ANNOUNCER: Ladies and gentlemen, please welcome Microsoft’s chief operating officer, Kevin Turner. (Cheers, applause … )

KEVIN TURNER: Good morning! Good morning!

All right, it’s great to be here to conclude our partner conference this week, and what a week we’ve had. It is incredible when we represent over 8,000 partners from 145 countries here just this week. And that is really, really awesome, I mean, because that is a big increase that we’ve had as we continue to grow this wonderful event that Allison and her team put on.

And I’ll tell you, I love spending time with our partners. I probably spend as much time, if not the most time, at Microsoft with partners. I travel around the world doing partner roundtables in every single location that I go to, between 30 and 35 countries a year. And certainly the time I spend with partners is the most valuable time that I invest, and that is something, time is the one thing that none of us have enough of, and so it is a very, very important use of our time.

And I’ll tell you a couple things: One, we’re on the same side as partners. We’re a company that 33 years ago, that Bill and Steve founded this company to be able to enable software for third parties, and to be led by partners. That is a difference in Microsoft, and I want to talk to you today and sort of pull the culmination of the event and everything that you’ve heard and all the strategy together to really package it for you from an advantage standpoint. And I’m going to take a look back at FY08 and sort of how we finished the year, and then I’m going to talk to you about as we transition into ’09 what excites me about it from a revenue standpoint, from an investment standpoint, from where we’re going as a company and certainly the advantages that we have going forward.

But before I do that, I want to say thank you. I want to say thank you to the partners who have delivered this past year.

And I’ll tell you a couple things. One, every quarter after quarter after quarter you’ve helped us grow our business. You’ve grown your business. And certainly it has been a year, not necessarily the easiest year from an economic conditions standpoint, but it has been a year of where you’ve persevered, and where you’ve leveraged and something what I would call ROI. That means return on investment to a lot of people. To us it means Return on Innovation, and you’ve leveraged that innovation, and you’ve leveraged it from a monetization standpoint, and I want to say thank you.

I want to say thank you for taking the time to be here. We think this is a super important event for us to get your feedback, and to be able to calibrate with you and share commitments on what we’re going to deliver this next year.

But certainly I want to say thank you throughout the year for the tough feedback. You all continue to give us good, tough, constructive feedback, and I want you to know on behalf of all the senior management at Microsoft, we need that, we appreciate that, and I want you to know to keep it coming, because we’re just getting started as it relates to where we’re going to go from a technology standpoint. So, thank you very much. (Applause.)

You know, this launch has been covered. We had a wonderful launch; in fact, one of the greatest launches that we’ve ever had in the history of Microsoft. And when you think about the three products — Visual Studio, Windows Server 2008, new release of SQL Server — what opportunities that we have to really monetize in the marketplace.

Last year, I told you it was a feeding frenzy of revenue sharing opportunities, and it has delivered. And we’re going to have so much fun competing in this virtualization space.

On the way down here from Seattle I was reading a Goldman Sachs report on IT spend, where are CIOs going to spend their money this next year.

Number one and number two on their latest survey was server virtualization and server consolidation, moved way up the chart year over year, number one and number two.

With Hyper-V and the release that we’ve done with Windows Server 2008, and where we’re going, we are going to have a ton of fun, ladies and gentlemen, competing in that virtualization space and getting after it in a big, big way.

Our SQL Server launch: incredible. SQL Server 2008, what we’re doing there, we’ve got over 500,000 people who have already previewed and are utilizing the technology in the marketplace, and we’re going to have a lot of fun in that space as well. So, thank you very much for a great launch, and certainly that is a launch that we’re going to leverage this year from a return on innovation standpoint.

As is customary, I also like to say, what did I tell you last year that we were going to do for you? What are the things that I said you can count on Microsoft for?

So, I always each year, I’m going to hold the mirror up, and I will next year as well, and say, hey, look, here’s the things I said, did we deliver those things.

I told you we were going to have a long term approach to innovation, and that we were going to invest (US)$2.3 billion into our partner ecosystem in that year. We did that.

I told you that we were going to continue to take that long term approach to innovation, and invest over (US)$7 billion in R&D, and we did that.

And I told you that we were going to get committed to software plus services, and one of the biggest commitments I made to you a year ago was, look, we’re going to get you the monetization models so that you know how partners play in our software plus services strategy by the next Partner Conference. And Stephen Elop kicked off the week with that particular monetization opportunity, and what a great opportunity it is, but we’ve delivered that, and we’re going to continue to deliver on that.

And then I talked to you about multi-core innovation, and the fact that we’re going to continue to develop across the PC, the phone, the Web, and certainly I’ll share with you some of the progress we’ve made, and some of the future of where we’re going in FY ’09.

