Stephen Elop: Worldwide Partner Conference 2008

Stephen Elop, President, Microsoft Business Division
Worldwide Partner Conference 2008
Houston, Texas
July 8, 2008

ANNOUNCER: Ladies and gentlemen, please welcome Microsoft President, Business Division, Stephen Elop.

STEPHEN ELOP: Thank you. Thank you very much. Thank you. It is great to be here at my very first Worldwide Partner Conference. It’s a great opportunity to meet many of you, to learn a bit about your business, and to learn about some of the opportunities that we all have going forward for continued success. Since this is my very first Worldwide Partner Conference, I thought it would be helpful if I shared a little bit about myself. You know, on a bit of a personal basis, just me and 12,000 of you, we’ll do that together.

I am 44 years old. I have led a remarkably stable, predictable, well-managed, and carefully controlled life. I have one wife. I have two dogs. I’ve only ever had three hair styles, and this will be my last. I’ve had four different phases to my career, and I have five children, three of whom all arrived on the same day. So you can imagine what a disruptive  yes, five years, round of applause, give me some credit for that, just a little bit, just a little bit. Actually, I know someone who is watching out there, you need to give my wife a little bit of credit, actually.

So you can imagine in that carefully controlled life what a disruptive moment it was for me when I had that first conversation with Steve Ballmer. And it went something like this, hey, it would be really super if we could get together and sort of talk about career and opportunities and developers, developers, developers, and all these things and get together. Why don’t you come on up to Seattle and we’ll have a great time and we’ll get to know each other. That was a disruptive moment for me, very, very disruptive.

It was disruptive on a personal basis because I had just moved my family back to California, and the thought of moving them twice in the same year was pretty hard to get my mind and my wife’s mind around. It was very disruptive for me on a professional basis as well, because I had just joined another company with plans to stay there for many years. And so the thought of a quick career change was also something weighing on my mind. And, of course, it was the case that for most of my career, I had competed with that company that shall not be named in the Pacific Northwest.

So I thought about all of those things, and thought, you know, I need to take this pretty carefully. I need to think about it. So I began a journey. I began a journey of learning about Microsoft by talking to people within the company, around the company, customers, partners, and so forth, so I could learn something about who Microsoft is today. And I thought it would be helpful if I share with you some of the things that I learned during that journey.

First of all, I learned very much about the absolute strength of the business. The absolute health of what’s going on at Microsoft. I very much enjoyed the opportunity to engage with the scope of the ecosystem, very much understanding that there are so many people around Microsoft that make it successful. For example, Allison shared some interesting factoids with me. Did you know that there are over 500,000 partners working with Microsoft today, 500,000. And that through you 96 percent of Microsoft’s revenue flows. And for every dollar of revenue that Microsoft generates, you generate US$7 of revenue for your company. Simply amazing factoid, tremendous success, and speaks so loudly to the strength of the ecosystem.

I also learned about the people, the people at Microsoft, the incredible concentration of talent within the company and around the company, the dedication and competitive spirit, the desire to win, the continued belief that the magic of software will continue to change the world. I learned a great deal about that.

I also learned about intellectual integrity. I define intellectual integrity to be that capability to recognize problems, to be honest with yourself, to see some other ideas that may be better than your own, and then to embrace those ideas as your own. I’ll tell you a little story about intellectual integrity. As you can imagine, I went through a pretty significant interview process before I joined Microsoft, and I had an opportunity to be interviewed by Bill. Three hours long, hardly intimidating, just maybe a little bit intimidating, but I did manage to squeeze in just a couple of questions for Bill. And the questions that I asked him focused on those areas where I believe Microsoft had the biggest challenges, things that all of us talk about here in the hallways, things that are in the popular press, and so forth. And, you know, Bill really impressed me because he gave me an unambiguous and very candid assessment as to what the issues are, what Microsoft is doing well, what it could do better, what he could have done better, all of those types of things, a completely frank assessment. And, of course, as I came to learn more, I realized that that same self-critical and high degree of intellectual integrity approach permeates the entire organization, which gave me tremendous confidence that Microsoft is able to deal with its challenges, and to deal with them in a way that will ultimately benefit all of us. And that was really, really important to me as I joined.

