Remarks by Kirill Tatarinov, Corporate Vice President, Microsoft Business Solutions; Klaus Holse Anderson, Corporate Vice President, Microsoft Business Solutions Sales and Operations, and Doug Kennedy, Vice President, Dynamics Partner
Nov. 18, 2008
ANNOUNCER: Ladies and gentlemen, please welcome Corporate Vice President, Microsoft Business Solutions, Sales, and Operations Klaus Holse Anderson.
KLAUS HOLSE ANDERSON: Thank you. Thank you and welcome to Convergence, to the second Convergence in Copenhagen, the third European Convergence. Welcome here. I saw some of you raise your hands in saying you were here last year, and we did organize Convergence here again a little later to keep the weather a little colder outside to keep you inside. So for those of you who arrived yesterday, you saw you have nice weather, so you could do some touristy stuff yesterday, and for those of you who got up this morning into the real weather, you would see it was raining, it was cold to keep you in here. The weather forecast, however, says that 3 o’clock tonight, or this afternoon, it’s night here, it gets dark very early, then the nice weather will come out again, you are going to have some fun time for the evening’s activities. At least, that’s what the weather forecast says. You never know how predictable that is.
The session this morning, the keynote, we took your feedback from last year, and you said, let’s not have as many demos, and so on, let’s not be as formal, let’s try to be a little more informal, have a discussion going. So we tried to emulate that in the format for this year. So that’s what you’re going to see on stage today. That’s why we have the sofa, so we’re going to have some guests on stage, and a few surprises as well as we go.
Convergence this year, again, even given the current economic climate is a good success. There’s more than 3,200 of you here in the audience today, and tomorrow as the customers come in there are going to be more than 4,000 people in total at Convergence again this year. So a big thank you to you, our partners, a big thank you for coming, a big thank you for inviting your customers to come as well; so thank you for that. (Applause.)
So, first of all, I want to just give you a little bit feedback from what happened since we met last. Part of that was we finished another fiscal year together, fiscal ’08, which we finished back in July, and that was a good year for the business overall, and I think that most of you felt that was a good year or at least the feedback I’ve gotten from many partners around the world has been that was a really good year, both in terms of software sales and in terms of the revenue you get from services out there.
In terms of Microsoft, we saw a good solid growth, 21 percent overall growth for the year, and 22 percent growth just for the fourth quarter of last year. So, that was a very good, solid, and healthy growth.
We saw good growth both in the ERP (Enterprise Resource Planning) side of the business and in the CRM (Customer Relationship Management) side of the business. CRM grew a lot. We had another 15,500 customers join the CRM business, and there’s now more than 750,000 seats sold worldwide; so a big, big takeoff on CRM. One hundred twenty thousand of those seats sold in Q4 alone of last year.
So, I would say very impressive given the situation. Fourth quarter was great. And then I know some of you are thinking, well, that didn’t quite translate into first quarter as well. We’re going to talk a bit about kind of the current economic climate. But with what we had last year, very, very solid success for the business overall.
A couple of things also happened on the product side since we met last. We’ve released a few products, new versions of the products into the market. This summer, early summer, we released AX 2009, and I’ll say I’ve never seen a product release come out of the organization before that has seen that uptake among you, the partners, and among the customers in the first go. Often we see you waiting for Service Pack 1 and saying, well, let’s just see what happens. But this time we saw a big take up from you, from the customers, kind of the role-tailored experience that the customers get, the role centers that have been built, this is what the customers are saying, we’ve been waiting for this, this is really what we need, this is what we want. So I think we’re seeing good uptake there. We’re seeing great interest there.
The feedback I’ve gotten on early adopters and quality has been very good. I think that what we’re seeing is that all of the testing, and all of the rigorous processes we’ve put in place there seems to be paying off. So the quality of the software that’s coming out is a lot better than we’ve seen in the past. So I’ve seen more uptake on AX 2009 than we’ve seen of any new release coming out.
Last week, we announced NAV 2009, so that’s now in the market, and another exciting release of the product. Brand new technology-based three tiered architecture, role-centered, new clients on this huge investment in the new NAV product that’s out there. Again, very good feedback from partners and customers on this. So NAV out last week, and then for those of you who are waiting, Service Pack 1 for AX 2009 came out last week as well. So for those of you who said, well, we’re going to wait for Service Pack 1, it’s time to go, it’s out, it got released last week.
And then last week, we also released the mobile product that fits with both of these, so the Dynamics mobile client that fits for both AX and NAV, it’s also our fourth release of that product. So really, really good steps forward in terms of products since we met last. Sure steps got released, the implementation methodology got released in the second version, and I’ve seen big uptake among partners in that one as well, shortening the implementation cycles. So very solid uptake on product, very, very good releases and I think that we now have a product portfolio that’s better than we’ve ever had before. So that should help us as we go forward.
Last year when we met here, we announced kind of the new Business Ready Customer Care, which is all about making sure that our customers and you as partners, benefit from the investments you make in the Dynamics products. Part of this was saying, yes, we are going to stay with all of the products, and we’re going to be very specific about what we do with these products, releasing a statement of direction 18 months before the product comes into market that allows you to see very clearly what’s in the next version of the product coming out. We did that for AX 2009, we did that for NAV 2009, we’re doing it for TPNSL as well. And as we are now getting into the planning stages of the next release on AX and NAV, you’re going to see 18 months before those products come out you’re going to see that we’re taking that direction again. We’ll very clear on what’s going to be in the products.
Also part of the Customer Care was the Customer Source that is out there, and the support that is in this one. So what you’re seeing is on support we’ve taken another step forward. Five years of support from release of the product, and extendable up to 10 years of the product. That is as good as anybody does just in the very biggest enterprise markets, and better than anybody else does in the mid-markets. I think we have a very compelling offering on support.
And then as you move forward and we think about Customer Source, this is your opportunity to have your customers engaging online, getting information online on all of the products you have, all of the best practices that are there. I think that getting your customers on Customer Source is really important from the sense of your renewals. This is a benefit they get from being on the enhancement plan. There’s a lot of opportunity to engage on Customer Source, get the best practices, get related updates, and so on, on that tool. Also part of Customer Source is an online community, online community for finance people, online community for some of the development people, and so on. I sometimes go there and just look at the conversations that are going on in these communities. I can only encourage you to go there as well, and take a look at what’s going on. Some of the conversations your customers are having on best practices, some of the conversations the developers are having on how they best adopt these products, how we best customize the products, and so on, can be quite interesting. At least they’re interesting to me as feedback on kind of what can we do more in the product, how can we better help you, the partners, in engaging and so on. So I can only encourage you to go there, there’s a lot of good feedback from customers in that one. So very, very healthy uptake on Business Ready Customer Care, and it’s been well received by customers as we’ve gone out.
Another thing that has been well received by customers, and by you, the partners, is Microsoft Financing. One of the things that we think about as we think about kind of the current situation, the current economic climate, what we see is that an increasing number of customers are coming back and saying, financing is hard to get. I think that’s the reality you all can see out there, but even customers that have a healthy business, customers that have great projects that they want to go through with can’t get the financing based on the current economic climate, and the banks not being able to finance it.
So being able to come back to Microsoft and get financing in the countries where Microsoft Financing is available is something that is a very big benefit for the partners, and we do provide financing for the whole project all the way from the software that’s in there, and all the way to the services that you provide our partners, and so on. So it is a very good package, and we are able to finance some of the deals as well where the customers can’t get financing somewhere else.
Something new that we’re going to announce today is a new offering which is zero percent financing for customers as well. So zero percent financing for the software, and for the first year of renewals. We think this is a very compelling offering for customers, not only do you have come and get financing, which is a big thing, but also get it at zero percent. So what you can see is in the 14 countries where we do have Microsoft financing, we’ll make this offer available, and it will run all through to the spring. So I encourage you to go talk to your customers and make this part of what we do for our fourth quarter, bringing customers into the business because financing is one of the key points that they have as a pain point.
