s first look at how we build on top of the products and help you build richer solutions, and we’ll go up the stack with really what is inside every GTM, the bill of materials.

It starts with what I’d call here a self-help. You can see these concepts of patterns and practices that start to bring to you prescriptive architecture. They start to describe to you where we see patterns or integration code or where we’ve seen through lifecycle usage hints, hits and tricks. It starts to bring the cost down, the speed up, and ultimately the risk of delivering solutions on Microsoft.

We take some of those and look at very deep customer testing and start to give sample code, and this is where we would get into the Solution Accelerators beyond the patterns and practice, all of which are readily available to you on the solutions portal on Microsoft.com.

Moving up a level in terms of expert assistance, this is where we get quite precise. For example, the Quick Start, this could be anything from a one-day strategy briefing, a two-day design and architecting session, all the way up to a two-week proof of concept where we start to map to the business benefits and the business environment inside our clients.

We can go beyond that with a Quick Plan where we turn that proof of concept into something more of a design inside the customer’s environment and pilot all the way through to having end-to-end service portfolio offerings that enable all of our know-how in all engagements of this type.

And very, very importantly, this whole area of expert assistance could be delivered by our services, and Mike will come and show us that in a moment, but more importantly you can freely take those, badge them and call them your own and again it just helps the quality of the solutions I think and the richness of which you can build.

And then finally, as we start to go up this stack by GTM, every single scenario with inside the GTM will build from these components and then every GTM will have connected marketing, as Kevin said, and then finally inside the enterprise we’re putting a specialty sales force behind every single GTM, so again it will help the decks of engagement, should this map to your competency, that you’ll be telling us through the new partner program.

So I really, really think we’re getting to the stage where we can say we’re solution selling to Better Together.

KEVIN JOHNSON: Now, a couple key points. One is, partners, you will all get the go-to-market kits and the information as we come out with these to help prepare, but the other one, Simon, I think is key that you made is that these solutions are not just made up of the Microsoft products; it’s the innovation that we do with the innovation that partners do that makes for a complete solution.

SIMON WITTS: Yeah, it’s really the solution is partner led and the richness in the ultimate solution provision is built with our partners.

KEVIN JOHNSON: So Steve talked on Thursday about a top priority for the company of security. Why don’t you walk through how this would work with the go-to-market around security and the solution around security?

SIMON WITTS: As of Thursday this is our first GTM that’s officially on steroids, according to Steve.

KEVIN JOHNSON: Steve set the priority, all right.

SIMON WITTS: Steve set the priority, so this is clear.

KEVIN JOHNSON: Go GTM on steroids.

SIMON WITTS: And it’s a good one to use as an example. If you look in the security GTM we’re really addressing what I would say are two scenarios in there, one, with you how do we help customers secure their system and then secondly, with inside the environment how do we help them deal with any vulnerabilities that may occur.

So let’s first go up the stack on how we help customers through this GTM secure their systems. Down at the bottom you can see we start with the two core products, the Internet Security and Acceleration Server, and this identity integration package that goes on top of Active Directory to manage the PKI and identity infrastructure.

We have the patterns and practices. Steve showed you the volumes as he threw them across the stage on Thursday of where we’ve got advice and guidance, integration and so on.

There is actually in this area a very clear solution accelerator for helping customers secure the Windows environment and building on that there is actually a Quick Start where we can share with you materials to do a one-day strategy briefing, proof of concept, all the way through to architecture and design. So, for example, in that case Network Associates and Symantec have both used that to build on their antivirus offerings and enrich their offerings inside our enterprise accounts.

Doing the same coming up the stack for the vulnerabilities, building on Software Update Server and the superset here with SMS, we clearly have a solution accelerator around patch management in that environment.

Interestingly, I was with a customer in Europe two weeks ago that told me the second issue around Slammer — around Blaster —

KEVIN JOHNSON: Slammer was one, too.

SIMON WITTS: Yeah, it was the same customer who spoke to both, just six months apart.

They actually admitted all the patch administration on all desktops and all servers with one man-day of effort, it’s essentially two administrators in one afternoon and then it rippled the whole network in 24 hours; really amazing technology to help customers administer the patches on their timeframe not just the hacker’s.

