Maria Martinez: Microsoft Worldwide Partner Conference 2007

ANNOUNCER: Ladies and gentlemen, please welcome Maria Martinez. (Applause.)

MARIA MARTINEZ: Hello, and good morning. I’m super excited to be here with you today. Thank you for joining us.

This is my first Partner Conference. I took over the services job just in January of this year. So, before that I was running the communications sector for Microsoft, responsible for sales and marketing and solutions development for our telecommunications companies and media and entertainment companies around the world, and from that perspective certainly I was able to really have a very good understanding of our enterprise business, as well as the role of services. So, I’m super excited about taking on this role, and about working with all of you.

So, something that everybody asks me first is what are you going to change, what are you going to do different. So, I will start by saying that after spending the first couple of months with my leadership team, I became convinced that our mission is right on track, that our high level strategy certainly is the same one that I want to continue to move forward, and I’m committed to the same three-year plan that we put in place before I arrived. We’re going to be working on some of the things that we’re going to be changing for the future, and I’ll tell you a little bit about that later on.

So, in general what we do in services is we support the rest of the company, the rest of the ecosystem to grow the market. And our specific role really is to focus on accelerated adoption of our technologies and productive use of our technologies.

To do that, that’s a big job, so part of what we need to do is enable our partner community, because we can certainly not do that alone, so working with you is super important for us.

We play another very important role in the company, and that is because we are the ones in the company that are more in touch with how our customers are using the technology, and we play a very important role as customer advocates inside the company.

So, that’s our focus, and certainly this drives some very important results for us as a business in terms of revenue, but most important we play a very important role in platform adoption. The feedback that we get helps improve our products. And, of course, we drive a very important part of customer satisfaction for the company.

So, let me tell you how we connect with partners. Well, first of all, we do have a Partner Advisory Council. I met with them last night. And there are about 20 executives from partners around the world, both small and large, and with that partner community we really use that for the key feedback for us to set the direction for our business, to bounce some ideas off, and really to actually validate the direction that we’re going.

But more on a day-to-day basis certainly one of the big ways in which we engage with partners is around core engagements around sales and delivery of our technology. On any given time we’re engaged with about 2,000 partners around the world. We engage with our partners through the account teams on the partner management functions, which are really ones that are eventually responsible for the partner selection and the partner management.

Also there are two programs that we run directly out of the services team. One is our Microsoft Partner Advantage and this is high-end technical support that we provide to our partners so that they can provide, of course, tier one support to our customers. The other program that we run is our Partner Strategy Consultants, and these are really highly specialized people that can help all of our partners establish Microsoft practices.

In addition to that, we play a lot of different functions that get delivered through the Microsoft Partner Program, and really I’m going to talk about these in detail. I’m sure that you’re very familiar with what these are. But in particular I wanted to point out that over the last 12 months we’ve seen a significant increase in the usage of these functions, and also on the satisfaction. So, I really encourage all of you to be taking advantage of these capabilities.

So, let me tell you about one area that I usually get a lot of questions about, and that is the work that we in services do around the Microsoft Consulting Team, especially that focuses on projects with customers. And what I want to highlight with you really is the rationale for the work that we’re doing, and the impact that we have in the overall market that benefits really all of us.

First, we engage with our customers on projects to really move the market and make the market. This is very important to drive the first reference implementations and the key customer wins that then we can use to advertise these capabilities and to drive the market overall for all of us.

The second area has to do when our customers really request that we Microsoft put some skin in the game, and this is really important around complex projects, high risk projects, new technology, and here our main goal really is not only to meet the customer request, but really is to drive key platform wins, and in particular to drive the usage of Microsoft technology in areas in the enterprise where before Microsoft technology was in use, for example, things like mission critical applications and et cetera.

The third area is around partner enablement and support. And I already touched on how we engage with partners, so what I’d like to add in here that the key area is around co-engagement on sales and delivery. The reason why this is important is because this is the primary mechanism that we have in services to be able to transfer IP and skills to our partners, so it becomes a really pretty important part of what we do.

And then the fourth area is we really need to get our hands dirty and use our technology as a company so that we can then take those learnings and make sure that they are being fed back into the product roadmap that we have across the company.

So, these are the four areas of project work. I’ll give you a little bit of flavor of how much work we’re doing in that area. We have about less than 25 percent of all the work that we do in services is projects, so less than 25 percent. Of that 25 percent, it’s split, if you really look at the top two boxes, about 37 percent is making the market, 63 percent is skin in the game, and then out of that 100 percent part, 41 percent really is past due revenues to our partners. So, we work even in this area of projects very, very close with partners on a regular basis. And, of course, 100 percent of the work that we do really translates into feedback that goes back into the product groups.

So, now let me step back for a second and let’s talk about the overall market opportunity that we jointly have. I’m sharing with you here some of the Gartner data in which Gartner really represents here the opportunity for support and services in the platform space to grow by US$63 billion over the next three years. That’s a huge and super exciting opportunity.

As you can see here, about half of that really is on the Microsoft platform, and by the way, less than 2 percent of that really is revenue that flows directly to Microsoft.

