Kevin Turner: Microsoft Virtualization Launch

Remarks by Kevin Turner, Microsoft Chief Operating Officer at the Microsoft Virtualization Launch
September 8, 2008, Bellevue, Wash.

BOB MUGLIA: So now what I’d like to do is invite Microsoft’s COO Kevin Turner up to talk about how customers are using virtualization today.

Kevin, come on up.

KEVIN TURNER: Good afternoon. Let me try that again, good afternoon. (Cheers and applause.)

All right. It’s great to be here, and I don’t know of two guys inside Microsoft more excited for this day than Bob Muglia and I, as it relates to virtualization, and really telling you our story, and showing you some real examples of what customers and partners are doing in the world. My job is to travel around and talk to customers, and really spend time in the field with the partner channel, and really get that feedback. And one of the things that certainly we’ve heard is, when are you guys going to have some virtualization technology in the marketplace that we can really deploy in a big way. So today is a big day for us to be able to talk about that, and really give it a megaphone, if you will, and launch this from around the world.

As we get into it, I really thought about what would I talk to you about today. And one of the things I want to do and set up is really about the company strategy, where are we going, where are we investing, how does virtualization fit into that. And then I wanted you to hear from some customers. And I’ve got one example that you’ll see, and another one you’ll hear from, from some real customers utilizing the technology, and showcasing it in a way that really is driving business impact utilizing virtualization.

But, as I get started, and get into it, I first want to say thank you. Thank you for your time today, thank you for your partnership. Certainly, we appreciate you being here, because time is the one thing that none of us have enough of, and certainly we appreciate you making the opportunity to be with us today, and I’d also like to thank all of our partners that are out there, as well.

The Microsoft Vision and Virtualization

So as we talk about Microsoft, I thought I’d start with the vision, because this is new. This would be something you haven’t seen before from the company, the original vision of the company 32 years ago, a little over, was that we wanted to be the company that could help enable a PC on every desk, and in every home. And certainly, in mature markets that vision is well on its way to being fulfilled. In emerging markets it’s happening in real-time. But, the new vision of the company, under the leadership of Ray Ozzie, Craig Mundie, Steve, the senior leadership team, which includes Bob and myself, we’ve crafted a new vision statement, and it’s really about create experiences that combine the magic of software with the power of Internet services, across the world of devices.

So really the vision for Microsoft is still anchored in software, but it’s anchored in software that runs across a variety of devices. So for every important piece of software, Microsoft wants to be at the center of that. That is our aspiration, and our vision as a company. Now, we still have the same mission, which we use inside to really galvanize our employee base, and that is enabling people and business throughout the world to realize their full potential. I actually think that’s the coolest mission statement in all of business. But, this vision statement gets back to bringing to life the magic of software, across a multiple variety of devices. So that’s an important sort of setup for you, as you think about Microsoft.

Microsoft Research & Development Invesments

Now, this year we’re going to spend about $8 billion in research and development. That’s more than any technology company in the world. And we’re going to invest in four key distinct areas. Certainly the desktop area remains an important pillar, if you will, of innovation, where we have Windows Vista, and the Office system, and our desktop optimization pack, and Internet Explorer, and those things, you can see there, a very important pillar. The pillar, quite frankly, that built Microsoft as a company.

The next area we’re investing in is our fastest growing area, both from a revenue standpoint, and from a profitability standpoint, and that is in the enterprise space. And it’s due in large part to the server and business applications that Bob Muglia and his team work on. That is where our virtualization and Windows Server 2008, and SQL Server, et cetera, run in that particular pillar of innovation. And that’s important to us.

The third pillar is entertainment and devices. And this is important form a lifestyle standpoint. So as you think about Xbox, and you think about Surface, and Zune, and Media Room, and the gaming systems that we’ve got out there in the marketplace, in Windows Mobile we’ll sell about 21 million units of Windows Mobile this year. This is an important area for us from a lifestyle standpoint.

The fourth area is one I want to spend a little bit of time on this morning, or this afternoon, is really talking about software plus services. When you think about software plus services for Microsoft I want you to think about it in two ways. One, we have commercial software plus services, and two we’ll have consumer software plus services, and they’re dramatically different, and they’re different on purpose.

Let’s talk about the commercial space, first. In the commercial space we launched something called the business productivity suite, with Exchange Server, SharePoint, Live Meeting, Communications Server, Outlook, we’ll host SharePoint, Exchange, all those things. And we have a unique model in that way. We have three different business models for commercial software plus services.