And then finally partners such as Avenade and PriceWaterhouseCoopers have really enriched their own offering with a patch management solution using this technology stack.

KEVIN JOHNSON: And a couple things, I think I really like these Quick Starts. These Quick Starts are short, packaged ways to help at least get engaged with the customer on some dialogue around the particular solution area. It’s a way to get engaged with the customer in a very low-cost simple kind of a way that leads to the broader sale as part of that whole sales process.

I also like the fact that these go-to-markets are all about you as partners extending based on the work we’ve done here. And we mentioned a set of partners and the extensions that they’ve done but we want all our partners to look at these go-to-markets and depending on your competency and your focus in your business you’re going to pick the ones that you can now extend and really, as you mentioned, Simon, enhance the richness of these go-to-markets.

So if I’m a partner, Simon, how do I engage in that solution selling process?

SIMON WITTS: Many of our partners will tell us that what they really are building is industry solutions, not just these horizontal solutions. So I’ll talk about that first before we go into the general engagements.

As you know, most of our subsidiaries have now organized their sales by industry, and I think that in and of itself is helping the depth of engagement in terms of expertise. But importantly, beyond what the subsidiary is doing in terms of picking its partners and its offerings inside that industry, we’re starting to evaluate what our industry offerings or your industry offerings might be beyond just the size of an individual district or an individual subsidiary.

So importantly we’re looking at a solutions mapping that becomes regional or even in some cases global. So an example here, the public sector, which for us includes government and education, the financial services sector and the telecommunications sector, we look at the solutions map globally and then across the U.S. subsidiary nationally now we look at these listed industries and in EMEA two additional ones, retail, automotive, and you can see how it’s beginning to emerge in the Asia Pacific region.

What the teams do then, once we did that we had to say what is a consistent solutions mapping process rather than just leaving it subsidiary by subsidiary. It’s part of being predictable in engagement with you. And all of those regions now use the same solutions mapping process, where we look at both what’s hot in the market and where we can deliver the most customer value, but also add differentiators and your differentiators to map to what’s hot.

And you get this concept where you really want to move up to the top right hand of having the most differential in value as part of the solutions map. And obviously we’ve got some ability to enhance or renew our solutions with you in some areas to get into that sweet spot and also to go out and recruit new partnerships and solutions where we have gaps.

What that essentially does, and I use the specific U.S. example here because we’re definitely more advanced, but you will think of this, by the time we’re in Toronto next July you’ll all be familiar with this concept whereby in this particular tool, it’s the spoke one for the U.S., the partner can come in and understand our solutions map and profile their own solutions against it. This will be part of the new partner program tool that we’ll roll out in the next six months.

But importantly, this vantage point is from our intranet where the representatives inside Microsoft see where our industry people in the U.S. have said, “Yeah, not only is this partner profile their solution against our industry map, but from our assessment this is in execute mode and we recommend it or we’re recruiting this partner still in a predictable way or so on.”

And you’ll also see on the left hand side there’s case studies, customer examples, real great evidence to start to enhance the intimacy between our sales force and your solutions by site.

KEVIN JOHNSON: So, Simon, as a partner, if I have an industry solution, I want to get that registered on that industry solutions map so that Microsoft sales force and customers are aware of it; that’s what we’re focused on getting done over the next year?

SIMON WITTS: Yeah, in the U.S. you can do it through Partner Central today. Over the intervening period we’ll put it inside of the core partner tools. And really where this all leads to is not just our intranet so our reps understand but also onto the solutions portal on Microsoft.com and ultimately, as you described, Kevin, we then lead this into connected marketing. And this is what I hear most from my partner discussions at this conference, how do we get integrated and start to drive demand awareness and leads through connected marketing, and we’ll do that by industry segment too.

KEVIN JOHNSON: So I want your solutions loaded into our system so that on Microsoft.com we can make them searchable so that customers can find them, our sales force can find them and then, as Simon mentioned, even as we do demand generation we start focusing on different customer references, customer testimonials that we’re working in the rich solutions work that you are doing and reinforcing that back in the demand generation and the awareness work. That helps strengthen the innovation that we’re collectively taking to market and it creates the environment for you to create super rich solutions and really extend on the integrated innovation for the platform and the business solutions that we’re bringing to market.

