Q&A: Microsoft Server and Tools Business Division Putting Power in the Hands of Partners

BOSTON, July 12, 2006 — During his Microsoft Worldwide Partner Conference 2006 keynote address today, Andy Lees, corporate vice president, Server and Tools Marketing at Microsoft, made several announcements from the Server and Tools Business division reinforcing opportunities for partners related to Microsoft’s four promises to IT customers on: managing complexity and achieving agility; protecting information and controlling access; advancing the business with IT solutions; and, finally, amplifying the impact of people. For an inside perspective on the partner event, PressPass called on Lees to discuss today’s announcements.

PressPass: What news is Microsoft Server and Tools announcing at this year’s Worldwide Partner Conference?

Andy Lees, Microsoft Corporate Vice President, Server and Tools Marketing

Lees: Yesterday, Steve Ballmer announced the launch of Windows Small Business Server 2003 R2—which we’re really excited about. That announcement included technology innovations such as the “Green Check” of software health and attractive new pricing that makes the software a more comprehensive and affordable solution for our small business customers. For our industry partners, it’s an important source of new business and service opportunities as well.

During my keynote today I made a number of announcements from the Server and Tools Business division related to our four promises and opportunities for partners. Today’s news included the immediate availability of our Branch Infrastructure Promotion; our sharpened focus on mid-sized businesses, including resources such as the Microsoft Assessment and Deployment Solution for Midsize Businesses; and new opportunities for partners to sell Microsoft Windows Server Datacenter Edition and provide customers with unlimited virtualization rights. In addition, we announced a new Download site for the benefit of our TechNet Plus subscribers.

From the Windows Enterprise Management Division, we also released new details about Microsoft System Center as a platform for Remote IT managed services, which will allow value-added resellers (VARs) and value-added providers (VAPs) to build new and recurring revenue models around remote management and monitoring services.

On the business security solutions front, today we launched the Microsoft Security Software Advisor (SSA) program, a new incentive program for eligible partners who advise on a sale or deploy Microsoft security products. We also outlined the new business opportunities that solution providers can expect from our recently expanded portfolio, which includes Microsoft Internet Security & Acceleration (ISA) Server, Microsoft Antigen anti-virus solutions and the new Forefront security products under development.

On the Application Platform side, we updated attendees on the growing wave of momentum and partner opportunity we’re seeing with our SQL Server 2005 offering and our new BizTalk Server 2006 R2 solution.

Each of these announcements from the Server and Tools Business Division act as further proof points that Microsoft is committed to our partners and their vital role in living out our four promises to IT customers.

PressPass: How do you see Microsoft Server and Tools innovating to benefit partners?

Lees:  Our success continues to grow in the server and tools group as we deliver new and innovative offerings. The group has posted 15 straight quarters of double-digit growth, and in our most recent quarter we had revenues of US$2.8 billion — a jump of 16 percent over the previous year. We estimate that for every dollar we earn, our partners earn at least another five dollars in revenue. You can do the math and see the opportunity that represents, and we believe that it’s only going to continue.

We try to enable channel innovation by putting our partners at the center of our product philosophy and market development efforts. We provide extensive training for VARs, service providers and so forth, designed to ease business and create new opportunities. By taking advantage of their tools and resources, customers can find the expertise they need for success.

We’re also looking holistically at solutions for specific workloads rather than just one-size-fits-all products, and we’re enabling a broader array of value-added service revenue opportunities. For example, from August 1 the new TechNet Plus Subscription provides access to the new Subscriber Downloads site, www.microsoft.com/technet/subscriptions which delivers subscribers exactly what our partners and customers have asked for – immediate access to software, betas, two free technical support incidents, and other resources which lead to increased IT staff productivity, minimized IT infrastructure downtime and accelerated deployments. The price of the subscription has been lowered from $499 to $349 to reflect our savings in distribution and with 2 free incidents (normally $250 each) this is also great value for our customers. For the first time we are pleased to announce that partners can resell the SKU or include it as part of their after sales programs.

PressPass: What key challenges do your small- and mid-size Business (SMB) customers and partners face today, and what does Microsoft propose by way of a solution?

Lees: Today’s climate poses three main challenges for our technology partners who serve the SMB marketplace. One, as an increasing number of small- and mid-sized businesses realize they need an external, trusted IT consultant, our partners are experiencing a rapid rise in their customer base. As a result, many struggle to provide high-quality service without adding resources. The second challenge facing our partners is growing competition from other technology vendors. To respond to this trend, they need to find ways to provide a unique value proposition. The third challenge is overall globalization and market complexity. As the world gets increasingly smaller, IT services are in high demand, day and night. Also, small- and mid-sized companies are creating more branch office locations, hiring more mobile workers and experiencing more security threats.

Our partners face a big job in maintaining these increasingly complex infrastructures. In terms of how Microsoft responds to those challenges, we believe the solution lies in understanding the unique needs of businesses of all sizes, including how situations, such as branch offices, impact the way people work, and ultimately helping customer and partners in deploying “the right server for the job” and providing complete solutions.

For example, the new systems management product, System Center Essentials 2007, is specifically built for mid-market customers. For partners, the combination of Operations Manager 2007 and System Center Essentials 2007 will provide a powerful platform for VARs and VAPs to create a profitable remote monitoring and managed services offering.

We’re also offering resources such as the Microsoft Assessment and Deployment Solution for Midsize Businesses, which is available at no charge. This tool gives our partners a streamlined way to guide their customers through the process of creating a network inventory of computers, software and network devices, recommending new solutions with auto-generated proposals, setting up an implementation plan and automating server deployment.

