Allison Watson: Worldwide Partner Conference 2008

ANNOUNCER: Ladies and gentlemen, please welcome Allison Watson. (Applause.)

ALLISON WATSON: Good morning, and thanks for being here. Let’s one more time give it up for the EB Fraley Band. (Applause.) By popular demand, all the band members will be in the Microsoft store following this morning’s keynotes, selling their albums and signing autographs, should any of you want to join them.

All right, so this morning it’s the story of evolution. In the last 33 years Microsoft and partners have been critical to our success. During that time, we’ve had five UN secretary generals, six U.S. recessions, and eight World Cups.

Also during that time we’ve evolved our partnering business. Five years ago, we created the Microsoft Partner Program with a mission that any one partner of any type could have a profitable business opportunity by partnering with Microsoft, and delivering innovation to the industry. I’m proud of that mission, and I’m proud of how that statement can take us into the next five years together.

But our business has evolved, the industry has exploded, and it’s time to evolve together to the next step.

So, today we’ll be talking about where we take the Microsoft Partner Program and your businesses over the next five years or so.

There are four core pillars of the evolution that we need to go through together. The first is around really cementing the value we have in the People-Ready Business, and talking to you about how we evolve the Microsoft Partner Program around more business specialization that’s aligned to today’s market realities.

The first pillar of alignment with the Microsoft competency framework in the new program will be the way customers decide and make technology decisions. The second major pillar will be around the way you go to market, and the third major pillar will be aligned to how Microsoft goes to market with you. You’ll see evolution, and we’ll be looking for your feedback in terms of how we evolve the competencies to achieve these objectives.

The second major pillar of MSPP evolution will be around driving differentiated performance. Again, your top feedback to me, traveling around the world, is about making you stand out from your competition, making Microsoft partners stand out from competitive competition in the industry.

So, you’ll see us evolve with your feedback, and we want to recognize those of you who are making real investments to change the way you do business.

So, we’ll look for differentiation for those of you who drive more technical and business depth compared to folks that aren’t investing as much. We’ll look at those with a renewed focus on customer satisfaction, as I talked about yesterday. And thirdly in the pillar we’ll look at those of you who are making business investments to stay current and stay on top of the technology so that you’re delivering the best value in the industry, and for our customers.

The third major pillar of MSPP innovation continues to be about profitability and growth. We’ll continue in the investments we make around attracting customers, closing sales, supporting and utilizing your investment.

I’m pleased today to talk to you about what we’re doing to attract more customers into our partner base with the announcement of Microsoft Pinpoint. Microsoft Pinpoint is the evolution of our Solution Finder technology we launched two years ago at this event. In the last 12 months, we’ve had 2.4 million visitors to Solution Finder, with 6.7 million searches. That’s 6.7 million searches from customers to partners. The 30,000 of you who have solutions in our Solution Finder are benefiting, and 250,000 leads in the last 12 months were transferred to partners.

By announcing Microsoft Pinpoint our goal is to double that in the next 12 months. We want to drive 500,000 leads through to partners from customers searching against the Microsoft environment.

You’ll see several innovations in Microsoft Pinpoint. The first is around attracting and continuing to drive differentiation in search, so that customers can find exactly what they’re looking for in the locations around the world.

The second is the concept of rich multimedia, and you’ll start to see us provide opportunities for customers to try and buy solutions that you may offer through Pinpoint.

And finally, one of reward, ratings, and rankings, and you’ll start to see that come online as well.

So, Microsoft Pinpoint is a big announcement in attracting more customers.

The second one is closing more sales. I’m pleased today to announce new tools available on the Microsoft Partner Program portal around the world in the Partner Sales Resources section. This is the single place with over 500 selling tools available for you, evolving through the sales cycle from prospects to qualified solutions to implement.