Now, tell me about the initiative then, Simon, to drive good sales engagement in the field. Our account managers and reps and TSs, are they motivated to engage with partners or what do you have in place to help ensure that we create the connection locally?

SIMON WITTS: They should now be motivated to work with partners for sure. Beyond the GTMs and beyond the lead PAM model, explicitly what we’ve done to really force — let me say it, force the right relationships to start to go through, and again I think it starts with partners, is we’re looking at across the sales force, whether you’re an account manager in an industry role or a specialist behind a GTM, really you need to think about accountability and every single one of our 6,000 sales people, and Mike will come up in a moment and talk about the services team, have scorecards with partner engagement metrics in tem all the way through to the role.

Secondly is predictability. This to me is going to build on the new partner program. The more we understand your competency and interest the more it will start to be a predictable relationship and especially if we map it to our industry address or our horizontal GTM.

And then finally I think simplicity. And I’m putting all my money in the lead PAM model and we really have to make that work to make that simpler for us both.

So what should you expect net-net? If you looked at what I would envision in terms of becoming joint across the engagement, it would be these five things.

We have fundamentally changed our account planning process where it cannot be completed without the involvement of the partner.

Second, we have changed our opportunity management process to integrate what we used to have as our partner engagement technique, so it’s integral to the opportunity definition and the pipeline review. So the services team, the sales team and the Partner Account Managers will sit and look at the same opportunity pipeline in the same opportunity review.

And then when it comes to engagement, again it’s getting deeper on industry skills, deeper on specialization skills so that we start to understand each other in the engagement map by account and opportunity.

And then it’s all to do with customer evidence. That’s what I think is in it for you, when we can start to drive reference and ultimately drive co-marketing, integrated, connected marketing. And that’s where success will come from. And in my view, unless we do this in a sustainable way we will not be able to compete against people like your friend and mine, IBM. The depth of the relationship will ultimately be our final differentiator against key competitors such as IBM in the enterprise.

KEVIN JOHNSON: Now, a couple things reinforced. I talked about excellence in execution, Simon. It sounds like what you’re building here is where I talked about a focus on the fundamentals of sales and marketing execution, orchestration across the different resources, Microsoft and partners, and being very systematic so we’re much more predictable, and these are the things you’re building into the account management team and the goals you’ve set, the incentives that you’ve put in place.

SIMON WITTS: Into that global segment that you described.

KEVIN JOHNSON: That’s right, around the world.

SIMON WITTS: Around the world.

KEVIN JOHNSON: Now, give me an example of perhaps a situation where this has played out.

SIMON WITTS: An example I thought was good and then when I was in India two weeks ago it got better, because I’ve been living in the UK up until the beginning of the year and followed this project with London congestion. It turned out to be the largest congestion project for traffic management in the whole world, where in the case of the city of London they’re dealing with hundreds of thousands of vehicles every day and made the problem even more complex from an IT point of view with not wanting to put anything on the vehicles, so really everything is done by camera, a very complex situation.

KEVIN JOHNSON: So the problem was what, there was just too much traffic in downtown London?

SIMON WITTS: It’s actually slower to go across London today than it was by horse and cart.

KEVIN JOHNSON: I see. So they had a significant business problem, right, a great opportunity for a go-to-market application? So tell me how they tried to focus on this application.

SIMON WITTS: Yeah, the mayor of London bet his reputation on being able to solve this problem and the project owner of it actually put out a tender that was J2EE specific in the RFP. And the reason I got even more jazzed about this story, knowing ultimately that we won it, was in India I met an offshore partner of ours who front-ended the bid. And they actually came in and said, “No, J2EE is better” but they actually put the whole consortium together, and did a three-month shootout and made absolutely resolute that the RFP terms were wrong.

KEVIN JOHNSON: Now, let me understand the application though. They said, hey, they’ve got too much traffic in London so the mayor said let’s start charging people for driving through the center of London, right?