So, it is indeed a great opportunity for us to work together to capitalize and really grab as much of that growth in the market, that 63 billion, but certainly from my perspective the real, real good opportunity is for us to work together to just really be able to change the shape of the Gartner slide so that it’s much more like I’m growing it here, and so we can drive much, much larger penetration for all of you for the Microsoft platform.

So, that is the opportunity. So, what are we going to do about it? So, certainly we take this opportunity very seriously in services, we feel that we need to be a key enabler to help all of you to be able to take that advantage of that opportunity. And what we’re doing, probably the most significant change that we’re implementing is that we’re formalizing the concept of service lines and service line offerings that Simon referred to early on as the way in which we’re going to drive our services business moving forward.

What does that mean? Today, the way we work in services is we train people on our expertise, we put them on the bench, we support our customers; we tend to be much more reactive. And moving forward what we want to do is really move to a model in which we’re more intentional and much more predictable about the work that we do in services. And this is feedback that we’re getting from you, and it’s really also an opportunity for us to get super aligned with what the rest of the company is doing.

So, you’ve heard from all the executives in Microsoft, and just to give you an example, what the service lines will do is really specify offerings that we will prioritize for, say, things like Vista deployment, business intelligence each specifically, but make sure that those offerings are super aligned with the sales priorities that Simon discussed previously.

So, what you can expect from us in the future is that we will be able to communicate for each of the sales priorities what are the offerings that we in services are working, and which are the ones that we’re not working on, what’s the timing for those, and how we’re going to be driving the prioritization of what we’re doing in the market. So, here I’m depicting how really each of these things already is aligned with the work that Simon is doing.

By the way, we will be launching the first few service line offerings late this month, and we’ll start slow. Our goal is to really increase our portfolio over the next two to three years.

So, let me tell you a little bit more about service lines and start with service lines one and service line seven. Service line one is consulting that we provide around IT architecture and planning. Service line seven is about support and proactive work around keeping our customers IT infrastructure healthy. And certainly service line seven is what you know about premier, this is certainly an area that we are going to continue to focus on. It is very important that we work in this area. Customers, the market expects a direct relationship with a vendor around these areas. Also as a company we know it’s super strategic for us to be able to understand what a customer’s needs, and that’s why these service lines become the primary focus for us to engaging directly with the customers.

We also already know from real data that by focusing on these areas, these are the areas that can drive the highest customer satisfaction and the highest loyalty for the Microsoft platform. So, we will continue to focus on these areas. This represents about 60 percent of our business, and will likely represent most of our growth in the future.

In the middle we have the service lines which really represent, as you can see from the bottom, the alignment with the infrastructure optimization that you heard about, also the alignment with business applications, and the industry work that we’re doing.

In this space really our goal is primarily driving accelerated adoption, making the market. So, our goal here is to engage in a few reference implementations, try to create the delivery IP. Once we get those wins and that knowledge, then really proactively start focusing more in a systematic way on transferring that IP to partners. And once the market and the ecosystem is bootstrapped, then to move our resources to whatever is the next set of technologies that will be coming down the line.

So, as we mature in this model, our goal will be that we will engage in these areas only when the technology is new or when the customer is really requesting a direct involvement with us, as I mentioned earlier.

So, anyway, this is the service line piece. It’s super important. It’s going to be the framework, the foundation for how we do our work in services moving forward, and you’ll be hearing a lot more about service lines in the future.

To wrap up my presentation today, I wanted to talk to you about the key things that we’re doing in FY ’08 to really increase our partner focus. First, I’d like to say that for the first time we’re adding partner satisfaction to the services scorecard. So, my personal success — (applause) — thank you — and the success of my entire management team is going to be tied to partner satisfaction. We’re improving, we’re going to be launching later this quarter a new way to survey our partner base to make sure that we’re capturing detailed data in a more systematic way, and that we take action on it.

The second thing that we’re doing, and actually I’m super excited about this thing, is we’re taking some of our significant portion of our best architects around the world, and we’re assigning them to work with our account teams in the enterprise sales to drive platform sales independent if that opportunity will result in services revenue or not.

So, this is a big investment that both Simon and I are making to really drive platform wins with all of you.

Third, we are going to be formalizing our partner selection and engagement process. This is an area we’re getting a lot of feedback, but we’re not being precise enough that we’re not really have clear rules or are executing on them, so we are in the process of finalizing the rules for engagement and really to work with the EPG and SMS&P people in the field to own that engagement and partner selection, and for us to be able to support it. This is, by the way, the one area where I got so far since I joined this job the most feedback.

And then the last area of focus really is going to be about increasing IT transfer to partners. I talked about that a little bit in the service lines model, and last year we did a little bit of this, we started sharing some of our readiness, and through co-engagements are sharing IP, but we know we need to formalize this process a lot better, and it’s one of the areas in which we’re going to run some pilots this year, and by the time we’re here next year we’ll be able to launch a formal program for IP transfer.

So, anyway, these are the focus areas for us in FY ’08. With that I conclude my remarks. I want to tell you I’m truly super excited about the joint opportunities that we have in the marketplace, and you can count on my support to make sure that we all win together. So, thank you. (Applause.)