I also learned about the degree of innovation that goes on at Microsoft. You know, when you grow up in Silicon Valley, you’re pretty well trained from birth that Microsoft does not innovate. Well, it turns out, that’s not true. For example, if you just spend a couple of days with the Microsoft Research Team, an organization that is today one of the world’s largest publishing research institutions, you realize that there’s all sorts of wonderful innovation being pursued and productized at Microsoft. Within my own division, the business division, there are all sorts of exciting things taking place there that will ultimately represent new opportunities for all us. So innovation is alive and well at Microsoft. And that was something that I was very much looking for.

And, of course, I learned about the opportunity, the opportunity for impact, the opportunity to take advantage of the many disruptive forces that exist in our industry today and actually through all days, disruptive forces like software plus services, new business models, new architectures, new competitors, all of those things. As it has in the past, Microsoft will lead through these disruptive times, we will have a big impact. What an incredible opportunity for me as I learned all of these things, and what an incredible opportunity for all of us.

So I made a decision, I decided that I could not pass on this opportunity. I had to play a role in that. So early in January, I made what was the most difficult career decision in my life, and that was to leave a company that I had just barely begun at and I decided to join Microsoft. Like all of you, I committed my career to Microsoft and the opportunity that it represents. And I can tell you now, six months later, unquestionably, it was the best career decision that I ever made, and I’m glad to be here. (Applause.)

My role at Microsoft is to be the leader of the business division. As such, I listen to and respond to the needs of our customers, particularly our business customers, so that I can help figure out how to solve the challenges that they face as they pursue their business ventures. So, of course, it’s a natural question for me to ask early on, what problems are our customers facing, what are the things that we can do to help them? At a very high level, I boil these challenges that our customers are facing down to three things. The first of these is productivity, companies today are challenged to get the most out of their employees, out of their systems, out of every asset that they have. We have to help them with productivity. Software has played a transformational role in improving productivity in the past, and it will continue to do so for many years to come. So that’s number one.

Number two is about competitiveness, particularly in today’s global business environment every company has to be better at recognizing the challenges, pursuing the opportunities, working on a global basis, and playing to win, competing aggressively. We have to help our customers do that.

And, of course, number three, particularly in this time where economies are a bit challenged in various parts of the world, we have to help our customers with cost management. How do we actually help them get the best return on their investments, while at the same time continuing to improve productivity.

These are the problems that our customers are talking about, and all of you hear about these every single day. The great news is that we are helping our customers with problems like this. We are doing these things. Let me give you a few examples of that.

For example, in the area of productivity there are over 500 million people today whose productivity is enhanced by the use of the Office productivity applications, and of course, that productivity improvement is increasing with the successful release of Office 2007. That’s really making a difference for our customers.

But, of course, what we’re doing is we’re taking it a step further. We’re extending the familiarity of the Office experience to other business applications, applications like ERP and CRM, and business intelligence. We are democratizing the use of technology. More people can access information, more people can do something with that information once they gain access to it. And fewer and fewer people are being left to navigate the cryptic user interfaces and complexities that for so long have been a hallmark of traditional business application vendors. We’re making a big difference here, as it relates to productivity.

Second, is in the area of competitiveness. We are helping our customers compete with the introduction of capabilities around collaboration, document management, and enterprise search, using products particularly like SharePoint. SharePoint is on a meteoric climb right now. In the year that just ended a couple of days ago for Microsoft there were over $1 billion in sales of SharePoint, which is amazing. But, the more amazing fact is in the year ahead we estimate that you, our partners, will generate $5.4 billion of SharePoint-related services revenue. What an incredible opportunity for the last few years. (Applause.)

Now, of course, SharePoint and other products like that are helping with the competitiveness of our customers. They’re helping our customers find information, develop knowledge, and share that within their organizations. And, of course, the secret sauce is that behind the scenes as we deploy and leverage the capabilities of SharePoint, more and more we are getting out there the next generation business application platform that will allow all of us to extend and build upon in the years ahead, so a great opportunity going forward.

Then, in the area of cost Microsoft, helping our customers to manage costs. The stories I like to tell here relate directly to me joining Microsoft, and using some technology for the first item there that I hadn’t been exposed to elsewhere, and that is in the area of unified communications and our voice offerings. So at Microsoft is one example, there are over 25,000 employees at the company who are no longer connected to a traditional PBX. They don’t have a normal phone anymore. They’re operating differently, they’re using our unified communications capability. I am one of those people.