So as we talked about financing, and talked about what we do for this, your fourth quarter, our second quarter, on bringing new customers in and financing, I guess I’m also alluding to what’s going on in the world in general. I think that we’re all feeling the impacts, at least we at Microsoft could see at the end of our last quarter, the first quarter for our business, the third quarter for many of your businesses, we saw the last couple of weeks there, the last couple of weeks of September there was a significant slow down in business as the financial crisis has rolled throughout the world, and I think that what we’re seeing is it hasn’t really picked up since then, even though October looked like a pretty good month for you, our partners, and for us, we still have some concerns whether this is a short thing that is going to pass, or whether this is going to last for a long time. I think it’s very, very hard to predict. I don’t think that it’s easy to predict in general, and predicting the future is especially hard for most of us. I think that it’s about viewing ourselves in a world where we’re going to have this uncertainty, and we’re going to have probably a slower pace of business for a while. I think we’re well positioned to be in a world like this. I think that what customers are going to be looking for in a situation where there is this slowdown, I think many customers are going to be looking for investing to making sure that they come out at the other side performing better. They’re going to invest in making sure that their business is more efficient when they come out on the other side, to really saving money, making their business more efficient as they go through this thing and coming out more competitive on the other side. I think both ERP and CRM can help them do this and we are seeing customers invest in this.
I talked to a customer a couple of days ago that said that they’ve cut down on all of their IT spending, except in the ERP system they’re going to be putting in, because this is going to be essential for them to kind of weather this situation, and it’s also going to be able to make them more competitive as they come out on the other side. I think that really for you to create the business plan for your customers on how do you make them more efficient it’s going to be important for us to go through this.
Secondly, a lot of customers out there will say, I need to get even closer to my customers. In a situation like this getting close to your customers, really understanding what’s going on with your customers, all the way from selling, all the way to supporting customers, your customers are going to be looking for that. This is where the CRM system comes in, so they really understand what their pipeline is, how they’re engaging with new prospects, how they’re engaging with existing customers, all the way from the services question, all the way to the pipeline for existing customers.
So I think that we’re going to see there’s opportunity still in ERP, there’s opportunity in CRM. And lastly, what the customers are going to be looking for, they’re going to be looking for somebody who is going to be there also when the crisis is over. So I think that we are in a good position, in the sense of you as partners, we as Microsoft, I think that we can stand up in front of our customers and say, we’re going to be there when this is over, as well, we’re going to be there five years form now, we’re going to be there ten years from now, and I think that’s a good safe harbor for somebody when the winds are blowing out there.
I think that we’re in a good position in that sense, and for me it’s all about keeping the energy, keep pushing, keep winning some business, so when this is over we come out somewhat stronger. And I think that kind of resonates with me as I think about a Chinese proverb that some of my colleagues told me. I’m going to try to recite that for you, but the thinking is that this Chinese proverb basically says “when the winds are blowing some build shelters, and others build windmills.”
I think for us it’s very clear where we are on that side, I think we can go out and help the customers that want to build shelters to build those, but for us we’re really on the side of building windmills. It’s all about getting the energy from this, still powering through, still being able to go out and help our customers, and help generate new business for them, generating new business for us, as well. So that we’re in a good position, we should be building windmills, we should be out there getting new customers.
So with that, that will conclude my third part of the session, and I will invite the first guest on stage to have a little bit of a discussion with me, and that will be Kirill Tatarinov, my boss, and the Corporate Vice President for Microsoft Business Solutions. So come on stage, Kirill. (Applause.)
KIRILL TATARINOV: Good morning, Klaus.
KLAUS HOLSE ANDERSON: Welcome.
KIRILL TATARINOV: Good morning, everybody.
KLAUS HOLSE ANDERSON: So, I guess we’re seated over here.
KIRILL TATARINOV: Sounds great.
KLAUS HOLSE ANDERSON: And it was a pleasure, you were here in Copenhagen last week, last year, and discussing with our partners in the event like this. I know you were out there talking about all of the things we talked about here, business customers, Business Ready Customer Care, the products and so on.
But since then, I notice that you’ve been traveling quite a bit. You’ve been in Europe, in Asia, a lot across the U.S. as well, meeting customers and partners. What is it that you bring back from that? What are you seeing?
KIRILL TATARINOV: Well, Klaus, the economy certainly looks a whole lot different compared to the way it was a year ago. And in times like this we believe that connecting with our partners, connecting with our customers, connecting with our employees, is of paramount important.
So I have spent quite a bit of time on the road the last six weeks, since we started to see this economic slowdown, and the effects of it on business. And there are a few steps that we’re taking picking up, and a few kind of common threads that I think it’s worth talking about. Obviously, people are concerned. And the majority of people I meet are very cautious, because, as you said, most people don’t know what’s going to happen, and don’t know how long it’s going to take. So people are cautiously. Some are cautiously optimistic, some are not, and we’re trying to be very focused and help or partners and help our customers endure and prevail through this economic climate.
I would also say that just in the last six weeks Microsoft conducted a survey of our small and medium sized customers, and SMB segment, and one of the questions on the survey was, what is the number one technology investment that you would be making in the current economic climate? And the answer that came out from that, the most the highest ranking answer was, I will slow everything down, but I will continue to invest in technology that helps me make my customer my people productive. And that is exactly what we collectively bring to our customers. So I view the current climate as an opportunity for us to demonstrate to our customers even more what we can do for them, and how we can help them endure and prevail this economic climate.
Now there are a few other things that we’re seeing in the industry that, frankly, remain unchanged no matter what economic cycle we’re in. Customer satisfaction crisis, the need for solid CRM systems, sales force automation, customer care systems today is higher than it’s ever been before. There are some very concrete figures that we’re seeing and very strong feedback form people indicating that they can’t serve their customers without a solid backend system, and yet again, this is an opportunity for all of us to work with our customers, and help them do it.
Lack of serious consultants in both ERP and CRM space is another thing that we see time and time again, engaging with customers and asking them how can we help you more. The number one thing that they tell us, bring us people who understand our business, bring us people who understand our industry, help your partners grow capacity, help your partners understand our business more, and they can help us grow. Yet again, this is where a forum like this becomes very important in the cycle of improvements, and the cycle of addressing the needs of the industry.
The last thing that I would highlight that we continue to see is enormous complexity that exists in the world of business applications. Enormous complexity that, frankly, has been there for years, is one area where we focused very vigilantly to address with our products. As I look across everything that we do, the number one thing that we’re focused on is simplifying the solutions that we deliver. So that’s a very important theme, and a very important thread there.
KLAUS HOLSE ANDERSON: And I know that since you joined the team I have been there, and I have worked with you and the team on some of this. I know that we’ve kind of been working on evolving the strategy along the lines here. Where do you see the strategy, try to cover that a bit, first on ERP and then maybe shift to CRM and take a look at that, as well. Where do you see the strategy?
KIRILL TATARINOV: So certainly strategy has been evolving, and I can only go back a year and think of Convergence 2007, which gave me an opportunity to connect with this group for the first time, having joined the business in summer of 2007. And we talked about one thing that many of you asked us, and that one thing that really cut across everything we do on the strategy side, this one word is consistency, making sure that we promise, we deliver, in the same consistent course. That has been a very important theme for everything we do in the strategy on the product side.
With that, you mentioned business ready customer care, which was announced here in Copenhagen a year ago, we remain very focused on making sure that all our partners and all our customers get a consistent message from Microsoft for our ecosystem. We’ll continue to invest in the entire portfolio of products, we’ll continue to drive it forward, we’ll continue to make sure that we innovate on that portfolio, and serve the markets where those products are thriving. That remains a very important thing.
With a lot of our products, especially on the ERP side, simplicity, as I mentioned, is the number one strategic thrust in everything that we do. We’re looking at scenarios, we’re looking at the end-to-end nature of what we can give to our customers, and how we can truly improve productivity in a very measurable way. Tomorrow in the customer-facing keynote we’ll talk about some examples of our customers who today by implementing Dynamics gain some very specific, and very measurable benefits that they can actually see on their balance sheet, and their income statement, and that’s a very important, very important part.
