Simon Witts: Microsoft Worldwide Partner Conference 2004

Remarks by Simon Witts, Corporate Vice President, Enterprise and Partner Group, Microsoft Corporation
Microsoft Worldwide Partner Conference 2004
Toronto, Ontario, Canada
July 11, 2004

SIMON WITTS: Well, good morning. It’s really super to be here and not only are we unique in many senses together with so many products across the business groups and operating on so many fronts in the enterprise and the small and mid-market and in the home, but I think it’s also fairly unique that here we are talking about an enterprise business that I truly believe is partner led. That’s pretty unique. This for me is one of the best four days of the year and if I don’t get the chance to know you all already or meet you, please, please use the e-mail ID, Simonwi@microsoft.com. The more feedback the better. In many senses this is as or more important than our own sales conference next week, and the more current I am the better we are, so please give feedback throughout the conference.

Now, some of you may be sitting there thinking, what is Microsoft in the enterprise, I don’t think that’s me, and I want to leave you today thinking it’s everyone. There are two things about Microsoft in the enterprise that maybe starting today you don’t actually know. First, how much of our revenue do we make from the enterprise customer? And just to make it fair, I’ve excluded Xbox and MSN, but I’ve included all Windows, all Office, all Mobile, all Server, all business applications. What you may not understand is, in fact, a full 40 percent of our business comes from the enterprise and in my 12 years at the company that’s grown every year. This last year, for example, was still more than double-digit growth in server and tools. We have our Microsoft Business Solutions in the enterprise growing at more than 35 percent. We have our mobility business growing in the enterprise at more than 100 percent; so really great growth engine that’s fueling our growth in the enterprise.

And really importantly for our partnerships, if I took this revenue number, actually there’s only about 12 percent additional in services. We don’t declare that on the top line, it’s still a cost center, but just to put it in perspective we’re about 85 percent more products versus our own services.

The other thing to translate this is how much of the customer’s wallet does Microsoft in the enterprise with our partners take. Let me look at my piece first or our piece first. Is it 1 percent, 3 percent, 8 percent, 12 percent? It may actually surprise you to know that it’s actually only 3 percent. If we did a calculation, this actually grows every year as well. We seem to do pretty well in hard times when people buy our software to do more with less, and we do pretty good in the good times when people are investing for growth and more business agility all around.

But most importantly to me. the number that also climbed is how much are partners are making. In fact, if you translated this to our best calculation, Microsoft and our partners in the enterprise are securing about 40 percent of IT wallet in the enterprise. So what we’re saying is there’s at least a 10 to one translation here and together we are beginning to win in the enterprise and create huge, huge winning momentum for us all. Sixty percent of this business also is for us annuity and fairly predictable, and I think that depicts also the partnerships and the type of growth that we’re now securing.

So I would actually like the house lights up and for every Microsoft employee to stand up for a moment and just to look around and congratulate and thank our partners for continuing very much to grow our business in the enterprise. (Applause.) Thank you. (Applause.)

So where do we go next? I want to take you to a point where you really understand how proud we are as a competitive differentiator in a positive sense to partner in the enterprise and just how much growth we still think is there for us to share. If you’re an existing partner in the enterprise, I hope what’s in it for you is you see a simpler Microsoft so that you can grow and be more profitable with us as well. If you aren’t an enterprise partner or didn’t consider yourself as one, I hope you see that what’s in it for you is maybe a new market that you hadn’t thought about because hopefully I’ll describe it, as Orlando says, in a very new and connected way where I think ultimately it involves all of us, and that being proud to partner in the enterprise is a value proposition that will bring everyone in this room growth.

We look at the enterprise historically in a pretty rudimentary segmentation of PCs or employees, and we’ve dabbled with looking at IT wallets. But as you can see, being such a low percent, we weren’t sure that was such a great segmentation variable.

