The Dream Server Launch

Remarks by Steve Guggenheimer, Corporate Vice President, Original Equipment Manufacturer Division, Steven VanRoekel, Director, Windows Server Solutions, and Michael Risse, Vice President, Worldwide Small and Midsize Marketing Organization
The Dream Server Launch – Microsoft Small Business Server 2008 and Microsoft Essential Business Server 2008
Redmond, Wash.
November 12, 2008

STEVEN VANROEKEL: Hello. My name is Steven VanRoekel, the Director of the Windows Server Solutions Team at Microsoft. I would like to welcome you to the Worldwide Launch of Windows Small Business Server 2008, and Windows Essential Business Server 2008. Today we are coming to you live from the Microsoft campus in Redmond, Washington, where I’m joined by marketers, product designers, and members of the engineering team who built these products we’re launching today. (Applause.)

In this Webcast you’re going to hear about Microsoft’s investment in the small and midsize business space, and how Microsoft is listening to customers, not only in the way we build integrated products which meet the needs of these customers, but even in the way we’re presenting this launch. Customers and partners asked us to be able to attend our launch in a way that is cost effective and respectful of how busy they are, and that’s why we’re bringing this Webcast-based launch to you.

The theme of today’s launch is The Dream Server, because these products are designed to help small and midsize businesses realize their IT and business dreams. So let me tell you a little bit about what’s on the agenda for today. We’ll start off with an interview of Bill Lee of Lee Company, a midsize business in Tennessee who is using Essential Business Server. We’ll also hear from Michael Risse, the Vice President of the Worldwide Small and Midsize Marketing Organization at Microsoft. Mike will tell us how customers can benefit from Microsoft’s investment in the SMB space. I’ll then return to give you an overview of the products and highlight some customers who are getting real value from these products today. And then we’ll be joined by Steven Guggenheimer, Vice President of Microsoft’s OEM Partner Division to discuss the importance of Microsoft partners in the way we build and sell these products.

So with that, let me hand it off to Michael Risse to talk about Microsoft’s investment in the SMB Space.

Mike.

MICHAEL RISSE: Thanks, Steven.

Good morning, and good morning to everybody who is joining us. I wanted to start out with a customer’s perspective on what’s happening in the small and mid-market space, and particularly invite Bill Lee from the Lee Company to join us, and discuss some of his experience with technologies over the next few years, in the past few years as well.

So, Bill, good morning.

BILL LEE: Good morning.

MICHAEL RISSE: How are you this morning?

BILL LEE: I’m great. Thank you.

MICHAEL RISSE: Good. I wonder if you could quickly set up for us some history on the Lee Company, and how it’s grown from a single person to a much larger organization over the years.

BILL LEE: Sure. Lee Company actually began as Lee Refrigeration Service Co. in 1944. My grandfather started this company. He was raised during the Depression, had 11 brothers and sisters, and had a sixth-grade education. And he decided that he was going to self-teach himself. He was a kind of self-trained mechanic, and he actually was a pretty sharp guy technically. He saw the opportunities around him. In the ’40s, the landscape was dotted with little mom and pop grocery stores, and each one of those stores had a milk cooler, or a food cooler of some sort. So he trained himself in refrigeration technology. And he really became a refrigeration service technician. He decided to, in fact, go into business doing just that. So in 1944, out of his garage, and the back of his converted sedan that turned into a truck, he started Lee Refrigeration Service Co., and began to provide services. He actually got a distributorship for equipment. It was Frigidaire equipment, and he sold, and serviced, and maintained these refrigeration systems for customers around the city of Nashville, where he was living at the time.

The company really grew over the next six decades through three generations of my family. Today the company is a full-service provider of what we call indoor environmental systems for industrial, institutional, commercial, and residential clients. And that’s Lee Co. today.

MICHAEL RISSE: OK. And what are the opportunities that allowed your family to grow the business from a single organization to the very, it sounds like, distributed organization it is today?

BILL LEE: Well, initially, I think, you know, my grandfather probably when he started this it was about putting food on the table for his family in the ’40s, but he was a man of vision, and there were market opportunities even then. He found himself in a post-war expansion economy, and he also saw  he could see on the horizon opportunity with the advent and the popularity of air conditioning. Air conditioning didn’t really exist to much degree before that, but it started showing up in places like theaters and public assembly halls, and that sort of thing. And he saw, you know what, this is a good idea, people are going to want this. They’re going to want it in their homes, they’re going to want it in their businesses. So he transitioned the company, took that opportunity, transitioned the company from really a refrigeration service company to an air conditioning company.