So it is the case today that if you’re within Microsoft and want to reach out to me, you can first learn something about my presence, am I in a meeting, am I already on the phone, am I asleep at my desk, these are things that anyone can learn about me within Microsoft using the presence capabilities. Then when you decide to reach out and communicate with me, yes, a voice-over-IP phone rings on my desk in my office, but also on the desk at my home, and also on my computer in a hotel room in Tokyo, if that’s where I happen to be, all simultaneously. And if I’m able to communicate with you, I will. If I can’t, well, it might end up in a voice mail. And, of course, that voice mail is available to me on any of those devices, on my computer, in e-mail, on my mobile device, wherever it makes sense.

My productivity, my personal communications productivity is being enhanced, but more importantly, the cost to Microsoft of the telephony environment is going down rapidly. We’re making a big difference. To be clear, we are in the very, very early stages of revolutionizing telephony through software. It’s just an amazing opportunity for all of us, and we’re going to make a big difference.

There is, however, much more to solving those three major customer problem areas than just great software. And, of course, that’s why all of you are here. For many years in my career, both at Macromedia, and at Adobe, I had the opportunity to lead the field and partner organizations. So I spent a lot of time out in the field, working with you, and people like you. I learned a lot of lessons during that time, most of which I can’t repeat here on stage for reasons that all of you understand. But, there are some lessons that I would like to share with you.

The very first lesson is the recognition that despite the best efforts of engineers, and testers, and so on, great software does not implement itself, it does not sell itself. There is so much work required to actually turn that software into a solution that meets the specific needs of customers, and that’s, of course, why you are here.

The second lesson that I learned by spending so much time in the field is that the truth is in the field. All sorts of great ideas come flowing out of World Galactic Headquarters, all sorts of great branding and advertising, all that stuff. But, at the end of the day the truth is where the customers are at, the truth is with the people who interact most directly with those customers. So I’ve learned to continue to spend a great deal of time with partners, and with customers, so that that truth, the truth from the field, is heard.

Third, I know that it’s very, very important to make sure that every company understands and can clearly state what its relationship is between itself and its partner community. I have consistently taken an approach, just as Microsoft has for 30 years, of building on a deliberately dependent relationship, between the company and its partner community. In other words, we each only succeed if the other succeeds.

That is the strategy I have always pursued, and that is what Microsoft has always pursued, and that’s what we will continue to pursue. I know that this is an important statement for all of us who understand, particularly as we go through these transformational times, as software plus services and all of these things get talked about, so that we understand where we stand with respect to each other. And as I continue in my comments this morning I’ll give you some specific examples of where we at Microsoft continue to invest in this deliberately dependent relationship.

So, given that I’ve spent a lot of time in the field historically, it’s only natural that I like to spend a lot of time in the field here at Microsoft, with customers, with partners, all different regions of the world. In speaking with customers and partners, it’s clear that there are a number of major themes that come back from those conversations about where we should focus.

One of those themes relates to the need for Microsoft to deliver more complete, and more seamless solutions, our customers and partners are telling us that they want to see solutions where the whole is greater than the sum of the parts. Yes, it’s great that we have this product, or this new set of features, or whatever, but the value can be so much broader than just each of those pieces, and we have to capture that. I hear this from partners, as well, because of course, for you, you can better meet your customer’s expectations if you’re providing that broader solution, you can make more money. It’s a better business proposition, it makes a lot of sense.

Now, we’re doing some really interesting work in this particular area. And I want to bring that to light for you, with a little demonstration. The purpose of this demonstration is to show some of the value of our approach, the value of extending that familiar Office experience across a broader range of applications, including CRM, unified communications, and enterprise search. We’re going to show you a little bit about that right now. so join me please now in welcoming Mr. Brad Wilson, who is our general manager of Microsoft Dynamics CRM.

BRAD WILSON: Stephen, thank you. (Applause.)

I want to talk a bit about the kinds of things you can do as a partner to go ahead and integrate technologies in a way to make business applications very, very relevant for people, very productive for people, and to deliver a much more easy to use application in business scenarios.

