Kevin Turner: Worldwide Partner Conference 2011

Remarks by Kevin Turner, Chief Operating Officer
Los Angeles, Calif.
July 13, 2011

ANNOUNCER: Ladies and gentlemen, please welcome Microsoft Chief Operating Officer Kevin Turner. (Applause.)

KEVIN TURNER: Well good morning. (Cheers, applause.) Let me try it again. Good morning! (Cheers, applause.)

All right, what a great three days. What a fantastic time, spending it with our partners from around the world. It’s an incredible opportunity. I’m so proud to be here. I’m so proud to be able to talk about the things that we’ve been able to accomplish together this past year and the things that we’re going to attack together this next year.

It’s an exciting time to be in this business. You know, the beautiful thing about technology and the industry is it’s always changing and always evolving. And if you can’t get excited about waking up every day in this industry and reinventing what worked yesterday, then you’re in the wrong business. So, it’s a wonderful, wonderful experience to be here with you these past three days. Certainly, we’re very, very appreciative of all of you who made the trip, made the journey, and all the work that has gone on this past year.

I’d also like to thank Jon Roskill and the entire partner team and Vahe Torossian and everything that they did to put on this event. They’ve done a very good job this year. I like the focus, I like the clarity, I like it by partner type and we’re going to keep working on that and refining that.

Now, the spirit of my remarks this morning around winning together are all around a couple of three things: No. 1, summarizing specifically what we’ve learned, accomplished, and what we’re going to focus on in FY12. That’s the most important thing.

No. 2, I’m going to talk about our execution to put the strategy into action. And No. 3, I’m going to talk about some competitive battles and some competitive opportunities that I think we can embrace together and have a lot of fun competing to win.

As I do that, I was sort of struck by the opportunity that says, you know, when I think about what we did last year and what I said a year ago, what I said a year ago to you was that we have to find a way to bet our businesses on cloud services and making this transition to the cloud. Certainly, it was a big risk, a big leap, and it’s one that Microsoft as a company had made a few years prior in our products, in our solutions, and in our offerings in the marketplace.

But we needed our partner ecosystem to come with us to the cloud because the cloud was how we were going to re-pivot ourselves. And when I look at the progress that’s been made and I think about all the things that have happened these past 12 months, many, many of you in this audience made the leap, made the jump to come to the cloud with us this past year, and many others are making the transition and making the leap to come to the cloud with us this next year.

As I told you all, it’s a multi-year journey for the cloud and it remains as such. But I want you to know one thing: We still have this big, audacious goal of having a continuous cloud service for every person and every business around the world. That is still the Microsoft goal, it will remain our goal, and we’re going to keep after it for both businesses and commercial and consumers. It’s so important that we continue to stay focused on delivering that continuous cloud service to every person and every business.

And when you check in one some of the progress that we made this past year, I think it’s just remarkable what we were able to get in market together this past year. Our product groups really did their part this last year. We are the market leader by a mile, ladies and gentlemen, in commercial and business cloud services.

When you think about our offerings that span across private cloud, public cloud, and the hybrid cloud and you think about our four big, key cloud services of Office 365, Azure, our CRM Online offering and where we’re going with Windows Intune, really, really significant. And where we’ve been able to position ourselves here, the depth and breadth of our offerings are simply unmatched in the marketplace, and we’re seeing incredible traction, and we’re only going to see that continue to accelerate this next year.

Let’s don’t forget that one of the most important things we do by making a transition to lead with the cloud is we’ve got to make sure that all of our customers are ready to embrace the cloud. And there are two things, two assets that are critical regardless of when a customer wants to go to the cloud. No. 1 and No. 2 are System Center and Active Directory. We have to have Active Directory completely deployed throughout a customer environment to be able to federate that environment and prepare them for the cloud.

No. 2 is the importance of System Center. We have to have System Center out there deployed in all of our customers, regardless of when they’re ready to go to the cloud, so that when they’re able to go to the cloud or when they want to go to the cloud, these two assets make that possible. They’re very, very strategic for us.

One of the most profound learnings that we’ve had on this transition to the cloud, ladies and gentlemen, is that when we sell and tell our cloud story, we sell more on-premises products. We sell more of our traditional solutions. Why is that? Because customers know they can bet on you for the future.