And then I talked about people, and we certified this past year 55,000 new partners, ladies and gentlemen. So, this is the Microsoft advantage that we had a year ago.

So, let me unveil and release sort of the new Microsoft strategy and framework for FY ’08 as we go into FY ’09.

You’ll notice it’s the same one. Now, the components that I’m going to talk about will be different, we’re going to make different and increase our investments, but it’s important that you understand from an adherence standpoint something we’re working on at Microsoft is really driving the consistency.

As I prepare to talk with you each year at this Worldwide Partner event, the thing I ask myself as I prepare what I’m going to say is, hey, if I were a partner, why would I bet on Microsoft? Because as a partner you have a lot of choice, just like our customers do, you have choice, and we know that.

Fiscal Year 2009 Investments

So, as I prepare the framework for what is the Microsoft advantage, it’s important that you understand we’re going to continue to stick to that framework. We’re going to continue to have adherence to that framework and build on that framework so that we can get that consistency and you can know what to bet your business model on, because you can count on Microsoft to have your back, to be there with you from an investment standpoint, and to continue to help lead the innovation in the marketplace.

And the first area I want to highlight in FY ’09 is the long term approach to innovation. Now, this year, like other years, we’re going to invest over (US)$7 billion again in research and development, more than any technology company in the world, and we’re going to continue to do that.

You know what? That’s a big deal, because as other companies are pulling back their R&D investment, we’re still hiring, we’re still growing, we’re still continuing to invest in our future, because we’re not running this company for one year at a time; we’re running this company for the long term.

And if you take a look back and say, how did we do in FY ’08, how did we do from an innovation standpoint, did we deliver it, let’s take a look at some of the products that we put in the marketplace this past year.

And I apologize for the people up top, because as I build this slide each year, it’s not intended to be an eye chart, but it turns into one, because of again a multi-core company with all kinds of assets and innovation as you continue to go through it: operating systems, security, IT operations, business platforms, application platforms, entertainment and devices, online, collaboration; incredible, incredible.

I mean, SharePoint is one simple example. It’s the fastest growing product in the history of Microsoft, fastest to a billion dollars. Why? Because of the partner ecosystem. Why? Because of the work that you and your team do every day with our customers. We don’t have enough partner capacity today for SharePoint. We cannot keep up with the demand in the marketplace. What a great problem for all of us to solve and have. That’s an example.

So, this is FY ’08. I know you’re asking, well, what does FY ’09 look like? Are we going to continue to see that? Because ’07 was pretty good, ’08 was really good; what’s ’09 look like?

Well, let me give you a look under the hood. Take a look at what FY ’09 is coming out. Again, these are all new products hitting the marketplace this next year, from operating systems, all the way through our Dynamics portfolio, looking at identity and security, the application platform, again tons of entertainment and devices; I know you all heard about Windows Mobile this week, looking at IT operations, and our online area and certainly collaboration again, another release of our SharePoint Online system, which is going to be really, really well received in the marketplace.

So, we are not slowing down, ladies and gentlemen. This is the foundation of the five things that I talked to you about on the Microsoft advantage on why Microsoft. It’s this investment and belief for the long term from an innovation standpoint that we’re going to continue to drive.

Now let’s talk about the partner ecosystem. We’ve got one heck of a partner ecosystem: 645,000 partners. The majority of our revenue comes from or partner channel. It is the strength of our business. What technology company do you know that can say that? We didn’t grow our business and then create a partner ecosystem; we grew our business with a partner ecosystem. It is in our DNA.

And we’ve got a lot of different partner types, and we’re working harder and harder, Allison and her team are working harder and harder to make sure we tailor our offering, make sure we tailor what we put on the Microsoft Partner Portal to the specific partner types. That’s important to us, because even though we have 645,000 partners, not a one of them is alike.

So, we’re going to continue to create tools for you. We’ve created some incredible tools, and I’m going to share a few of them with you right now.

We have something called GearUp. If you don’t know what GearUp is for partners, I encourage you to go to the Microsoft Partner Portal and check it out. It’s the greatest single sales tool that we have in all of Microsoft. It’s the only place you can go to get one consolidated look of all of our products, solutions, and licensing scenarios in one location.

When I came to Microsoft, I said, well, just give me a book that has all the products, solutions, and licensing scenarios in it. People looked at me and said, well, we’ve got several books, we don’t have one book. And I said, well, start bringing them to me. And it took about a month to gather up what we thought were all the books.

So, we’ve created this GearUp, and we’ve made it available not only to our own people, but we extended it to partners, and that’s a very important strategic tool that I encourage you to take a look at.

