Andy Lees: Worldwide Partner Conference 2008

Remarks by Andy Lees, Senior Vice President, Mobile Communications Business
Worldwide Partner Conference 2008
Houston, Texas
July 8, 2008

ANNOUNCER: Ladies and gentlemen, please welcome Microsoft’s senior vice president, Mobile Communications Business, Andy Lees. (Applause.)

ANDY LEES: Well, good morning. Oh, come on, let’s have some energy. Good morning!

AUDIENCE: Good morning!

ANDY LEES: That’s great.

You know, I’ve been with Microsoft for 18 years, just over 18 years, and in the last four years, I was in the Server & Tools group, and it was at WPC last year I was talking about virtualization and the trends in core infrastructure and application platform.

Well, four months ago, I changed jobs, and now I’m responsible for the mobile business at Microsoft. And, you know, I joined an industry on the verge of an absolutely massive change. In fact, so much so that the change is not just about the mobile industry; it’s how a number of different industries are coming together to converge. Now, convergence has been talked about for a long time, but this is it. It’s a gold rush of opportunity.

It’s a gold rush in that the way these industries are coming together and how the things are going to be set forward, all of those decisions are going to be made in the next couple of years.

In fact, today, what’s happening is as potential business partners are getting together, both people turn up at the meeting expecting the other person to pay them. We’re seeing changing business models, the evolution of hardware, software, media companies, telcos, music businesses, all coming together to collide to create new opportunities. So, this is a gold rush.

So, what’s the opportunity for you as our partners? Well, looking back at the original gold rushes that took place in the 1800s, it wasn’t just the people who went and struck gold that made it big; it was the people that provided the infrastructure and the solutions to enable the prospectors who also made it big, who made a big impact, who created a very, very successful business.

So, even if you don’t sell devices, even if you’re not a mobile operator, the opportunity for you is to double, yes, more than double the end points for the solutions that you provide, and how you help customers take advantage of this wave of opportunity.

So, what does the opportunity look like? Well, this chart shows you the number of mobile devices that are sold in fiscal year ’08 — so, that’s the year that’s just finished, the 12 months that’s just finished — and then what the projection according to IDC looks like for fiscal year ’11.

You’ll see in that in fiscal year ’08 there was just under 1.2 billion phones that were sold, 1.2 billion. Compare that to the number of PCs at about 277 million.

Inside of the 1.2 billion you’ll see that it’s broken into three main categories. The first one is Smartphones. These are devices that are very, very powerful. In fact, the state of the art device has about seven independent processors on it. The main computer processor is about the same as a laptop was about 18 months ago. They’re location aware, they have great graphics. In fact, the new round of graphics that is coming up next year will have the same Xbox 1 quality graphics on the device. So, these are very, very powerful things with Smartphones, with great connectivity, broadband type connectivity. That represents about 12 percent today of all of mobile devices that are sold, or about 145 million.

Below that, you’ll see the next, which is the major section, which is feature phones. Now, many of you may have feature phones or know people that have them. It’s 63, 64 percent of the total market.

These are the devices that play music. They have things like calendars and contacts. They’re very typically low functionality, they’re often difficult to use, but it’s the majority of devices.

What that shows you is that customers want that extra capability with their mobile device. I mean, there are more than 10 times the number of music-enabled mobile devices sold each year than there are MP3 players. But it’s just too difficult to get the music onto the device and to play it. The same is true with photographs and other things, the calculators, the calendars; they’re difficult to use in feature phones. But that in many respects is the opportunity.

Then if you look out three years, then you’ll see that the number of mobile devices increases to basically just under 1.4 billion devices, but the percentage of those that are feature phones increases to more than 20 percent. That’s 290 million devices sold in fiscal year ’11.

Now, this isn’t about comparing PC versus a mobile device. Both things, you’ll see that PCs will continue to forecast their healthy growth over the same period. It’s about providing extra end points. People will use PCs and will use mobile devices, they’ll use the Web, they’ll use a variety of different things, multi screens, whether that’s TVs, PCs, mobile devices.

But even with this amount of growth in Smartphones at 26 percent, IDC I believe is significantly under-calling the opportunity. The reason for that is because of Moore’s Law. If you look at the price people pay for mobile devices, and you look at the hardware innovation that’s happening over the next three years, then, in fact, the number of Windows Mobile capable phones, the top 30 percent or so of feature phones, you’ll be able to buy a Smartphone for the same price as a feature phone.

So, I think that even though this is dramatic according to the predictions, I think the change is going to be even more dramatic.

When you realize that with Smartphones, that they do more, so mobile operators can make more money on them, that means that those handsets are more subsidized in the two-thirds of the world that subsidize devices, making it such that Smart Phones are often cheaper than feature phones, and that’s why this change, this dramatic change is going to happen over the next three years. And for you and for us that spells opportunity.