So, for all the fears that went into, hey, if we make this big push in the cloud, are we actually going to hurt our business? That’s not been the case at all. It’s only helped our business because they know when they make a bet on Microsoft and our partner ecosystem, they’re betting on their future. And so it’s so important that we continue to work with our customers and provide that cloud on their terms because we have a cloud that’s right for every customer. And if they’re not quite ready to go now to the cloud, it doesn’t matter. We’ll take them when they’re ready and we’ll take them at their pace and we’ll take them across the different cloud types that we have with you, our partner, to be able to deliver the cloud of their choice.

Now, some of the momentum that we’ve been able to accomplish together is just incredible. Look at some of these numbers. Office 365: 5 million licensed users, 2.8 million already deployed, 42,000 partners trained. I want the other 600,000 partners to get on board. That number needs to be 642 next year. So, while I told you a lot of partners made the transition, we still got a lot more that’s got to make that transition with us, and so much opportunity for upside.

And Office 365 has been just an incredible asset. When you think about what’s in that Office 365 and you think about products like Lync, and I know you all saw from Kirk and Kurt yesterday the Lync product; what an exciting demo. I have yet to demo that product and not see customers light up like you’re showing them Kinect in a retail mall. It’s a lot of fun to show that product. And when you think about the Lync value proposition against Cisco unified communications, and you think about all the years that Cisco’s been milking those high margins, 75, 85 percent margins on that unified communications product, where do we stack in that? There’s all kinds of business value to be added by our Microsoft partner group with Lync.

And then you think about the success we’ve had with our Exchange product. Last year was very typical. We were able to displace about four and a half million Lotus Notes seats last year from IBM. This year, we want to do another five million Lotus Notes seats exchanged for Office 365 and our traditional on-premises products. Big, big progress in this first pillar, and it’s just been a lot of fun to see the momentum and how it’s resonating with our customers and certainly many of our partners.

You look at Azure and where we’re going. It’s literally doubling every month and every quarter the number of users and the number of applications that we have for that particular product and the importance of that platform as a service is transformation in the marketplace.

I mean, the biggest thing about Azure for customers and partners to understand is the leading-edge IT companies around the world are rewriting their applications to take advantage of an elastic cloud so that they no longer have to buy an IT environment and all the infrastructure that goes with it around their peak volumes. They’re able to actually use that elastic cloud and only get charged for what they utilize. And big, strategic customer after big, strategic customer is beginning to figure that out. And so where this can go from an upside standpoint is tremendous.

Dynamics CRM Online, it is so good to have something to compete with head to head. You know, we already have a great CRM product that does extremely well against the traditional players like Siebel. There are no happy Siebel customers in the world, you all know that. (Laughter.) And we can go win every single one of those.

But now we’ve got this humongous pacifier to stick in the mouth of Marc Benioff called Dynamics CRM Online. Which is a really, really beautiful thing for us, for both partners and Microsoft. (Applause.) And Windows Intune, the ability to manage those desktops and where we’re going is tremendous.

So, just incredible cloud momentum with you this past year. And when you think about the focus on FY12, it’s about the acceleration of the private cloud. We’ve got great momentum with our public cloud, now we’re going to get straight away after the private cloud. We’ve got the right solutions. We’ve got the solution that says we’re going to support multiple hypervisors. We’ve got the solution that says it’s not just about managing the VM, it’s about managing the application. We’ve got the solution that says we’re going to put the cloud on your terms, private, public, hybrid. We’ve got it. You can go at any pace, any rate you want, but we’re here for you and we’ve got best-in-class performance.

Incredible benchmarks are being set every single day with our workloads virtualized using Windows Server, Active Directory, and System Center. This is the year to accelerate and get behind the private cloud in a huge way and a huge opportunity.

And just so you know as a company, ladies and gentlemen, we’re going to keep focusing in on consumer cloud services because we know the better job we do with consumer cloud services, the better job we’re going to do with our commercial and business cloud services. And when you think about the progress we’ve made this past year across Windows Live, Hotmail, Bing, MSN, it’s incredible — Xbox LIVE, now over 35 million people on that paid service. And the Kinect product, we talked about a little bit in the show, but Kinect, the fastest-selling consumer electronics item of all time through this past holiday selling season. We got a Guinness Book of World Records for the sales of that particular product during the holiday selling season this year. An incredible accomplishment. (Applause.)