He also, though he had a sixth grade education, he also knew that he needed  he had limitations, and he needed to surround himself with folks, as all of us do today, that have gifts that we don’t have. So he had two sons, they attended Vanderbilt, got their engineering degrees, and entered the business. That was my father and my uncle. My grandfather died at that point as a relatively young man, but the company then entered into the next phase of its development.

And those two, my father being the president of the company, saw market opportunities, and saw the opportunity to create something more than just a business that puts food on the table. He was visionary, and entrepreneurial, and over the next three decades, really began to add complementary services to our business, complementary to air conditioning, electrical, plumbing services. Being an engineer himself, he created an engineering group. Most companies in our industry either provide or design, he wanted to create a company that could do both. And so he created a full-service indoor environmental systems design, installation and service company.

He retired in the ’90s, and myself and our team then looked at the opportunities before us, the changing marketplace, and since that time we’ve tripled the size of the company to the place where it is today. We have about 600 workers that are spread across the country, mostly in the region of South and Southwest, and we provide a full breadth of services to clients, industrial, institutional, commercial, and residential clients throughout the region.

MICHAEL RISSE: And could you share with us how changes over the years have impacted your company, and what you’ve learned from the experience?

BILL LEE: There have been a lot of changes in 28 years, different market changes. And when a market changes, we have a responsibility to kind of see it coming. We faced a recession in the ’80s, for example, that was profound in the construction industry, and it caused us to change. We had clients that filed bankruptcy on us, and significantly impacted our company. It caused us to change the way we view our customers. What it really caused us to do and me in particular was begin to look a little further out on the horizon than I had really been looking before. You know, with negative or challenging market changes, you want to survive. With positive ones, you want to thrive. Our city, for example, became a healthcare capital of the world with the emergence of some significant healthcare companies. And our company was not really prepared to adapt to or to really meet the customer’s needs there. So we adapted to be able to do that.

You asked what I learned from that. I think the greatest learning experience that I’ve gained from market changes occurred really in the last five years. Five years ago our company went through a great expansion. Our region of our country was expanding greatly, and we opened offices in other states, and hired dozens of employees at a time, and expansion is great, over-expansion is lethal. We experienced some really difficult times because mistakes were made, but we learned from that, and have really created a company today that’s much different than it was even five years ago.

I think, just to finish that thought, I think the biggest thing I’ve learned is the need to be agile, the need to be able to be decisive, and to make decisions quickly, and to adapt to a rapidly changing market landscape.

MICHAEL RISSE: And how are you preparing for today’s challenges? You mentioned the economic challenges in the ’80s, and obviously today there’s some excitement in the world markets, credit markets, the overall economic situation. How are you getting ready for that?

BILL LEE: Well, you know, our strategy is, if you could put it in one word, it’s one of diversity, to diversify the services that we offer to our clients, to expand the breadth of offerings that we have, and therefore to be able to capture a bigger piece of the market. Of course, the challenge with that is, as you segment, as you diversify, you run the risk of kind of segmenting your company, or creating silos. And technology is an important tool that we’re using to battle that segmentation, that silo-building, in our company. And EBS (Essential Business Server) is a product that is in our technology tool belt that we’re really using because the way to battle that segmentation is to integrate and to collaborate. We have employees that are located all over the country that don’t work at their desk, and the need for them to collaborate with those that do work at their desk, as it were, or that work in other parts of the country, it’s critical for us. Our folks need to be mobile, they need to have mobility, and EBS has really given us mobility that we didn’t have before, which really gives us the ability to be efficient, to be productive, to move faster, smarter, and more cost-effectively. We could have purchased, and looked at purchasing really the individual components that come with the integrated solution of EBS, but we found it more cost effective to take those as one integrated piece. Not only on the outset, not only with the acquisition of the product, but once the product is up and running, the operation of that, and the cost of that operation is improved.

So really we have a total cost of ownership that’s improved for us. And that EBS system, to go back to the word agility, which is what I’ve learned that we need to be, it allows us to have that agility, that mobility, that ability to collaborate. And it helps us in creating the foundation that we need to offer the diverse services that we want to to take advantage of the changing marketplace.

MICHAEL RISSE: Well, Bill, thank you very, very much for your time and the explanation this morning. Thank you for being a pilot on Essential Business Server, or EBS as you called it, and just congratulations on the excellent success you’ve had, and best wishes for a strong future.

