Bob Kelly: Worldwide Partner Conference 2008

Remarks by Bob Kelly, corporate vice president, Server & Tools Group
Houston, Texas
July 9, 2008

ANNOUNCER: Ladies and gentlemen, please welcome Microsoft’s corporate vice president, Server & Tools business group, Bob Kelly. (Applause.)

BOB KELLY: Well, good morning. Good morning, Houston. What a great time to be here, and a great time to be a part of the Server & Tools business.

I’ve been at Microsoft for almost 13 years, and been a part of many, many launch waves. The launch wave we just concluded was absolutely phenomenal, and with your help we’ve accomplished things that we never thought possible. It was the largest outreach to IT pros and developers ever for Microsoft, having reached over 270,000 people in physical events, and with our user groups over a million people in the physical events, and 12 million people online. Thousands of partners were engaged in helping us make this happen; absolutely could not have happened without you. In fact, I want to show a short video of some of the footage from around the world of this global launch. Let’s go ahead and run that video, please.

(Video segment.)

BOB KELLY: Incredible. Give yourselves a round of applause for that amazing result. (Applause.) We could not have done it without you. The ISVs, IHVs, the readiness solutions, customer engagement, everything so far exceeded our expectations, so thank you.

And if you take a look at some of these early results, the PR has been fantastic. Windows Server 2008 is the upgrade IT can’t refuse; Hyper-V, the no-brainer virtualization stack for Windows.

And we’re seeing great early sales results as well. In fact, if you compare Windows Server 2008 units in the same launch period for Windows Server 2003, we’re up over 10 percent. That’s absolutely fantastic; we could not again have done this without you.

In fact, because of that momentum, all partners now have the ability to just sort of take hold of that and run with it and see tremendous business results from that momentum.

But as you understood from Simon and others, launch was just a key milestone on the road to Dynamic IT. This conversation we’ve been having with you and with our customers around how we can move from a much more basic or unmanaged state to a much more dynamic state to help customers realize their business goals through Dynamic IT is critical, and the foundational element for how we move customers along through that journey are the optimization models, and that’s core to our strategy.

We have three years of experiences working with these models and working with partners. In fact, we’ve seen many partners actually building practices with their own IT in the IO models, and together we have profiled more than 17,000 customers where we know exactly where they stand on the optimization curve, which means it’s just another opportunity to have a joint plan with Microsoft to go after this customer base.

So, what I want to do for you now for the rest of my time here is share with you the priorities for the Server & Tools business, and talk about some of the things that we’re going to get done together this year. These are the same priorities that the sales force from Microsoft would see, and building on this incredible success of FY ’08, and of the 23 consecutive quarters of double digit revenue growth we feel like we have the wind in our sails.

So, here are the five main strategies. First, Windows Server and the partner ecosystem, and this is really about how do we go win in the workloads in the unit space that actually drive the foundation of the business.

Secondly, virtualization, desktop to the datacenter. This is about how we really drive the use of virtualization in a broad and cohesive fashion through the IT infrastructure.

Third, delivering integrated infrastructure, integrated management, identity and security across the infrastructure.

Fourth, application platform and SQL. This is really about how do we take advantage of the broad platform that we’ve built, and the momentum we have with SQL, launching into the SQL 2008 broad availability.

And finally, next generation Web and development. Again, this is how I have talked to our sales force and goaled our sales and marketing teams, and how we can now partner with you to drive our businesses together next year.

So, when we look at the Windows Server space specifically, there are sort of two concepts you have to get to understand how we think about the business. The first is workloads. This is things like high performance computing or storage or Web. The first job we have in the server business is to make sure that Windows runs exceedingly well, and performs better than anybody else, workload by workload: That’s our job. Then together we either package new products, like an SBS or Essential Business Server, with targeted solutions to customer segments, and we work together to drive that infrastructure in at the platform for running their business.

So, what are the five priorities for the Windows Server growth for this year? First, upgrade the base. The Windows 2000 Server base is still over a million servers strong. It’s a huge opportunity to just go and upgrade that base, drive significant adoption of Server 2008, and a lot of revenue for you.