Where we’re heading in our advanced segmentation work is essentially saying we’ll define the enterprise where we have a relationship. Essentially that’s done through having an account team, an account plan that includes partners. But more and more we take that decision based on the vertical industry that the customer is in where it will be quite different and distinct by vertical and we let the industry teams take more of the decision now than just again looking at employees or PC count. The relationship is incredibly important and we’ll come back to that as it relates to partner relationships, too.

But, first, what kinds of trends are we seeing inside this customer base? The first one I called agility and oversight. Some of the classic attributes of agility, of speed, keeping up with the market, responding, being better and fast are still there but also we see a new definition of agility where people and companies want to do more subtle things. They want to understand their key people, their culture. They want customer responsiveness and insight. They want to think very hard about competition and keep track of it.

There are very few examples of agility that just track back in our mind to just running the business and operational process, but we are now seeing again and again this need for oversight, somewhat driven by Sarbanes-Oxley, but if we ask our customers we would estimate about 40 percent of them are justifying their ERP upgrade or purchase on the need for oversight, and the same with CRM in terms of taking systems to a broader user base in order to make sure there’s actually systems with command and control.

The other trend is in technology, and I called it real scale. It’s at the high-end we see 64-bit is going to be standard because it runs 32-bit better and cheaper, not many years from now. We see the ability to consolidate servers of very large scale and obviously with virtualization I personally think it will reverse the trend of appliances to bring them back into what I would call next generation datacenters.

And at the low end, obviously we’re seeing a proliferation of devices. I was in the Mobile Partner Advisory Council on Friday and I shared elective numbers with the enterprise and what’s happening with mobile e-mail, with mobile applications and so on, and I received an e-mail yesterday from one of the partners who said, “You know, Simon, your data is a bit out of date.” He was right, it was back in February, and he gave me the latest numbers, which just show what the trend is here.

And we’ll come back to what this means for us with you in the enterprise but the mobile, I call it scaling both ends. We’ve truly got next generation datacenters and a huge proliferation of the technology expanding the application reach and richness to all sorts of connected user types.

In terms of IT trends, potentially what we see here is people investing in these next generation datacenters. People really are looking at the hope of automated or more automated operations.

We’re seeing people invest in richer information networks to increase the resiliency but also to give anywhere, any time access, to make sure security and privacy is given but just giving people the ability to self-collaborate, to manage documents and really communicate real time.

Believe it or not, the capital expenditure in the enterprise will be increasing 6 to 10 percent and we’re getting back to a PC refresh rate of about 25 percent per year and a real investment phase of richer information networks so it can be better managed all up.

And obviously we’re seeing people invest in next generation applications. On average we see our enterprise customers having about 20 Web services applications. We’re seeing those become more server side and as Sanjay showed we’re seeing different propensity inside different verticals but ultimately people are investing, in fact, a full 65 percent of the app dev development budget is now what’s called custom, and ultimately some of that is app maintenance, but a very, very, very large portion of that is rich sets of tools that let people integrate and broadly use applications through the Web services architecture that we have now together to use.

And finally, I called it sourcing, but really here I’m meaning procurement and I’m meaning provisioning. And really I don’t think there’s a single person in the room that doesn’t say there’s innovation here on the side of our customer, whether it’s how they negotiate, how they use central purchasing from distributed purchasing, how they think about fixed costs with shared variable bases, how they think about the term of the contract, how they integrate many people, supply side, which means together with you I think we need to innovate back and that’s what this conference is about, keeping up with the innovation on sourcing.

So what about our competition? I would call our first competitor IBM. In many senses I’m immensely proud of how well it’s not become head to head in the eye of the customer, and that’s very, very good news because of the work we’re doing on Web services and ultimately being able to support our mutual customers.

But we can’t make a mistake that the vision of On Demand versus Realizing Potential. or the value proposition of services versus our value proposition of software or ultimately the result, which is vertical integration versus what I would call across the lifecycle or horizontal integration that you take vertically and ultimately the results, I think ultimately IBM is just doing standard process automation where together we are delivering truly agile systems for agile businesses that make them more distinct as a result.

The Linux competitor has just made us really sharpen our pencil. This is typically IT driven, it’s typically IT saying Microsoft’s not scalable enough, it’s not manageable enough, it’s not sure, it’s something that’s driving that tipping point to look at a different source.