The first model says the customer can support it, and host it, and manage it, because we believe for most large customers that there are going to be some sets of users, some important pieces of data, or some applications that the customer simply wants to manage, due to privacy regulations, competitive opportunities, or whatever it may be. So in that first model, that is our traditional model, and we’re going to continue to enable that.

The second model that we enable is a partner-led model. So where you say that a partner has a certain ability of expertise, where they want to host some of these applications, and systems, and programs, we’re going to enable that model. So therefore you can take our CRM, and a partner can host our CRM, a partner can host Exchange, SharePoint, et cetera. And so we’re going to continue to work closely with partners, and be partner-led, as it relates to commercial software plus services.

And the third way is that some of you have come to us and said, hey, Microsoft, we want you to host it. So we’re building the data center and the capability to be able to also do the hosting. So we’ll have three different models, but at the center of that model is choice. The customer can and should decide. That’s the Microsoft difference in the marketplace on this topic. If you take a look at Salesforce, or Google commercial software as a service, their model is, hey, let us host it, or there’s no software as a service. That’s not the Microsoft model. Ours is all centered on choice, and allowing the customer to decide.

And I actually believe that most customers of those three different business models that I described, will have two out of the three deployed or installed, or will have all three deployed and installed. So some hybrid of software plus services is what we believe, and that’s why we anchored it around choice. And we are the market leader, make no question, in the commercial software plus services space today, with what we have in the marketplace.

In the consumer space, that’s where search and online advertising, and MSN, Windows Live, Office Live, and something we call Live Mesh lives in that particular space. We are not the leader. We are certainly someone who is working very hard to continue to improve our relevance in search. We’ve made acquisitions in the online advertising space with a company called aQuantive, to really figure out how to monetize advertising, and we’re going to continue to invest in that space, as well. But, they are distinctly different, and it is an important distinction as it relates to the multiple core, or pillars that we have of innovation in the company.

The thing that I want you to keep in mind as you think about that vision statement, of really bringing the magic of software across an array of devices is it’s really about connecting the digital lifestyle, and the digital work style. The reason we are in entertainment and devices is because we believe that both mobility and the living room is important, because where people work, and how they work, and when they work continues to have more and more overlap with the workplace, the living room, and on the go. So that’s an important thing for you to think about, as you think about our strategy and our investment of this $8 billion across these four areas.

What Microsoft Hears from Our IT Customers

Now, as we get into virtualization and driving business impact, I think it’s important to note that there are three key themes that we hear in the marketplace today. CEOs increasingly tell us that the expectations of the IT organization are going up, and that they have to align with the business strategy. The second thing we hear is that IT has to adapt to the needs of an ever-changing workforce. When you think about the number of people with laptops, or mobility, or computing on the go, or not working in the workplace but actually working out where the customer is, that the complexity there continues to accelerate, and that that’s important. And the third thing, certainly, during tough economic conditions, or economic uncertainty, it is time that the IT organization has to continue to belt-tighten and become more and more efficient and effective as they work through their strategy. And so we hear these three reoccurring themes as we go around the marketplace.

And this is an important setup to how do we talk about driving business impact, and using that lens of those three themes, what do we see are the key pillars for us to help you drive business impact in the customer community. First, accelerating that business responsiveness. And so when you think about running any workload, anyplace, anytime, I really want you to think about this means that IT is now going to be able to be free to respond to business demands in a real-time situation, and really provide bottom line impact. You heard Bob talk about Dynamic IT, that is our definition of Dynamic IT.

When I think about a customer in Revera in New Zealand, and one of the things that they talked about was the ability to set up a new server in less than an hour on their data center floor using virtualization, completely unbox it, uncrate it, and put it on the floor, and have it in mainstream production in less than an hour. When you think about that ability to respond, when you have a Web site, or you get an influx of traffic, being able to do capacity planning is an important way that this virtualization is really going to drive home a lot of payback.

Now with virtualization, when you think about it, it can just be a few key strokes, where you’re really looking at a few commands on a command line to really enable to get that server up and running. And so this anytime, anyplace workload, and the ability to dynamically respond to business needs is at the heart of us being able to accelerate your responsiveness.