And when you think about Skype and the fact that, certainly, it’s pending regulatory approval, but 170 million monthly users of that particular cloud service. And on and on and on. So, we’re going to keep working on commercial and business cloud services and consumer cloud services in a huge way. And we all know that none of this would have been possible without you, our Microsoft partners, your support, your commitment, your belief, your dedication, your hard work, and I want to say thank you on behalf of all the Microsoft employees around the world. We couldn’t do it without you. We’re very, very, very committed to you, the partner. (Applause.)

And it’s great to make more than a year’s worth of progress in a year’s time on something. It’s great to have that. And we’re going to double down and do it again this next year, and we think that’s super important, and super important for us to continue to work on with you.

So, let me raise it up a level. That was FY11. This is FY12. The Microsoft approach. This should look familiar to you. The yin and the yang of our company is we’re going to continue to innovate for the long term and we’re going to drive execution excellence.

So, let me give you a look under the hood. What does that mean? Well, No. 1, it means we’re going to keep investing. Not only did we invest more than $3 billion more than the next closest technology company this past year, ladies and gentlemen, we now invested more in R&D on an annual basis than any company in any industry in the world. That’s a great investment in our future. (Applause.) That’s right. Huge.

And we’re going to do that by continuing to focus on hiring great people, getting excited about emerging technologies, and finding ways to create business value in the marketplace. That’s what we’re going to continuing to do. And you should know that the majority of all of our developers are now working on cloud services, which makes our on-premises product better, and they certainly make our cloud services product better and we’re going to continue to double down in that initiative. So, there’s no turning back. This is a company committed and investing for the long term.

Now, we’re going to invest some big bets, some really big bets across five key areas that I want to share with you. No. 1 is no surprise, winning in cloud services. I told you all last year, this is a multi-year journey and we’re going to continue to have that multi-year journey, and we’re going to continue to double down on consumer and commercial and business cloud services in all ways, shapes, and sizes. We have that big aspiration of a continuous cloud service for every person and every business, and we’re going to continue to drive that.

No. 2, winning with end users and consumers. Again, this is a multi-year journey, but we all know when we do a better job with consumers, we’re going to sell more product into businesses and continue to keep relevant. So, the ability for us to make some very significant changes in the company has transpired this past year. Certainly, you know about the consumer assets of Xbox, Kinect. You know about the progress we’ve made with Windows 7. You know about the phone. You certainly know about Bing.

Some things you may not know about is we made a significant org change. We aligned ourselves around three key components in the company: Be great at selling to businesses, being great at selling to consumers, and being great at selling advertising. And having a consumer channels group for the first time in our history all in one organization is going to allow us to have and leverage better synergy, better reach, and better efficiencies and effectiveness with this critical channel. And we’re going to continue to drive that.

The second thing you’re going to hear more about in a little bit is the importance of our Microsoft Stores. We’re doubling down on the Microsoft Stores. It’s allowed us to put the customer first and learn a whole lot about the consumer experience. And we’re going to continue to leverage that.

So, this idea of winning with end users and consumers, from a product standpoint, from an organizational standpoint and from a relationship standpoint is fundamental to the company.

Three, winning in search and display advertising. Every single company in the world is shifting advertising dollars from the traditional, old ways to the new, digital way. And being able to capture our fair share of the pie as that digital advertising marketplace grows is a really strategic reason for us to do a great job with display advertising.

Fourth is winning in phones. We know that mobile is important. We have to do some very strategic things to get our phone volume up. And we’ve made some huge bets. The first bet we made was with Nokia, which has about 38 percent of the world’s smartphone share. We have dreams and aspirations that we can get to 100 million units per annum with that single day. That’s the kind of progress we want to drive with phones.

Secondly, we’re going to continue to put great innovation into the marketplace in a rapid way in the phone space. We released that product in October, we’ve already put out two operating system enhancement releases on top of it, and we’re just going to keep innovating and keep coming and keep coming and keep coming with innovation, new functionality, and creating value for the phone product.