For us, of course, we are focusing with Windows Mobile. So, exactly how is Windows Mobile doing? Well, we have very, very broad support from lots of operators around the world, about 160 different operators. We have about 50 OEMs providing devices. More than 100 devices are available today in a variety of different form factors, some with QWERTY keyboards, some with 20-key keyboards, some with no keyboards, some touch screens, non-touch screens, some one-handed operation. The main point here is that we want to enable consumers and business users to have whatever type of devices they would like. We’re doing it with very innovative, small OEMs, as well as the top OEMs. In fact, the top four of the top five OEMs are producing Windows Mobile devices now that Sony Ericsson is about to ship their first Windows Mobile device.

As a result of this support, we’re seeing significant growth in Windows Mobile. In fact, in the last reported quarter of market data — so that was the Q1 in this calendar year — we sold about over 4.5 million devices in a single quarter.

Our year over year growth for the market was about 1.8 million devices. By the way, that is more devices in our year over year growth number than Apple sold in total during the same quarter. So, we’re seeing very, very strong growth — (applause) — thank you — we’re seeing very, very strong growth, growing faster than the market.

In the last six months we shipped Windows Mobile 6.1. So, that is just making its way to the market just now with new devices. You’ll see a demonstration of that later on in my session later this afternoon or later this morning. We will be showing a full demo of what Windows Mobile 6.1 looks like.

We also shipped System Center Mobile Device Manager, which basically extends the mobile device to being just another end point on your network, and I’ll talk a little bit more about that in just a moment.

The momentum that we’re seeing is starting to be recognized by the analysts. So, you’ll see here some quotes comparing the forecast for Windows Mobile versus iPhone, RIM, and Nokia from a couple of analysts.

So, we see a lot of momentum today with Windows Mobile getting ready for this massive explosion, this gold rush of opportunity.

So, what are people using these devices for? Well, of course, consumers want to use the devices to be able to do things like to access the Internet. That’s why we’re putting Internet Explorer 6.0 on Windows Mobile where we’ll complete that in the next six months, and that’s so that you get the full PC experience on a mobile device. That’s not a cut-down browser; it’s the full IE 6. We’ll continue to innovate and put new versions on that as we increase our pace of innovation on Windows Mobile.

That’s important because it means that you’ll be able to do things like AJAX-based applications and things that you can’t do on any device. You can’t do that on an iPhone, you can’t do that on a Nokia device, you can’t do that on a Google device, because of the fact that it’s exactly the same PC browser that is available on the mobile device.

Consumers also want to be able to get access to their personal information, access to their Hotmail, their Messenger for instant messaging and chat. They want to be able to do communications with social networks, share photographs and all of those types of capabilities that we build into Windows Mobile, plus the fact they want to do entertainment, listen to music, watch video.

An interesting fact that I learned is 54 percent of all mobile devices in Japan include a TV tuner. Think about that. A lot of people watch the TV as they’re traveling on the trains to commute into work. They actually sit down on their mobile devices and watch the TV; so people using them for gaming, for music, for TV, and then new types of entertainment.

So, of course, there are consumer scenarios. That’s what mobile devices are often known for.

But at the same time we’re also seeing that these devices are being used as business tools to enable business productivity so people can get access to their calendar, to their contacts that are inside of Exchange. We provide the rich synchronization of that information, and it’s very, very tightly integrated into the way the phone works.

We include full blown Office in there, so you have Excel and PowerPoint and Word, and even OneNote so that you can make notes on your phone, and they automatically synchronize onto your PC. So, for business productivity it gives you an opportunity to extend your business into mobile devices.

With application platform and business applications you can extend what applications and solutions that you provide for your customers to not only be focused on PC and Web, but also the mobile device as a target scenario.

Of course, any time that you open up information or applications as a business to your users, you want to make sure that you do that securely. So, by just making it so that the Windows Mobile device is just another end point on the network, it means that you can have the right level of infrastructure management for security, access, and to make sure it’s fully locked up, and that’s why that’s an important part of that.

So, let me give you an example of what that trend looks like. You’ll see here, this chart, I realize it’s a little bit difficult to see at the back, but what this chart shows is it shows you a survey of enterprise IT managers and what they’re deploying today or in the middle of productivity or starting early deployment, and also what they’re evaluating.

At the top you can see that e-mail and contacts and calendar is actually starting to be deployed now fairly broadly, about 70 percent of organizations starting to make that available, another 15 percent in the middle of evaluation and piloting.