Two, launch the Windows Essential Solutions family. As you know, in addition to SBS, this fall we’ll have the Essential Business Server, which is a solution targeted to the mid-market space. So, we will be launching this going forward.

Three, wining key workloads. There are a couple of workloads where we actually are not performing where we are relative to the other workloads: high performance computing and Web. So, we’re going to get after it. You know that we’ve already released the first version of our High Performance Cluster Server, and coming this fall we’ll announce a next version, HPC 2008, and we’re very excited about this opportunity to go win in HPC and user Server 2008 to go win in the Web.

Four, increasing OEM attach. This is not just about pre-installation, although that’s a big piece of the business. It’s also about the Reseller Option Kit, and attaching that license downstream through the partner ecosystem.

And five, grow revenue through mix shift to the premium SKUs: enterprise edition and datacenter. In fact, this year alone we’ve seen in excess of 30 percent growth for enterprise edition and over 150 percent revenue growth for the datacenter server SKU, principally due to the very, very generous rights we have associated with virtualization.

So, these are the priorities, and the growth for Windows Server, the underlying growth for Windows Server equals services, platform, and hardware opportunities for all of you. That’s priority number one in driving Windows Server growth.

Priority number two, announcing: I get the luxury to announce a couple different things here today. I missed this one quickly. Windows Small Business Server 2008 and Essential Business Server 2008 have hit release candidate 1 status, and we will launch these in a public way November 12th, 2008. It’s a very exciting time to be in the SBS and EBS business. We’re really excited about the opportunity that we have both with SBS and with Essential Business Server, and we’re excited that the launch date is approaching quickly.

I’m also pleased to announce yesterday Service Pack 1 for Response Point, an advanced small business phone system from Microsoft, is now available as a free download, and works very well with SBS 2008 as a solution to the Small Business Server.

So, it’s a great opportunity here for SMB partners, and with the next revolution of SBS and the new offering through our mid-market Essential Business Server.

So, the next focus area, virtualization, this is a massive area of focus for Microsoft. We are taking a broad and deep view to how we can take virtualization deep into the infrastructure and really help customers understand and take advantage of virtualization in more than just the server compute space. Our strategy is to have virtualization used in many ways across the server infrastructure, the desktop infrastructure, applications, presentation layer, all managed with a single pane of glass.

As Simon was saying earlier, less than 10 percent of the servers going into the market today are acting as hosts for virtualization. While there’s a lot of momentum and buzz around virtualization, it also means that more than 90 percent of servers going into the market are not acting as virtualization hosts. So, it will be a mixed physical and virtual world for a long time.

Having a management portfolio in System Center that allows a customer to manage across that physical and virtual infrastructure with one toolset is critical foundation to our success in this business.

We are on the front foot. We are no longer on the back foot. We’re telling our story. We had a great launch, as you saw earlier. We had virtualization day as sort of a way to actually activate our partner and customer ecosystem to really understand what our strategy was. We have the most comprehensive view left to right in the industry, management of physical and virtual; oh and by the way, a third of the price of VMware.

So, we know that we have a compelling offer to the marketplace, and we know that we’re at the right time to really drive virtualization usage and adoption in a deep way.

So, another announcement: You may have seen last week that we had completed Windows Server 2008 Hyper-V. Well, I’m pleased to announce that as of yesterday Hyper-V is now available on Windows Update. For those customers with Server 2008 — I heard an applause, you can applaud all day long if you want on that one. (Applause.) Customers who have a Server 2008 license now have the right to go and get Server 2008 Hyper-V. We’re very excited about this. We had committed to deliver this within six months of the release of Server 2008, and I’m proud to say that we accomplished that and beat it by a month or so.

We also at MMS announced the beta availability of System Center Virtual Machine Manager 2008, and application virtualization. We’re very, very positive about the feedback we’ve gotten from customers and partners. These are coming close, and we hope to see those later in the calendar year.