Then you look at continuity, and certainly as the days that we’re in now with continuity, the thing about virtualization that I found very, very profound is that it’s actually built-in. That it actually makes it easier to keep your business running and improving, because in the past you had to snapshot servers, and use tapes, and drive them offsite. I can’t recall the number of times that I did tape inspections. I was a CIO for a very large company for a long time, and the number of times we used to audit our backup tapes to ensure that they were able to be read and utilized and the number of times that we found that they weren’t is a really, really frightening opportunity. And when you think about it now, where you can virtualize everything and stream it, the OS and the apps become a data file. And the ability to run that in multiple places at the same time certainly enhances continuity. And everything getting backed up and restored by a data stream to the locations that you need it to go is a big competitive advantage in the marketplace.

So, continuity is just part of the design in virtualization, which certainly will add a lot of value as we go down the road.

The other thing we hear, adapting to the needs of the ever-changing workforce. So, when you hear about all kinds of the hundreds of millions of desktops that we’ve got out there, the hundreds of millions of laptops out there, and the computing on the go that is beginning to happen in coffee shops or in airports — you know, I saw a statistic recently of the number of laptops that are stolen in airports. It’s quite frightening.

And when you think about — you heard Bob talk about this idea of user-centric computing and the replaceable PC, and the ability or opportunity to really use virtualization to have that impact, it’s an exciting way to respond to the workforce.

Desktop and Presentation Virtualization

We’re going to offer multiple virtualization solutions on the desktop, and we’re going to continue to work on application virtualization, something that’s been wildly received in the marketplace, by eliminating the need to install applications, and stream them on-demand. Users get the applications they need. Because we have learned really that there’s no one size fits all as it relates to deployment on the desktop.

Then when you think about desktop virtualization and the opportunity there to go all the way through presentation virtualization, and really for structured task workers think about the people focused on a single application, and the opportunity there that they don’t need a full desktop. Some people might say, well, hey, Microsoft, isn’t that a threat to your business model? We actually see it as a big opportunity to our business model. The more people who utilize the technology, our technology, the way that it’s supposed to be utilized, the more sticky we believe over the long term that it’s going to become. So, we actually see it as a huge opportunity for Microsoft to continue to drive value in the marketplace.

So, the point is that each user gets the opportunity to use the right technology that meets their needs when they need it.

Now, when you think about Windows Vista, and I talked about computing on the go, certainly securing the desktop or the laptop with BitLocker is a big deal. The BitLocker enhancement we have in Windows Vista is absolutely the tightest, most secure data encryption that you could put on a laptop.

So, when you think about the laptops that are left in taxis or stolen in airports or lost, and you think about the opportunity, BitLocker is something you should really understand how it works, and the protection that it gives you in IT to be able to encrypt that data.

So, when you think about the opportunity there, adapting to these needs of the ever-changing workforce, this puts a lot of pressure on us as an organization to ensure that our listening systems, our feedback from you continues to infiltrate our product groups and our research, and that’s really at the heart of our virtualization launch today.

Now, one of the things that I thought I’d do is now show you, let’s talk about, let’s see a customer. This is a customer called Heidelberg in Germany. Let’s see how they’ve utilized this application virtualization and really gotten after creating business impact by really getting after about 15,000 or so desktops within their environment. Please roll that.

(Video segment.)

KEVIN TURNER: So, if you would have thought that we would have been able to have a customer really articulate the ease of packages and deployment, and saving 40 percent on a new distribution out to a corporate environment, you would have thought, hey, Microsoft, when are you going to fix that problem, because that’s been one of the age-old opportunities that we’ve had as a company is saying, hey, we’ve got to make it easier to get patches out, we’ve got to make it easier to get updates out. But when you think about the technology we have in the marketplace today, there’s at least 40 percent savings there available to every single customer.

So, when we talk about driving business impact, utilizing the virtualization technologies, it is real.

That brings me to becoming more efficient and effective. So, certainly virtualization, when you hear about, hey, what’s the number one way to really improve TCO, well, hey, let’s get virtualization, since most of the servers are used somewhere between 10 and 15 percent of the time. Wow. There is a big opportunity to make the assets more efficient in every company.

So, when you go through it, you think about the Microsoft value proposition, certainly in training and in management, and you think about the cross-platform solution we have in management, and the ability for a company to have one tool, to use pane of glass to mange their environment, regardless of the competitive virtualization products they have in place, what a competitive advantage that is for us, and certainly it’s one that we feel very good about, being open in the customer community to protect the environment, to protect people’s investment that they’ve made already, but also the ability to have one tool that manages cross-platform is very strategic for us.