The fifth one is arguably the single biggest decision that the company’s made in the last 35 years. We announced on January the 5th that the next release of Windows will no longer be exclusive to X86, including Intel and AMD. Now, we’re going to run great on Intel and AMD, but we’re also going to run on ARM and system on a chip, which will open up a whole new ecosystem of devices. It will open up a whole new opportunity for us to participate with the Windows ecosystem across an array of content-creation and content-consumption devices.

We’re very, very excited about these five big bets, but I want you to know, these five big bets are not for the faint of heart. They’re going to take resilience, they’re going to take passion, they’re going to take persistence, and we’re in it to get it right, and we’re very, very proud of this company and the adversity we’ve faced before and the adversity that we’re going to face in the future. And we’re going to continue to drive on these five challenges to improve in every single one of these areas. That’s what we’re doing with the $9 billion in R&D.

Now, I want to shift and say, well, what does execution excellence look like? It really comes down to our Microsoft partner ecosystem and our company doing these four things really, really well. No. 1 is no surprise: Leading with the cloud. No. 2: Driving Windows 7, Office 2010, IE9. No. 3: Growing share by competing to win. No. 4: Driving customer satisfaction.

So, when you think about leading with the cloud, we only have 42,000 partner companies trained, we need 642,000. I want to remind every single one of you that there is a place in the cloud for every single partner type. There is an opportunity for you to build, tell, sell, and support all the cloud services that we offer. And we invite you, encourage you, and want to drag you to the cloud if needed to come with us on this multi-year journey. It’s an exciting opportunity for us, and it opens up a whole new world of opportunities for both our businesses.

And the stickiness of a great cloud service is just impeccable. You don’t have to worry about old versions and keeping people current. The ability for you to create new revenue streams.

Now, I’m going to show you an eye chart, and I’m showing you this eye chart for a reason because I want every single partner type to know that there is opportunity for you, whether you’re a VAR, an SI, an ISV, and app builder, a LAR, scale resellers, distributors, hosters, service providers. There is opportunity for you to attach, provide services, develop, migrate, create. There is so much opportunity for you.

And Jon and the team have been through these, so I’m not going to. I just want to remind you that we want you to come to the cloud with us. It’s so important in our future.

No. 2, driving Windows 7, Office 2010, and IE9 refresh.

The first thing we have to do when we think about this second execution point is we really need to give credit where credit’s due. The greatest ROI for any piece of software in almost any company in the world is Windows XP, Office 2003, and IE6. I mean, those products deserve a standing ovation. God bless them, they’ve worked for the last 12, 13 years. (Laughter.) We love those products, we absolutely love those products. (Applause.) They’ve been so good to so many people, including the people in this room.

But you know what, they’re dead. (Laughter.) They’re dead. End of life is 2014. We have to get behind this refresh. We have to transition our customers from the old technology into the new world.

And it is nothing but a huge partner opportunity. It is just an incredible partner opportunity for you to help every customer make those transitions. We absolutely want to bring the customers with us to the new world. And as you all know, when they come to the new world, it opens up services, it opens up the cloud, it opens up the ability to redefine what we’re both about.

Too many customers in the world define Microsoft and define our partners by old versions of Windows and old versions of Office. That’s what they think of Microsoft and our partner ecosystem; too many of them do.

The reality is that’s not what we are at all. You can’t even begin to get someone’s mind around Lync and the power of SharePoint and collaboration and the cloud until we get these old applications remediated and moved forward. And that’s why it’s important that all of us take this as a go-do and make sure we follow up and drive it extremely hard, and I think it’s an incredible partner opportunity for all of us this next year.

And when you think about Windows 7, I want you to have the confidence that it remains the highest quality operating system we’ve ever put out in the market, we’re getting wins every single day, and all of the deployment goals are ahead of target.

But you know what, there’s still 300 million business PCs out there to go — 300 million, as best we can count around the world, and we’ve got to go get all of them. We don’t want to leave any of them behind.

And over 400 million copies of Windows 7 already in market, and growing every single second of every single day. We’ve got to continue to drive that extremely hard.

Now let me talk about compete, my favorite part of the session.

You know, let me remind you of a few things. Competing is a test of will. It is simply a test of will. Competitors make us better, ladies and gentlemen. We have some great competitors, we’ve got some phenomenal competitors out there. And I’m grateful for those competitors, because every single one of them makes us better.

But you know what, it’s fun to get up in the morning competing, it’s fun to really go after it in a big way.

