Kevin Turner: CeBIT Keynote

KEVIN TURNER: Thank you very much. Appreciate that. Thank you.

Well, good morning. It’s great to be here, and I’m very honored and humbled to be back with you to talk a little bit about what Microsoft is doing, and really share this important time about our thoughts on the IT industry, because there’s an incredible wave of innovation happening, something around cloud computing, and cloud services. And I’m going to talk to you about our transition as a company, and really taking this market transition as an opportunity to redefine and reinvent Microsoft in many ways.

But, before I do that, I want to jump in and say thank you to our customers that are here today. Thank you to our partners as well. We appreciate, certainly, your feedback, your help, your guidance, your counsel, and we’re honored to be here, and honored to partner with you to help you create value. And that’s the name of the game. So, thank all of you, and thank the customers and partners in the room specifically.

So, let me set a little landscape for you. If you think about Microsoft the company, it’s a 35-year-old company, which started out with a dream of Bill Gates to be the company in the world that could help enable a PC on every desk and in every home. And that was in the mid-’70s, and you look at that initial market transition, Bill really saw the opportunity for us to be able to write an operating system to leverage this PC and help it proliferate. And certainly today in mature markets, that dream is mostly fulfilled. In emerging markets, it’s happening very, very rapidly. And that’s exciting to see that come to fruition.

And you look at what happened with the PC. And then applications were built around that, and certainly that helped enable all kinds of interesting opportunities for products like Office, with Word, and Excel, and PowerPoint, and the beautiful things that came from that. And there was a market transition there to the graphical user interface. And Microsoft was one of the first companies to really take advantage of that transition, and reinvent ourselves around the graphical user interface, and certainly Windows.

And then you look at the mid-’80s, and you have the client and server, and distributed computing began to really put the power of the PC and technology in the hands of individual end users, not just a few people in the IT department. And that was an important transition for the company. We started a server business with NT, and really have been able to really have a successful business in that area. But reinventing ourselves around distributed computing was a big transition.

And then certainly the Internet. And I remember Bill wrote a famous memo about the Internet tidal wave, and the importance that the Internet was going to have on our lives, and society, and business. And certainly that’s really continuing to evolve and come true when you think about what’s emerged in that transition with browsers and the proliferation of e-mail and e-commerce, and all the different technologies that have come along with it, are just incredible.

But, today we’re really on the cusp of a huge market transition, as well, and it’s cloud, and it’s cloud services. And the opportunity for us to take advantage, as we have in our history, of reinventing ourselves around cloud and cloud services is a unique inflection point for Microsoft and it’s a unique inflection point for all of the end users out there in both consumer and business. So, that’s what I’d like to talk about today is how we really plan to be on the forefront in leading with the cloud and leading with cloud services in this, what we think is, significant, important market transition.

If you look at Microsoft the company, and you think about the cloud and the opportunity for the cloud to interface with client, I think it’s a real important aspect, because there’s going to be an incredible amount of devices. There’s going to be an incredible amount of technology that interfaces with the cloud. And you look at what the cloud is able to do for us, from scales resources as needed, so that the ability for a company to write an application and put it up in the cloud and not have to provision servers, and not have to run power, and not have to have data center footage is an interesting way to really increase the speed of business and the speed of competitive advantage. And that’s just one way that the cloud is going to completely change and revolutionize the opportunity for technology to provide competitive advantage.

And we see the client devices continuing to come in all shapes and sizes, from readers to pads, to laptops, to all-in-one devices, to in the car — it’s just an incredible opportunity for the client to interface with the cloud and really take things to a different level from a technology standpoint.

So, we took a look and said, what should our new aspiration be as a company? And it’s this idea that, yes, we’re going to get in the cloud and, yes, we’re going to have a significant on-premises business, as well. And how do we manage ourselves so that we can balance both of those businesses across consumers, as well as commercial business? And one of the things when we looked at that is we saw that the digital lifestyle and the digital work-style continues to have more and more overlap, because where people work, how they work, and when they work continues to have more and more overlap between the home, in the living room, the workplace in computing on the go.