Taking full advantage of Microsoft platform and, frankly, doing things that none of our competitors could do, because they try to create heterogeneous, is another very important part of our strategy. Really making sure that we can take full advantage of innovation that happens in SQL Server, full advantage of innovation that happens in SharePoint, and really serve it to our business customers in a way that is unmatched by anybody in the industry, because they try to support our platform.
And the last thing that I would highlight as it relates to ERP, focus on the segment, and the realization that we went through as we were going through the strategy work on the ERP side that the mid-sized market, the market of mid-sized organizations is the one that is served the least by incumbents in that industry and, frankly, the market that needs the most help from a vendor like Microsoft. Being laser-focused on delivering to the needs of mid-sized organizations is a very important strategic thrust for us.
KLAUS HOLSE ANDERSON: I think that’s at least the feedback I’ve gotten from partners that have seen this, and heard this, is the word consistency, as you hear it in the very beginning, given some things that we’ve stayed on for a long time it sounds like we’re on that track of consistency. How about CRM?
KIRILL TATARINOV: Well, CRM, as I mentioned, this I technology that today can truly serve the needs of this customer satisfaction crisis, and we see many of our customers embracing it, large and small. If I look at CRM products and the core thrust of the strategy there, power of choice, of course, is the one that’s worth mentioning, the fact that CRM products, the same technology, can be deployed on-premises, and can be hosted by our partners, and we have many of our partners hosting CRM products for their customers, with all the innovations that they put there. And, of course, Microsoft offering CRM products in more of a horizontal fashion from our own data centers for North American customers today, and the rest of the world in the future, that’s a very important differentiator for us, compared to the rest of the industry. It’s really the case where it’s not how you deliver the product. You choose the way the product will be delivered to you, but the capabilities that come through it is what’s important, and what we emphasize.
On the CRM side it’s also very important to highlight that the CRM product is extremely customizable to the point that you can actually say that this is a platform for delivering XRM (eXtended Relationship Management) applications, applications that take advantage of entities and templates, that’s available within the product, take advantage of all the openness in the product, and helping our customers construct their created applications on top of capabilities that we provide.
From the segment point of view, of course we continue to serve mid-sized organizations with CRM products like we did in the beginning. CRM 4, which shipped almost a year ago is very scalable, and 100 percent enterprise ready. It was a test that we conducted internally, and we’re seeing very significant pick up in the large enterprise organizations who are now starting to embrace the product, particularly on that XRM capability.
KLAUS HOLSE ANDERSON: Yes, and I guess that’s consistent with the feedback I’ve gotten from folks in the room, and through travels, kind of being able to customize this and deliver it anyhow, or any way you want to is really important for our partners.
So that’s kind of what we’ve been doing on strategy, and delivering great products. What are some of the big things we’re working on now, what do you see in the future?
KIRILL TATARINOV: Well, I’ll say a number one thing that we’re focused on, a number one thing that’s a very important message from us to our partners, and our customers, as well, we’re a solution provider, and innovating on a portfolio of products as we have, and continue to invest in R&D, and continue to make sure that we continue to drive massive investment in research, whether it’s applied, or whether it’s research in some future capabilities, remains to be a very important part of our overall business strategy.
We will talk tomorrow in a customer-facing keynote about some role-tailored research that we’re doing, and some additional investments, and additional advancements that we’re doing in the area of user experience. That is just one example of how we’re taking the portfolio forward, and how we drive those capabilities forward.
A few things that I would highlight from the business strategy point of view, portfolio commitment, and delivering on the business customer care promise that we delivered a year ago remains a very important part of our business strategy. Software plus services and fully embracing software plus services in our solutions, whether it’s figuring out a way to delivered hosted applications, hosted by our partners, most and foremost on the ERP side, and hosted by Microsoft on the CRM side, that also it’s actually helping our customers turn on-premises implementation of business applications into a hub that enables them to connect them with the variety of services delivered by either Microsoft or our partners. That’s a very important opportunity, and a very important area of investment for us.
Deliberate dependence on partners is something that is absolutely a core part of our business strategy. We talked about last year, we talked about that as being a very important consistent strategy we have in Microsoft Business Solutions. And we will continue to remain true to this promise, we will continue to engage, work with you, and help you drive more opportunities in your businesses.
And last but not least from the business strategy perspective I would highlight one very important shift that has happened in the last 12 months, and something that you will start seeing more and more as we put this strategy into execution, and that is industry focus. That came as a feedback from many of you in our discussions last year, and in the past in general. Basically it’s stating, help us deliver capabilities that would enable us, or our ISVs to do easier job, and deliver faster vertical and micro-vertical solutions, to really turn these horizontal ERP applications into more of an industry platform, and also help us with the people in the field, Microsoft field, help us articulate the value to customers, and help Microsoft work with partners, and be able to say that we’re committed to drive the industry in vertical segmentation.
KLAUS HOLSE ANDERSON: So I think that that was the feedback we’ve gotten for a while, and I think that at least this audience should be very happy to hear you kind of say, deliberate dependence on partners a few times in the answer. I think that is very critical, and it’s important for us, and it is this connection between us and the partners that is really the driver. So that was I think very good to hear again.
As we look at what we are doing, and we look at what’s going on in the market, how do you see the competition out there?
KIRILL TATARINOV: It’s a good question, Klaus. Obviously when we look at the broad market of business application vendors there are many different companies, and many different competitors, and they don’t come equal. When I look at competition I probably break it into three categories. The first is where SAP, Oracle, and Microsoft live, basically the category of established players who continue to innovate, and who continue to invest in a broad range of solutions, serving the needs of global markets.
I’ll speak on SAP and Oracle for a couple of seconds. On the SAP side, obviously they’ve been in this business the longest, and they have built a pretty credible expertise and portfolio of products. They’ve been in this business over 35 years, and the industry expertise that they’ve built is very, very strong. And this is certainly something that we’re looking at, and this is something that we obviously understand that we’re in catch up mode.
But, I would only point that Microsoft is pretty good at catching up. This is kind of part of our DNA, and I’m confident that we will be there, and our industry solutions will be on par or better, and broader compared to what SAP was able to build in the last 35 years. I’d also point to the difference in approach. SAP is pretty good at emphasizing how businesses ought to drive their vertical solutions, and really providing pretty rigorous templates, to the point where they’re literally telling businesses how they need to change to map their entire business process to what SAP thinks businesses need to look like.
Our approach is different. While we are embracing industry and vertical specializations, working with our partners and delivering complete solutions to our customers, we try to make the solution flexible, and we try to make sure that the business process that comes form Dynamics can be fully adjusted to the way the customer wants to run their business, not forcing them to change to the way we think they should run the business. So that’s a very important key differentiator here.
On the Oracle side of things, yet again, they amassed a pretty significant portfolio of products in the last five years by acquiring a myriad of companies, primarily in the enterprise space. And I would say that from their CEO all the way down they stay very focused on the enterprise segment and, frankly, they’re leaving mid-market companies not covered, giving us the opportunity to serve this market the best. So that’s kind of the segment where we compete the most today.
There are other competitors, I would call them aggregators, a set of companies like Sage, and Infor, and a few others, who basically went on and acquired lots of local solutions in lots of different geographies, and then put them in portfolio mode, and frankly milk the maintenance of those products. And there isn’t a whole lot of innovation happening there and, frankly, I would question whether those products are viable for the long run, especially under current economic pressures. And frankly, I would question whether those products are viable for the long run, especially under the current economic pressure.
And last, I would highlight a couple of competitors who are trying to experiment, I should say, with a new business model. This is Salesforce.com, and SNAP Suite and a few others, who are trying to deliver hosted business applications, whether it’s CRM or a complete suite, and I think this experimentation needs to go on for a while, and so far we’ve seen that there’s some questionable business models from that whole experiment that we’re seeing on either sales proposition or cost of goods in terms of how much it costs them to host an application that, frankly, isn’t designed to be able to serve a broad range of customers.
And most significantly, what is the partner opportunity working with those hosted solutions, and frankly I have not seen the model where there is partner value from the hosted solutions delivered by anybody in the industry. And as we continue to do research on what Microsoft should do in the world of hosted business applications, partner focus, and opportunity for partners to continue to do all of the customizations, and to continue to keep the customer intimacy will be a very important strategic thrust as we go about that analysis.