Virtualization Licensing

In licensing we’ve heard a lot of feedback on how should we improve and really tailor our virtualization licensing. Certainly in the server area we introduced the datacenter SKU per proc with an unlimited number of virtual machines. You can scale from one to 50 virtual machines in a day without worrying about licensing.

Second, management. We’re combining the server plus the virtual machine licenses. You buy one license, and you can manage certainly the physical and unlimited number of virtual machines, and pay per physical host. If you get to use a System Center suite, all four lifecycle products are included.

And application licensing, so now you have the server and the management tools with the capability to create unlimited virtual machines, certainly that’s important, but beginning on September 1st, customers are going to be able — this past September 1st — customers were able to move any one of the 41 Microsoft server applications between servers within a server farm as often as necessary without paying additional licensing fees.

That’s really some feedback that we got from you, our partner community, and our customer community, to continue to find ways that we can be more effective and efficient in this particular space. So, we’re very, very excited about the efficiency and the effective propositions.

Customers Using Microsoft Virtualization Technologies: WorleyParsons

But now I thought to really make this more relevant to the audience, let’s hear from a customer who’s actually doing it. So, I don’t want you just to hear about these great savings from me; I want to help bring up Vito Forte, our CIO of WorleyParsons. I want to bring him out here to really talk about the experience that he’s had with Microsoft virtualization technologies. Please welcome Vito.

Vito, welcome!

VITO FORTE: Thank you.

KEVIN TURNER: First, why don’t you tell us a little bit about WorleyParsons.

VITO FORTE: WorleyParsons. We’re a professional services company for the mining and energy industry. We’re a large global organization now. We’re basically about 32,000-odd people, based in about 40 countries, and in about 110 locations.

KEVIN TURNER: Forty countries, 110 locations. Excellent.

So, how long have you been looking at virtualization technologies?

VITO FORTE: We’ve actually been using virtualization now for about three and a half years. We originally started with the Virtual Server product. At the time, we went through a bit of an evaluation between Virtual Server, which had just recently been released, and the VMware product set. So, we spent a bit of time looking at that, and understanding our requirements and what was being delivered, and basically we went down the path of Virtual Server because in the end what was the key driver was value. So, we found that we would get more value out of going down the Virtual Server path than going down the VMware path.

KEVIN TURNER: So, you looked at VMware as well?

VITO FORTE: Yes, absolutely.

KEVIN TURNER: And how did we fare in the performance and the benchmarks?

VITO FORTE: For the environment that we were dealing with it was pretty much comparable; to a certain extent we were getting some benefits where we weren’t getting in the VMware space, and that’s continued today with the Hyper-V rollouts that we’re doing at the moment.

KEVIN TURNER: So, what virtualization products are you using from us now?

VITO FORTE: Well, I think we have all of them.

KEVIN TURNER: All of them?

VITO FORTE: Yeah, yeah.

KEVIN TURNER: We like that.

VITO FORTE: We’ve also got some Citrix as well, which obviously works well with your product set. So, we’re looking at the virtualization piece for us is across the board. So, it’s not only server, desktop, application, all of that, and it all has to work together in a holistic manner for us to deliver to our customers.

KEVIN TURNER: So, when you look at benefits and the benefit profile, what have you really seen as it relates to saving money, reducing the number of servers, getting better utilization out of servers, the ability to deploy from the physical through the virtual? Tell me where the biggest ROI for you has come from.

VITO FORTE: Well, obviously value is a big one. We’re a large Enterprise Agreement customer, and a key driver for me there is to eke out the most amount of value I can get out of our agreements. This is seen as one of those elements.

I guess the other area for us has been in the business continuity recoverability space, and we’ve demonstrated that by basically putting a lot of trust in the Hyper-V platform, because we’ve actually implemented our full recovery application environment within the Hyper-V platform globally.

KEVIN TURNER: Excellent.

When we think about the amount of servers that we’re putting in our datacenters today, we’ve sort of mandated that they’re all virtualized. Have you done something similar?