So, let’s talk about how do we compete this next year with some of our biggest competitors. What’s the first one? Google.

All right, so two and three years ago, all of the headlines all over the world said, “Hey, Microsoft, you’re in big, big trouble; Google is going to wipe you out and wipe out your Office business. They’re going to take you out.” You guys read it, we read it. We spoke at this Partner Conference, me telling you hang with us, hang on, it’s not going to happen.

Well, guess what, it hasn’t happened. And more importantly — more importantly, when you look at it, with what we’ve been able to put in with Office 365 in market — (cheers, applause) — Office 365 is to Google Apps as Xbox 360 is to Pong.

Now, Pong, there used to be something out called Atari 100 years ago. (Laughter.) And when you think about it, this headline from CRN absolutely spot on. The ability for us to really get after it with Office 365, we have every single thing we need.

And I’ve got to tell you, it’s so exciting to be able to talk about Office 365. I can only describe what Office 365 is in sort of two words. You could say technically it’s three words. But Office 365, ladies and gentlemen, is nothing but a Google butt-kicker, that’s all it is. (Cheers, applause.) That’s all it is. And the reality is customers know it, every customer knows it.

Just look at some of these customers that we’ve rescued from Google. These are win-backs, customers who made a mistake, a very innocent mistake, and we went in there and said, we’re here to help with our partners, and we took these customers and we moved these customers straightaway — straightaway. (Applause.)

And then we had some other very competitive battles where Google was in the lead, but when we show up with our partners, they don’t win. They don’t win in the messaging and collaboration space, and they shouldn’t win in the messaging and collaboration space.

And here’s a little secret ammunition for you to use this next year to sort of prime the pump, just keep it coming.

So, we’ve uncovered in doing some of these win-backs there’s a lot of hidden costs. Yeah, whoa, look at this. You’ve got a little iceberg emerging when you really peel it back. Wow. There’s some hidden cost there. Those are annual hidden costs. And then you’ve got some one-time costs that also come into effect. And we’ll provide you more and more information like this to be able to have those conversations with customers, but, hey, the whole 50 bucks per year per user is just the tip of the iceberg as it relates to what customers are getting charged and what they have to do to try to prop up that inferior messaging system and set of productivity applications.

So, we’re going to continue to look and peel it back, and make sure we’ve equipped you and we have it ready.

But a couple more things for you to think about. I mean, Google is helping us with some of their actions, and I’m encouraged to remind you all this is a company that has a mission statement that they have to remind themselves not to do evil, right? (Laughter.)

And, you know, I love this. I got this — this picture came from last week. This is a policeman that’s pulled over, you know, that car they drive around to snoop your Wi-Fi and all that stuff. This is a cop that pulled it over. I’m assuming he’s saying, what are you doing? (Laughter.)

And when you think about the trouble they’re getting into with some of their statements, claiming certain things and allegations that they’re dealing with, this is nothing but help to us. We don’t scan your e-mail. We’re not snooping your Wi-Fi. We’re going to continue to do the things we do well, which is help you become more productive.

But Microsoft and our partners should not lose a deal to Google, period, full stop. That’s the goal, that’s the objective.

And as Steve talked about on day one, we’re going to keep putting the pressure on in the search space. Look at this, last three years, 142 percent. We were left for dead, ladies and gentlemen, three years ago in the search space, and look at where we’ve come, almost 27 points of combined share in just three years. We’re just going to keep growing every single month just like we did in June, every single month we’re going to keep growing, keep earning, every single day. And the biggest thing you can do to help us is make sure you use and evangelize Bing. That’s what you can do to help us.

Now, let’s go to Oracle, and should our customers bet on Oracle. Well, you know, to really talk to a customer about whether they should bet on Oracle let’s just take a look at the cast of characters and you make the call. (Laughter, applause.) I don’t even know what to say. (Laughter.)

When you look at what the customers are saying, there is a tremendous opportunity for us, ladies and gentlemen, to really go after the Oracle customer right now. This Fusion product that they have, that they’re beginning to make some traction around and some noise around, is a huge opportunity for us. Their lack of focus on customer service, taking care of customers and doing the right thing by customers is catching up with them.

Now, it’s been very lucrative to them financially, but you and I both know how many happy Oracle customers are you talking to? It’s about like Siebel.