We’ve got something called LicenseWise that Joe Matz and his team in Worldwide Licensing and Pricing put together that I want you to take a look at as well. You can get to it from our Microsoft Partner Portal. And LicenseWise allows you to see scenarios and pricing and the ability for you to be able to look and see what is the best option for this customer type, how should I license my business.

We’ve made some progress with our licensing simplicity but not enough. We’ve got to continue to make more on your behalf. And we’ve got a Worldwide Licensing and Pricing group that is committed to you as partners to making sure that we deliver on that licensing simplicity that you need.

And the other thing that I would tell you is the partner profitability model, Allison shared with me that we had — and a year ago I told you we had seven, and I wanted you to use them. Well, now we’ve got 13 — 13 profitability models that you can go in and do scenarios and modeling on your business and how do I make money.

Ladies and gentlemen, we aren’t there yet, but we’re going to keep getting better. We’re going to keep investing. We are going to continue to listen to your feedback and continue to tailor our solutions in the best interest of partners.

As I said, we’re on the same side as our partners, and this year we’re going to increase our investment in you by over (US)$600 million year over year. We’re going from 2.3 billion to 2.9 billion in our investment, in our training, in our rebates, in our packaging for you to be able to continue to grow your business and grow the profitability of your business. But partners are definitely in our DNA.

Characteristics of the Most Successful Microsoft Partners

I also get asked, what are the characteristics, Kevin, of our best partners around the world? What do they look like, what do they work on? And I thought about that, because I do meet with thousands of partners, as I said, in over 30 countries every year, and I really began to think about what are the characteristics, how do I answer that.

And I came up with these four things of the characteristics of the most successful partners that we have. Number one, they help customers realize business value. That may sound obvious to you, but let me propose that it’s not that obvious, because these partners define success in terms of the customer. They start there and work backwards. They’re really there to solve problems.

You know, as this economy tightens up, as IT budgets tighten up, it’s the people who have earned the status as a trusted advisor, and the people who are there in the middle of things that are helping customers solve problems that are going to get the business. Number two, deep expertise on Microsoft solutions. They just don’t accept us not communicating our roadmap. They just don’t accept that we haven’t really told them what our plans are. They demand that we tell them what our plans are. And they continue to push us to get better and better. That tight engagement with the local Microsoft sales team, they don’t accept if we have that account, partner account management with them. They don’t accept that they’re out of sync with the local team. But they’re a participant with us at the table. And fourth, constantly they challenge us to become a better company.

So these are the four things that I would tell you that the best partners, the most successful partners do throughout the world to grow their businesses and achieve success. And my challenge to you all is to keep pushing us to get better. We want the feedback. Sometimes feedback stinks. But what I tell our team internally is, look, there’s only two ways to do something, right or over. And so if we’re not right the first time, we’re going to do it over, and we’re going to keep doing it until we get it right. So keep pushing us, ladies and gentlemen, to continue to get better.

Software Plus Servivces and Partner Opportunities

Software plus services as a Microsoft advantage. You’ve heard a lot about it. The thing I want you to know is, it does come down to why are we different in the marketplace? This is the single best slide I can give you on why Microsoft in the marketplace. We have three different business models. We are committed to customer-hosted, the traditional model that built the company. We’re committed to that traditional partner opportunity. That’s the reason that many of you came to this conference is, you built your business on this model. We are sticking to that model. We’re going to continue to invest in that model.

Next, you’ve heard us talk about the partner-hosted opportunities. Certainly SQL and Windows Server are huge partner hosting opportunities. And we’ve unveiled a whole bunch of new ones for you. As you go through it, Exchange Server, Office, Live Meeting, SharePoint, et cetera, Online Communications Server, these are all new opportunities.

And third, you look at the Microsoft hosted piece, which where we release the monetization models for you all to make money. It’s an important thing that you understand we’re going to have three different models. At the center of those model is, we want to be partner led. We want partners to know that they are now equipped to go in and talk to any customer of any size about software as a service, and explain and articulate, and get proactive with some Microsoft and our Microsoft partner ecosystem software plus services, because the key factor here is that we do have the ability to extend the platform from the client to the cloud in a rich way, and our competitors cannot offer this flexibility in choice. Our competitors’ software as a service strategy, as you all know, is, hey, let me host it. There’s no software as a service. That is not the Microsoft model. Keep talking proactively with our customers about the ability that we have to give them choice.