What you see listed here are just three examples: Gear Up, our toolset for people who have to learn all of our technologies and all of our battle cards, product by product and solution by solution; the Infrastructure Optimization Assessment Tool, so that you have a quick and ready way to do assessments for customers as to what stage of IO model they’re participating in; and thirdly, what you see here is License Live. You’ve asked us to simplify how we go to market with licensing. License Live is a toolset to enable you to do quoting and support for customers around licensing in every country around the world.

The third pillar we’re driving is about support, and we’ll be introducing faster SLAs and a better support experience for you so that you can always be ready in front of your customers when the time needs it, and when crises do hit.

We’ve got international language expansion and we have improved response times in our digital forums from 24 hours down to four hour SLAs as a result of your feedback.

And finally, so that you can utilize the investment that you make and that we provide as part of the Partner Program with our software, we’ll be introducing in this year’s renewal in the Microsoft Partner Program an opportunity for you to receive your software via digital distribution. You’ve asked us for that, and you’ll know what your license position is, you’ll know exactly who in your firm is using the technology that we provide, and you can really start to get an opportunity to drive the investment further.

Now, the fourth major pillar of the MSPP evolution is really the one that’s been a centerpiece of our conversation this week thus far, and that’s about evolving the software plus services.

Now, take for a moment the size of the market that we sit in. The total software market today all up around the world is US$77 billion. In the next three years that market will grow an average of 10 percent a year, and we will have a $94 billion market three years from now — a $94 billion market.

Now, within that market we’ll look at the software component of it and the services component of it, and you’ll see the growth rate of around 24 percent expected in the services market.

More importantly, and you heard Stephen mention this yesterday, but more importantly, one in three customers expect to evaluate a services-based software option on one of these key workloads — one in three.

So, in the next three years, as you think about evolving your business, think about how one out of every three of your customers will come to you for a solution in that area.

So, going through this evolution and the conversations I’ve had with many of you this week is exactly when do I do it, what do I do, and how do I do it.

So, I wanted to talk to you a little bit about that evolution based on the business model that you’re in today. Here are the five business models that most of you are in, and many of you are in multiple of them.

As a way to talk about how to take that evolution forward, I’ve invited five partners on stage with me to have the opportunity to be at WPC over the last few years as we started this dialogue, and are willing to talk to you about how they’ve changed their businesses already with software plus services.

So, I’ve got to get to the right side of the stage for this. This is good; you don’t know where you are. I’m going to start right over here, and let’s hear from partners about evolving their business with software plus services.

First David Hall from Compucom.

DAVID HALL: Hi, Allison.

ALLISON WATSON: Welcome to the stage.

DAVID HALL: Oh, thank you, thrilled to be here.

ALLISON WATSON: So, David, what’s going on with software plus services at Compucom?

DAVID HALL: Well, I’ll tell you, at Compucom we’re really excited about what we see with software plus services. We see a lot of opportunity there.

You know, we took a look at our business over the past year to determine the best way for us to grow our core infrastructure based outsourcing services.

So, we determined, we went out and we actually acquired companies in both software and in services, and we incorporated that with some of our best practices like ITIL and ISO20000. We used that to create additional value for our clients.

So, from a benefits perspective, this allowed us in our past fiscal year to grow our revenue in excess of 20 percent in certain areas of our services. Additionally, it allowed us to look at our service delivery mechanisms and leverage managed services to lower our cost. And finally, we now see with Microsoft Online Services the ability to establish a new annuity-based revenue stream.

So, partners, here’s my action plan for you: I reach out to you and say take a close look at your business plan. Make sure you incorporate software plus services into that plan. And the time is now. Take what you have as special sauce, the magic that you’ve created for your clients to add additional value to your services. And lastly, make sure you communicate that clearly, and you collaborate with your associates, with your partners, and with your clients. Thank you.

ALLISON WATSON: Thank you, David.

DAVID HALL: Thanks, Allison. (Applause.)

ALLISON WATSON: So, in the selling and influencing business what you heard that was so important for companies in this business model is to me to create new business offerings so that you can be ready, investments in different forms of marketing so that you can reach customers, and benefits in lower cost of sales all up, and outreach to what we think is 70 percent new seats in the marketplace for sellers and influencers.