And so the reality for us to engage and really get in there and don’t let customers get locked into Oracle is tremendous — is tremendous. We can rescue the Oracle customers in a big way, and we can continue to do that. We’ve got great product in our SQL product, and if you look at this SQL product, and if you look at this SQL product, you go through it, we have a tremendous price value proposition. These are all the things, this is all prices are per processor with a single core, and our base license price is lower than what IBM and Oracle are, and we include things that you don’t have to pay extra for. And recent studies show in the last eight years we’ve had less security vulnerabilities than either of these competitors.

And so when you think about it, we’ve got more value with SQL. That product has come so far so fast, that we have a great platform for us to rescue these Oracle customers, and get them off that maintenance drug, and get them off that lock-in that they’re so worried about. So, big opportunity for each and every partner on competing with Oracle.

So, let’s talk about Salesforce, and when you think about Salesforce, the best thing I can tell you is don’t let the customers get forced into paying these exorbitant prices and hidden charges for a solution that doesn’t quite meet their business needs.

But let’s break it down, because I haven’t had this Dynamics CRM Online that long. And look at the price delta that we’ve got here and where we’re going, 44 bucks versus 65 bucks.

And one of the most beautiful things that we have on that monthly cost per seat is that when you throw in Office 365 and I get all of the Office 365 services, look at where I stack up.

And there’s a great quote on here from a customer, Vickie Flores, who said, “We’ve basically outgrown Getting information out of it is really difficult, and the price point is extremely high. And with Microsoft Dynamics CRM you get all these features out of the box, which is great.” The customer says it best. The truth lies with the customer.

And so we have a unique opportunity, ladies and gentlemen, to really take our arsenal, get you excited about Dynamics CRM, and continue to drive that.

Now, I know what excites most partners, and it’s making money, right? Most partners get excited about making money. So, let me talk to you about making money.

This is a 250-seat CRM deal. A Microsoft Dynamics partner earns almost 53 grand. The partner earns about 20 grand. Love that, absolutely love that. And unlike Salesforce, we continue to pay margins on annuity deals.

If you’re thinking about getting in with us on CRM, do it. If you’re doing stuff with us on CRM, let’s do more, let’s double down, let’s go after this space; it’s a huge competitive opportunity.

Now let’s talk about VMware and the VMware tax. And we’ve made some tremendous progress versus VMware, probably more than any other competitor this past year. And the way we’ve been able to do that is we’ve caught VMware flatfooted, because they’re fighting the economics of the cloud. The cost of managing the VMs in the private cloud, just look at this slide. When you think about it, 500 VMs, we have about three times a cost saving advantage. The more VMs you have, the more our savings goes up, because at Microsoft anything beyond six VMs is free.

Now, as a partner why is that beautiful for you? Because you don’t want the customer spending money on a bunch of licensing from VMware. You want to build services that as they expand their private cloud environment, you’re able to take advantage of those professional services that you offer and you provide and scale the Microsoft environment.

And many of you have told me that VMware is getting more and more into the services space. And if you look at their numbers, that’s where their increases are coming from.

So, the ability that we have to get the facts out and continue to do that is a tremendous opportunity for Microsoft and our partners.

And I’m so proud to be able to tell you we’ve made a lot of progress this past year again. We’re growing at almost two times the rate in market share versus VMware. And we’re now up to 23 points from zero, ladies and gentlemen, just a few years ago, together. (Applause.)

And for those partners who have jumped and gone in with us, thank you. For those partners who are still kind of standing back waiting, get onboard, because we’re coming and coming in a hurry, and this is a critical space for us to continue to show and demonstrate value with our customers.

Now let’s go to Apple and the consumerization of IT.

Before I jump into Apple, let’s talk about their ecosystem and what is it. They’re a tremendous competitor. This is my best description of their ecosystem. They have five different platforms, from the TV to the iPod Touch to the iPhone to the iPad, certainly to their Mac platform. And they run horizontally iTunes across that. And they have some ecosystem divides within those five platforms. And it’s your guess as good as mine on whether they’ll ever unify Mac and iOS. I don’t know that.

But let’s talk about the Windows strategy, because it’s fairly — not — it is really, really significantly different, because our future at Microsoft is the ability to unify the ecosystems and the user experiences. It’s the ability to enhance those ecosystems with great cloud services.