BILL LEE: Thank you very much, glad to be here.

MICHAEL RISSE: So it’s interesting to hear Bill’s comments. There are some great quotes in there about surviving the tough times, and thriving in the good times. He talked about agility. He talked about the role that Essential Business Server is playing in terms of integrating their overall organization, as well as cutting costs. And when you put that together that’s really what software can do. What’s interesting is, as tough as the current economic situation is, software spend will increase in the small and mid-market space this year about 7 percent. Software is still the lever for success for agility, for cutting costs, and for setting up for the next positive period when these organizations will thrive.

And Microsoft is a unique provider of software and software services. It’s unique in the sense, as Steve Ballmer said, we invest more than anybody. We’re investing about $6.5 billion in our services, and our product development. We also have the broadest portfolio of software for small and mid-market companies, not just the new server products we’re announcing today, but the Office products, and other server products, our online resources like the Office Live offering, or our support services for Windows. We also have the broadest partner ecosystem, and when you’re talking about on a worldwide basis a hundred million small and midsize companies, then you need an extensive partner infrastructure to take our portfolio to those companies, and help them accomplish success. So over 400,000 partners worldwide, including over 20,000 small business specialists worldwide. And it’s that partner channel that’s critical to take that comprehensive product portfolio out to this 100 million small and mid-market size organizations, and help them succeed using this technology.

So with that, we’ve had a customer perspective, and a perspective on Microsoft and software. Let’s take a deeper look at the products that we’re announcing today, and have Steven walk us through.

STEVEN VANROEKEL: Thanks, Mike.

Today we’re very proud to be announcing the worldwide general availability of Small Business Server 2008 and Essential Business Server 2008. So let me take a few moments to tell you a little bit more about these products. SBS 2008 is specifically designed to meet the unique needs of small business. Small businesses really have the same needs as large business, they need to present a professional image to their customers, they need to empower their employees, and they need to connect with their suppliers and partners, much like Bill Lee said. The difference with small business is that they really don’t have in-house IT resources to help them manage this technology, and that’s really where SBS comes in. With SBS 2008, we bring the full breadth of Microsoft’s enterprise-class server technologies, such as Windows Server 2008, Exchange Server, Windows SharePoint Services, and Office Live Small Business, and support for Windows Mobile devices, and we take all that technology, and we put it together in an integrated package that makes it really easy for small businesses to consume and get the benefits from these technologies.

We also add specific features that make the small business perform more efficiently. An example of a small business that is literally transformed with SBS is Carson Valley Golf Course located in Nevada near Lake Tahoe. Similar to many small business owners, Tom Brooks, the owner of the course, and his wife, wear many hats to run this golf course. SBS gave Tom and his wife the capabilities to work remotely, saving them time that they could put directly towards course improvements and customer contact. They’ve told us that this has contributed to a sales increase of over 25 percent, and they expect that’s going to grow over time.

Customers who have deployed SBS are telling us they’re able to be more productive, reduce their costs, and be more competitive. One such customer who many people may be familiar with is Robby Gordon MotorSports. While Robbie is a very well-known racer for NASCAR and Dakar in Europe, and Indy 500, he runs his own business. And like many small businesses, he finds that he has to compete against much larger teams. So let’s take a look at how SBS is helping Robby do that.

(Video segment.)

So you heard from a great small business. Well, midsize businesses have really a lot of the same needs as small business. They are faced with their own unique set of challenges. On average, midsized businesses have between one to three IT professionals, in-house, who are responsible for running and maintaining all the IT across the entire business. This is in sharp contrast to the enterprise, where specialists really manage the very specific needs, and the very specific departments and technologies. You can imagine what the mid-market IT professionals day is like, addressing help desk calls, troubleshooting a PC at someone’s desk, managing software updates, and ensuring the business critical applications are all up and running.

IT professionals in mid-sized business spend much of their day in reactive mode, and Essential Business Server was designed to put them back in the driver’s seat. EBS also includes the latest versions of our enterprise server technologies, pre-configured to best practices, providing mid-sized businesses with a predictable platform. Additionally, built into EBS are unique features that provide value beyond the included software. The centralized administration console is one example that you can think of, as a single command and control center for IT. And, like SBS, EBS enables remote capabilities with Windows Mobile, and remote Web workplace. Customers are realizing significant economic upside with EBS.