I’m going to go ahead and jump right into the demonstration here. In this context, this is a case where I work for the municipal government for the City of Woodgrove. And for Woodgrove I manage the community relations, and I’m managing events that my community has within the area, to make sure we kind of plan and execute things in a seamless fashion in our area. In this case what’s happened is, inside of Outlook I’ve got an e-mail from the Mayor of Woodgrove. And the mayor has met with the CEO of Trey Research, one of the companies based in our community, that wants to have a walk-a-thon, and the mayor would like to go ahead and have an update from me to make sure things are going well with this project.

Let me go ahead and show you how you can use multiple technologies to very quickly and easily solve this problem on behalf of a business user.

In this case, I’m going to come down here and look inside of CRM, and there’s all the usual things you have in here. I’ll come down here and click on my news feeds tab. Inside of news feeds what you’ll see here is that I’ve got a number of things. I’ve got some statistics around permits being issued. I’ve got some aerial mapping. I’ve also got a list of news events, which in this case could be alerts or information or workflow steps that have been flagged for me as a user that are specific to my role. They’re both what I’m allowed to see, but they’re also what I have chosen to see. In this case there’s a whole lot of things that are happening both from external events, as well as internal processes that we’re following. These are the kinds of things that partners would set up on behalf of different kinds of users to make sure that every user gets the right role tailored set of information to help them be successful. This is just one part of how we think about business intelligence, not just charts and figures, but the right information flowing to each user in the organization.

In this case I’m going to come up here and I’ve noticed that Trey Research has exited the resident review stage. Before every event in the community we go ahead and check for resident feedback to make sure there’s no conflicts or problems with that. In fact, in this case a modified route plan is needed.

I’m going to go ahead and open this up, and within CRM I’ll bring this up, and I’ve got SharePoint hosted inside of CRM right now.

If you look at this, I’ve got a variety of tabs here, kind of a general tab, really documents and then details, et cetera. It’s already got the name of Trey Research walkathon right there, I’ve already passed that in, the event sponsor at Trey Research is right there, and I’ve got a calendar view. I could have used standard SharePoint calendar parts. In this case this is actually Silverlight. And all the information in the calendar here is being populated using data from the CRM system.

On today, July 8, we’ve got an indication here in red, which means there’s an immediate follow-up required for an action that we’re doing related to this walkathon project.

So, I’ll go ahead and click on that, and it says I need to go ahead and notify Ted, who’s the event sponsor, with resident feedback and ask Ted to go ahead and file an amended right of way form for that.

So, I’m going to come up here, and pop into the application and look and see if I can flag Ted and find him online.

Well, in this case I can’t. If he was online, I could use a variety of unified communications technologies like instant messaging or VoIP or videoconferencing to reach directly out to Ted and have a real time conversation. In this case Ted indicates he’s out of the office, but available via e-mail. So, in this case what I want to go ahead and do is get an e-mail out to Ted, track it within the system, and make sure that Ted can then follow up on this appropriately, and that I can follow up on the request out to Ted and to Trey Research.

So, in this case I’m going to come over here and go to related documents. When I click on this, what I really want to do is find the right information that can help me expedite the process of driving an e-mail out to Ted, and really get this thing done on his behalf.

In this case what you’re seeing is there’s kind of three parts to this. On the left side you’ll see a search of our intranet here at Woodgrove. In the upper right you can see a search of our external public-facing site. In the lower right we’re actually pulling CRM data up into the system as well. This is a case of using SharePoint Business Data Catalogue as a bridge between SharePoint Enterprise Search and then source applications. This is the kind of thing that our partners would define on a roles-based fashion for our users and for our customers to have the right relevant views in there, and to connect the right kinds of information to the audience.

In this case I can see I’ve got my right of way form right here, and this is the form that Ted needs to file in an amended fashion for the project. In this case I will click on this, and there’s a custom action. Again, one of our partners could define a series of custom actions here. One of these here says send a link by e-mail. When I click on this, it will pop up an e-mail form. We’ve already passed in Ted’s e-mail address, the subject matter, and the link of the document Ted needs to go ahead and file. I could send it right now, but in this case I’ll go ahead and move up to the ribbon, and I’ll click on Set Regarding. What this will do, when I tag this e-mail as being regarding the Trey Research walkathon, this e-mail will be tracked automatically in CRM, and then any e-mails back and forth on this topic will be tracked automatically on behalf of the customer.