SIMON WITTS: Oh yeah, I mean this is hard core stuff.

KEVIN JOHNSON: And I’m sure the public responded well to that proposal or maybe, maybe not.

SIMON WITTS: Yeah, I mean it’s a very complex system because you can pay by phone, pay by Internet, pay by voice. There’s all sorts of scenarios there. It’s very complex.

The key point of what Mavtech did here was they stood their ground that only .NET could integrate something as complex as this. The competition was your friend and mine, and in the end the consortium won the bid and that the key thing is, having spoken to the CEO of Mavtech, they were prepared to win this deal together or lose this deal together. Of course, because it’s a case study, we won this deal together.

But where I want to leave you is this core vision I have and hopefully we’re further when we get to Toronto next year. I would like to have a story like this that showed an unshakeable relationship with every enterprise partner inside the room, so I can talk about more success we have through deeper relationships and better engagement against core competitors like IBM.

KEVIN JOHNSON: That’s great and it sounds like you’re building in all the processes and the structure and the fundamentals to help us better orchestrate our sales efforts with partners.

Now, a key pillar of this in many of the discussions has been things like the Quick Starts, the patterns and practices and the work that we do with Microsoft services.

Why don’t I invite Mike Sinneck, vice president of Microsoft Services, to join us on stage and carry this discussion forward, so please welcome Mike Sinneck. Good morning, Mike. (Applause.)

MIKE SINNECK: Thank you. Thank you. It’s good to see you all today.

KEVIN JOHNSON: Well, Mike, I know over the years many partners have asked the question, hey, is MCS competing with us for business, Microsoft, do you want to be another IBM Global Services, and I think we’ve been pretty clear in our strategy but perhaps you might want to start and just reinforce our vision for services.

MIKE SINNECK: Great. First I’d like to thank you all for being here and for the ongoing trust and relationship and partnership. Working with you is a joy and let me explain to you in no uncertain terms, this is not IBM Global Services. And even though I spent 32 and half years there, I did drink the Kool-Aid, and there really is a better way and it’s the way we’re doing it here.

Our strategy has never been more clear, in my opinion, in services. Kevin, we’ve used services as a means to an end and together with our partners the end we try to reach is to enable our technology. It’s to help the customers get the value out of the product, to make solutions that stick.

And as a result of that, our natural inclination and bias is not to generate pure services revenue and profit. As a matter of fact, the primary measurements in our structure are customer satisfaction and partner satisfaction. Sure, we try to break even on the bottom line just to keep this thing financially sound, but our motivation is product placement sticky solutions. And we’ve done a lot of work over the last 18 months or so to really reinforce that strategy.

I think you’d probably all agree that we’ve made a lot of change and there’s more to do. We have a smaller resource footprint than ever before in Microsoft Consulting. We’re trying to keep that organization lean and really focused on the things that matter. We’ve established standard and predictable discounts for our services to make our people more attractive to you so that you can build them into your engagements and make money on them. I think we’ve got a little more work to do there.

We have a stated preference not to prime on contracts and I’d give you an example. Yesterday I was with a large insurer for the Midwest of the United States and they wanted to understand our model and how we work and I said here’s the model. We really work best in the architecture and design phase. We want to snap in under the partner and make it a go. There’s a bulk of the work and the heavy lift is done by the partner. We’re not a systems integration and custom application development shop.

It was a pretty rich discussion and at the end of that I think the customer appreciated the fact that it’s not our intent to climb. We reinforce that theme every day.

We’ve got a management system approach we use called the Service Matrix Set, defining our areas of strategic interest but more importantly to try to create traction with our partners so we can go to the market and together succeed on behalf of our customers.

We’ve changed the focus of everything in field services. We’ve adjusted their measurement, we’ve created balanced scorecard that puts customer and partner sat at the top of everything we do. We’ve got specific targets for revenue generating with, through and having contracts and with our partners that’s over 40 percent of the P & L today. We’re doing everything we possibly can to reinforce the notion that we’re here to do this together with you to generate real value for our customers.