And that’s a significant opportunity for us to really figure out how we can bridge the gap between the digital work-style and the digital lifestyle. So, having the three screens across the PC, the mobile device, the television in the home, and the cloud is an important extension and enablement that opens up a world of opportunity. And we have today, ladies and gentlemen, the broadest cloud offering in the marketplace. Let me show you what I mean by that.

If you look in the consumer space, we took a look and said, gosh, we’ve been doing some elements of cloud computing for over 15 years with properties like our MSN portal, with over 600 million unique users, and our Hotmail property of $369 million. Our Windows Live ID functionality, which is a wonderful extension to the client, and I’ll talk about that more in a minute, with over 500 million Windows Live IDs.

Our Zune social media platform with over 6 million songs today in our catalogue, and we’re actually enabling that marketplace through Xbox in 18 countries. It’s an incredible proliferation. And one of our most successful recent software-plus-services and cloud services initiatives has been the Xbox LIVE platform with over 20 million unique and paid subscribers that utilize that particular property. And our exciting search product with Bing coming out, which is now up to over 3 billion worldwide queries each and every month, are just examples of the cloud services for consumers where we’re extending across the three different devices — is really at the heart of our mission and aspiration.

When you think about Windows 7, the most successful operating system we’ve ever released in our history. It’s the highest-quality operating system we’ve ever released in our history. This year they will sell 300-plus million PCs. That’s what the forecast is. You know what, Windows will be on 300 million of those PCs this year and that’s an incredible statement to that particular product and the opportunity that we have to continue to work with customers and end users and consumers, as well as refresh the desktops for enterprises. And in looking at the core operating system of the company what are the ways  what ways are cloud services going to be an extension for it.

When you look at things like Internet Explorer 8, which is the safest, most secure browser in the marketplace today, the 500 million Windows Live capabilities and how it lights up all kinds of wonderful scenarios within Windows. The Hotmail that I talked about. Windows Live Messenger, which has several hundred million users every day. MSN and something called Windows Live SkyDrive, which is just on fire and extremely popular with college students for the ability for them to put their work in the cloud very simply from their Windows desktop.

These are all extensions to help improve the Windows Experience for end users, consumers, as well as commercial business, and a great example for you to think through on the consumer side. And the other platform that is equally important has to do with phone. And when you think about the opportunity for Windows Phone, I think it’s an incredible platform that we put in the marketplace with Windows Phone 7. And the Windows Phone 7 product, particularly, is a new experience  it’s a new experience that allows us to take the best of mobile computing and take the best of cloud services and put those two things in that experience into one particular platform.

Now, we just announced the Windows Phone 7 this past week and a half ago in Barcelona at the World Mobile Congress. And it’s an entirely new platform for us. You’re going to see us continue to invest in our Windows Mobile technology. It’s integrated. It’s going to provide integrated experiences that still allow developers to innovate on the platform and open up a whole new world of marketplace opportunities. And with our hardware vendors, we’re going to make sure we raise the bar with this particular product and have a little bit more consistency in the hardware, as well as the platform.

But, we still need to be able to enable their innovation. And with our mobile operators, where we’ve raised the bar, we’re going to continue to find ways where we can build capabilities in their network and take the power of Xbox games and take it to the mobile phone. Take the power of the Zune Marketplace and music players, and take it to the mobile phone, and take the power of great browsing in the Internet Explorer experience, and take those things to the phone.

So, without talking about it much more, I’d like you to see a short video that really helps you understand where we’re headed with Windows Phone 7, which we believe is going to be a transformational product for us.

(Video segment.)

And so, we’re excited about Windows Phone 7. It’s the first time we’re going to leverage all the Microsoft technology and assets with a completely new and fresh UI, and really connect that digital lifestyle and digital work-style. And as you saw from that short video, it’s not a me-too product. It’s transformational, the ability to find, use and connect with people. The ability to merge what you do in the workplace with what you do socially is here. This is a great enabler, and a great tool that’s going to really transform the way people work, live and play. And so we’re very excited about that. And the extension to those cloud services is so important, because it’s absolutely the way that lights up the scenarios on the actual device, or the client.