And again these kinds of things like Set Regarding are all configured on behalf of our customers, typically by our partners. So, lots of areas where you can configure things to specific business scenarios to make all this technology incredibly powerful and incredibly relevant to every company and to every role inside of a company.

Now, in this case I’ll go ahead and send this. What that means is Ted is picking up his e-mail, and hopefully he’ll have this all be synchronizing out to his Windows Mobile device, but this all be taken care of automatically.

Now, as part of this process I don’t just want to send the e-mail into the void and hope it gets tracked and followed up on. Behind the scenes, workflow is being driven at all times, and so Windows Workflow will then generate an activity to make sure that either myself or someone else in the organization will then follow up on this.

So, I’ll click on activities here, and what you’ll see is there’s a new follow-up on the e-mail regarding Trey Research walkathon activity that again I can take or I can assign to other people in the organization.

So, what this has really shown you in a very short timeframe is a number of things that you can do as partners to take these technologies, things like unified communications, business intelligence, CRM, SharePoint, enterprise search, and take these and construct specific business user scenarios that are extremely relevant, extremely productive, fast and easy to use. This really is a large part of the partner opportunity Microsoft provides for you to go ahead and take these technologies and make them simple and relevant to your customers and to our customers. Thank you. (Applause.)

STEPHEN ELOP: Thank you, Brad. Thank you very much.

I hope that gives you a sense of how it can all fit together. And clearly there’s a big opportunity in areas like unified communications, CRM, business intelligence, a whole variety of different opportunities for all of us, which is really exciting.

Of course, you have to ask the question, but can I make money at this, can this work for me?

Well, I’ll tell you, we’ve done some research, and in developed markets what partners are telling us, what you are telling us is that the margins associated with services, the margins are ranging in the area of about 27 percent when engaging in solutions around collaboration, enterprise search, and related areas.

In the areas of communications, unified communications, and so forth, a bit of a newer market, so the services margins are a bit lower, generally approaching 20 percent, seems to be what we’re hearing from you.

So, the bottom line message is great opportunity to bring it all together, and there is an opportunity to make money here, which is really exciting.

Now, when I’m out in the field — I mentioned one area of conversation, what we just discussed — but the other topic that comes up over and over again, and is clearly something we need to talk about today, is that of software plus services.

You know, the very first time that I heard Microsoft use the term “software plus services,” particularly with my Silicon Valley blinders on, I thought it sounded, you know, a bit like a rationalization, even a bit cheesy, and, you know, it sounded that way because it sounded a bit like Microsoft was trying to explain where it had been and who it was, and less so about the future.

But, you know, in the time that I’ve been at Microsoft, I’ve really engaged in this. I’ve really spent time with customers. And what customers are actually telling us is that they need diversity, they need to resolve the complexities of their business through a range of choices. They have to have a different way of engaging with technologies in different circumstances.

This diversity creates a bit of a natural tension. For example, on the one hand, customers want control, they need security, they need to be able to extend and build upon their platform. That’s one side of the discussion. Of course, on the other side, they want to deploy rapidly, they want to manage costs, they don’t want to consume their entire IT organization with each major project that needs to come along. So, there is a bit of a debate and a bit of tension within the industry about how to simultaneously meet all of these needs, how to resolve this tension for our customers.

Microsoft has opted to provide customers with the power of choice, the full range of capabilities across the spectrum, and thus Microsoft is fully embracing the principles of software plus services.

Now, there are certain self-proclaimed industry luminaries who will say, software is dead. They even have great marketing logos, great big red circles and a slash through the word “software.” No software? How else does all of this work? How else would it all come together?

You know, what it reminds me of is my son when he got his new bicycle, and he was riding down the driveway. And he was going down this driveway faster and faster, and he said, “Look dad, no hands.” And, yes, there is a 14-foot hole there, so we know how that story ends.

Software actually brings all of this together.

What our customers are really telling us is that they need to see their diversity and their complexity reflected in how we allow them to procure, deploy, and support software.

There will be software on client devices. There will be software on personal computers and mobile phones and all of that, that will continue for a long, long time into the future. And, of course, some customers will say, you know what, there are certain applications where I want this hosted for me, I don’t want to worry about the day-to-day operations or maintenance of that software, I want you to do that for me; so that’s something they’re saying. And, of course, some business applications will be completely built and deployed in the cloud, and that makes sense as well.