KEVIN JOHNSON: Now, Mike, I know we’ve had a lot of feedback from partners on areas that they say, “Hey, Microsoft Services focusing in this key areas helps compliment the partner services and it helps act as a catalyst for creating market demand very broadly.” Perhaps you’d like to describe how this engagement model works and how it’s been shaped.

MIKE SINNECK: Yes, I would. I think I’ve got the right slide up. Yes.

Now, Kevin, this model illustrates how we’d like to work in the solution cycle. First, I think you have to understand that our resource footprint is actually very small. There are only 28 consultants in the world — 3,800 consultants around the world. They travel like maniacs and they’ve got utilization that you can’t imagine, 600 or 700 per cent each. (Laughter). That was a bad joke and I lost my train of thought. (Laughter) Anyway,

KEVIN JOHNSON: You’re on the service engagement model.

MIKE SINNECK: We have a relatively small resource footprint and what that tells us therefore is given the fact that we operate cooperatively with our partners, what’s the best way to use these skills? And the best way that we determined to use these skills is to get the leverage and the architecture and design phase.

So we purpose built our services resource to deepen architecture, deepen interoperation and we really would rather that you take the lead position on a contract, have our resource snap in, get the architecture and design, use of the product properly specified so it can be successfully employed and supported, and then you carry on and do the bulk of the work in build, deploy, operate and support. That’s the optimum engagement model. It’s a sweet part of our capability and it’s how we’d like to engage with you.

Ladies and gentlemen, we’re not going to grow the services capability to be remarkably large. We’re going to purpose build it, focus in on architecture primarily and snap it in under your engagement.

We also will continue to provide support for our customers through Premier and TSS, which is, I think an exciting frontier for us as well.

So my message to you today and it’s one I’ve been reinforcing since I got here 19 months ago, we are not IBM Global Services, we are not here to compete with you. It’s not our intent, its not our strategy, it’s not our behavior. And when we get situations where we our behavior doesn’t belie these principals, I want you to call me. I’ve made this offer in every speech I’ve ever given and so far you know how many calls I’ve gotten? Zero. Which tells me it must be working perfectly.

KEVIN JOHNSON: Mike, I know you’ve worked hard really engaging and connecting with the partner community, so tell us a little bit about what you’ve done to really do this in a way that compliments the partner services.

MIKE SINNECK: Well, I’m really excited about the work we’ve made here and the progress. It’s taken us a while to build some momentum, but first, off the remarks that Simon made a bit earlier, we’ve created services offerings, Quick Starts, Quick Plans and Portfolios. Those offerings actually take the work of the prescriptive guidance and solution accelerators, integrate them in a MSF and MOF setting, provide IT that is relatively extensive all the way from how to qualify and sell opportunities right straight through the delivery. They’re tied to the 11 go-to-markets and the 23 scenarios and all of that IP is available to you.

At the Microsoft Services exhibit, if you go over there, there are DVDs that are available and all that’s required is you sign a letter of understanding, which really has to do with the protection of that IP when you use it in the marketplace. But it’s there for you to use today. It establishes a clear point of view and a way of solving these problems that relate to pain points.

And what we hope you do with this IP is either take it directly to the market or wrap it in other things that are meaningful from your advantage point, industry solution or other solution contexts.

We’ve refreshed the Premier offering. Frankly, I think we’ve got more work to do to provide clarity around our managed support offering space. We’ve extended the offering of Premier to something called Essential into the corporate space. We’re testing new and innovative ideas for how to take those offerings to the marketplace, including you take the offering to the market, you sell it, we do the fulfillment and you get a commission.

We’re also evaluating Microsoft inside kinds of approaches where we take the richness of your capability and the richness of our capability, marry them together and do something truly meaningful for the customer. So there’s a lot of exciting work going there, more to do.

We are, frankly, becoming much more predictable with respect to the support we provide. We’ve established uniform service levels for how we respond to problems. Ninety percent of the problems are solved in seven days or less. We’re enhancing that objective this year. We’ve established a crisis management approach that has predictable triggers and escalation points. And we’re now listening on all ears to your feedback through a system called complaint.