But when I look back, and when I look at the constituency as a whole, I actually feel quite encouraged about an opportunity that we have to come into this market and to serve the need of mid-sized organizations on the IT side, and companies of all sizes on the CRM side.
KLAUS HOLSE ANDERSON: I think that’s all, again, feedback that partners have given, kind of competing with the SAP, freeing the users of that, and so on, has been a good thing in competing with these small legacy systems seems to be good. I think that we’re in a good position there.
As you then look forward to tomorrow, and you’re going to be on this stage, and there’s going to be 4,000 people out there, customers and so on, what’s going to be in the keynote tomorrow?
KIRILL TATARINOV: Well, obviously 4,000 people coming together, the majority of the people are business decision makers and Convergence is the prime Microsoft event for business decision makers. So we’re going to talk about the business. And we’re going to talk about what businesses want. And we’re going to talk about what Microsoft and our partners will do to help our customers drive sustainable growth, and really drive the business, endure, prevail, preserve in current economic conditions, and build out sufficient capacity to outlive this economic cycle with strength to be able to withstand those winds.
We’ll introduce a new messaging platform, a new speaking platform for Dynamics tomorrow. We’re going to call it The Dynamic Business, and we’re going to talk about three very concrete characteristics of The Dynamic Business, and what Microsoft’s commitment is to help our customers get to the state of being The Dynamic Business. And in that context, we’ll talk about people productivity as being the most important aspect of making business dynamic. We’ll talk about business process, we’ll talk about business process as the backbone for any business, and commitments that Microsoft has in helping our customers really have this adaptable, flexible business process that can be tuned for lower economic conditions, or faster economic conditions, slow down or growth, really be very flexible in the way you run your operations.
And last, but not least, we’ll talk about the ecosystem, and we’ll talk about the connectedness that businesses have to demonstrate today, connectedness with customers, connectedness with partners, connectedness with a broad range of suppliers, and consumers, and what Microsoft is doing, and our commitments to helping our customers drive this and create connected ecosystems.
KLAUS HOLSE ANDERSON: So The Dynamic Business. I guess that we are all going to be looking forward to hearing that in the morning, bright and early, so Kirill, thank you, thanks for sharing strategies, thanks for sharing what’s going on in the business, and what’s going to go on tomorrow. So a big thank you.
KIRILL TATARINOV: Sounds good. (Applause.)
KLAUS HOLSE ANDERSON: Thank you.
Part of the feedback we’ve gotten from you is that you would want interaction with this group. So we thought about, how do we interact with about 1,500 people in the room, and that’s tough in a sense. So what we’ve done is, we’ve created a section within here to have some partners come on stage, have the discussion, ask a few of the questions, and so on, to see what we can do.
So the first of those sessions is going to happen now, and I would like to introduce George Brown, who is going to be talking to Tina about the premise of an ISV (independent software vendor). Thank you.
GEORGE BROWN: Thank you, Klaus.
And with me this morning is Tina Thomsen. She’s the president of TopSolutions. And getting going this morning, Tina, I wonder if you could just explain to everybody what you do at Top Solutions, what’s the role there?
TINA THOMSEN: We’re an ISV, and we offer a solution for professional services within the terms of project and resource management. Our value is to sell it through 100 percent partner-based channel, and we have partners in 14 countries, and today we have sold more than 150 solutions worldwide.
GEORGE BROWN: When you say 14 countries, the first thing that comes up to my mind is, do they all speak Danish?
TINA THOMSEN: No.
GEORGE BROWN: All right. So what in languages are you working?
TINA THOMSEN: We have the Scandinavian languages, we have English, Dutch, German, Greek, Spanish and Portuguese.
GEORGE BROWN: All right. I guess that would be a perspective on partners on a global basis. You have partners across the globe.
TINA THOMSEN: Yes.
GEORGE BROWN: And I’m wondering, do you see any differences today, if I look at partners across the globe I see differences, but I would like to know from your point of view, what are the differences you see amongst partners, say European compared to North American?
TINA THOMSEN: Sure. Well, we see that the message about going vertical that has been sold for years, I’ll say the north of Europe are taking that message in more and more. Where we could hope for that the North American and the Eastern Europe would go more in that direction.
GEORGE BROWN: The North Americans are sort of more on parallel with the Eastern Europeans?
TINA THOMSEN: In this example, yes.
GEORGE BROWN: All right. They’re a little bit behind the ball. All right. So the other thing, I was listening to what Kirill was saying there, and I heard him talk about the advantage of really leveraging the Microsoft platform, taking advantage of things that other competitors can’t do. So I would like to get a better understanding, what is Top Solutions doing as an ISV to take advantage of that platform?
TINA THOMSEN: Even before NAV 2009, we already started to take advantage of the family that it belongs into. So we have an inspiration for Microsoft Exchange, integration for Microsoft partners, and with the new amazing Web services that come along with NAV 2009, there’s actually no borders for what we can do. You know, George, like a project-oriented company, they need project employees entering their time in a certain way, and it’s very different in what kind of user interface they want to do that in. So we will build light applications for project employees who interact with NAV on SharePoint, on ASP.net, on Project Server, and, of course, on the road to the client.
GEORGE BROWN: You’re taking advantage of this product family, and leveraging it across?
TINA THOMSEN: Yes.
GEORGE BROWN: Another thing that I was reflecting on as I was listening to Kirill talk, he talked in that last little minute about the dynamic business, the dynamic nature of business. And I was thinking when we were standing in the back there, it’s one thing to have a dynamic nature and to think about it from a customer perspective, but thinking about it from Top Solutions perspective, is your business typical of a dynamic business?
TINA THOMSEN: I think so. And this time we’re going into now is a very good example of how movable you need to be. And we try to take our own medicine, run our own system internally, and our ambition is to kind of get a business intelligence tool where we at all times have the industry information needed to make the right decision in the right time. Everybody wants that, but the few companies have it when they need it, they need to reach out for the information before they’re able to take the right decisions. So it’s the only right way forward.
GEORGE BROWN: All right. I’m also thinking about the other challenges, because I’ve traveled all around the world this year, one of the biggest constraints we always hear is that there aren’t enough skilled implementers, skilled consultants, skilled programmers, et cetera. I’m just wondering, as someone serving multiple partners in multiple countries, is this something you experience at all?
TINA THOMSEN: The one with the lag resources, we can say that it’s a challenge that there’s not qualified resources enough. And it’s basically because our customers, our end customers seem more and more to need partners in different countries because of their presence in the different countries. And to come back to the qualified resources, this year one of our largest partners has told us in February that they were sold out for the rest of the year, and only a little bit of our new sales have rested on existing customers.
GEORGE BROWN: So basically impacting your sales?
TINA THOMSEN: Yes.
GEORGE BROWN: All right. So I’m going to ask you a tricky question now, so if we have a shortage of resources then, what’s your forecast, if I look around and say, you know, I was listening to what Klaus was saying about October may have been a good month, what are you seeing in the next 90 to 180 days in terms of this economic cloud that’s looming?
TINA THOMSEN: Well, I’m sure that there will be some hold back in the market. But for our industry, I’m sure that it’s up to us to see how long it will take, and how fast we could make it move forward.
GEORGE BROWN: So you’re seeing, going back to your first point, which is we don’t have enough resources, are you seeing any actions taken by partners today in terms of getting ready for this economic
TINA THOMSEN: We are seeing a few partners that have downsized their organizations, getting rid of resources that weren’t performing well enough, but no drastic action yet.
GEORGE BROWN: No drastic action. Are you expecting it? You’re saying yet, are you expecting drastic action, or no?
TINA THOMSEN: I suppose I am in some regions.
GEORGE BROWN: Okay, in some regions. All right. Let’s personalize this a little bit, what are you taking, what actions are you taking at Top Solutions, as the president of that company, to prepare now for this pending economic storm?
