Kurt DelBene, Chris Capossela, Betsy Frost Webb: Microsoft Office 365

BETSY FROST WEBB: Good morning, and welcome. I want to thank those of you who are joining us here in the room today, as well as those of you who are joining us via Web today. I particularly also would like to call out and thank you to our customers who are joining us here today. Our customers such as Starwood Hotels, the Herbfarm, Aeon Corp., All of Us Designs, and the Wyse Group, customers representing a broad base from around the world. I also want to welcome and thank our partners who are joining us today, Avanade, Insight, Nortel, Ingram Micro, as well as Mamoo, PointBridge, Slalom, a number of partners. Thank you for coming with us along a cloud journey and being with us today.

I also want to thank CSC for joining us today, one of our partners, who just yesterday announced that the State of California is going to be working with CSC and Microsoft for online services. A wonderful opportunity, a wonderful opportunity for the people of California, 169,000 state employees, to have the best of business-grade e-mail capabilities; a wonderful opportunity for cloud services to deliver capabilities to allow the state to consolidate over 100 e-mail systems, and to gain the efficiencies that the state needs. It’s a wonderful example of the power of the cloud to deliver services to organizations and benefits to the states.

I’m Betsy Frost Webb, the general manager of our marketing team for Online Services, and I’m thrilled to be here with you this morning. Just two years ago, we were at the same hotel in the same room, and we talked about the fact that we were going to be bringing online services to customers in the United States, that we would be enabling our customers to be able to use SharePoint and Exchange Online. And in the last couple of years, our business has grown tremendously. We’re in business in over 40 markets today, and we have millions of people who are using cloud services today, demonstrating the power of the cloud, and the interest from our customers together as well as our partners in cloud services.

Today, Kurt DelBene, the newly appointed president of the Microsoft Office Division, and Chris Capossela, the senior vice president of Marketing in the Microsoft Office Division, will be joining you to tell you how we are catapulting our strategy for cloud services going forward.

Kurt will join me in just a few minutes, but for those of you who haven’t had a chance to meet him yet, I thought I would take a few minutes to introduce him. He’s been in business and technology for over 27 years in a broad range of positions, from management consulting at McKinsey & Company to software development at AT&T Bell Labs.

And for the last 18 years, Kurt DelBene has been a business and engineering leader at Microsoft in a variety of positions, and very focused on productivity. He joined the Outlook team after the very first release, and was at the beginning of SharePoint. With that business, driving the strategy and leading the engineering team from its early idea to where it is today, over a billion-dollar business delivering benefits to organizations of all sizes.

He was also responsible for leading the 2010 wave of technology, leading the engineering and business planning behind that, introducing our flagship products, Office, SharePoint, Exchange, and Lync. So far, this release has been so well received by our customers. In fact, this is the fastest-selling version of Office in our history. Together, he has provided a broad range of leadership across our business.

And it’s my pleasure to work with Kurt DelBene, and my pleasure to introduce him to you this morning. Please join me in welcoming Kurt DelBene. (Applause.)

Good morning, Kurt.

KURT DELBENE: Thanks, Betsy, and thanks to all of you for being here today in San Francisco. I’m excited to be here to talk to you about our future vision for productivity, and for the Office business in particular. As Betsy mentioned, early in my career, I led the Outlook business, and that was the point where Outlook was really at its infancy, but we had a vision. We had a vision that people didn’t want to use different applications for e-mail, and for calendaring, and contacts. And we also shared a vision with the Exchange Team that if we created a rich client and server set of applications, we could actually transform the way people do business. We could help them make smarter, faster decisions. And so we set upon a path to really evolve the Office business to the point where it’s really become the leading client and server messaging and calendaring system on the planet. And we did that by listening to customers, by looking at where the industry is going overall, and by having a vision ourselves, and setting forward on that vision release after release until we accomplished our goal.

And today that journey continues, and the vision evolves as the market changes, and the needs of our customers change as well. About a decade ago, with the advent of Exchange, and with SharePoint, and Lync, we actually transformed our vision from just being about the Office applications and personal productivity to really being about teams, and how they work together to accomplish their goals as an organization.