Really the only way to respond to this is look individually by workload, and you’ll see during the conference how we’re really honing in. The customer wants to just buy SAN, the customer just wants to buy terminal services, the customer just wants to buy storage; we may solve that with a Windows general purpose server but we need the business value, the evidence and the approach to really compete at the cost of ownership maybe against a single appliance or device.

And exactly the same when you look at the priority solutions, point of sale, we need to respond with a specific SKU; branch in the R2 server, we need to get even better at running distributed or unattended operations across multiple branches. When you look at application rehosting, we’ve got to make simpler with the benefits of .NET to go from UNIX to Windows, not be for UNIX to Linux.

And so these priority solutions, as we call them, really again make us focus on what is ultimately the important thing to focus on: how strong is our solution and what’s the ultimate business value or back to IT, reduced risk and better TCO, and I really like how in many senses the Linux compete has made us think harder and harder and harder, business group and field and partners, on how to do that together. It’s really smart.

And then finally, this one may surprise you, but it’s our installed base. Driven by good-enough or driven by complexity or perceived complexity, we really do have frankly a large position where we’re by and large over-licensed and under-deployed. So we have customers who aren’t realizing the full value through adoption or deployment, and I think that puts us collectively at risk, and I’ll come back to that; as a real competitor we need to keep firmly in our sights in terms of retaining the customer and growth.

So how do we support partners in the enterprise? First off, I think it is to do with close relationships, and I’m so delighted to report that whilst our account management scores have been going up for the last three or four years, the overall satisfaction in the enterprise all up has now turned the corner and last year for the first year in five it’s started to head back north, so I’m very, very pleased hopefully with the overall impact that has on all of us in terms of our customer relationship on the Microsoft platform and sales.

Secondly, when we look at the go-to-markets, which you’ll see during the conference, you could say they’re version three, those whose third conference this is or more. Just take it from the guy in the enterprise, these are really, really targeted this time. They hit the right pain points, there’s very clear business value and evidence and I’ll show you my optimism as I describe the opportunity we have together in terms of them. But I really think we’ve done a good job.

On industry we’re moving from just having managed the communications and public sector globally to having full global implementations of retail, financial and manufacturing. We’ll have global managing directors of all of the sub verticals and the solutions maps that the partners enjoy in the U.S., where we can look at our target solutions, get our applications profiles and broadly help engagement and marketing, I’m glad to report that will go worldwide to help the partnerships that we enjoy. And it’s more important now than ever to have that vertical front end to the work we collectively do.

I’m pleased that we’re enhancing segment marketing both in Redmond and in every single sub. This will let us focus on business value tools and evidence, it will let us focus on our demand generation in the enterprise but most importantly it will allow us to collectively do relationship marketing and take vertical marketing global as well, alongside the solutions maps in those industries managed that way.

Also response management, this will be attached on more but this is one sense the solution to what we heard last year, how do I work cross-product, how do I work cross-solution, how do I work cross-program, but also for our relationship in the enterprise it really helps us with this so-called lead PAM where in one sense you can come in and say I’ve got an opportunity, Simon, and it’s cross-geography and that subsidiary can’t help me, which is the usual one I go to or turn to, how about that one, or it’s cross-segment between the small and mid-market and the enterprise or it’s cross-sector in terms of cross between two verticals. And this will really empower you to get those issues resolved but also ultimately for partners that are account managed it will also help your Partner Account Manager to get that resolved and start us to do what we said we’d do, which is to make Microsoft simpler.

And ultimately we’ve asked every general manager in every subsidiary to work across their groups, the ISV team, the enterprise teams, the small and mid-market team, the services team to ultimately come down to one list where we do manage but also broader than that one set of commitments so that we can become more predictable and that could be managed from the top, so to speak, of each and every subsidiary. I’m very, very pleased with those enhancements over the last nine months.