Now, let’s talk a little bit about our commercial cloud services. What’s Microsoft doing in the commercial cloud services? Well, in this particular space, we’re leading. We’re leading the industry. We are leading with the cloud. You talk about the product Office, and with our Office 2010, Office is now in the cloud. You talk about Exchange, we’ve got Exchange 2010 in the marketplace. Exchange is now in the cloud. You talk about SharePoint, the fastest-selling product in the history of Microsoft. It’s now in the cloud. You talk about our wonderful CRM product that’s just growing like crazy. It’s now in the cloud.

And then you talk about SQL, and you talk about the opportunity to have a platform in the cloud with Windows Server. Well, we have a platform called Azure, which is now in the cloud. And you talk about identity, and the ability for you to federate what you do on-premise with a cloud. We offer those services today.

So, what I’m showing you on this particular slide with this particular segment of my remarks today is where we are today. Not where we want to be, not where we aspire to be; this is what we have in market today. And this is our coming-out party here at CeBIT to really kick-start the fact that Microsoft is leading in the cloud, and it’s an incredible opportunity for you, and we’re going to continue to do that.

And we’re going to work with you on the things you want to keep on-premise as well, but we’re going to change and reinvent our company around leading in the cloud. And that’s an important aspect.

And I told you some about Office, and the opportunity for Office in the cloud. Office 2010, with the Web App capability, Excel, PowerPoint, Word, OneNote, is just an incredible way to light up the power of Office. And we’re bringing Office to the mobile device, and we’re bringing it in the cloud. And so, it’s just a wonderful extension to that incredible product of Word, Excel, PowerPoint, and all the features and functions that we have with that capability are now going to be available everywhere. And that’s the power of the cloud. That’s an example of why we think this market transition is so significant.

I talked some about Azure, the platform. What a great opportunity when you have a new application you want to do, or try, or test. You just simply go to a Web site, enter your credit card, and you’re able to develop, utilize CPU, utilize the full Microsoft development platform at your fingertips. And it’s a pay-for-utilization model. It’s an incredible model that we now have in production that is just proliferating. We’re getting thousands of people signing up to the Azure platform to be able to build, and use this disposable computing that’s over and available through cloud services. It’s an outstanding opportunity.

And so you look across our three screens and the cloud, and on-premise, this is our vision. This is our aspiration. This is how we’re reinventing Microsoft, and what we’re bringing to the marketplace. And this is a company that will invest $9.5 billion this year in R&D. Not only is that $3 billion more than the next closest technology company, it’s now more than any company in the world, which is an incredible opportunity to really, especially in light of the tough, difficult macroeconomic times that we’re coming out of, we chose to really lean in, and double down on our innovation and R&D story, because we feel like this is an incredible, unique inflection point in time, and we want to lead in the cloud.

And we’ve got some commitments to our customers. We’re going to continue to listen and seek to understand your business. We’re going to continue to connect in a deep way. We’re going to invest for the long term. As I said, $9-1/2 billion in R&D, that’s our commitment, to keep bringing out wonderful products like Windows 7, and Office 2010, and SharePoint 2010, and Windows Phone 7, and Bing.

We’re going to lead with the cloud, and we’re also going to work with you to help you rationalize what you want to keep on-premise. That’s a great model. We’ll continue to enable that, and lead you with the cloud and what you want to manage on-premise. We’re going to help you drive deployment and business value. That’s an important aspect for us. In the cloud, the opportunity for you to take those resources for things you used to manage, and turn those into strategic development capabilities, is at your fingertips now with letting us, and our partners, work with you to take off some of the work from some of the operations capability that you manage today.

And, last, we’re going to continue to work hard to earn your trust, and earn your business. So, we’re very excited about this unique market transition to the cloud, and cloud services. And, again, I think we’re going to  Astrid is going to come out, and we’ll take some questions. But, on behalf of Microsoft, and all of our team here, we’re humbled and honored to be able to share with you our excitement, and our philosophy about this unique market transition, and how we plan to lead with the cloud in the future.

Thank you. (Applause.)

END