So, when you think about the next release of Windows running across X86, ARM, system-on-a-chip, the opportunity to put Windows with an OS that is scalable across those platforms exists in a new and profound way. And where we go in the future of unifying these ecosystems is certainly going to be an exciting ride, but a big, big step forward is about to get made with Windows 8, and this is really important for you to understand.

And I want you to also understand that Microsoft Research is really hard at work in making sure that we’re adopting and embracing the proper new user interfaces, because we not only want to be great at content consumption, we want to be great at content creation, and we want to be great in between. We want to be great across the array of devices. And to take that step back and make the leap into an application and into an operating system that runs across X86 and ARM is very, very strategic for everyone in the room, and it’s going to open up a whole new array of opportunities for us to compete, not just with Apple but with every competing OS that’s out there.

Now, one of the big questions that I get, that I’m sure you get, is addressing the consumerization of IT.

Well, guess what, here’s the strategy. You’re hearing it first right here, right now. We have four pillars to our consumerization of IT strategy.

No. 1 is the reimagining of Windows and being able to show people what we’re able to do with this OS that scales multiple device types, multiple screen sizes, works great with a mouse and keyboard, works great with touch.

And using some of the D Conference video and the COMPUTEX videos that you have out there, and we’re going to provide you some tools in very short order on this subject matter, is really, really important for you to know. Describing, educating the people where we’re going is absolutely paramount. And the gateway to get to Windows 8 is Windows 7, and we will have backward compatibility with Windows 7 embedded into Windows 8. That’s something that we’re very committed to. But that’s a really important first pillar.

The second pillar, because every CIO is all faced with this challenge of, hey, how do I answer this “bring your own device?” Every company is faced with that. How do I embrace “bring your own device” to work, but yet I still own security, I still own data sovereignty and data protection; how do I address that?

Well, the reality is with what we’re doing with Windows Intune and managing that desktop and taking it up to a new level — and I know they announced the second beta of that product at this conference, very excited about that platform, but I’m also thrilled by an announcement we made not long ago that System Center 2012, which is coming out in October, November timeframe, is going to manage other devices, something no one else does. So, we’re going to be best in Windows and best in class on those other devices. So, System Center and the strategic importance of it is critical, and it’s critically important that we convey that to customers and we educate them.

Next is the best productivity experience. Again Windows, when you look at Office 365, SharePoint, Lync, et cetera, having the best possible productivity experience across Windows devices is a given, and we’re also going to be best in class on these other devices.

And then bringing this unified application development, today, when I talk about that Apple ecosystem, the ability to get one application to run across those five platforms is very difficult. In the future of Microsoft using HTML5, IE9 and 10, the scalable OS, the ability to do that gets much, much easier. And so having that vision to take us to a unified ecosystem with consistently connected user experiences is really, really strategic for us.

So, this is important. We’re going to give you some tools, we’re going to give you what you need, and what I need you to do is get out and let’s get this message out to every single company out there. We have a plan, we have a strategy, and it’s the most comprehensive strategy you can get, and we can win in this space; very strategic for us.

Next up I wanted to share a little fun stuff with you on Apple. So, I travel all over the world. Many of you know I go to 30, 35 countries a year, every major city in the U.S., and I was in one recently in Latin America that I hesitate to name because you’ll know why I don’t want to name them here in a minute, because once I do, I think the lights might go out on this authorized reseller for Apple.

So, this is a shop in a Latin America country, and certainly I was in a mall checking out retail. I go into this mall, and I was shocked to learn that the reseller is selling Windows 7 on the Apple Mac hardware. Now, Apple has got some great hardware, I love that, and when you look at it, he’s got it on laptops, he’s got it on desktops, he’s just selling the heck out of that stuff. (Laughter, applause.)

Now, that should tell all of you a lot about the importance of having a great OS. Even the Apple franchise stores think so.

So, when you think about that, we’ve got a huge opportunity with Windows 7.

And certainly I talked to you about the stores, we’ve now got 11 stores open. I hope you get the chance to visit our store here in LA. I think you’ll really like it.

The biggest single thing, ladies and gentlemen, we’ve learned from the stores is it’s helping us to transition from thinking about our customers to thinking like our customers. And giving us that direct customer feedback is what we’re learning and getting from our stores, providing great choice, value, and service.