So, now I’d like to talk to Scott Harrison here from Accenture and the consulting business. Scott, what do you all do with software plus services?

SCOTT HARRISON: Well, thanks, Allison. It’s great to be here.

You know, Accenture believes that market dynamics are changing the way our customers consume software, and Microsoft’s software plus services strategy is at the heart of that change. It’s a great opportunity to add value to our customers, and to add value to Microsoft’s partner ecosystem.

Accenture and Avanade have invested in an offering that’s based on Microsoft’s hosted mail and collaborations, coupled with Accenture and Avanade migration and deployment services, and help desk integration.

And this offering adds great value to our customers in the form of flexibility, in the form of lower costs, the service levels are guaranteed by Microsoft with financial incentives, and software upgrades are included in the overall subscription offering. It’s also a great offering for Accenture because it represents incremental services opportunity that’s additive to our business, and based on the pricing structure that Stephen shared yesterday, it creates a recurring revenue stream for us.

So, partners, market dynamics are also changing the way your customers consume software, and now is the time to embrace that change. Thank you.

ALLISON WATSON: Thanks, Scott. (Applause.)

So, for those of you in the consulting and systems integration business, what you heard about the investments you have to make is really understanding how your delivery model changes and the bridge between online and on-premise, as well as the investments you need to make to really get Web design and Web consulting as part of your offering.

Payoffs can be big, though, with great services revenue attached for every dollar of software, and incremental customers outreach with shorter utilization and shorter deployment times.

The next up here is with Gabrielle Deeny from Conchango in the app development area.

GABRIELLE DEENY: Hi, Allison. Thank you.

ALLISON WATSON: Good morning.

GABRIELLE DEENY: Morning.

At Conchango we believe in investing in partnerships, innovation, and integration. An example of where we have done that is at the BBC. The BBC Radio One Big Weekend, a digital concert experience built on Silverlight Deep Zoom, is a rich, interactive media experience uploaded to a super cool Web site.

We worked closely with our partner Streamuk to deliver this excellent solution, and the feedback that we have had has been phenomenal.

Another area of investment for us is around integration. The IP that Conchango has built on top of Commerce Server 2007, the digital commerce platform, means that we have a solution that we can take to customers in a repeatable fashion. We can realize recurring revenues around that. Working at the business level, our customers are secure in the knowledge that their e-commerce environment is being managed by experts, and they can focus on building a profitable business.

So my advice to you is to around software plus service is to understand the opportunity that Microsoft brings to the market; be innovative on how you use the technology; and embrace the opportunity.

ALLISON WATSON: Great. Thanks, Gabrielle.

GABRIELLE DEENY: Thanks, Allison. (Applause.)

ALLISON WATSON: All right. So, for those of you in the application development market what you heard is an investment in relationships with hosting partners, and with CRM partners who can extend your opportunity. And then what you heard in terms of business benefit is you can really start to templatize and pay off by investment once and reusable many times in your application development environment. So, a great opportunity for those of you in the application development space with services.

Let’s stop over here with Ian Gotts at Nimbus. Ian, tell us about application development all up.

IAN GOTTS: Okay. So, the business is now taking control back from IT. Line of business managers are deciding what applications they want to buy, and how they want to buy it. But still IT is the gatekeeper.

So, four years ago, Nimbus decided to make our offering available through a hosted service, alongside our on-premise application.

So, now four years later, 70 percent of all new projects — that’s 70 percent — are being run by clients on that hosted service, companies like Toyota, Nestle, Unilever, and SAP.

So, the result is our revenue over the last four years has grown 40 percent year on year. We’ve also found that actually our sales cycles are reduced by almost six months.

So, the question you should all be asking is, why me and why now? Well, the business is driving the demand there for online services, and that train is leaving, and you need to be on it.

So, my comment to you is you need to stand up and lead. You shouldn’t be part of somebody else’s agenda; you should set the agenda.

ALLISON WATSON: Thanks, Ian. (Applause.)