Now we have all the tools to start really testing and deploying the virtualization stack. We have a complete stack now, and on September 8th in Seattle we will actually have the public launch of this end-to-end offering, and our end-to-end story around virtualization. It’s mostly going to be focused on press and analysts at the September launch, but then we go out to the field, and the feedback we’ve gotten from our field has told us that we will reach in excess of 100,000 people through physical events with our virtualization story.

So, we’re really very excited about this. There’s a lot of momentum to be had here. We know that you’re going to be able to satisfy the needs of the market with the technology, and drive deep solutions around virtualization within our customers.

So, how about instead of me talking, I do a little demo of our virtualization technology. And if I could be the only exec that doesn’t fall off this stage, I’ll be happy.

Okay, so what I’m going to show you here is actually a few things. The first is what you see out of the box when you install Windows Server 2008 and Hyper-V. And this here is the Hyper-V manager. And you see I have a number of different hypervisors running on this machine. It’s a pretty good UI. I have all my tasks that I can take on this single box. You’ll also note that if I go into my system view, you’ll see here that I have a 64-bit guest, which is new in this release of Hyper-V, and if I go into task manager you see that actually I have a four-way 64-bit machine. Hyper-V supports up to four 64 gig hypervisors, and that’s twice what you can get from VMware. So, from out of the box very strong, compelling feature set.

You’ll also note here that it’s not just Windows. I’m actually running a SuSe Linux system here as well. So, I can actually install it all on my Windows and Linux boxes onto Hyper-V. So, it’s a great interoperability story for our customers.

But the reality is virtualization is not likely to be done on a single box. Most customers are going to want to use virtualization around their entire infrastructure, and therefore need a toolset to manage across that infrastructure.

So, what you’re looking at here is actually Virtual Machine Manager. The Virtual Machine Manager gives me one view of all of my hypervisors, whether that’s Virtual Server, Hyper-V, or, in fact, VMware ESX.

So, as you can see here, I’m running a number of virtual machines. I can filter by operating system, so 64-bit editions or Server 2003, which machines are running there, which hypervisors are running. I can go down into the VMware view and you see that actually managing the VMware environment. But if I expand this fully, you see I have the hierarchy that is actually my VMware hierarchy. In fact, if I go over to the VMware client, you see that it’s exactly the same hierarchy; we just inherit that. We’re trying to do a very good job of not forcing a customer or a partner to have to build a second infrastructure just to manage the ESX environment.

So, now that you see sort of the basic features of the hypervisor and Virtual Machine Manager, let’s go to the next thing here, which is what if I want to migrate one of these virtual machines, right? There’s been a lot of talk about quick migration versus live migration, and what I’m going to show you here is actually the quick migration. You saw a little message box come up. Because we’re in pre-release, that’s a message box that says, hey, you’re going to change some state here, it’s going to impact your machine for a little bit. That goes away when we get to the final release.

So, what I’m going to do here is I’m going to choose this particular one. You notice that I’m looking at a view here that’s what we call Intelligent Placement. Intelligent Placement is actually looking at the system of hardware and trying to figure out which machine is the best place to put this hypervisor. So, it’s looking at things like CPU and I/O. So, I’m going to choose this one that’s called the cluster.

And you note here it’s also I can look at this script. Because Virtual Machine Manager is actually built on PowerShell, I can actually take all of the stuff that you’ve just seen me do, write a script in PowerShell and automate that. So, that’s just here the PowerShell script. I’m going to go ahead and complete this task. And just as simple as that, that server is now going under migration.

Okay, there’s something else to note here. This is about a six to 10 second process that was quick migration. Live migration is a very interesting feature, but it’s only useful today at the very, very high end of certain kinds of user scenarios, and it is a feature that we will deliver in the next version of Windows. But quick migration is suitable for most cases, as you could see just right there.

The other thing that’s important to note is because I’m actually running this on Server 2008 Enterprise Edition, which has clustering built-in, I actually can have geo-clustering — that’s a new feature in Server 2008 — of my virtual infrastructure. What does that mean? I now have a disaster recovery solution out of the box, not another thing for a customer to have to go buy and license with complexity and cost. So, we’re really very excited about what we’re doing here.