VITO FORTE: We’re just about to do that. The issue at the moment for us is the rate of growth that we’ve undertaken. Less than four years ago, we were about 3,000 people. So, we’ve grown by a factor of 10 in the last three and a half, four years. So, we’ve got a lot of legacy issues. But to a certain extent the virtualization that we’ve been talking about here for the last couple of days actually helps in relieving a lot of the legacy issues that we have. So, I would estimate that we would at least be 70 to 80 percent virtualized within the next six to eight months.

KEVIN TURNER: One of the things that Vito is known for is being tough on us, tough but fair. What are some things you want Microsoft to continue to improve and do better?

VITO FORTE: Fair? I didn’t hear fair here. My account manager tells me I’m fair. (Laughter.)

KEVIN TURNER: I added that.

VITO FORTE: Yeah? He also tells me there’s no money in software, but I don’t believe him on that one either. (Laughter.)

KEVIN TURNER: There’s not a lot.

VITO FORTE: No, no. I hear there’s no money in hardware either. (Laughter.)

Sorry, what was the question again? I’ve forgotten. (Laughter.)

KEVIN TURNER: What are some things you want us at Microsoft to keep pushing, working on that we can continue to do to help you?

VITO FORTE: Really it’s the case of tying a lot of these things together. If I go back to my original statement around the value that we try and get out of our agreements, and out of our Enterprise Agreement, is really making sure that when things go into these agreements and when we buy product, that they actually all work together.

KEVIN TURNER: That’s right.

VITO FORTE: We’re now starting to see a lot of that coming through. So, you have a lot of discussion about best of breed and all these sort of things, but we’re now seeing that that integration capability is a real key enabler for us.

KEVIN TURNER: Well, Vito, we want to thank you for A) making this trip, a long journey for you — I know you’re headed back to London and then back to Australia after that; but certainly I really want to thank you for continuing to push us. You were one of the early Early Adopters of this technology, and as a result of your feedback and your blazing the trail, it’s going to make a different for a lot of customers and partners worldwide. So, thank you for that. Keep pushing us to get better; we need the help and we need the feedback. Thank you very much.

VITO FORTE: Thank you. (Applause.)

KEVIN TURNER: So, when you think about the virtualization and driving impact, certainly there’s a large competitor out there in the marketplace today. And you saw one example of a customer saving 40-plus percent. You heard from Vito about some of the opportunities there to really get after creating that business impact.

And I thought it would also be helpful to share with you what we know. These are list prices, list prices straight off Web sites. And when you look at what we’re putting in the marketplace today, I love this chart for a variety of reasons. It’s great to really sit down and go through with a customer, but it’s also an excellent opportunity for everyone to understand the value proposition that we are putting in the marketplace.

Being a third the price of the largest competitor in this space — you know, we believe competition is good. Certainly it makes us better. And in this space we are not the largest player today. I actually think we have a shot to become that some day with this particular suite of products, but we’re starting out we think in the right spot from a value proposition standpoint.

So, when you look at this and you go down through multi hypervisor management, app management, physical management, virtual management, and the hypervisor, and the ability for us to provide you that cross-platform solution that says you can protect whatever investment you’ve made — and by the way, you can also keep every vendor on their toes by ensuring that each one has the right price performance product in your environment; we think we’re really well positioned in the marketplace.

We have a product in the company called SharePoint. It’s a collaboration product. It’s the fastest growing product in the history of Microsoft, faster than Windows and faster than Office to a billion dollars. I actually believe that this virtualization suite of products has an opportunity to break the record that SharePoint set just last year. That’s how bullish we are on the opportunity to help you drive business value and make impact.

And so when you think about really across the physical and the virtual, the desktop through the datacenter, putting these solutions into the marketplace today, we’re proud of the announcement. As I said earlier, nobody is more excited I think than Bob and I, because the customer community has really been asking us, get these to market, because they’re making these decisions right now.

So, we’re excited to be able to bring them out to you today, and I’m going to tell you a couple more things. We’re going to work hard, ladies and gentlemen, to earn the right to be your trusted advisor. So, we appreciate again and thank you for your time, for being in this forum. We’ve got another two more rounds of breakout sessions. Also be sure and visit the Partner Pavilion and Solutions Pavilion that’s next door. And then tonight I know they have a lot of fun and entertainment for you that’s going to start around 5:30.

But really think about how virtualization and driving business impact can apply to your business environment, and Microsoft wants to earn the right to be your trusted advisor in that space, and continue to work hard to help you create that business value.

Thank you very much. (Applause.)

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