But if you look down below that, you’ll see all of these different line of business solutions like sales force automation, logistics applications, customer facing applications. These are actually relatively low. They’re only about 25 percent on average of the companies that are actually deploying that. But actually that sets a double: There’s a further 25 percent are in the middle of evaluating. So that gives you a good opportunity to go through to say how can you help your customers help move over to Windows Mobile to make the most out of moving over to these new types of scenarios.

To give you an example of that, what I’d like to do, please join me in welcoming Craig Dewar to give us a demo of Dynamics Mobile. (Applause.)

CRAIG DEWAR: So, Andy, the Microsoft Dynamics team, along with our partners, create tailored software solutions for all the different roles inside of a company. It’s a very diverse set of people. You’ve got the sales folks, all the people in marketing, the HR team, operations people, all the way from an ops manager down to the warehouse floor where they pick, pack, and ship, and finally the finance team, the CFO and the comptroller and so on.

Now, all of these people need rich mobile experiences, many of these roles. Because Microsoft Dynamics is based on the Microsoft platform, we’ve been able to easily go ahead and build rich mobile experiences for many roles. We’ll take a look at one.

ANDY LEES: Great.

CRAIG DEWAR: So, what I’m going to show you is the experience that a salesperson could have inside an organization that’s using one of our Microsoft Dynamics ERP products, and what you see up on the screen in front of you is what we call the Role Center. This is the starting point for someone who wants to go ahead and use this application. It’s a single point where all of the capability and functionality I need as a salesperson is surfaced to me.

There’s a few things I want to point out. The first is down on the bottom right here the synchronize option. Every morning I start off and synchronize my device with the back-end system. This is a very easy thing to do, and it leverages the broad connectivity options that Windows Mobile provides. So, I can synch over Wi-Fi in a coffee store or I can synch over the cell network any time I want; don’t need to be in the office.

Once I have that information down on the device, there’s typical sales activities that I can use that for, and I’m going to show you three of those.

The first one is this campaign area, and the idea of a campaign is that campaigns are defined for me by people back in the head office, by my sales manager and by the marketing team. These are products and services that we’re promoting this quarter or this month. What this allows me to do is understand where I should focus my selling effort when I’m out with a customer. These are the things we’re trying to move.

So, once I’m familiar with my campaigns, I can take a look at the next area, which is my route plan. What the route plan shows me is what I need to get done today as a salesperson.

It shows me a couple of different kinds of information. The first one is highly structured, managed information from the back-end systems, and these are things like when I go on a sales call or meet with a customer. We want to capture that and store it back in the LOB system.

The second kind of information it shows me is more ad hoc kinds of appointments or meetings. These are things I typically schedule myself. They could be training, travel time, personal commitments. These are in Outlook, and also synchronized on the device. The route plan blends together those two information types and lets me just focus on what I need to get done today.

Then the final thing I want to shows you is this application makes it very easy for me as a salesperson to go ahead and capture and order when I’m out meeting with a customer. So, in this case I’m meeting with Christine at the Glass Bulb, and she wants to go ahead and place an order. I’m able to click on the new order option and launch a wizard to step me through that process.

The first thing it does is offer me the promotions, so I get the chance to capture her orders that she may have from our promotional materials, and it makes it very easy to just key in the different quantities that I’m wanting from that section.

The next thing the wizard lets me do is pick any item that we actually sell. So, in this case I’m going to pick from bulbs, and I’m going to pick some energy efficient bulbs that Christine has expressed an interest in ordering, and let’s grab 99 of those.

So, I can continue through this process and capture all the things she wants to actually order, and then I finally go ahead and capture from her the date that she requires these by, a requisition number, if she has it, and I’m ready to go.

The final step is I get Christine to actually sign the order and save that. The next time I synchronize with the back-end system, that order will go up to the ERP application with that signature attached, and it will kick off the fulfillment process for her.

So, that’s been a quick look at how Dynamics has used the power of mobile to make our users more productive.

ANDY LEES: So, how do the partners get hold of this Windows Mobile application?

CRAIG DEWAR: Yeah, so anyone that’s an existing Dynamics partner today can actually get hold of this already. It’s up on Partner Source, and there are two things that are up there. One is specific applications like I was showing you, and then the second thing is a development toolkit, because they do a lot of custom work themselves.

ANDY LEES: Okay, so a great opportunity for partners. Thanks very much.

CRAIG DEWAR: Thank you. (Applause.)

ANDY LEES: So, exactly how do you get involved in mobile? Well, in many respects this isn’t about doing something that’s completely different. If you look at the main things that we provide as part of mobility, it builds upon the business that you have today. It’s about doubling your opportunity, double the number of potential end points that you can have with your customers.