What does it mean in terms of sales engagement? We are going deeper on the relationship, we are adding account managers and importantly as well we’re creating more formal account teams, the account managers and the technical specialists. We’re actually adding, we’re taking about half of our specialists and moving them to be assigned to a certain number of account teams and making sure the services people are part of the team, and I will and do expect us to make headway in the relationship and have literally 100 percent of our territories and accounts covered with account plans, and I do expect as partners you to become as or more involved in that process as we look to both identify and qualify the vast majorities of our opportunities directly inside those account plans. We’re doing this for our own simplicity or productivity but I think it will help partnerships, too.

Also on the specialists we’re really starting to make sure they’re aligned [with] that core business, the infrastructure, the information work and the app platform and the tools, but very, very importantly for partners we will have a sales-management process where we decide to assign those two things that we know about or things that you know about and truly support the partner engagement by resourcing the best opportunities in our collective pipe. This is very important that if we come in with well qualified opportunities we’ve all got fair chance, either collaboratively or us just supporting you, to make sure we win in every one of those cases.

And then sales and services integration: Rick will be up in a minute with Kevin, but this is a huge breakthrough where we’ve put single accountability inside the sales teams of making sure that we integrate our services appropriately but also align that strongly with our partnerships.

What it means to you is essentially three things: From now on you’ll see one account plan between sales and service, you’ll see one opportunity pipe that’s easier for us collectively with you to manage, and again you’ll have one set of commitments in terms of the business plan we set with you and the way we engage.

And then finally we really are making sure that everybody in sales and services aren’t just cold about being partner led, but are being paid on being partner led, and we’re truly asking people to be accountable for the partner engagement in every case.

I want to show you a quick video as to why we want to drive this, and I’ve picked an outsourcing video with Fujitsu just to show you the power of the engagement between Microsoft and the partner if we can really emulate one single approach with the value of your solution set and the value of our technology and in a combined sense the value of our collective relationships in the enterprise. So let’s take a quick look at that.

(Video segment.)

SIMON WITTS: You can see the benefit there when the partner and Microsoft get in front of the customer with a solution and technology and we all know that standardization in the solution sense and standardization in customer terms will bring tremendous benefit.

And that’s the opportunity I want to focus and close on, what is the opportunity. Again, we see our business in these three ways more and more: What are we doing to make the infrastructure efficient, what are we doing to make information work done best and then how are we creating an application platform and tools and now our own business apps as well.

The way I think about this in terms of the IT infrastructure is the operation efficiency and the productivity in terms of creating that information worker infrastructure. You’ll hear a lot more about this tomorrow but I just want to relate it to the customer pain I see in the enterprise and the value propositions I think together we can create.

First on the operational efficiency side, it’s very clear management has become too complex, it’s very clear that deployment has come to us at too much cost. More and more we see in the enterprise the IT executives and the IT teams trying to struggle with this balance of achieving or even beating their Service Level Agreements or doing new things with ultimately what ends up being less.

On this area, we would see the core proposition obviously as the Windows Server System itself, and we know in this environment through consolidation and using our tools we can bring the cost of IT management and deployment down inside the datacenter by a full 25 percent. We know in the case of NT 4, it’s a huge 80 percent. So there’s a lot we can do on the operational efficiency at the back end.

When it comes to creating the richer information networks, here we’re really allowing the customer to create more robust, secure, mobile available networks. We’re really enabling them to create and provision real-time, rich media services for their employees and we really have this proposition of anytime, anywhere access that can bring the support costs of the workstation down by 40 percent and the support costs of the servers when consolidating Exchange or consolidating file servers or so on by a full 70 percent, again Windows Server System driving the value proposition there for IT.

When it comes to building this out, there are also two initiatives around this broader GTM. Obviously this infrastructure can allow, through better management and better distribution and ultimately the Windows 2003 Server, much, much higher levels of security. And then also with the XP SP 2 upgrade and broadly being able to deliver and deploy desktop software more efficiently, we can really start to tip the balance where the perceived cost of deployment or management of the Windows and Office desktop and the perception of security can be behind us and we can move on; really, really good value propositions.