TINA THOMSEN: Well, being dependent on a partner channel, and that influence we get from whatever direction they’re taking, we definitely need to scale up our distribution channels. That will be the most important thing. We need to put our bet on more horses, and the technology is there with NAV 2009. We hope to build applications where we can attract new types of customers, and especially also a new types of partners, and by that scale up our business, even though there will be some recession in other parts of the market.
GEORGE BROWN: So you’re, I guess, one of those partners that are building windmills not shelters?
TINA THOMSEN: Exactly.
GEORGE BROWN: All right. We’ve got what I’m going to ask for is one last question. Do you have anything else you’d say to partners, or anything else you’d say to the partner community before we close for this morning?
TINA THOMSEN: Frankly, yes, I think I will. In times like these it’s typical for any management and executive to kind of take it easy with the costs, look for cost reductions, and I believe that us, as IT partners, we have the possibility to actually take some of that period off. We still show some of the best public support out there, and to go out sell efficiently, and thereby make the best companies even more competitive, I’m sure that we can make a difference. But, it’s about who to believe in it, and even though some are focusing on the red numbers, it has never been more important that we don’t do that.
GEORGE BROWN: All right. Thank you very much for playing. Thanks for spending your time with us here. (Applause.)
KLAUS HOLSE ANDERSON: So, thank you, George, thank you, Tina, and I commend the partner that is out there building windmills with the rest of us, and being aggressive about going to market, even in this situation.
So, now I would like to welcome the second guest of the day, who is Doug Kennedy, who is the vice president for partners, the Dynamic partners, and he’s the guy who sits back in Redmond and designs all the programs, gets us all ready, and gets readiness into the field.
So, Doug, why don’t you come out and say hello? (Applause.)
DOUG KENNEDY: How are you?
KLAUS HOLSE ANDERSON: Very good. Welcome to Copenhagen. Come have a seat.
DOUG KENNEDY: I love what you’ve done with the living room here.
KLAUS HOLSE ANDERSON: Yeah, exactly, we moved the living room in here.
So, welcome to Copenhagen.
DOUG KENNEDY: It’s good to be here.
KLAUS HOLSE ANDERSON: This is your first European Convergence I guess, so that will be fun to have you here.
DOUG KENNEDY: Yeah.
KLAUS HOLSE ANDERSON: Part of the discussion here is going to be all about partners and what are you seeing out there. I know that you’ve spent quite a bit of time with partners, ever since you joined the team. So, what do you see the relationship we have with partners?
DOUG KENNEDY: I think we have an outstanding relationship with the partners. You know, the last eight months since I arrived were extremely busy. There was an awful lot of things that I’ve asked of not just the team but the partners directly. I’ve asked for a lot of direct feedback. A lot of you folks in the room have contacted me directly, and we’re doing a lot of things across not just individually with what some of the partners need but across the partner program itself, some changes you’re seeing manifested in the short term and some will be over the long term. So, a lot of things going on that span readiness, go-to-market, looking at capacity requirements, et cetera.
KLAUS HOLSE ANDERSON: You know, I think that capacity is back to what Tina said, so it all gets down to how we’re going to keep growing with this. So, is it all about growth?
DOUG KENNEDY: Oh, it is all about growth. And you look at it, you have to break it down in a couple of different things about growth. So, helping our partners grow their install base, I mean that’s important to all of you, making sure that you’ve got a large install base that you can sell into, cross sell, and up sell, but also looking at growth of new revenue opportunities, as well as making sure that we’re growing profits with our partners.
And so there’s a couple of key things we’re looking at. We can create a lot of business development activities out there that will drive sales, but we absolutely have to make sure that we’re enabling you, our partner community, to make sure you can capitalize on those spends.
So, we’re spending a lot of time on training and enablement, and then complementing that with the right business development activities that they can then take those skills around pre-sales and sales and implementation and fully capitalize on the opportunity. So, those two have to go hand-in-hand.
KLAUS HOLSE ANDERSON: So, that’s kind of important, growth. I know that’s kind of what some of the partners are looking at, especially growth in profitability.
DOUG KENNEDY: Right.
KLAUS HOLSE ANDERSON: But then what are some of the trends that could drive that?
DOUG KENNEDY: Well, profitability is one of those trends. A couple other ones focus around the industry. We’ve all been talking about industries and verticals here today. That’s a big trend, which we can spend a few minutes talking about, but also midsized, companies that are midsized, that’s the opportunity to go after; not mid-market but midsized businesses. Those are really kind of the three trends that we’re trying to focus and pivot our partner programs and our ecosystem around to go capitalize on.
But profitability is an important thing. We heard George talk a little bit about it, and I know you were talking about it earlier.
We refer back to an IDC study. It’s a great study that talks about the challenges of partner profitability. And it correlates to the size of partner, it also correlates to subtle differences in different countries.
But typically you take a look at a partner. If they’re around 10 employees, up to that point they’re doing fairly well: reasonable revenue numbers, good profit numbers for them. Then they enter a valley, a profit valley. And they struggle to get through that, and once they get to around 45, 50 employees, then they become profitable again.
What we’re focused on is how do we do two things. One, how do we help accelerate them through that valley as quickly as possible, and then make sure they get through the valley. Because an awful lot of partners, they collapse when they’re trying to get through there; they can’t sustain the business.
So, some of the programmatic pieces we’re putting in place will actually address that, and we’ve got to make sure we’re doing things with our partner ecosystem around velocity of customer adds, and not just large customer adds but you have to have a good balance, for example: small customer adds, large customer adds, keep your implementation bench really busy, et cetera. There are some good practices to help partners get through that valley. We need to put those out programmatically and help partners adopt that into the business cycle.
KLAUS HOLSE ANDERSON: Doug, tell us about sharing and the technologies that we’re putting forward to helping our partners share best practices and connect with each other and find each other and all the work that we’re going to be announcing actually tomorrow on improvements in Partner Source that now allows us sharing and allows us community. I know that’s a very important part of helping them.
DOUG KENNEDY: Well, that’s key around industry verticals especially.
KLAUS HOLSE ANDERSON: Yeah, so industry verticals, Kirill said industry is very important to grow key focus and so on.
DOUG KENNEDY: Yeah, we talk a lot about industries and verticals, and we kind of mix and match them a lot. The thing I keep coming back to is it’s important for all of us to understand that every customer is in a vertical. They’re all buying business solutions to meet their vertical business needs.
So, we need to take more of a prescriptive role in helping partner to partner ecosystems, so we’re providing a complete solution to that customer. Customers don’t want to be the SI (systems integrator). They don’t want to be the ones putting all the pieces together. They want a VAR (value-added reseller) that deeply understands their business to come with a complete portfolio of our horizontal solutions, as well as the point you were making, Kirill, the vertical solutions that complete that business offering for the customer.
So, that’s what we have to do. We haven’t taken really a prescriptive role in helping network our partners that way, and going to market by more complete portfolios. So, that’s something we’re doing a lot of work on, and what you just mentioned is a key piece of that, and you’ll see programmatically we’re going to do other things to help that.
Because if you take a look at the way customers are buying, the velocity of a sale when it’s correlated around verticals, so if you have the complete solution, you’re going to see outstanding results as a partner.
KLAUS HOLSE ANDERSON: So, as Kirill said, we’re going to have the industry layer built in, and then what you’re saying is you as partners you get out there and you do kind of the last mile verticalization. So, from process industry to food and beverage to actually fresh foods or beverages, I’ve got to do that verticalization of it.
But what is the driver there? What are some of the things we’re doing to help partners verticalize?
DOUG KENNEDY: Yeah, one of the things that we’ve had out for a little over a year now is around Certified for Microsoft Dynamics. It’s something that I don’t think when we first brought it out, we spent a lot of time discussing how important of a program that is for both VARs and specifically ISVs.
I mentioned complete portfolios. Well, it doesn’t just mean we develop the pieces loaded in the apple cart that we’re taking into a customer. We need to make sure that we’ve tested the integration between those solutions, and so the customer has confidence they can install more rapidly, that once it gets into production it’s going to be more robust staying in production, and if you do run into some issues, if you’ve done a lot of the pre-testing, you should be able to address the issues when they crop up in production.