So, in a very quick five minutes I’ve shown you the feature set of the hypervisor, what we’re doing to actually enable interoperability across Windows and ESX environments and Linux, and a single pane of glass to manage that entire environment. Not bad? (Applause.)

Okay. So, now that we’ve talked about sort of the core infrastructure side of the house, I’m going to go ahead and move on over to the application platform side of the house. And the application platform side is an extremely strong business for us, growing fast in all areas.

It’s important to understand how we think about the application platform though, before I talk about some of the momentum. We have a very end-to-end view of the application platform, from development through operations, and including the end users. We want to be able to connect the lifecycle of an application. The reason why customers spend so much money deploying and building and operating applications is because that lifecycle is disconnected. A designer builds the applications, tosses it over the wall to IT, IT implements it, rolls it out, finds out there’s something broken or a policy has been violated, and it goes back to development and so on and so forth.

What we want to be able to do is actually connect that lifecycle and capture all that knowledge in models, and have that integrated stack all the way across from the dev tools to the infrastructure around the database and BizTalk, all the way up through the user tools of Office, SharePoint and Silverlight.

So, having that broad view of an integrated end-to-end lifecycle oriented stack is absolutely critical for the success of the business.

And you know what? We’re seeing that success in the marketplace. Gartner has just put us into their Magic Quadrant leader position for application infrastructure and BI. We are now the primary vendor for SOA implementation, according to IDC, around BizTalk. We are now the primary mission critical development platform with .NET, and, in fact, we still are the fastest growing database with SQL Server, selling more units than Oracle and IBM combined; huge amount of momentum here. And we have a lot of things that we’re going to continue to do to generate more business for you.

So, today I’m also excited to announce that SQL Server 2008 will be available on the August price list. (Applause.) It’s a very exciting release for us, tremendous, tremendous momentum for this product, and a couple of things to note.

This is a great business opportunity, really great new features within the product, but unlike Oracle, no price increase; we’ll keep the price the same. You will be selling the market leading database, as I said.

We have over 500,000 CTPs, Community Technology Previews, out there already. Just to put that in context, we only sell, the market only sells a million database units a year. So, there are 500,000 sockets waiting to be converted to live licenses; great opportunity for you. We’re really excited about this, and we know that you’re going to have this data platform from some servers to devices to desktops to Web hosting and the cloud, one integrated platform across the stack; tremendous opportunity, we’re really excited about it.

However, rather than have me talk to you about why we’re so excited about the product, I’d really like to invite a partner, the CEO of Conchango, Mike Altendorf, who’s going to come on up here and show you a great demonstration of what they’ve been able to do with SQL Server 2008 to solve the McLaren business problem they were trying to solve. So, Mike.

MIKE ALTENDORF (CEO, Conchango): Good morning, and for the next few minutes welcome to the world of Formula One motor sports. It’s an amazing sport, fantastic sport, and it pushes engineering and technology innovation to the limits. It really is man and machine working together in perfect harmony, something I personally have never quite achieved.

In the world of motor sports you’ll find that data is absolutely critical. They’re looking for the minutiae in the data to increase the performance of the car, performance of the driver in a matter of microseconds.

And over the next few minutes I want to introduce you to the complexity of streaming and interpreting this live data, but also how we use the Microsoft application platform, particularly SQL Server 2008, the .NET Framework from within that WPF, to create a very visual business intelligence environment for a very, very demanding client.

But first just a few introductions. This is a collaboration between Microsoft, McLaren, and Conchango, and I guess everybody here has probably heard about Microsoft, but about McLaren, they’re a Formula One racing team, as I said, and they’re also a supplier of technology to most of the teams that compete in this championship every year.

Conchango, we were the partner who was brought in to sort of bring this together and bring the business intelligence applications to life, and we’ve been around for 17 years, although these days I know I’ve been around a little longer. And we really have evolved with Microsoft to develop a services business now that looks at designing great applications but also developing and delivering them. We’ve balanced the needs of great user experience design with business and technology consulting. We’re based in the UK, as I’m sure you can tell, and about 350 people. And why we’re here in Houston is because the Microsoft technology platform has allowed us to create these great applications.