When it comes to connected productivity at the individual level we’re really looking at the pain here of information overload, we’re looking at the pain of not being able to get documents or being able to come in remotely or frankly still having to rely on IT in order to deliver or provision the collaboration platform.

For the team itself we really get into an efficient team collaboration where we really can start to get document control and we can start to loosen that dependency, so to speak, from IT. And the value propositions here are immense and I’ll show you them in the last slide, but essentially we’re pretty comfortable to say there’s an eight month internal rate of return without even looking at the growth or the customer relationship or the outbound productivity gain in a softer sense, clearly IIR of eight months on an internal opportunity to move to Office 2003 and the Office System and that richer set of collaborative tools.

When it comes to connected systems, as you saw, .NET is essentially winning out and we’re seeing this manifest itself in three pain points with three propositions. One would be around replatforming of the business applications from UNIX to Windows. Two would be around basically building connected .NET applications. And the third one would really be about business intelligence where we’re seeing a far broader usage of BI in a very stringent sense at Merrill Lynch, at the stock exchange and so on, but at far broader usage with a much, much lower cost and hence a higher ROI.

Just to look finally a little bit more at this deployment area, as I said at the beginning, it’s a huge issue competitively, it’s a huge issue in terms of realized value for customers and frankly it’s a huge opportunity in disguise for us all.

If, for example inside the operational efficiency through putting in this richer information network we believe we can with you get to a point where people think of rather than managing an unmanaged or trying to manage an unmanaged Windows NT 4 Workstation at around $5,500 a year, people can and should expect to be running a current Windows well-managed desktop at easy sub-$3,000 a year.

Through the Desktop Deployment Initiative, we should and could be able to get customer perception back from having to spend about $1,000 or more deploying a new client system to being able to do that through light touch at $350 or through zero touch at sub-$300 and we’ve got tremendous solutions now to bring the app compat component of the cost down, too.

And then finally on the productivity side, as I said, really an internal rate of return of eight months for the Office System and huge upsides based on whether it’s call center or sales rep or engineer in terms of the growth and the broader, softer business benefit.

I personally think this is probably the biggest job together I’m asking from us all in the enterprise. I’ve certainly put all of my resource investment here. I’ve set multiyear goals for our sales teams for AD deployment, for Office deployment and Windows deployment. We really have set multiyear, tangible, financial goals and I’d love to discuss this when there’s time during the conference because I think we’ve waited too long and we don’t need to wait for “Longhorn” and we really need to get on top of this one and deliver value to the customer as well as our own growth and get the job done.

OK, Allison positioned our mutual promise to the customers and hopefully through Sanjay’s work you saw the platform, and Orlando’s work you saw the small and mid-market. Even though my time is up, I’m going to go back one point to the business applications and the opportunities, because I don’t think I could go backstage with Doug and Orlando, having not mentioned the opportunities for Microsoft Business Solutions inside the enterprise. It is in our corporate segment we are setting up a separate execution through leadership, dedicated and specialist sales and we’re looking to recruit partners who can go cross-geography and in some of the specific scenarios of hub and spoke and downstream in even some of our largest accounts.

I’m hugely committed to the MBS business and the partners here. Actually, it’s one of the biggest, outside of mobility, growth engines we have, so I would like to just not forget that when I walk backstage now.

Before I hand it over to Allison, we talked about the Partner Advisory Council that has helped us with this event, and thank you very, very much indeed, but I’ve found through Allison’s team an unofficial video of an unofficial Partner Advisory Council that has actually been working with us on this whole mess of the systems and the partner program and the complexity and what it is we really have to do in order to make things simpler and to tee up some of the things Allison is going to come out and talk about next.

So through video I’d like to introduce to you some other partners. I’m not going to tell you who the “culture vulture” is of this Partner Advisory Council or who the grooming guru, the fashion savant, the design doctor or the connoisseur, but trust me, this group of partners is very committed to makeover Microsoft, one Microsoft guy at a time. So can we see the video and thank you very much. (Applause.)

(Video segment.)

Related Posts