Of course, what we really know is that most customers will have a hand in each of these different approaches simultaneously, and that’s where we are committed to giving customers that power of choice, the power of choice to decide what’s right for them and for their businesses, the power of choice to decide how they want to deploy their software solutions. That is how Microsoft is approaching this.

Now, from a business perspective this is actually really big news. It’s really great news, because there’s huge opportunity here.

Let me give you a few factoids. IDC, for example, is estimating that the software plus services marketplace, Web-based applications, will grow 32 percent year on year through 2011, resulting in that timeframe in a $21 billion market. That’s a real market that’s worth pursuing.

At the same time, Gartner — Gartner is estimating that 25 percent of all new business application deployments in 2011 will be in a Web-based environment.

So, there is a real business opportunity, and Microsoft will continue to make it real for itself, for its partners, and for its customers. That’s a key part of our strategy.

You’ve seen some announcements in this area already. For example, our recently announced Microsoft online services is a good example of a set of solutions that provide customers with choice, and help to respond to the diversity that they’re looking for in their environment. It delivers what they’re asking for in areas like e-mail, CRM, collaboration, communication services. It gives them the appropriate degree of control and flexibility, while at the same time allowing them to have others host it and maintain that environment for them.

Dynamics CRM Online is a great example of this. The online version of CRM is a full-fledged CRM application, just released a few months ago in April, and already there are more than 500 customers and 200 partners engaged in the sales of those products. It’s really getting some good traction, so we’re excited about that.

The key to our online strategy though is to recognize that Microsoft Online is enterprise class software, delivered on a subscription basis, hosted by Microsoft, and sold with partners. That is the approach we’re taking. Customers can subscribe to Exchange Online, to SharePoint Online, to Live Meeting, to Office Communications Online, they can subscribe to all of those things; or for $15 per month per user they can subscribe to the Business Productivity Online suite and get a number of those elements all bundled together. It’s a pretty good value, 38 percent less than the sum of each of those individual online services. So, we expect a lot of you to be engaged with the selling of that suite offering.

Now, there’s already great traction around Microsoft Online Services. Customers like Coca-Cola, Eddie Bauer, Nokia, AP Moller Maersk, Aviva, Doosan: They’ve all made commitments to online services for their collaboration and messaging needs. So, this is really starting to happen.

Now, today, I’m also very pleased to announce a companion service, a companion service for deskless workers, those people who are not traditionally at a desk. It could be nurses, it could be factory floor workers, it could be delivery drivers. People who aren’t traditionally working at a desk will now have the ability to subscribe to and participate in a corporation’s messaging and collaboration applications, some great opportunity here. This is an environment where literally 50 percent of the workforce in the world will now be an expanded market opportunity for all of us. We can help millions of people who regularly have not been connected to actually better communicate and collaborate within their organization. The deskless worker suite therefore opens up a whole huge new market, and we’re excited about that.

Now, the one thing I do want to say is we want to encourage you to sell the deskless worker suite, because as I was preparing for today, I realized that if you don’t sell the deskless worker suite, you will be forced to sell, and I quote, the Microsoft Office SharePoint Online Deskless 2007 suite thing, the world’s longest product name. Okay, there’s still some transformation ahead at Microsoft, and I promise you by this afternoon when you see elements of this presentation in more detail, we will have changed that product name. We’ve got to tighten it up here just a little bit; it doesn’t fit on an order form.

The real sound bite thought, the real sound bite I want you to remember for the deskless worker suite is that for the price of a latte every month we can have a factory floor worker engaged in a company’s collaboration and messaging environment, and that’s something we should all aspire to do. It’s a great opportunity for us going forward. (Applause.)

But there is something even more important that we need to talk about, and that is to recognize that in the history of Microsoft we have only been successful when we have gone to market with you. That is the model for this company. That is the deliberately dependent relationship that I talked about earlier. We need you to be successful for us to be successful with online services.

So, today, I am pleased to announce Microsoft’s partner compensation model for Microsoft Online Services, which puts partners at the heart of our efforts around new online services and software plus services in general.

With Quick Start from Microsoft Online Services we have established an economic model that will allow each of you to build businesses around software plus services.