And when you think about the commitment that we have from the company, we’re going to open up to 75 more stores over the next two to three years, and continue to bring our stores outside the U.S. as well.

So, we’ve got a huge opportunity to get the Microsoft story out there, and we’re going to keep driving that, and I encourage you to check it out.

My fourth and final point is driving customer satisfaction, earning the right, ladies and gentlemen, to be the trusted advisor of our customers. And we have so much together in this space that we’ve done and we have to continue to do.

And when I break it down for both the Microsoft people in the room and the partners in the room, I really come up with these five things.

No. 1, every single one of you has got to run the latest and greatest stuff. I’ve got to have you run our latest and greatest stuff. You can’t tell the latest and greatest stuff if you’re not running the latest and greatest stuff. I’ve got to have you do it.

No. 2, driving customer deployment and adoption. Don’t let us be defined by our old versions. Let’s get the new versions out.

No. 3, lead customers to the cloud. Even if they want to buy on-premise, tell the cloud story; you’ll sell more on-premise. That’s a really fundamental message for you to really take home.

No. 4, create business value. We all learned going through the economic recession that when you don’t create value, you will become obsolete. That’s precisely what we have to do together.

And let’s leverage this R&D story. We’ve got an R&D story like nobody else. And if we do those things, our customers are going to trust us and they’re going to grow with us. And growing with us and growing our businesses together, we’re on the same side, ladies and gentlemen. We’re all in it to grow our businesses together.

And I want to share with you a result I got from a Goldman Sachs survey on IT recently. They ranked — the question was, who do you view as the top three strategic IT vendors today. Well, guess what, No. 1 was Microsoft. No. 1 was Microsoft. (Cheers, applause.) Ten years ago, people said, hey, you’re not an enterprise company. Guess what, we’re the most strategic enterprise company in most companies, and that’s because of you, the hard work that you do every day; very, very strategic for us.

And just another plug for the importance of deployment and adoption; it’s essential to keeping customer trust, it’s essential to keeping customers with us. We have to stay focused on that and continue to drive it.

So, these are my four things: Leading with the cloud; driving Windows 7, Office 2010, and IE9 refresh; growing share by competing to win; driving customer satisfaction. Those are the four things we need your help on this next year. We’re with you, we’re 100 percent with you, we’re going to continue to stay with you, and we’re going to continue to focus on the things that you tell us are important.

And you know what, we’ve had a lot of vision at this conference, and we all get motivated by vision, but the reality is vision doesn’t pay the bills; execution pays the bills. And that’s what we’re focused on with you this next year is how do we execute with you, how can we do a better job for you, how can we help you with these four points around the world, growing share, winning share, growing our businesses, continuing to stay relevant in the marketplace with our customers. That’s what Microsoft is all about, that’s what the Microsoft partners are all about, and we’re very, very committed to that.

And as I always do, I’m reminded that when I travel around the world, I learn some amazing stories, some incredible stories that we have with what our partners do in the marketplace. When you have 640,000 partners in 191 countries, they get the opportunity to do incredible things. And I’ve got one today from a partner that I want to show you, because it’s a humble reminder that we’re all a part, ladies and gentlemen, of something bigger than ourselves, we’re all a part of a process and a company that’s main mission is to enable people and businesses around the world to realize their full potential.

Roll that video.

(NetHope Video segment.)


KEVIN TURNER: And we’ve got Frank Schott, the global program director from NetHope, here. Where is Frank at? Let’s get a light on that. Where’s Frank at? Raise your hand, Frank. Where you at? Right here. Welcome. Let’s congratulate Frank and thank him. An awesome story. (Applause.)

There are stories like that all over the world, ladies and gentlemen. It’s an incredible opportunity that we have.

And I spend the majority of my year with partners, talking to customers with partners, in roundtables with partners, working on partner strategy, and it’s my favorite part of the year.

Thank you for every single thing that you do for our mutual companies, thank you for the belief and the trust. I’m excited and optimistic about the future. We had a great year this past year, and I know that by pulling together, working together, we’re going to win together. And we’re going to win because of you, our Microsoft partners.

If I can help you in any way, [email protected]. Thank you for everything. Have a great rest of the show. (Applause.)