And you all should know, we’ve embraced this disruption of software plus services, and it’s in full force. And today, as I’ll share in a minute, we’re really in a leadership position specifically in the commercial space. And we’re going to keep listening to you, and getting your feedback. We’ve got a partner council that really helps us design the monetization models that we will share. And I know when many of you do the math, you’ll figure out this is a more lucrative model than we’ve ever had before for our partners. I know I’ve already gotten some notes from some of you that have said, hey, this is great, because it gives you a chance to increase your margin structure. So when you think about, if you’re a transactional partner, you can now sell hosted services. If you’re a systems integrator, hosting or custom integration only represent opportunity. Custom development is going to continue to be a bigger and bigger opportunity as services move into the Web. And if you have the opportunity to win customers who want to move to new services models, establish a reoccurring revenue model that is a great business model opportunity for you, our partners. We’re going to win, ladies and gentlemen, in Software Plus Services, and we’re going to continue to offer that choice, and we think that’s a real strategic advantage going forward.

But I also want you to know, not only does the customer have a choice, you, the partner, also have a choice. Our model is built on choice, the traditional model, the partner-hosted model, and the Microsoft-hosted model. And you all should continue to push us to continue to give you that choice.

Multi-core. You know we started out as a desktop company 33 years ago. People ask me, where do you spend that $7-plus billion? Well, these are the four areas that we spend it on. And we’re going to continue to invest in the desktop area. We know that the PC and desktop area is important to us as an organization. Why? Because we have a billion people every single day that use our software. And there’s a little over a billion PCs in the world today, just a little over. Now, you have to understand, we only get paid for 50 million of those. Yes, what an opportunity for partners and for Microsoft. But guess what, there’s like 6.7 or 6.8 billion people in the world. We think they all need, want and someday will have a PC. So we’re going to continue to invest in the desktop area.

Enterprise, you all would know this area cold. This is the area that most of you make your money on. This is the most profitable area, highest growth area in our company. This is the area that’s carrying lots and lots of water today, and it’s paying off, and we’re investing big, big, big into it.

Entertainment and devices, Xbox, Surface, you look at MediaRoom, you look at the new  all the different games and opportunities we have there. We made a bet that the living room and computing on the go is important. And because of that bet, we’re going to continue to invest in entertainment and devices so that we can connect up to that digital lifestyle, and we’re going to bring that digital workstyle, and that lifestyle together.

The fourth area, Software Plus Services. Now people have said that some people in this space have a lead. Let me clarify something for you right now, in the commercial space for software plus services with what we’ve announced, launched, and have in market today, the world’s leader in commercial software plus services is Microsoft and the Microsoft partner ecosystem, no question. The opportunity we have in the software plus services area is in the consumer space. We are not the world leader today. Steve said yesterday, we’re a strong third, moving up, hopefully to the second position, and we’re going to keep after it until we can eventually become number one in the consumer space. But don’t let people put them together, because they’re two entirely different business models, and two business opportunities. In the commercial space, you, the partner ecosystem at Microsoft, and Microsoft are the market leaders in software plus services.

So this multi-core of innovation is a tremendous advantage that we have, particularly in tough economic times. Having the diversity of a portfolio to be able to nail your investments, to be able to tailor solutions based on the customer certainly is a big advantage.

Now I want to hare a couple of opportunities with you that I’m really excited about from a revenue growth standpoint. Windows Server 2008, Hyper-V, ladies and gentlemen, we’re going to be about two-thirds the price cheaper than VMware in the marketplace. We’re going to have a cross-platform solution. So when a customer already owns VMware, our management solution is going to allow that customer to manage their VMware investment, and the Microsoft investment. A huge strategic advantage. We’re going to be cheaper, we know it works because what we’re putting in our data centers right now is virtualized already using Windows Server 2008. This is going to be, as I said, a super big, important product for us from a revenue standpoint this next year.

SQL Server 2008, it just continues to grow. We continue to take share in the marketplace against Oracle, IBM, Sun and others. And we’re going to continue to. And this product works from a scalability standpoint, and where we’re going to continue to take it is incredible. And I’ll show you in a minute the cost advantage that we’ve got on that particular product, it’s unbelievable.

Windows Vista, and I’ll talk about that in a moment, but the security, the TCO, the sustainability story, keep those themes in your mind, because we’re going to make big noise with that because it is an excellent story in the marketplace, and we’re going to really get after that message.

Our Silverlight and our application development platform, we’ve probably made more progress as a company the last three years improving this application platform development with .NET, with Visual Studio, with Silverlight, it is an incredible opportunity to build applications and build a platform to grow your revenue.

The online services we’ve talked about. And then, of course, SharePoint. We are still behind the demand in the marketplace for the hottest and fastest growing product in our history.