Earlier you met Bill Lee, and heard him mention the value his business is realizing with Essential Business Server. In fewer than three months of having deployed EBS, they are seeing productivity gains resulting in anticipated cost savings of over $40,000 per year. Another significant benefit that EBS provides is server consolidation, bringing together a number of disparate servers into a neat and streamlined configuration. We know from a lot of our research that mid-market IT tend to run the same technology on about seven to nine servers that we run on three servers, with Essential Business Server. And we have several early adopters who are reporting improved energy usage with EBS.

One such customer, Wasser Studios here in Seattle, told us they’ve cut their server BTUs in half, not only cutting down the energy use of the servers themselves, but even the air conditioning that it takes to cool the servers that they had before. Air Botswana, the national airline for the country of Botswana in Africa, is basing their entire infrastructure on EBS. They’ve reduced their management and maintenance cost by consolidating 10 servers into six, while also reducing their licensing costs by over 30 percent. And they expect that to even improve over time.

These examples represent just the tip of the iceberg of SMBs who are reducing costs, increasing productivity, and in turn getting real business value from SBS and EBS. We have many more customers, and I encourage you to check out all of our customer evidence on our Web site on Microsoft.com.

I’ll now hand it off to Steven Guggenheimer to talk about the important role our partners play in the SMB space.

Steven.

STEVEN GUGGENHEIMER: Thanks so much, Steven. I’ll be Steve today, then.

Good morning, everybody. First off, as the person representing the partners in this discussion, I want to thank our partner sponsors. We couldn’t put on a launch event, whether it was in person or a virtual event like today, without the support of our partners. We have both a set of platinum sponsors, as well as a set of launch sponsors, and I want to add my personal thanks, many of these are long-time partners to Microsoft. They contribute both time and energy into this event, and so we want to thank them for that. Now, when we look at the broad partner ecosystem, it really is sort of the critical third part of the discussion today. With over 40 million small and mid-sized businesses around the world, those businesses look towards essentially local partners to help them. They’re not interested in global partners, they need somebody who understands their needs, who works and understands small and mid-market needs, and is locally available to them to help them out when they’re ready to go.

So in this space it really is the partners that bring this technology to life. So when you look at SBS, and you look at the new Essentials offering, both of those and the updates we’ve done are based on feedback from our partners. We really heard three things.

The fact that we have an offering that’s tailored towards small and mid-market customers is key to them. They recognize it gives them a really good value proposition to go out and work with the small businesses and bring true value to those customers, and help them out. And that’s a great opportunity for them as business people, them as participants in the local community and ecosystem, and them as partners to us. So they really appreciate that.

The second thing is, by building a set of offerings that offer real customization for their customers, but at the same time can be configured easily and quickly, and that has a lot of consistency to it, means that they can service a large number of customers in a consistent and sort of reusable fashion. And that’s very important. There’s a lot of diversity in the small business community, you need something that’s on one hand the ability to be tailored, but the other it doesn’t take you days and days to set up. So they like that ability, or that complement of offerings they know how to use that are pre-configured with the right customization.

And that customization leads to the third part we’ve heard from our partners, which is the ability to have value-added services, the ability to build that custom user interface, or that custom SharePoint site, that ability to offer post-installation support services, or remote services, and being able to manage those offerings remotely. Those are all key parts of what keeps the partner community both excited, and moving in this particular part of the space, or the ecosystem. So having a great offering tailored for this marketplace, having the ability to have up-sell offers and services on top of that, and having something that can be configured easily, but customized, is a key to this particular part of the market.

Now, in support of our partners, we worked on really three things. One is, by using the full set of software, in terms of Windows Server 2008, Exchange, and SQL and the other offerings, it means that applications that have been developed for 2008, or SQL, run naturally on these offerings. There’s no work to redo the applications at any level. In addition we’ve worked with certain ISVs and certain applications that are tailored to this space.

So, for example, within Microsoft we’ve worked with the Dynamics team, to make sure Dynamics integrates really well in the Essential Server offering. And in this way we bring together the best of the software that you would run for the applications layer, along with the infrastructure that we provide in SBS and EBS. So one area is software.

The second is hardware. Many of our partners don’t build their own servers and, in fact, rely on the larger OEMs to have the server infrastructure, or hardware to use in this space. For Small Business Server, Dell and HP, and IBM, and others provide the offerings for Small Business Server in a pre-configured, ready to go manner. In the new Essentials space we have several different offerings. Blades are very important in this particular space, so HP, IBM, and Intel have all created blade offerings. Then of course there’s full racks that are available, and both Lenovo, as well as Sun Microsystems make those available, as well. So we have a range of hardware available for our smaller VAR, value added reseller, and breadth community to work with.