That’s an example of some of the things we’re doing with the partners, and there’s a session here that I encourage all of you, if you’re not (CFMB ?) partners or not familiar with that program, please attend that session. I’ll actually be in that session as well to make sure that you can take advantage of that program.
KLAUS HOLSE ANDERSON: So, clearly industry vertical is important. Kirill also said the kind of specific focus on a segment or a type of customer. Sometimes we say mid-market. I heard Kirill specifically say midsized companies. How is that —
KIRILL TATARINOV: Clearly midsized organizations.
KLAUS HOLSE ANDERSON: Mid-sized organizations. What is the difference, and how does that play with the partners?
DOUG KENNEDY: Well, maybe I can explain with just the market data. So, in mid-markets around ERP there’s around an $18 billion a year spend on the five industries you were talking about earlier, so manufacturing, distribution, retail, public sector and professional services.
But you’ve got to take a look at the types of business you’re dealing with, and those types of businesses also exist in the enterprise.
So, when we make a statement about just mid-market, we’re actually understating the market opportunities for our products, our collective products with our partners, and the sweet spot that it really hits. It’s more of the midsized businesses, which exist in the enterprise. If you look at hub and spoke, the spokes are all typically midsized businesses.
So, when we talk about $18 billion spend a year, that’s not really the number; the number is bigger than that. And that’s what we’re focused on, because it’s a sweet spot for us. When you take a look a look at our history, the majority of our sales actually occur in the mid-market, because we have data on the mid-market, in those five industries. So, we’re already doing extremely well there, it’s a good fit, and the opportunity is huge.
So, today, we only have a little over 5 percent of that mid-market, and as we said, that 5 percent doesn’t really represent the whole opportunity. When you look at 18 billion, it’s a huge opportunity. And there is no big player in that space. It’s ours to collectively go after. We have the best product set, we have the best partners, and collectively we can go after that market and be outstanding partners to win the revenue and the business.
KLAUS HOLSE ANDERSON: So, I think that is an important point, because what I get as feedback from U.S. partners is, no, we’re not mid-market only, and I think that’s what both Kirill and Doug are saying, no, we’re not, we’re about the mid-sized companies in ERP. That’s kind of where we are on that one. And mid-sized companies can live both places, as a standalone company or can be owned by an enterprise company, but it’s a midsized company, a midsized organization inside of either its own or inside something else. So, I think that’s a very important one.
We can then look at deployment. There’s a lot of discussion on kind of software as a service and software plus service and so on. How do you see the opportunity for the partners in the room around software plus service?
DOUG KENNEDY: Well, first of all, I want to thank the partners that are already in software plus services. We have a few hundred that are actually participating in that.
But the big question I get asked by partners, they say, so, what does it mean to me, and the answer back, well, it depends what you are. Are you an ISV, are you a VAR, are you an SI, for example?
What I do is I make sure I’m reminding them that if you’re a VAR or an SI, your business is not going to dramatically change very much at all. You still need to have great partners, VARs going out and selling the business solutions.
The deployment vehicle is totally different, but the business sales cycle is basically the same.
But then you need the implementation capacity. Now, just because it’s actually running in the cloud doesn’t mean it magically gets installed and implemented. You still need to have the VARs and the systems integrators dedicated to the capacity we need to actually do the implementation work out there.
Now, with the ISVs it’s a little bit different. We’ve got to make sure that they’re, like ourselves, building a robust platform that can be actually deployed either on-prem or in the cloud. We’ve had some outstanding tools announced lately for that where actually our own product set, as you know, in development. We’re continuing to make our products more hostable all the time.
So, take advantage of that, but I remind the ISVs it’s subtly different. You need to make sure that you’re building for deployment both ways.
So, there’s a great opportunity right now when we talk about the economy. Software plus services actually fits when you take a look at some of the businesses that are challenged with cash flow. They’d like to move to an annuity model. So, it’s a good fit for a lot of the companies today looking to start out with going straight to an annuity model instead of having an upfront cash payment for infrastructure and software licenses. It makes a great sense in the economic environment.
KLAUS HOLSE ANDERSON: So, I guess what you’re saying to the partners out here who still can kind of afford to put in kind of the solution in the cloud and go to a monthly based fee or a yearly based fee, this is what customers will be looking for, some customers will be looking for in this. So, getting in and hosting your vertical solution for a cluster of customers might be something to look into. And I know we’ve got hundreds of CRM and hundreds of ERP customers out there right now.
DOUG KENNEDY: Yeah, and back to the comment you made earlier is what we should be helping with is ISVs, for example, that have built their solution that can go software plus services, but don’t want to be a hoster. Link them together with the hosters we have in the ecosystem as great partners. So, we’re doing some of that, too, and we need to expand that.
KIRILL TATARINOV: But from the investments and from the innovation point of view, the announcements that we made at the Professional Developers Conference a little over three weeks ago with Windows Azure, or Azure as some people call it across the pond, on the other side, those investments effectively will provide this very flexible platform that enables our ISVs to build applications whether on-premise and in the cloud. Those investments will also enable to do two things: First, they will provide scalable platforms that will enable very easy scale-out for the applications that are hosted there, and we’ll actually demonstrate how it’s done tomorrow during the keynote in one of the demos. The most important investment that we are making is to effectively enable our partners to take full advantage of our services platform in the cloud, maintain this customer intimacy, and yet take advantage of cost of ownership advantage from the usage of their platform, and that’s in all the announcements that we’re making, all the investments that you’ve seen. Only this morning we announced SharePoint Online and Exchange Online available for North American customers. Of course, it will come and become available worldwide in the not-too-distant future. It is a massive investment that we’re making there as a company.
DOUG KENNEDY: Yeah, good point.
KLAUS HOLSE ANDERSON: And all focused with partners. That’s very important.
KIRILL TATARINOV: Partner economics is very much part of the strategic thinking behind all those initiatives.
KLAUS HOLSE ANDERSON: With that, I think that was good news both from the platform, from CRM, from ERP, but then kind of it’s also something going on outside there. We talked about building Windows, Tiny talked about the economic situation.
How do you see that? How do you think about that for all of the partners?
DOUG KENNEDY: Oh, it’s a very real situation. So, what we as a partner of all of our partners, we need to continue to remind ourselves that there are outstanding opportunities right now. We’ve got some obviously product releases that we can utilize when we go back out to our install base. So, focus on your customers you have today, and also balance out and continue to go after new customers.
But we are providing more upgrade tools, we’re providing actually more opportunities because of the AX release and the NAV releases recently. It gives you an opportunity to go back in and reengage with your customers. Make sure that you’re keeping your customers close to you during tough economic times, but look for needs there. They’re looking to be up-sold. They can adopt new products; they can enhance their business a little. We need to give you tools to make you very efficient at doing upgrades, et cetera.
So, we’re helping on that front, but we need to continue to remind ourselves we can’t ignore there are new opportunities out there. In tough economic times, if you look at ERP, traditionally customers during tough economic times, they need a quiet period to implement business systems such as ERP. It may not be the best of reasons at the quiet period, but the customers that can afford it will actually spend, buy the new ERP system, take advantage of the quiet downturn right now to retrain their people and be poised to move on and take advantage of those systems once the economy picks up.
So, there are great opportunities out there, and we need to work together as partners to remind ourselves to continue to focus on those things.
KLAUS HOLSE ANDERSON: So, I guess that what you’re saying is look for new opportunities, look for existing customers and make sure we engage with those as well. And I agree, there are many that are going to be looking to this downturn as an opportunity.
I think there’s also a timing thing in here that we’ve talked about. There was something about get out your kind of year 2000 badges again because they’re coming off a renewal. Is that kind of the thinking?
DOUG KENNEDY: Time flies when you’re having fun. Yeah, Y2K, we all kind of threw our badges away and didn’t want to go through that cycle again, but there is a great opportunity there. When you take a look at the age of those systems, it’s already coming up to eight or nine, 10 years since those systems were put in to address the Y2K issue.
So, we need to go back to our customers, and that new prospect out there that are running older systems, and remind them that those systems are now aged, it’s a cycle that they’ve gone through, and capitalize on that opportunity itself.