So these are just a few of the things for you to think about as you go back and you make your investments for this next year. Certainly at the top of our five key platforms is people. So let’s talk about it. A year ago, I told you that we’re putting partner account managers in all the subsidiaries around the world. That it was an important function. I think Allison told me we’ve got about 1,500 PAMs here today. And this is the message that I want you to take back on partner account managers, their job is to be the executive representation to Microsoft on your behalf. Their job is to make sure that they shield you from the complexity of Microsoft. Their job is to make sure we have a partner account plan in place that we’re working on business development and relationship development with you.

I listed these high expectations of the PAM role. I want you to know what they are, because I want you to help me hold our PAMs and our country managers, and our general managers accountable for delivering the high execution on a partner account manager role. I’m committed to this role. We’re going to invest in this role. We’re going to continue to train, teach and equip them to do their job in the best way possible to serve your expectations, and meet your needs. And so it’s important to me that you know that. We are committed to the PAM role. (Applause.) It’s here to stay.

And we’re not there yet, we’re not perfect. But I do want you to know what the strategy is, and I do want to know about it. [email protected] if you have feedback for us on how we can make that role more impactful for you as an organization. But it’s important that you know we’re there, and we’re going to stay there for the long-term.

World Class Selling for the Partner Ecosystem

I also launched something a couple of years ago called World Class Selling, and this is the year I want to bring World Class Selling to the partner ecosystem. Now I really came up with this basically myself, I happened to be one of Microsoft’s biggest customers for a long, long time. Now only Microsoft’s biggest customers, but IBM, I never would buy from Oracle because I didn’t think that that company had great integrity at that time, I didn’t buy much from Sun for the same reason. But I was HP’s biggest customer. I was IBM’s biggest customer. And one of Microsoft’s biggest customers. And I’ll tell you, when you look at it, it’s two things. It’s about sales basics, and it’s about being a trusted advisor.

And my challenge is, you go back and you talk to your people, and you build out your plans asking, do we really have a great roadmap for success? Are we really engaging in a proactive dialogue with this customer to help them solve problems? Are we really able to articulate the roadmap? And right now articulating software plus services with the customer is critical. If we don’t get out there and tell this story our competitors are going to tell it, and they won’t tell it the way we will tell it. So it’s important that we articulate it in a proactive way. But, developing solutions for customers to solve problems and create business value.

So one of my challenges today is to keep working hard to become world-class sellers, with our customers, because as you think about the economy, and all the economic conditions, and all the competitors in the marketplace, we collectively, Microsoft and our partner ecosystem, have to earn the right to be the trusted advisor with our customers.

This is the message I’m giving our field, our sales, or services, and our support organization. And I want to share it with you, the partner ecosystem, to make sure that you think about it, and think about ways that you can help me embrace it, and evangelize it, and let’s take that to the next level. It’s not a given. In tough times customers are only going to spend money with those people who solve problems, and those people that they trust. So that’s a challenge that I would have for you today.

Investing in the Next Generation: Dreamspark and Imagine Cup

I want to share some investments that we’re making from a talent standpoint. None of us have enough qualified, capable talent, not Microsoft, not you. And we know that. And this isn’t our problem, it’s our problem, collectively. One of the things that we’re doing is launching a product called Dreamspark. Dreamspark basically says that we’re going to give away for free to all students our Visual Studio, our Game Studio, our .NET platform, Windows Server Standard Edition, and SQL Server, we’re going to give it away free to any student in the world. Right now it’s rolled out to 38 countries, it’s rolling out to 38 countries, and we’re going to continue to take that out to all countries, and give away our development platform for free.

This was not an easy decision, because we make a lot of money in that space, but it’s the right thing to do long-term, and it’s one of the best things that we’ve done, from a student population standpoint, in a long, long time. Get plugged into Dreamspark. Imagine Cup, now in its sixth year, what an incredible competition that we have, where students come from around the world, to provide an outlet for students to explore their technology interests, and create business opportunities in local marketplaces.

Imagine a world where technology enables a sustainable environment. This was the theme of this year’s Imagine Cup, and what a great experience we had. Over 1,000 students from 25 countries around the world participated. And this year it’s 200,000. So we’ve gone from 1,000 six years ago, to 200,000 in six short years, in one year, participating in the Imagine Cup, and we’re just getting started. This is only going to continue to grow, and grow, and grow.

But, one of the painful lessons we’ve learned about talent development is if you just focus on the university level, you’re waiting too long. Those students have already opted out of math and science, and the number of kids that are opting into math and science, ladies and gentlemen, continues to shrink around the world. So we have to get involved at the high school, and K through 12 level. And I encourage you to get involved at the local level, at the high school level, to encourage kids with us to get involved in math and science. It’s a worldwide problem. And all of us have to be participant in our own rescue for this talent. So I encourage you to help us get involved, and stay involved at the local level, particularly in the K through 12 area.