We’re also providing a comprehensive set of security technologies that easily integrate with an organization’s existing infrastructure, with an emphasis on simplifying the deployment, management and ongoing administration of a customer’s security investments.

PressPass: Can you speak on the Branch Infrastructure Promotion announced today and Microsoft’s focus on branch solutions, in general?

Lees: IDC reports that there are roughly 9.5 million companies worldwide with branch locations, amounting to about 23 million branch offices and more than 50 million workers spanning industries such as retail, finance, hospitality and healthcare (IDC, Addressing Operational Efficiencies in Branch Offices, May 2006, #201568). Customers tell us that their corporate IT departments face huge challenges supporting knowledge workers in these remote locations. The complexities of managing a secure, distributed infrastructure over wide area networks (WANs) drives up cost and inhibits employee productivity.

But we’re working to change this. Customer feedback on the branch office technologies in Windows Server 2003 R2 has been extremely positive. According to that same IDC report, surveyed Windows Server 2003 R2 customers anticipated savings of over $84,000 per branch office per year.

Our Branch Infrastructure Promotion is part of Microsoft’s ongoing effort to lower the expense and complexity of branch IT. It includes Windows Server 2003 R2, ISA Server, Virtual Server 2005 R2 and System Center Server Management Licenses — all available at a 10 percent price discount on the total value of the solution. This is an excellent opportunity for partners, because it offers solution providers, integrators and VARs the means to provide customers an all-in-one branch IT solution.

We’re seeing great momentum with partners who are using Microsoft technologies to build branch IT solutions. For example, Getronics in the Netherlands recently launched its Managed Branch service solution for the financial sector, built on Windows Server 2003 R2. And Nortel recently launched its Business Continuity Solution 3000 Branch Office solution built on Windows Storage Server 2003 R2.

To further help partners deliver branch IT solutions, we offer information and training, such as a four-part webcast series that addresses the business opportunities and technical details of Microsoft’s Branch Office Infrastructure Solution (BOIS). We’re also offering our U.S. solution provider partners a 100 percent subsidy on branch office direct mail campaigns. Details can be found at msbranchportal.com.

PressPass: What news did you announce today about Windows Server Datacenter Edition?

Lees: Windows Server 2003 R2 Datacenter Edition is optimized for enterprises requiring the highest levels of scalability and availability. It enables critical solutions for databases, ERP, high volume real-time transaction processing and server consolidation. Beginning October 1, customers will be able to purchase Windows Server Datacenter Edition on their Microsoft Volume Licensing agreement from Microsoft resellers and account managers and we’re adding unlimited virtualization rights. Customers will also be able to purchase Windows Server Datacenter Edition from OEMs preinstalled on servers with two to 64 processors, with or without the Datacenter High Availability Program.

With unlimited virtualization rights on Windows Server Datacenter, customers can run as many Windows Servers in virtual machines as they wish without purchasing additional licenses. This significantly extends the savings that customers can realize through server consolidation on the Windows Server platform. We see virtualization as a key enabling technology for the vision of self-managing dynamic systems, and we will continue our efforts to make virtualization more broadly accessible and affordable for partners and customers.

PressPass: Can you elaborate on the work you are doing across the application platform and the opportunities this affords partners?

Lees: Our focus is on making it easier for customers to build, deploy and manage applications. Our goal is to help IT better respond to business demand and influence a proactive shift where IT becomes a valued “contributor” driving business growth.

We expect this year to produce tremendous growth for the platform, as well as growth in business opportunities for our industry partners. We’re already starting to see growth in the partner competencies underneath the application platform. For example, the Business Process and Integration competency has grown over 1000 percent in FY06 and the Data Management competency has doubled this year. On the development front, we’re seeing a whole new breed of partners spanning beyond the traditional component and language vendors to those focused on the development process, customized services and development excellence.

With the delivery of Microsoft Visual Studio Team System and BizTalk Server 2006 R2, combined with other technology pieces and best practices guidance across the platform, we’re investing in core capability areas as a catalyst for business growth. These capabilities – data management, business intelligence, business process and service-oriented architectures (SOA), development and user experience – enable us to talk to customers through a common lens and address industry trends. These capabilities are closely aligned with the core application platform partner competencies – creating a unified and integrated ecosystem where partners are primed to address customer needs.

Partners have a lot to gain as well. For example, the partner opportunity around business intelligence is upwards of $25 billion, while the opportunity for partners in application lifecycle management is close to $2 billion. In addition, analysts firms are advising IT decision makers to make business process a top priority. Finally, we expect partners to play a big role in user experience as it becomes a critical component of the application development process.

We also expect our partners will see some expanded opportunities from a new campaign we announced at this week’s Partner Conference, which is aimed at helping them migrate customers to SQL Server from Oracle. Also at the partner event this week, we are demonstrating BizTalk Server and the Microsoft Office System 2007 working together to manage critical business processes. This demo highlights a new segment of partners focused on enabling this scenario.

PressPass: What do you hope attendees, customers and partners come away with from this year’s Worldwide Partner Conference?

Lees: In my mind, the overriding takeaway would be the idea of working with partners to deliver on the people-ready business vision. This vision is based on our belief that business success is driven primarily by people – people who can achieve insight, make decisions, close deals, invent novel products, expose new efficiencies and so forth. A company that empowers its people with the right tools, information, resources and opportunities is a company that fosters a winning environment, and we think software is a big part of that equation. By investing in the four promises and fully engaging our partners in this endeavor, we can stay focused on the people who drive a business forward.

In terms of the new technologies and tools announced this week, we hope our partners feel encouraged to work with us here at the conference and going forward to evaluate, test and market these solutions to their customers. And in terms of technologies on the horizon, we urge our industry partners to continue providing feedback to us and to get ready to start testing.

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