So, unfortunately it seems like just yesterday we went through that, but it is eight years ago, and those systems are nine or 10 years old. Let’s go back in and reengage and engage with new opportunities as well, with an outstanding set of ERP and ISV products, and our VARs and SIs have to do all the work to position.
KIRILL TATARINOV: I think there’s some of the customers who bought for Y2K are some of our customers as well, and I know we’ve got a few on kind of back level versions, and I know that your team has unleashed a new product or a new offering for the partners to go talk to as well.
DOUG KENNEDY: Yeah, to unleash your potential.
So, is there a show of hands in here? Does everybody know what unleash your potential is? Actually those that do know put your hand up. I can actually see you. There we go. We’ve got one — I could probably count them on a couple of hands. Okay, great.
We have — thank you for those that know what it is. For those that don’t, it’s an opportunity to go back and re-engage with your install base. And any time — we’ve all been in sales, it’s give me an opportunity, always go back in. We’ve given a couple with the new releases, NAV and AX with the new releases, great reason to go back and reengage.
But what this tool actually allows you to do, it gives you a framework for the discussion around the business benefits and opportunities inside of those customers that you’ve got, to up-sell and cross-sell and look for other business needs that we can address, and capitalize on.
So, I’d encourage all of you, there’s a session here in the next couple of days. I think it’s actually tomorrow, but we’ll have that up here I think. Please sit in that and understand what it is. It’s something we want all of you to take advantage of. The feedback I’ve got from some of the partners, and maybe even a few that were in the room here, is it’s outstanding. It gives you an opportunity to go back and reengage. It’s another reason to have a business opportunity discussion with your customers. And as an old sales guy, I always welcome those tools, so take advantage of them.
KLAUS HOLSE ANDERSON: And it’s integrated with the systems. We ask you to gather an excerpt of what the customer has, what the customer will need, to engage in some new stuff the customer might want to engage in. So, great, great tool; go look at it.
So, I think that we’ve kind of talked about a few opportunities to kind of get more aggressive in this time. If you were to kind of summarize, what is it that partners can go get done?
DOUG KENNEDY: Yeah, I mean, recession-proof your business. Take a look at the areas that you can make sure you’re optimized in.
But more importantly, as I mentioned earlier, don’t forget to continue to sell and promote your offerings, your services, your sales expertise, your industry vertical expertise.
Now more than ever you need to market yourselves and get out there in front of the selling opportunity, whether it’s just going back to re-engage some of your existing customers, and more importantly getting out there in the marketplace to make sure you can capitalize on those new opportunities, whether it’s around using our new products, around the Y2K issue or whatever it is. You need to get out there and tell your story and our collective story together. It’s a great story, because you can save those companies money in the short term through our powerful solutions that we’ve got to offer collectively, and over the longer term they’re going to be poised to take even better advantage of those applications.
So, get out there and make sure we’re not just isolating ourselves to our customer base and doing some of the things that we are limiting ourselves to do. Get out there more than ever and be bigger than we’ve ever been.
KLAUS HOLSE ANDERSON: Great. So, I think that we’ve now asked Doug all of the nice questions on kind of what are you doing and how should we think about this and so on, but there’s also one question that I got at Convergence last year, I got it at Convergence in the U.S. half a year ago, and I get it consistently from our CRM partners out there.
So, getting a CSA fee is a tough thing, but I thought that we should also leave one of the tough ones for Doug before we kind of let him out of the couch again. So, what are we doing about this? These guys want their fees and they want them quick.
DOUG KENNEDY: Yeah, you’re not the only one that hears this. So, I’m sure we’ve got some folks in the room that are all waiting for an answer here. And we have an answer on some of the issues and I think they’re good ones.
So, Christmas is coming early to a few folks, and some of this is coming this month. So, one of the key issues we had was the actual payment cycle was too long. So, in this month we’ve actually moved to twice a month payment cycles. So, folks that are looking for their CSA fees, those are now going to be far more frequent than they have been in the past, so that’s a great one.
Insufficient fee reporting: So, right now we’ve got improved partner BI and being able to get at the reporting capabilities and understanding what is supposed to be coming out. So, providing that and putting that in the hands of the partners is coming again this month.
But the big one I keep getting is the activation of the CRM customers for support entitlement. I think I get that at least once every two or three days.
So, we’re fixing that. Actually internally we’re doing really an import and a soft match of the CRM transactions to be able to get the customer support entitlement in place. So, that’s a big one that I know the partners usually are burdened with that question more than anybody, and we get it secondarily. That’s also being addressed this month.
The last one of the four that we’re talking about and launching out this month is the lack of notification around customer renewal base. So, there are all the partners of record, they can get access to that information, and it’s on Partner Source, and they can go out and make sure that they can get at that.
So, those are four fixes. I know some of you have been patient in asking for this. Hopefully you see this as an improvement. If you don’t, get a hold of me personally. I’d love to know what else we could do. Because we’ve got to make the payment of those fees seamless and efficient for all of you.
KLAUS HOLSE ANDERSON: Very good. So, thank you. I think it’s good that we’re getting that fixed, and it’s good for the future, so thanks, Doug.
DOUG KENNEDY: Thank you. (Applause.)
KLAUS HOLSE ANDERSON: So, that concludes the discussion here.
The next segment is one of those where it’s another engagement between George and a partner on kind of discussion on the business, asking some of the good questions to us and to the partner. So, George, over to you.
GEORGE BROWN: Thank you, Klaus.
With me now is Peter Oliver. He’s with Green4Solutions. Peter, just to open up with a question, what Dynamics products do you support and sell today?
PETER OLIVER: Yeah, it’s pretty much 100 percent Microsoft CRM. On occasion we provide some supporting technologies like SQL Server and SharePoint, but pretty much focused on CRM.
GEORGE BROWN: Within that space of CRM, because often cases in CRM people are quite horizontal in that participant space, so what particular industry or vertical do you focus on within that CRM space?
PETER OLIVER: We established a business to entirely focus on the sports and leisure marketplace. When we established the business in 2006, it was really to make sure that we had a solution specifically for that vertical market.
We’re an ISV. We add some products and services to the core CRM engine, and we believe we have a solution that is very well oriented towards the market.
The e-marketing aspect in particular CRM is geared towards more because of the passion and the emotional attachment, and we’ve latched onto that part of the solution.
GEORGE BROWN: Okay, so you talk about the e-marketing solution, but tell me a little bit about your revenue models, because it sounds a little bit different when you talk about — it almost sounds like you’re fulfilling something there.
PETER OLIVER: Yes. I think we established ourselves as providing a service to the industry. We use CRM as the engine, and then we build on top of that components that allow us to deliver electronic campaigns. We join up all of the attached systems, the transactional systems that businesses use. We feed that all into the CRM engine, and then we deliver electronic, personalized electronic campaigns. And that delivery is done as a managed service from our own center.
GEORGE BROWN: Great. So, just so I can understand this clearly in my mind, so are you actually selling people the CRM licenses?
PETER OLIVER: Yeah, the license gets sold, but there’s always a tail to it, there’s a subscription service that attaches it for the customer for indefinitely.
GEORGE BROWN: So, that would mean — I’m just trying to make sure I’m clear in my mind. So, you’ve got a revenue source from the sale of licenses, the services obviously, and then that subscription model that you’ve layered on top of it in terms of packaging the service?
PETER OLIVER: Yeah, that’s absolutely right. We deliver the licenses, we provide implementation services, and then there’s an ongoing subscription service.
GEORGE BROWN: So, that begs the question then, okay, you have — because it always — you know, the secret of all partners or we all dream about this is we’re hoping that 90 percent of our revenue would be recurring. That’s always a dream we’d always have. So, it sounds like kind of an interesting model. What percent, if you don’t mind answering that question, what percent of your revenue would be recurring then out of the model you structured?
PETER OLIVER: Yeah, it’s a growing percentage, and you’ve got to remember that we started with zero customers two and a half years ago. So, the proportion is increasing. Right now, three years in, it’s around about 40 percent is coming from recurring revenue.