Now, as I wrap up the Microsoft Advantage, there are four things that I wanted to share with you, that I think are our challenge. The partner ecosystem, and all of the Microsoft sellers, this is our challenge. And these are four big things that I’m going to share, next week I’m bringing all the field, country managers, general managers, subsidiary in to a convention place like this and we’re going to lay out this same strategy for next year. And I want to share the four big things that I’m tasking them with, and the four big things that I’m tasking us with over this next year that we need to do together.

The first certainly is Windows Vista deployment. This is absolutely a critical year for us to get out there and drive change in perception. We have to get the facts out. We’ve talked a lot about compatibility, we don’t need to talk as much about compatibility anymore, we need to talk about the fact that, look, what Vista is, its the most secure product in the history of operating systems on a desktop. It is more secure today than Apple Leopard, or XP, or Linux, or open source.

We built this product to engineer in security on the front end, not as a service pack. As a result of that, we tightened down things like user account controls. Yes, it required a lot of compatibility upgrades and fixes, but you know what, it’s important that you understand the progress, and you’re able to articulate that, and fewer patching is what all customers want, and there’s a cost savings there. Windows Vista with Service Pack 1 delivers that.

Sustainability, when power management is turned on, on Windows Vista, for every 10 PCs it’s like taking one car off the road, from a power savings standpoint. That’s important to our customers. It’s important that we get the message out on that.

Fewer security upgrades, hot patching, we have something called hot patching built in Vista. One of the most frustrating things was getting updates that required the PC to reboot, which then caused a lot of support opportunities. With hot patching you don’t have to reboot the PC for many of the security fixes, or other vulnerability fixes that may go down.

That total cost of ownership and the gold system management that goes with that is super-important. There is a TCO story, there is a security story, there is a sustainability story, that we want you to get out in the marketplace. And we want to say, we want to help you evangelize, and find a way to help us drive deployment this year with Windows Vista.

Windows 7 will be built on the same foundation, particularly on a compatibility front, so any investment you make in Windows Vista will serve you extremely well when the next release of Windows comes out. And we’ve got big customers in the world that have embraced deployment of Windows Vista Service Pack 1, but the biggest customer is not on here. The biggest customer so far to deploy it has over 100,000 PCs running Vista Service Pack 1, and that customer is Microsoft, because it was important to me to get it deployed 100 percent on every PC, every laptop that we have.

Something called BitLocker, I read recently there are 10,000 laptops stolen, lost, or taken in airports every single week, ladies and gentlemen, 10,000 laptops. We’ve got a feature called BitLocker that you can put on that laptop to encrypt data, and add deeper security than just password security. The TCO savings is there. The security savings is there. The sustainability savings is there. And what we have to do is give the facts a megaphone. Give the facts for Windows Vista a megaphone, and turn the tide form a momentum standpoint, and continue to drive that. So that’s the first big opportunity that I need your help on.

The second one is around driving deployment. And you may say, boy, that’s pretty similar to driving Windows Vista deployment, and I would say, yes, but this is much more broader, so that you understand a new focus at Microsoft, and a new focus within the partner ecosystem has to be on deployment. The only way we can show customers the value of the software is to help them drive deployment. None of us can be licensing bill collectors. None of us need to have a customer that owns Microsoft assets, or Microsoft partner ecosystem assets that they haven’t deployed.

We need to get in there, roll our sleeves up, and help them get it deployed and adopted. And there are three things, helping customers realize their value, solving problems is important. That’s where it starts. Building expertise, having the capability to get it deployed is the second thing. Third, is engaging with us, pushing us, making sure that we’re being accountable. I’m giving you carte blanche to push us to make sure we’re helping you drive deployment.

If we don’t get after deployment, and if we don’t earn the right to be the trusted advisor with the customer, we’re going to put our business model in harm’s way. That’s how serious a topic this is. Develop your expertise. It’s a great services opportunity, but you can win a customer, and earn a customer for life getting after deployment by helping them see the value of the technology.

Third, competing to win. This is our favorite part. Why? Because we’re competitive at Microsoft, and you know what, we’re competitive in the Microsoft partner ecosystem. Sure, we’ve got lots of challenges, and lots of competitors out there, lots of shapes, and dimensions, and sizes, and we have a lot of fun competing. People that want to compete want to be a part of our ecosystem.

And when you take a look at some of these competitors, and I’ll talk about it, I told you about VMware, number one and number two spending this next year for CIOs in enterprises, let me remind you, virtualization, server consolidation. Get engaged with Windows Server 2008, get engaged with Hyper-V, get engaged with our management solutions that allow you to manage that VMware, and sell in Hyper-V, and Windows Server 2008, and you will save customers a ton of money. That is a big opportunity.