Let me give you some specific examples. Partners will receive 12 percent of the first year’s revenue from a new customer addition, and 6 percent of ongoing revenue, making it possible for you to build an ongoing annuity stream from your customer base over time, that if you take care of those customers will just keep growing and growing and growing.

In this model you will help Microsoft sell its online services to its customers. You will help them through the ordering process, and you will receive a fee back from Microsoft.

The strength of this approach is that any partner can sign up for and participate in the software plus services transformation. Our vision is that everything you do today with our server product you will ultimately be able to do in this software plus services world. We have work to do to get there, no doubt, but that is our vision, and that’s where we’re going with this.

Of course, the even larger selling opportunity beyond the recurring and building revenue over time of a differentiated, value-added services that you can place on top of these environments, here are some great examples of this: for example, integrating a customer’s Active Directory environment with our online directory; helping customers move off of Notes and into Exchange Online — we love when you do that, that’s great for all of us; helping customize the SharePoint environment with team sites and Internet portals, all of these things are things that you can do, new help desk services, business process consulting around collaboration and messaging to help with the productivity of an organization, so all of these value-added services that you can add on top of the growing, recurring revenue opportunity that exists.

So, we think that there is a significant opportunity to create and capture value here, and we’re going to tell you a lot more about that during the course of today. I would encourage you to visit Chris Capossela’s presentation — I think he’s doing it twice this afternoon — to help you understand this in even more detail. (Applause.)

You know, today, a number of partners have already announced their support and commitment to building their businesses around Microsoft Online Services. These partners are ready to engage customers and assist Microsoft in selling these new services.

I had a great opportunity last night to meet with a number of the executives of the companies listed above, and we had a really rich conversation about what this means. On the one hand, I heard a lot about the power of this opportunity, the scale of what could happen, all sorts of great things like that. There was no debate about that in the room.

But the challenge in the conversation was the recognition that this really is a transformation, this is hard, this is going to require all of us to learn in a journey together.

I know as we roll this out — we don’t have it all figured out, it’s new for us as well, but we’re going to have to charge through this, because it is what our customers are asking for. There is so much that we have to learn together.

So, of course, how do you get started with the Microsoft program for this? Well, there’s a great opportunity to sign up for Quick Start for Microsoft Online Services here at the Worldwide Partner Conference. I’m told you’ve got to get a bit of training. You have to sign some unimaginably complex legal agreement to make it all possible, and you’ve got to go through some sort of assessment test to make sure you’re ready to serve our customers. You can do all of that at WPC, and I would encourage you to absolutely do this.

Now, to make this even more real, what we thought we would do is share a video with you. This is of one of our partners, PointBridge, who’s been a leading advocate of this approach, and to show you a bit of how they’re approaching this with one of their customers. So, please join me in watching PointBridge with their customer.

(Video segment.)

STEPHEN ELOP: Good work, PointBridge, excellent. (Applause.)

I hope that gave you a good sense of the opportunity that we have to give customers the power of choice through software plus services. And the interesting thing is there are many, many more software plus services opportunities for all of us that will be coming in the weeks and months ahead. So, watch closely; there’s a lot more happening in this space.

So, you know, as I made my commitment to Microsoft just six months ago, I knew and welcomed the fact that this was a disruptive time in our industry. There are new ways to deploy software, there are new architectures, there are new business models, there are all of these things.

Steve Ballmer recently asked me a question. He asked me a question about what I thought I should stand for at Microsoft. And I know that the very first thing that I must stand for at Microsoft is to be someone who aggressively facilitated the transition, the transition for our customers, the transition for our customers and partners, the transition for our customers and partners and everyone at Microsoft, through this period of generational change. That’s what I have to stand for. I know that if we focus on that transition together we can truly all benefit.

But every one of us has to embrace the fact that a lot has changed and will continue to change. Our business at Microsoft is changing. Our customers’ businesses are changing. As a partner of Microsoft, your business must change as well.

At the same time, however, each one of us does have to build on the foundation that has brought us this far. This means enabling our customers to realize their potential through the magic of software while building on the deliberately dependent relationship that has worked so well for us for so many years.

I have made my commitment to Microsoft. I have made a commitment to you here today to continue to invest in that deliberately dependent relationship. And I know that each of you, every single one of you has made that same commitment to Microsoft, and for that I thank you.

Please enjoy the rest of the Worldwide Partner Conference. Good day. (Applause.)

END

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