So, there’s a bit of news, after those 12 to 13 years now partnering with Microsoft, we are now part of EMC, and we’re hoping to build out EMC’s global consulting business through a very strong strategic alliance and partnership with Microsoft. That’s enough about the plug.

This is the sexy stuff, and the sexy stuff is what you can see now. And this is what the McLaren Group does, they design, they build, and they deploy these sorts of amazing machines, and they’re one of the most successful teams in the world. So there’s a very demanding challenge we expected. A lot of the people from outside of the states will know about Formula One, but it’s not so well known inside the U.S. But Indy cars are something I’m sure everybody knows about. But if you compare a Formula One car in terms of technology and engineering innovation with an Indy car, this is what an Indy car actually looks like. (Cheers and applause.) But this is Formula One. So it’s very cool. (Applause.)

So Formula One is the third most watched sport in the world. These races have a global audience of 850 million viewers, and the cars go up to speeds of 250 miles an hour. But, again, through data, the aerodynamics will create 2-1/2 times the weight of the car in down force, which means they actually can drive upside down in a tunnel. It’s something I don’t suggest we try this evening in downtown Houston. And each corner they go in, they can pull up to 5Gs, and a fighter pilot starts to blackout at about 6Gs, so the driver, again, is very physically strong. But it relies on loads and loads of data. At the center of the car is the engine control unit, and our challenge was that there’s a lot of data inside this engine control unit, and our job was to get that out, put it inside a Microsoft platform, and make it useful to the team.

It really was a transition from an existing solution, an old solution, to a new one. There are over 100 sensors on a car monitoring around 2,000 parameters, and generating two gigabytes of data per race. So you’re talking terabytes of data in a season in a year, and they like to keep multiple years of data for comparison. And they’ve developed a very flat file structure, which actually got the data from this engine control unit into a flat file system based on Windows Server in a very robust, and very quick subsecond response time, and the performance of getting that data into their existing application was actually, very, very good. So it was quite a challenge. What they couldn’t do is, they couldn’t really analyze the data. They just observed the data and made some guesstimates.

So our challenge was to take something already performing into an even more performing environment, create better analytics of it, and the heart of this was SQL Server 2008. There’s an overview of this coming on in a second, but there are just two or three points I wanted to get out of it. Performance reliability was key, because they work in these sort of microseconds of time, but also there were two or three key features in SQL Server 2008 that allowed us to do this. The first one was File Stream, which is an amazing piece of technology in the new database, and that allows us to stream data up to 800 megabits a second, but it also allows us to store different types of data.

And one of the key datas that was used here is a time-theory based data, where it’s stored in a very linear fashion, and it allowed us to provide very fast access to this data into the application. And the other one within SQL Server 2008 was the memory caching, which has provided just truly amazing performance. And it was those two areas alone, when McLaren just had a quick look at Oracle’s and IBM’s technologies, that Oracle and IBM were packing their bags and getting out of there pretty quick, which was just great.

Here is how it all sort of hangs together.

(Video segment.)

So Bob talked about virtualization just a few minutes ago. That was virtual me, and I’ve got to say it’s pretty weird hearing your own voice played back to you like that. When we bring all this together what we’re really doing now is visualizing data in real time for constant monitoring. And they’re asking the sort of questions, the engineers are asking the sort of questions about how does a spring perform under 5G of braking. Is the engine torque optimized for those sort of gear shifts, and what sort of pressure is on the front wing when it’s doing about 150 miles an hour, the sort of normal things you’re asking yourself on the freeway.

In short, what they’re really looking to do is to shave milliseconds off a lap time. And it’s our ability to bring all these different datasets together that has created a highly, highly intelligent application for the engineers. So what’s more interesting is when we look within the rich presentation framework now, WPF, that is available from Microsoft, it’s giving us now, as you can see the ability to start to set more intuitive search in finding relevant datasets, and allowing the comparison of previously historic data that wasn’t around. And they can find this data with much more context than they ever could before, and this really is the forefront of what we’ll see in many business sectors, from retail to finance, in terms of the way they visualize and manage data, and as partners I would say this is the sort of technology you invest in. And the services that you can build around this are really quite phenomenal.