When you take a look at it, good things happen to good people. One of the greatest gifts we’ve been given in years is Oracle just recently decided to raise the price 15 to 20 percent across the board on all their products. And my favorite quote here is from the CIO in India, Oracle can afford to hike prices like this, because people can’t change their database environment overnight. The CIOs I know, if you’re going to raise prices across the board 15 to 20 percent, most of the great CIOs in the world will say, watch me.

The thing that I would tell you here, with the tough economic, and challenging economic environments that all of us have, when you raise prices, and put it on your Web site, across the board 15 to 20 percent, you’re either extremely bold and confident, or something else. And I’ll let you figure out what the something else is. But, when you look at the delta that we have with SQL, it is unbelievable. Just take a look tat this, these are list prices, no Oracle discount, but these are their list prices. And when you look at this from a data warehousing standpoint, almost (US)$500,000 to (US)$50,000, business intelligence, (US)$528,000 to (US)$50,000, online transaction processing(US) $1.3 million to $50,000.

Now, I don’t know about you but I love to compete with great products at a cheaper price. It makes up for a lot of opportunities. So the big challenge, our go do, which is want I talked to our field about, our go do, ours, yours and mine, is let’s go win some Oracle databases. Let’s save customers money. Can we do that. (Applause.) We’re going to do that, and we’re going to have a lot of fun doing it.

Let me talk about Docs and Spreadsheets. The bright shiny object, I’m talking commercial here. Let me say one more thing about competition. I’m glad we have competition. I think the hardest Microsoft product to develop, I think the hardest Microsoft product for a partner is the product that we have with no competition. And so I’m thankful for competition. It wakes us up, it challenges us, and it only makes us better.

So in the commercial space, you heard some noise about Google’s Docs and Spreadsheet. Well, the thing I want you to do is make sure you take back and get answers to a few questions with your customers. Now, if you’re a company that has to publicly remind yourself, do no evil, think about that, the thing you have to do is make sure you work with customers, because the customers I hear, enterprise readiness, latency, response time problems, are they really committed for the long-term for a free product, or is it actually free?

I’ve had partners recently in roundtables, around the world, that have been to Google and talked to them about a partner ecosystem, and they’ve come running back saying, oh, goodness, they have no partner ecosystem. Exactly, that’s right. In the commercial enterprise space, that’s right. Pricing, $50 a year, or not. And then the whole privacy opportunity there, the cloud that they have on this particular product. They don’t offer customers a choice, it’s either let them manage it, or there’s on software as a service. And so this is a competitor, a formidable competitor. But the main go-do that we’ve got to do together is get out and proactively evangelize our software plus services story that we give customers a choice.

And I’ve held us back, ladies and gentlemen, from being and using a megaphone in the marketplace until now, until this day. Next week, I’m turning the field loose on articulating our software plus services strategy because I held us back until we had it in the marketplace. What they talk to customers about is where they’re going for the next two to three years. What we’re going to talk to customers about is what we offer today. And we are the leader in the commercial software plus services space. So this is an important compete area for us.

Windows Server. When you’re competing against the fraudulent percept8ino of free for Linux and open source, customers are starting to get it. We’ve outgrown Linux and open source in the marketplace for several quarters for the first time in the history of our company. This is a big, big deal. Continue to get out there and share and teach the value of Windows Server 2008. It’s an incredible value. We’re continuing to grow faster and faster and gain share in this area. And it’s one that we’ll be competing with all of our lives, and most customers are going to have some of both, but really explain the value proposition and get the TCO facts out. That’s how we’re winning share in the marketplace.

This past year, we Exchanged 4.7 million IBM Lotus Notes seats. This next year, I gave our team a challenge of 5 million Lotus Notes seats swapped out. So we’re going to continue to save customers money and compete in this space, and we’ve made something available to you called the Notes Transition Program. Go to the Partner Portal and check it out. We’ve got Access for partners to help us engage in swapping out and Exchanging the Lotus Notes seats in the world, and we’ll go get five million next year.

Number four, handling turbulent economic times. As many of you know, I spent 20 years at Wal-Mart. I grew up there. I started out as a cashier in a Wal-Mart store, working my way through college. I took the job because I needed the money to pay my own way through school. I got the privilege to spend about 18 months in the audit department, and I did some audits for Sam Walton. One of the things he told me was, Kevin, during tough economic times, there are two types of companies. I said, yes, sir, Mr. Walton, what types of companies are you talking about? He said, well, one type participates in a down economy, and just resigns itself that it’s going to happen, and things are going to get tough, and it’s going to be a lot harder, and, you know what, we’re just probably not going to grow as fast as we did before. He said, but there’s a second type of company that decides and chooses not to participate. And he said, when you choose not to participate in a tough economy, the only thing you will do is grow your market share. He said, because in a tough economy, you won’t stay the same, you’ll either go up or you’ll go down.