The third thing then we work on is case studies. Our partners need that help in selling the value of this technology, and there’s nothing that a customer will listen to more than another customer who has used the technology, and seen a change in their business. So whether it’s the Robbie Gordon video we just saw, the discussion with Mr. Lee this morning, or others, we create a set of case studies that our partners can use to have a value-based conversation with their customers.

In support of that, one of the fun things we do around every launch, at least for Small Business Server now eight years in the marketplace, we used to call it the Extreme Technology Makeover, but now it’s just the Technology Makeover, supported by HP and AMD, and Microsoft. And what we do is we go out and find either a small business, or in this case a midsized business, and basically remake the company. The first winner this morning is the Gypsum Supply Company from Dallas, Texas. It’s about 50 employees, and they’re looking forward to using Small Business Server to basically revamp their organization in a similar way to what we heard from Robbie Gordon this morning. It’s basically a drywall company, servicing the Dallas area, and we look forward to working with them to sort of remake their shop.

The second winner comes to us from Utah, actually, Bountiful, Utah – as opposed to beautiful Utah. This is the Menlove Toyota and Scion dealer. They have about 140 employees, so we’ll in this one go into the Essentials offering, and work on how we can grow this particular business. With 140 people they have a 65-person call center, about 120,000 square feet of space, and they’re looking forward to, again, seeing how the technology can help them be more efficient, run that call center, and move forward. So two new great case studies that we’ll deliver with our partners.

So with that, we have a great set of offerings for partners. We’re working to support them, and we look forward to their success with these offerings. And I want to hand it back over to Michael to keep going from here.

MICHAEL RISSE: Thanks, Steve.

So first of all, congratulations to the winners, that’s awesome for the companies that are going to be able to work with Small Business Server and Essential Business Server. What’s interesting so far is, we’ve gotten an overview of the technology and the products from Steven, and we’ve gotten an overview of the work we’ve done with partners, the ISV partners, and the smaller partners, and the hardware partners from Steven. Now what I want to make sure we spend a minute on is accessibility, because these products, and these partners, they need to come together with one more piece of the story, which is the ability for customers, particularly in this interesting economic climate to be able to access that technology in an effective way.

So today we’re announcing several new ways to acquire Microsoft Small Business Server and Essential Business Server, relying on Microsoft Solution Financing. The key part about this financing is, first of all, it’s total-solution financing, so it includes some of those cool blade servers that we saw earlier, as well as the software, as well as the services to put these things together. It’s also being set up so that there’s no money required up front. The fee is paid over time, which means it matches the cash flow from the organizations that are taking advantage of this new technology. And this will be available in over 15 countries around the world. And it really sets up a predictable cost structure for that organization, so that they can know what’s going to come from a cost perspective, and they can get the benefits, the cost-saving benefits, the productivity benefits, the mobility benefits, the IT savings benefits that are associated with these new versions.

We’re also bringing new leasing options, in Europe in particular the rental model, or basically the subscription model is very popular. So not only will we have total solutions financing, we’ll also have leasing models available in some geographies where basically it’s a full rental of the software.

In addition to this, we’ve partnered with Palm to provide a special offer to our partners. Now, you heard about the importance from Bill Lee earlier on mobility, how they want mobile access to that information, or from Robby Gordon, I need mobile access, access anywhere to the information that’s centrally stored. The offer there is that if you purchase four Palm devices, you can get the fifth one for free. So now you’ve got access to your core information from your mobile employees, and you can wrap that mobile offer into the overall financing, the total solution financing that I mentioned earlier, or into that subscription model.

We’ve also got a number of other incentives, and offers related to making this new technology accessible to the broadest number of customers possible, from a financing, and cost perspective. You should visit Microsoft.com to see the complete set of information.

With that, we’ll transfer back to Steven to wrap things up.

STEVEN VANROEKEL: So thank you all again for joining us to launch Small Business Server 2008, and Essential Business Server 2008. I want to specifically thank our great customers Bill Lee, Michael and Steven for joining me today, and thanks to the many customers and partners who have helped us design and are using and deploying these products.

If you’re not already there, make sure to attend our virtual launch event, where you can interact directly with Microsoft and our partners, and learn more about our solutions for small and medium business. You can access the virtual launch event from your browser at Thedreamserver.com.

So thank you very much. We’re excited to launch these products, and change customers’ lives forever. Thank you.

END

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