And, as Betsy mentioned, just two years ago we launched Exchange and SharePoint as online services. That launch brought a strong signal, both to our teams internally and to the market as well, that we would move our core applications to the cloud, and that we would put the cloud at the center of our strategy moving forward, and our vision.

We believed in the cloud, and we embraced the cloud, because we actually thought it would transform the way that people work. It’s not just about a business transformation; it’s about new things that we can deliver to customers. And in just two years we’ve had tremendous success. Take companies from Aeon to Aviva, from Gap to GlaxoSmithKline, from Starbucks to Starwood; companies in 40 countries across the world have really embraced the cloud and Microsoft’s offering, and those are just the name brands; there are thousands of business customers of all sizes, governments from California to Holland, and schools from around the world are moving to the cloud services from Microsoft. And we’ve had remarkable success, and remarkable adoption from this point.

So, today, our business customers are sending and receiving 167 million messages every day from our cloud services. That’s about 2,000 messages every second. And since I started speaking, that’s a quarter of a million messages that have been sent and received on Microsoft’s cloud services.

We’ve accomplished this because we’ve really transformed how we think about our engineering systems. Every single person in the Microsoft Office Division is now thinking about what cloud services mean to our customers, what they mean for our business, what they mean for our products. We’re building industry-leading data centers across the world, and we’ve changed the way that we actually deliver our services so we now reprovision and update our service every 90 days.

As a result, our customers are also changing the way that they think about the cloud. Just a few years ago, our customers were asking us, should the move to the cloud? That conversation has dramatically changed in just a few years. They’re now asking us, when should they move to the cloud, and what should they move to the cloud moving forward. So, we’re unequivocally at a pivot point in the adoption of cloud services.

When I talk to customers about the cloud, there’s a kind of general assumption that it’s really just about a business model transformation. It’s about taking the infrastructure that they hold within their organization, and figuring out, how do we move that to our infrastructure, to our data centers. It’s about thinking about how do we move from a licensing model to a subscription model. But that’s really not the way to think about the cloud. The cloud is a transformation, and it’s a technology transformation. In fact, we believe it’s one of the most impactful transformations that will happen in our generation. We think it’s similar in magnitude to the change to the graphical user interface, and we think it brings on huge new possibilities and opportunities, not just for us, and our business, but also for our customers in terms of what we can deliver to them.

It’s a transformation that enables people to work more closely together, and more efficiently across boundaries. This means that individuals within a company can have the full capabilities of their infrastructure regardless of where they are in the world. It means they can reach out to their customers, to their partners, just as easily as they reach out to others within their organization, and they can do all that simply and securely, a critical capability that has to be there.

So, take for example the Starwood Group. As Betsy mentioned, they’re the owners of the St. Regis, and they own properties around the world, including this hotel. They use the cloud to enable their regional managers to work better together. Each of their managers operates something like 70 to 80 hotels around the world, and Starwood managers are using the cloud services to improve the way they manage those properties. They’re using Web conferencing together with collaboration and messaging, and it’s really changed the way they think about things like promotions, how they train new employees, and how they share best practices. It’s really been transformational in terms of how they think, about their business.

What it means is now their managers can work virtually in a way that they never could physically. They couldn’t necessarily get to all those properties across the world on a regular basis. I actually had dinner with Jim, and members of his team last night, and he said that his team itself, their IT organization, operates virtually as well because of some of these technologies that we’re delivering to them. So, it’s really transformed the way that they think about the business.

Secondly, the cloud actually changes the rules of business for our users. We can deliver technology to the largest of our businesses in the same way those technologies to the smallest businesses as well. That’s because the cloud takes advantage of both scale economies and skill economies.

What that means is now a business basically gets elastic IT capacity. At their fingertips is 20 football fields of IT capacity whenever they need it. And thousands of our engineers are immediately at their side. This is not feasible for individual companies, particularly of a small size. With the cloud we can offer these capabilities to a vast new class of customers, and do so at a much lower cost.