And so the challenge that we have, because of tough economic conditions around the world, is figuring out how do we leverage our assets as a company. So let me talk to you about just a few of these. Look at why we are confident, the number one bullet of why we are confident is the strength of our partner ecosystem. No other company was built by, for and with partners. And we have more diversity, more diversity in our solutions, capabilities, services, it’s an incredible competitive advantage, and that’s where we’re going to start.

When you go through this list, the breadth of our portfolio, the multi-core of innovation, sometimes that’s a weakness because we’ve got too much to sell, we don’t know where to focus in tough economic times, it’s a tremendous competitive advantage that we have over any technology company in the world during these tough times. The business diversity, mature markets, we sell products out of 191 countries in the world. As I said earlier, 145 of those represented here. We’ve got to figure out next year, Allison, how to get the other 50. But it’s important that you understand that diversity is a strength, and leveraging that strength is super important.

If you look at why Microsoft, the low-cost, high-value proposition, offering a choice, our percent of IT spend is already low. What a way, what an opportunity for us to grow that together. Partners are going to dive best practice implementation, and if we get in there, and earn the right to be the trusted advisor together, and if we help customers solve problems, ladies and gentlemen, we don’t have to participate in a tough economy. And this is the message I’m giving the field sellers, and this is the message I wanted to share with you today that hopefully you’ll take back to your team.

Now, the question I get the most often when speaking to our partners is, Kevin, what should I bet on? What bet, if you were me, what would you bet on? And there’s only one answer, ladies and gentlemen, there’s only one answer, and it’s the right answer. The thing you should bet on is bet on what your customers are telling you. Listening to the customer, invest where the customer is going, not where the customer has been. That’s a very hard thing for business leader to pick up on. Invest where the customer is going, not where the customer has been. And that’s what I tell our partners.

I’ve summarized the opportunities for you, so that you understand this is the focus that we’re internalizing and taking all of our people through, these four things with one big caveat, earning the right to be the trusted advisor. These are the four things that I need to ask your help, participation, and involvement on. These are the four things that I need you to help me be relentless n the field, and hold us accountable to. But that last thing on there is something only you can do. I can help you, but only you can do, only you can earn that trusted advisor status in the eyes of our customers and partners. But I want you to know, we are rock solid committed to winning with partners, to winning with partners. We take this responsibility very, very seriously.

And I want to appreciate again, and thank you for your commitment to us. And, as I said, I calculated the other day, I’ve probably been  I’ve visited, gosh, this past year I think about in 33 countries, some of those countries more than once, multiple times. And I’m with partners, hundreds and thousands of partners around the world, and the thing that I’m really inspired about is what’s incredible is the partners that we have in this company, and what they’re doing on a daily basis. When you enlisted to be a partner in the Microsoft partner ecosystem, you joined a cause. That cause is to enable people and businesses throughout the world to realize their full potential. That’s the mission statement of Microsoft, it’s the mission statement of our Microsoft partner ecosystem.

The Microsoft people in the room, when you chose to work at Microsoft, you joined a cause, that were all a part of something bigger than ourselves, enabling people and businesses throughout the world to realize their full potential. And each year, at this partner ecosystem, I generally highlight an example that really inspired me in one of the travels, and there are so many of them. And I know there are thousands of examples around the world. But I have one today that I want to share with you, so please roll that video of an example of a partner making a difference in his business and in society.

(Video segment.)

I think Angel Santos is here, where are you at Angel? Stand up. Where’s he at over here? He’s right here. Let’s appreciate and thank him. (Applause.)

That an incredible story, it’s an incredible story of a partner who has found a business opportunity, found white space, if you will, a void where they can use software to create a business opportunity, and at the same time help society.

That’s what it’s all about, ladies and gentleman. And I know there are  again, there are thousands of examples of those around the world that we’re all a part of something bigger than ourselves, that we all joined this cause, and this company. And I want to tell you all as the champion for partners at Microsoft, I’m proud to represent the cause with you. I’m proud of what you do every single day, and I want you to know there’s my e-mail address, my phone number, and I have a Windows Mobile device, so I’m on 24/7, except at dinner with the wife and family. She doesn’t let me look at it there, but other than that you can get to me, and we are committed, and I know we’re going to win together.

So let’s get after it in FY ’09, build your business, bet big, we’re with you all the way, and we’re going to continue to win in the marketplace. Have a great and safe trip home. Thank you.

(Video segment.)

Are you ready to run? Are you? (Applause.) Let’s run in ’09. Have a great day.

END