GEORGE BROWN: That’s significant.
PETER OLIVER: Yes, it is.
GEORGE BROWN: Yeah, in that short period of time.
I also want to come back, you know, Doug was talking about the fact that from a study point of view, and IDC and various people can say that, you know, being in a vertical accelerates the velocity of deals, but that’s one thing to hear it and then one thing to hear it directly from the horse’s mouth. So, I’d like to know from your perspective what do you think about this whole vertical side of it, and how significant has that been in your own business?
PETER OLIVER: It’s absolutely vital to our business. We are a vertical player. For example, we don’t do any generalist exhibitions. We only attend exhibitions and seminars that occur within the sports and leisure arena. We get endorsed by the football leagues, by the rugby football leagues. So, we’re an integral part of that marketplace.
And I think in terms of volume, you mentioned volume, the only example I can give you is that within 2007 and 2008 we are Microsoft’s Volume Partner of the Year in the UK, but all of that was focused on one vertical.
GEORGE BROWN: So, are you experiencing the speeds — and I’ll come back to that question about speeds. Do people buy from you faster, do you think, because you’re focused on that space?
PETER OLIVER: Yes, I think partly because we’re focused on that space, we’re very referenceable. If a customer comes to us, we always have at least a dozen customers that they can easily reference: football clubs, horse racing courses, indoor ski resorts. We’ve got references within that marketplace.
GEORGE BROWN: All right, I want to also call on a couple other things. When I was listening to Doug talk in the back, he talked a little bit about an increased focus on partner profitability, sort of the industry focus, which we’ve talked about already, in the midsized organization. So, what’s your perspective on partner profitability and Microsoft’s interest and focus on that?
PETER OLIVER: Yeah, I mean, I just started the business three years ago. We’ve rushed to get to a point where we’re profitable as quickly as possible. That means we can build our working capital, it means we can grow more quickly, and it also means we get more attraction from Microsoft as a partner that’s established in a certain vertical market. So, it has been critical to get to a point for flexibility as quickly as we possibly can.
GEORGE BROWN: All right. So, I want to shift our focus for a moment here, because I think we’re also on everybody’s mind here, thinking about how do you think this economic situation will impact you. I mean, you’re in the UK, it’s been a little bit of a leading edge there. So, what’s your perspective in terms of the economic outlook and how that might impact your business?
PETER OLIVER: I think generally from any businesses’ point of view that during economic turmoil you’ve got to look after your customers, and we go out of our way to make sure that we engage really closely with the customers that we have got. We try and lay new services on top. So, for example, we provide this delivery of electronic communications. We now provide managed services that help us prepare and design the campaigns, to analyze them. So, there’s more day-to-day involvement with customers.
I’d also say that in our space, because people get impacted on top line marketing, the advertising spend suddenly disappears. We focus our message that this is a very measurable, very personalized, very contained electronic marketing, which is low cost. So, it is a bit of an economic boom to us anyway in terms of the product that we sell.
GEORGE BROWN: So, I mean, it sounded like what you were saying there is some of your clients might be tempted to pull back their marketing, yeah? So, my question would be, are you tempted to pull back your marketing?
PETER OLIVER: No, absolutely not. I mean, I think from our point of view this is the time for us to invest in our marketing, particularly in terms of what we do. You know, we can use an electronic tool that has low cost of delivery, it’s delivered a very personalized message, and it gets out to our customers. So, no, we haven’t pulled back on marketing.
GEORGE BROWN: Are you planning any changes — like I’m just thinking of the next six months — are you planning any changes inside your business right now?
PETER OLIVER: Yeah, as I mentioned, really the focus is on delivering high quality service to customers, and I think that’s been the real focus is on making sure that the engagement in anything from delivery of a campaign to help desk is of the highest quality, so that we don’t lose any customers.
GEORGE BROWN: Just before we wrap up this morning, do you have any other inputs or comments you’d like to share with the audience today?
PETER OLIVER: I think from our perspective being in a vertical market has been absolutely essential. It’s taken some time. You have to build credibility in that marketplace. But once you’re in there, it’s a great place to be: safe, very difficult for other vendors to come into that marketplace. And you’ve got to remember also that technology is an enabler. So, even though we’re in times of economic difficulties, you put technology in and it can help other businesses to reduce their headcount and move forward.
GEORGE BROWN: Do we pay you to say that?
PETER OLIVER: Not enough. Just kidding. (Laughter.)
GEORGE BROWN: That was like a brilliantly delivered message, but I want to thank you this morning for your time and taking the time to come out on the stage this morning, and thank you very much, Peter.
PETER OLIVER: No problem. (Applause.)
KLAUS HOLSE ANDERSON: Thank you, Peter. Thank you, George. I think another good example of being vertical, being focused is really driving business forward, is making a partner very successful here. And the mix of online, the mix of on-premise is a great mix. So, I think we are all kind of moving in that direction, so I think it’s a great connection here.
So, I think we’re now getting ready to wrap this session, and there’s only a couple things left for me. One is that last year when we did Convergence in the U.S., we made a new invention. We made an invention called Walk the Mile, walk the mile in the shoes of the partner. So, (Michael Park ?), who runs the SMS&P business in the U.S., and I, we volunteered to go spend a full day with a partner somewhere in the U.S. We partnered in converting sales through their business card into a fishbowl, and at the end of Convergence we pulled out two cards, and Michael and I got to go to one of the partners out there.
I got to go to a partner in Denmark – Ironware, one of our biggest partners, and that was a great learning experience for me, and I think we had a good conversation with partner as well, had good conversations internal, and had a customer appreciation of them, customer prospect and so on. It was a good experience for me.
So, I’ve now done bits. I’ve convinced a few more of my colleagues to do the same. So, Kirill has promised to go out and spend a day with a partner, walk a mile in your shoes. Doug has said yes to come out, spend a day, walk a mile in your shoes. Dassa Sanuta, who runs international, has promised to do the same. Catharine Morris, who runs my sales team, has promised to do the same. And, of course, I’ll do the same once again, and have some fun.
But for all of you, you should take your business cards, you should kind of throw it in the fishbowl out there, and we’ll do a drawing at the end of this. And you get to choose what we do for that visit. We’ll come out, we’ll walk your dog, we’ll take the telephones, we’ll kind of cook the meals for your people and so on; that might be one use of our day. Another use might be to have a business conversation on how you evolve your business, have a conversation with some of your customers out there, do an event for that. But at least make sure you use the full day.
So, again drop your business card in there, and then at the end of Convergence we’ll announce the names of the five partners who can have some fun with the five of us. We look forward to being out there and having some fun and engaging with you and the customers.
So, with that, the only thing we have left to talk about is Convergence. So, now as we conclude this session and walk out the doors, there is going to be general sessions for you as you get out of here. And I can strongly encourage you to go to each of these general sessions, the one that has your particular interest, and engage in those, and make sure you engage not only in listening but also in asking questions and engaging in those sessions.
As the customers come into tomorrow, of course we’ll have a whole new set of sessions on a general session here, breakout sessions out there, and so on. Make sure that you welcome your customers as they come tomorrow, make sure we talk them through all of the sessions so we get a productive day tomorrow and the day after, and they really get something out of Convergence.
Part of it is all of the sessions that you will be coming to in terms of general session, concurrent sessions and so on, but as we said earlier this morning, the networking is also a key part of it. Networking at the exhibition, networking in the hall down there at the country lounges and so on is a big part of this.
The networking between you, the customers, the Microsoft people is some of the biggest feedback we get out of Convergence that people really like.
So, what you’re going to see is that we as a team, all the Microsoft people that are here as well, we’re going to be out there, we’re going to be trying to connect with you, connect with the customers and so on, get as much feedback as we possibly can, and give as much feedback as we possibly can in this one.
So, with that, I want to say thank you for coming, thank you for being active in bringing your customers. Having 4,000 people come to a conference in Copenhagen in November is not an easy task in this economic climate. So, a big thank you. You are the ones who are making this happen by coming, bringing your customers and so on. So, a big thank you to all of you, and I hope you have a great Convergence. Thank you.