So, for those of you in the application development business, you heard a couple things there. Number one, you do have to pick how the applications you have today are going to perform in a hosted environment, and thinking about investment in multi-tenanted, multi-client application development scenarios. The payoffs can be huge, however, with access, as Ian says, to BDMs that previously would be floated aside because of how their large corporations make decisions; you can get in, you can get trials, and you can get real solutions cemented quickly; so a big opportunity for those of you in application development.

And finally, I’m pleased to welcome Gus Harsfai from Ceryx, our hosting partner, on stage. Gus, how’s it going with software plus services?

GUS HARSFAI: Fantastic. Thank you very much, Allison.

Seven years ago, Ceryx transformed from an e-mail consulting company into S+S. We chose to invest heavily into our platform to ensure that it doesn’t force conformity onto the customers, like many fast solutions do.

Together with our partners, we’ve been successful in delivering a highly configurable hosted solution that’s been responsible for in excess of 500 percent recurring revenue growth over the last few years, and the platform is really sticky as well, with less than 1 percent churn rates.

So, I have some advice for the hosting partners out there. If your platforms are based on conformity, now is the time to build some value. There’s a lot of hosted solutions in the marketplace today, and I’m having a tough time telling them apart. And if you’re new to S+S, invest in differentiation. Remember that every dollar you spend on base infrastructure is one dollar you have less to invest in being different, and that’s what’s really important. That’s where we invest all of our money. Thank you.

ALLISON WATSON: Thanks, Gus. (Applause.)

So, for our hosting partners out there a big opportunity exists in the power of choice, hosted from Microsoft, hosted by a partner, or on-premise solutions. In this scenario what you heard is a clear call to action to differentiate your offerings now, and to start to make P2P, partner to partner connections. This conference is a great opportunity to find partners with whom you will collaborate on end-to-end solutions offered in the services world.

Business benefit includes incredibly rapid growth and excellent customer retentions. Gus was telling me up to 71 percent customer retention year over year over year for the customers he gets in the hosted environment.

So, join me in thanking the partners for sharing their stories with us and their evolution. (Applause.)

All right, so what are we going to do inside the Microsoft Partner Program to assist you in building businesses out like the folks you saw here on stage?

I’m pleased today to announce again the evolution of the Partner Profitability Toolset, designed to support the evolution and transformation to software plus services.

First, today, on the partner portal we’re launching the Partner Evolution Guide. This is an interactive toolset for helping you identify future business opportunities, learn from case studies and from analysts about the market, and based on your business models where to place the bets.

Second, it’s critically important that you understand how you’re performing relative to others in your industry. Over two years ago, we started building profitability benchmarks, and this allows you to benchmark yourself in your business model with both our online services opportunities, as well as our on-premise opportunities against the rest of you in the industry, both people on the Microsoft platform, as well as people not on the platform, so you can understand how you could perform in the top 12 to 15 KPIs that really matter in driving profitability in your business.

And finally, and I’m proud to introduce today a tool for actually modeling different scenarios of profitability for your company and for your investment. So, the Partner Profitability Modeler will allow you to take the data that comes out of the benchmark tools, put your own data into it that’s live, your own revenue, your own costs, your own investment models, and do pro forma profitability modelers on future revenue streams.

So, I hope you’ll take advantage of the toolset that we’re rolling out for partner profitability. It is available online today on the Microsoft partner portal. And I’d encourage you to take a visit by our booth to understandn what tools are available, as well as to give us your feedback in digital forum about where we can take software plus services for your business.

So, regardless of what business you’re in today, it’s time to evolve, and there’s the opportunity to take it to the next level to make the next five years as equally as productive and interesting and exciting as the last five.

And I thought I’d share a quote, because I thought it’s perfect for the day, from Pablo Picasso: “Everything that you can imagine is real.” Everything that we’ve imagined for the last five years about our business, about partnering with Microsoft has become real. I encourage you to imagine for the future to make the next five years even better. Thank you. (Applause.)

END