Since we’ve lowered the barriers of entry this means that a self-employed professional, a local municipality, a startup in Silicon Valley, can all benefit from enterprise-class applications. Take the capabilities in the richest, largest organization and we can deliver those services, those complete services to all of those users. And this means that they can compete with those large organizations immediately, out of the gate at whatever scale is appropriate for them.

Let me give you another example, The Herbfarm, which is a fantastic restaurant in our backyard outside of Seattle, they actually use the cloud to communicate and to set their menu. So, what happens is a sous chef goes to the local market every morning and they find out what produce is fresh, what meat is available and what they should think about putting in the menu. They communicate that back to the chef. The chef figures out how to put together the menu, the manager prints up that menu, and they’ve got that for their diners that night. So, that’s a case where the cloud and our services enable them to deliver a world-class menu each and every night.

It also means that Thomas, who is a guest here today, I think Thomas is in the room, it means Thomas can focus on guest services and making every guest comfortable every day, and doesn’t have to worry about his IT infrastructure, because we take care of that for him. The third thing that the cloud does is it allows you to have agile IT. Companies that make changes and scale out in different ways can take advantage of the cloud to do that. So, imagine a company takes an acquisition, or it grows in scale, it opens a new store, it does a holiday promotion; they can expand their infrastructure to take advantage of that, and they can do that virtually instantaneously.

As an example, the Lions Gate Studios recently acquired the TV Guide Network. They were able to get the TV Guide Network up on their infrastructure in a matter of a week. Something that was never possible in the past is made possible, because of the power of the cloud. So, those are great examples of how the cloud brings new value to organizations really of all types and sizes, which brings us to today’s news.

When we began developing the Office 2010 product several years ago we knew that delivering these capabilities both on-premises and in the cloud would be essential to us. And we knew we had the possibility and the opportunity to push the boundaries of our vision by thinking about the release in that context. We know we had the ability to transform, literally transform the IT infrastructure, the landscape, and transform business as we knew it, from small and midsized companies to large companies, to government agencies, and to educational institutions, as well. And that’s why I’m pleased to be here to announce the next step in Microsoft’s productivity vision, Office 365.

Office 365 brings together SharePoint, Exchange, Lync, and for the very first time Office as a subscription for services and organizations of all sizes. We chose the name Office 365, because nothing says productivity better than Office and customers will get the best of everything we know about productivity 365 days a year. We also recognize that the cloud brings new responsibilities to us, as we take responsibilities for the customer’s infrastructure and bring that into our data centers. That’s a huge responsibility that we’re committing to today. And that’s why we’ve dedicated tens of thousands of engineers to support Office 365 and we’re investing deeply in our cloud services. Office 365 is the biggest commitment that we’ve made to customers and partners.

We started accepting applications for the beta today, and with a few thousand organizations across 13 countries worldwide we’ll actually ship Office 365 worldwide next year. And now I’d like to invite Chris Capossela on stage, and he can walk us through the details of Office 365.

Chris.

CHRIS CAPOSSELA: Kurt, thank you.

KURT DELBENE: Thank you.

CHRIS CAPOSSELA: Well, good morning, everybody. It’s a real pleasure to be here today to talk about Office 365. You should think of this as really everything we know about productivity brought to the cloud as a great productivity service, hosted by Microsoft. Kurt talked a little bit about this, but I just wanted to be super-clear that Office 365 brings together Exchange, SharePoint, Lync, the Office Web Applications, and Office Pro Plus, the rich client that runs on your PC, all in one integrated productivity service from Microsoft. And we’re incredibly excited about it.

Again, Office stands for productivity and we stand behind this productivity service 365 days a year and we always keep it up to date. So, you’re currently always using the latest version of our software.

We think there are really five core reasons that customers will bet on Microsoft for their productivity and on Office 365 for their cloud productivity. The first one, of course, is that it enables people to work together smarter, and it allows people anywhere access to their information. Using a PC, a phone, a browser, using IE, Safari, Chrome, Firefox, you can connect to the Internet, get to your e-mail, get to your documents, collaborate with other people on those documents. You don’t have to connect to a corporate firewall; it’s all just incredibly easy to do and that we think is obviously super-important.