I mentioned earlier we’ve done balance score card. That’s a unique and radical change. Simon talked about it a bit earlier on in terms how we’re adjusting people’s behavior by telling them what matters in terms of their compensation, customer and partner satisfaction on the top of the heap at this point in time. The numbers, what we call responsibility margin and revenue are actually on the bottom. That’s been a big change. We are inspecting in our monthly cadence pipeline reviews. We’re asking which partners are involved? If a partner isn’t involved, we ask the question why not and we’re really pushing hard to make sure you’re involved in everything we do.

We’re also opening up a variety of feedback channels to make sure that we are active and listening in terms of our approach.

So, I think, frankly, from my vantage point, we’ve taken down the barriers to success and progress here. We’ve opened up as best we can our strategy, our thinking. We’re asking for your feedback and asking for your commentary and making appropriate adjustments so that the fundamental principle here that I operate with is when you win we win, and that’s the formula that I’d like to go forward with.

KEVIN JOHNSON: Now, that’s great, Mike, and I know you’ve got things set up like the Partner Executive Council, the partner advisory councils and you’ve got a direct pipeline to feedback and a dialogue that you have with many of our partners. I don’t know if you want to comment on some of the things you’ve learned by doing that but I think that’s an important attribute of the relationship.

MIKE SINNECK: Yes, I’d like to comment briefly, Kevin, on something we call WSPEC, the Worldwide Services Partner Executive Council. There are approximately 20 of the firms in this room that at the senior executive level participate with Simon, me and Sanjay Parthasarathy. We do two or three meetings a year in which we basically let our hair down and talk about our thinking, or strategy —

KEVIN JOHNSON: You let your hair down? (Laughter)

MIKE SINNECK: I want to thank you for that remark, Kevin. (Laughter) Yep, well I used to have hair but that was a long time ago.

KEVIN JOHNSON: Must be good meetings. Go ahead. I’m sorry.

MIKE SINNECK: I let my hair down. Kind of an odd concept.

We talk to the partners in a pretty open forum about what’s on our minds, they share with us what’s on their minds. For example, we had this notion of building industry specific solutions about a year ago, much like the offerings that we just prepared for Quick Start, Quick Plan and Portfolio. And they were going to be industry specific. And our partners advised us that if we went down that path we were going to seriously damage the relationship with selected partners so we backed 100 percent off that approach and are now working with our ISVs to take the Quick Start and plans through those channels to the marketplace. So the partners had a material effect on our thinking, our strategy and we’re really pleased about it.

But like all things in this space there’s always healthy tension in the balance that we’ve achieved and I’d like to encourage that we always have an open and candid feedback because we’re in this together. We’re in this to beat the competition and create traction in the marketplace for you and for Microsoft.

KEVIN JOHNSON: What about feedback from you? Have we made some progress in terms of getting services more aligned with you as partners? What do you think? (Applause) This is a journey. We are going to continue to solicit your feedback, continue to have the dialogue and I think continuing to work together. I think we’ve identified ways that we can be much more effective at winning in the enterprise.

So certainly services, I know Mike used service both enterprise as well as small and mid-market but certainly, Simon, the work that you’re leading with the enterprise segment and the work that the services brings is pretty key and any final comments then on how this translates to the partnership in achieving excellence and execution in the field.

SIMON WITTS: I think it’s very clear that good company, good products aren’t enough. The credibility and the competitiveness of our ultimate offer will be based on the strength of our customer relationships and hence in my book the strength of our partner relationships. I hope you leave the conference very, very clear. The GTMs give you an opportunity to build richer solutions, horizontal or vertical, engage deeper with more specialty sales, get connected to our marketing and ultimately I think what’s in it for you is more joint success. Win together, lose together and ultimately pull through more wins and more success. So, let’s go do that.

KEVIN JOHNSON: Great. Well, Simon, Mike, thank you very much. I appreciate your insight on the enterprise go-to-market. Thank you.

I’d like to now transition into the small and mid-market segment and on Thursday Orlando talked about forty million small and mid-market businesses out there, 39 million of them small business, and according to IDC they’re leading the economic recovery. Please join me in welcoming Orlando Ayala to talk about our small and mid-market segment. Orlando! (Applause)

PLEASE SEE ORLANDO AYALA TRANSCRIPT .