So, if you are a partner focused on business productivity, because of Office and Outlook and being included, and connectivity into Exchange, and that is Exchange that you can run on-premise or Microsoft Online that Stephen talked about earlier on, or Small Business Server, all of those are enabled for mobile right out of the box or right straightaway on the server to make that happen. So, for business productivity we also include connectivity to SharePoint so that you can create very rich business productivity scenarios for your customers.

The second this is, as I mentioned, the minute that you go through and you open up information, whether that’s e-mail or our full line of business applications like the one that you’ve just seen, then you want to make sure that the device, that you can secure that. So, if you’re an infrastructure partner, you can help a customer deploy mobile devices inside of their network, and you use exactly the same tools.

We’ve just shipped System Center Mobile Device Manager, and that extends group policy and the System Center family of products so that you can go through, your mobile devices join the domain, you can just set your group policies in exactly the same way as you would do for PCs. If you want to lock up things like make sure all the device is encrypted or that you want to be able to stop access to the memory card that’s on the side of the device, any of these things, you can do so quickly and easily.

System Center Mobile Device Manager also includes the ability for you to directly connect all the mobile devices into a secure pipe, a secure VPN pipe directly into your network. You can then use your firewall to decide what information is going to go in and out of the Internet, as well as open up data and applications behind the firewall securely to those mobile devices; so extending your infrastructure business to include mobility.

If you develop applications using the application platform, it’s no accident that you still use the same tools. You use Visual Studio, you use .NET and Silverlight, SQL Server Compact Edition, and Internet Explorer.

There are four ways in which you can develop applications on a Windows Mobile device. The first one is just designing the application so it fits inside the browser. The second one, we announced that we’re putting Silverlight onto the mobile device, which includes obviously .NET plus very, very rich application environment and user interface extensions for very rich experiences. The third one is using .NET in the .NET Compact Edition. And the fourth one is to run native on the metal, just programming directly into Windows Mobile. So, it gives you a lot of choices, but utilizing very, very similar programming technologies and the same development tools, so again very easy for you to extend your existing application platform business onto mobile devices.

Then lastly, you saw a demo of Dynamics with our business applications. We are going through and extending those things to make sure that mobile devices are first class clients.

So, you compare this to what our competitors do, and you’ll notice that if you look at RIM, for example, who do the Blackberry devices, they do quite a good job of business productivity. They don’t do the advanced stuff like if you get an e-mail that is rights protected you can’t read that on a Blackberry device. The e-mail that they do is basic text as opposed to rich HTML; I know they’re working on that. But you get a good level of business productivity even though it’s not as advanced as what you get inside of Windows Mobile.

Infrastructure, they have their own infrastructure tools, but they are proprietary, very different to what you would have inside of the Microsoft tools. So, you have to have two sets of infrastructure, which, of course, has increased costs for you and also for the customers.

In terms of application platform, they have their own app platform and some business application support, but again done in a proprietary way.

Nokia has — and actually Apple, both have basic support for business productivity, Apple with their new update where they just provide very basic connectivity into Exchange, not as rich as you would get on Windows Mobile. But as far as the programming models that they provide, they really aren’t robust enough for application development outside of the browser, and so for you to be able to provide application platform business solutions, certainly we provide a much richer way of doing that.

Google is a new entry into this. Of course, they haven’t shipped anything yet. They have a development kit, but it’s not fully clear about what these pieces are really going to get delivered. We do know the infrastructure is not going to be as easily plug and play and extendable, and the same is true with the application platform as they are going browser specific development methodology for their line of business applications.

The reason I’m showing you this is because really if you look at what IT managers are recommending for their organizations, this was a study that was done in the United States and Europe of enterprise IT managers to say what are you looking to choose as your platform for mobile devices. You’ll see that there are two sets of columns. The first column shows if they’re just choosing mobile devices for very basic stuff like business productivity, and then you’ll see the second column is what they’d choose if they’re actually looking to do line of business solutions.

You’ll see at the bottom there that Windows Mobile is basically just under 50 percent of the time IT managers on a go-forward basis are recommending Windows Mobile as being the platform of choice, and that for you ultimately gives you the best opportunity for you to make the best business in terms of easy to get into, but also by moving into a trend so that you can get into that growth.

So, I want to show you a quick video of a partner that’s doing that from France called Tibco Mobile, who’s betting their business on Windows Mobile.

(Video segment.)

(Applause.)

ANDY LEES: So, in summary then, there is a gold rush going on. You have a massive opportunity as this industry changes so dramatically, and that we think that the best way for you to do that is to mine that opportunity with Windows Mobile. It’s easy for you to go through to extend the skills and the services that you provide to your customers by building on your existing business. This is going to be an amazing few years together, and I look forward to the growth that we can have together. Thanks very much. (Applause.)

END

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