I would also say that the productivity of the platform, from having now a stack, from having a presentation layer, like WPF as a client layer, right through to SQL Server 2008 as the database, is just giving a phenomenal productive environment for our developers, and database guys. And we see, again, 30 to 40 percent improvement in productivity as the user experience design people can work directly with the developers, and it is very, very cool.

Okay. So it’s time for me to ask Bob to come back on stage. I don’t think Bob can get here as quick as it takes the 2.6 seconds a Formula One car to stop, from 150 miles an hour to a dead stop. So just to sort of wrap up, what we’ve given you here is the Microsoft technology platform, the application platform put into a very demanding business environment for a very demanding client, great performance, great speed, security, brilliant teamwork between ourselves and Microsoft. And just to show whether this is successful or not, last Sunday the British Grand Prix was won by a British driver, Louis Hamilton, and that team was McLaren. (Applause.)

Thank you.

BOB KELLY: Thanks very much, Mike.

Okay. Now you see why we had Mike come up. That’s a fantastic example of the richness of the application platform, the breadth of the application platform, and how it is that we really take this and drive it deep into the heart of what a customer can do.

Okay. So we are continuing to invest in next generation applications, both in the rich client area, so Windows Vista-based applications, and in WPF. And we’re seeing tremendous momentum really beginning to build around WPF, 13 percent of all ISVs are not targeting via WPF for their app user interface. And we know that this is going to climb in Fiscal Year ’09, and we’ve really started to innovate in a big way, with .NET 3.5 release coming in FY09, and it really addresses the key challenges around performance and startup, that ISVs and developers have told us around WPF.

We’re also doing great things to take all of this innovation to the Web in a rich Internet application space, with technologies like Silverlight and ASP.NET. We have an absolutely huge summer ahead of us. The Beijing Olympics, the Democratic National Convention will all be streamed live and on demand, through Silverlight-based applications. That is huge, and really tells you the sort of real innovation that can happen with rich data sets, and rich data applications on the Internet. We have the most comprehensive platform and tools, from Visual Studio to VSTF, to Expression. And with the evolution to software plus services we’ll see lots of that development moving to the cloud, as well. And stay tuned for more on that as we head towards PDC in the fall.

Okay. So I’m going to wrap up. This is a huge business opportunity for both of us. The server and tools business has tremendous momentum. That momentum is built on the great innovation that we bring together to the market to solve customer’s problems. I am extremely thankful for all of the hard work and the commitment that you’ve made to Microsoft, and to helping us improve our product and capabilities.

So I have a couple of asks of you. Keep giving us the feedback. Keep telling us what we’re doing well, or more importantly, what we’re not doing well, in the product side, in our offerings, in our go to market, in our partner programs. That feedback is absolutely critical for us to innovate faster, and in a better fashion for you.

Specifically, keep the launch momentum going. We have tremendous momentum, we have the SQL product coming, we have SBS, and EBS. We have innovations that we’re doing around the security and identity space. Real innovations happening there, with tremendous investment behind it, so really keep that momentum going.

Two, work with us on IO. Continue to work with us, if you have not got an IO practice, I strongly recommend it. We know partners are seeing improved profitability by using the IO conversation with customers, and really helping customers move to a more dynamic IT environment.

Three, leverage the solution accelerators. You’ve given us feedback that the solution accelerators are some of the best stuff that we deliver to you, whether that’s solution accelerators around Vista deployment, or the recently released one around virtualization, to accelerate adoption of the technology. So leverage those accelerators.

And finally, send your architects and developers to the PDC. We’ll give you much more detail at the PDC timeframe on what we’re going to do to evolve our application platform stack to be inclusive of the cloud.

So with that, I’m going to wrap up. Thank you very much for your commitment. Thank you for coming to Houston, and enjoy the rest of the show.


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