When it comes to using Office, of course there’s no learning curve. It’s just the Office people know and love today. You’re using Outlook on your PC, or on your Macintosh. You’re using Outlook in the browser. You’re using any phone that supports Active Sync to be able to get to your e-mail and your documents. There is no learning curve.

End users really aren’t going to see much of a difference. They’re just using the same tools that they’re used to today with Office. It will be the latest version of those tools, but they’ll be connecting up to our data center, using Exchange and SharePoint, and Lync on the back end, but the end user experience of Outlook on the PC, phone, and browser, Word on the PC, phone and browser, all of those tools are really unchanged. So, there’s no learning curve for end users.

Of course, we think we can really differentiate from our competition, particularly competitors coming from the consumer space, by making sure that our data centers and our service are incredibly secure and reliable. Many customers who look at our data centers tell us that that security that we provide is far beyond anything that they’d be able to afford in their own data center. So, that’s a real differentiator for us.

And then finally, we give IT professionals and our partners a lot of control over how the cloud service works. They can control all sorts of features and functions for the end user, almost as if they were running the servers on-premise themselves. So, that combination of a cloud productivity service, that runs securely and reliably, and IT control, we think is a real winner for us. We feel like just as Office defined productivity on the desktop, Office 365 will define productivity in the cloud. And we couldn’t be more excited about it.

Now, for Microsoft and our partners, there were really some exciting opportunities here. I would say the first big opportunity is to reach customers that we’ve never reached before, customers like the Herbfarm, small organizations who just don’t have the IT staff to really run Exchange, or SharePoint, or Lync. So, with Office 365, we’ll be introducing a new plan, or a new offer that’s very targeted to extremely small businesses. This is really focused on 1 to 25 users, so we think that the independent professional working on their own is going to love this service. We think a 10-person architecture firm will love this service. We think a five-person PR firm would love this service. Targeted at the very, very loose end, no IT needed, incredibly fast and easy to get up and running with a trial, and then to buy it. We’ve got a financially backed guaranteed SLA of 99.9 percent uptime, and then when it comes to the actually functionality that we’re providing, we think small businesses are going to love this. Of course e-mail and calendaring using Exchange, but as mentioned it’s mobile. You can use your iPad, you can use your iPhone, you can use your Android device, you can use a Windows Phone 7 device, anything that supports Active Sync means that you connect to Office 365 very easily, and you’ve got e-mail on the go. The Herbfarm example is a perfect example of that.

We’re also delivering a public-facing website for small businesses, so they can create their own presence on the Internet with incredibly simple tools that they can use just using SharePoint to edit and publish content on the Web.

We’re also providing an intranet, or team site capability, for small businesses to collaborate inside their company, and extranet capabilities so they can create a team site that they then share with people outside their small business, maybe their lawyer, or their accountant, or their PR agency. So, whether it’s Internet, extranet, or intranet, our Office 365 has small businesses covered. This offer also includes the Office Web Applications, being able to run lightweight versions of Word, Excel, PowerPoint, OneNote, et cetera, in the browser. And we think small businesses will absolutely love the videoconferencing technology that Lync brings to the table to connect them with people all over the planet, and do audio and videoconferencing, all of this for $6 per user per month.

This is a great opportunity for Microsoft to expand our reach into the very small business space. Today we sell Windows and Office to small businesses, but we really don’t reach them with Exchange and SharePoint and Lync. And it’s also a wonderful partner opportunity as well, and we’re quite excited about this.

When it comes to the enterprise, we think that one size does not fit all in this segment. We talked to many, many CIOs who tell us, hey, I don’t want to provide the exact same technology to my manufacturing shop floor workers and to my information workers in the finance department. You’ve got to help me create the right offer for the right user. So, Office 365 for enterprises will have a variety of different offers ranging from that kiosk worker, or that manufacturing shop floor worker, who really just needs very basic e-mail, all the way up to the CFO of the company, who needs the richest tools at their disposal.

One of the reason is we think people will choose Office 365 is because we provide a single platform for all their users. You’re not going to use one company’s solution for a certain set of users, and another company’s solution for another. That’s a management nightmare. So, a single platform for everybody from the manufacturing shop floor to the board of directors.

Of course, enterprise-quality support, and one of our top requested features, a single sign-on, which allows you to just sign on to your PC, and will automatically sign you in to Office 365 at the same time.

Now, Kurt mentioned that one of the things we’re quite excited about that’s new with Office 365 is not just bringing the Web Apps to the service, the Office Web Apps that run in the browser, but actually bringing the rich Office client, the Office Pro Plus client to the cloud. When you subscribe to Office 365, you have the ability to download Office Pro Plus, the rich client, onto your machine, and run it on your machine. It automatically connects up to the Office 365 cloud for Exchange and SharePoint and Lync, and you’ve got the best of both worlds. You’ve got the rich experience on your PC, you’ve got the reach experience in the browser, and of course, you’ve got the mobile phone as well.

Now, we’re bringing all of the sophisticated capabilities of Exchange, and Lync, and SharePoint to our enterprise customers. Some of the features that people tell us they’re most excited about are social networking using SharePoint, team sites with SharePoint, we give people 25 gigabytes of e-mail storage. But, if you move to one of our offers that includes e-mail archiving, now you have a full-blown e-mail archiving solution with unlimited mail storage for those users, and a lot of IT professionals are quite excited about that. We deliver voice mail directly to your inbox. We give you voice and videoconferencing all in this integrated service.

The offers here range from $2 per user per month for the sort of manufacturing shop floor, very basic e-mail, up to $27 per user per month list price. Obviously volume discounts will apply. So, we couldn’t be more excited about being able to bring the right offer to the right user on a single platform. And I know our customers are really looking forward to that as well.

One thing I should also mention is that we are transforming our Live@edu program for academic institutions to Office 365 for education. We’ll have more details to share about the exact offerings for institutions, but of course there will be free offerings just as we have with Live@edu, and there will be paid-for offerings for administrators at universities, K through 12 schools, et cetera. So, you can think of Office Live Small Business, the Business Productivity Online Suite, and Live@edu all coming together in this next generation with Office 365, for small business, for enterprises, for education. And we’re quite, quite excited about it.

I mentioned that we think this is a wonderful growth opportunity for Microsoft. Traditionally Microsoft has only competed in the software space, which is about 15 percent of any IT budget goes to software. With Office 365 and our other cloud services we’re actually now in a much larger pool of IT spend, because we’re actually running a company’s infrastructure.

That gives us an opportunity to increase our absolute profit and our revenue, but it also gives us an opportunity to save our customers real money. On average 10 to 50 percent cost savings is what we’re seeing customers tell us that they’re realizing by moving their productivity infrastructure to the cloud. We also see it as a wonderful partner opportunity to reach new customers, to provide actual services on how to use the software, not just how to deploy the software.

So, we’re quite excited about redefining productivity once again. Office did it on the desktop. Office 365 will do it in the cloud. And I wanted to close my session with just a short video that we taped at one of our customer and partner airlift events a little bit earlier this year.

(Video segment.)

BETSY FROST WEBB: OK. You’ve heard it from our leaders, you’ve heard it from our customers and partners. This has been a terrific journey for the cloud and Microsoft online services, and with Office 365 it just gets better. We absolutely would love you to learn more. We invite you to learn more at the Microsoft News Center. And beginning today at noon you can learn more on Office365.com. Get all the information you want, as well as sign up to test out the beta.

For those of you who want to follow us on this journey, we absolutely invite you to continue to participate in the conversation. Follow us on Twitter, friend us on Facebook, ask your questions. We’ll be answering those questions every day as we get them and want to make sure that you’re as excited as we are about Office 365. Thank you much.

And for those of you who are in the room with us today, I’d like to invite you to stay and continue the conversation. When we started I mentioned that we have customers and partners who are with us, with all of you, or press, and we’d love to continue the conversation to talk further about Office 365 and services from Microsoft. We have refreshments outside and look forward to continuing that conversation with Kurt, Chris, Aaron, Kelly and myself.

Thanks again.

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