Satya Nadella and Marc Benioff: Microsoft and Media Briefing

JOHN CUMMINGS: Good afternoon, everyone, and thanks for joining us for a briefing on the Microsoft, Salesforce partnership announced a short while ago.

On the call today is Microsoft CEO Satya Nadella and Chairman and CEO Marc Benioff. Satya and Mark will open the call with a few brief remarks and then we’ll open the call for your questions.

During today’s call we may also reference certain unreleased services or features not yet available. We cannot guarantee the future timing or availability of these services or features, and recommend that customers listening today make their purchase decisions based on services and features currently available.

In addition, it’s possible that some of our comments today may contain forward-looking statements which are subject to risks, uncertainties and assumptions, and should any of these risks or uncertainties materialize or should our assumptions prove to be incorrect, actual results could differ materially from these forward-looking statements.

And a description of risks, uncertainties and assumptions and other risk factors that could affect our respective companies’ financial results are included in each of our SEC filings, included in our most recent reports on Forms 10-Q for Microsoft and 10-K for under the heading Risks Factors.

So with that, let me turn the call over to you, Marc.

MARC BENIOFF: Well, thanks very much, John.

First, I just want to say how absolutely thrilled I am to be partnering today with Satya. It’s been absolutely great working on this agreement together. I just couldn’t be happier with how things have gone. So thank you very, very much, Satya, for all your efforts and everything that you’re doing to make this so successful.

We both view our mission as helping customers succeed in today’s new world, a world of the cloud, a world of social computing, of mobile computing, of connectivity. And this announcement is really about putting our customers first. It’s about extending the power of the Salesforce, the world’s No. 1 CRM platform, with Microsoft, the world’s most widely used productivity solutions.

And really to go into the details, I’d like to pass it off to you, Satya, and maybe you can just explain to everyone the details of our new relationship and how all this has come to pass.

SATYA NADELLA: Great. Thank you very much, Marc. First, I want to say it’s a pleasure working with you and your team. I couldn’t have been more pleased that we’re partnering across many areas of our businesses.

I want to spend some time upfront discussing what this partnership means for Microsoft, why we partnered at this time, and what it means for our customers.

Those of you on the phone are probably asking why we did this deal. The simple truth is that we wanted to bring more value to our mutual customers, and be each other’s customers in relevant areas.

More specifically, we are excited to be working together on the following: First, we will empower people to use Office 365 and Salesforce seamlessly together, whether it’s sharing Office documents in Salesforce1 or analyzing CRM data in Power BI for Office 365.

Second, we are bringing the leading CRM application to Windows devices, both phones and PCs.

Third, Microsoft has renewed our commitment to using ExactTarget Marketing Cloud for one-to-one digital marketing efforts. And Marc will talk more about Salesforce’s commitment to use Microsoft database and cloud technologies with ExactTarget.

This partnership is about helping customers extract more value from our technologies. It gives them access to the services they need to be productive, to collaborate, market and sell, wherever they work.

At Microsoft we are focused on building the best productivity experiences and cloud platforms, and enable our customers to thrive in a mobile-first and cloud-first world.

I couldn’t be more thrilled to make this announcement today with you, Marc, and bring the value to our mutual customers.

And, with that, let me hand it back to you.

MARC BENIOFF: Well, thank you, Satya. And as I mentioned, I couldn’t be happier with this announcement. And your team has really been doing a phenomenal job at Microsoft, and I’d like to be so thrilled and appreciative of all the hard work of both teams in fostering this partnership and today’s announcement.

Customers need and they want us to work together. They want this partnership. They want this partnership badly. They want to be able to work with Office 365, they want to be able to work with Excel, with Outlook, they want to work with all of Microsoft’s apps, and they want to be able to work with Salesforce. And they want us to work together for our customers’ benefit.

Our new native Salesforce1 app for Windows Phones is going to give our users the power to run their businesses from their Windows Phones, and we see that in the market today. Our customers want to run their business from their phone. I run my business from my phone, and I’m going to be running my business from my new Windows Phone, and I want to thank you for that, Satya.

And we’re also excited to announce that SQL Server is going to continue to be the database for ExactTarget, and that we are increasing our investment and resources on SQL Server, and that Salesforce will also use Microsoft Azure for ExactTarget development and testing, and also researching other areas where we can use Azure through our company.

You know, this is an incredible partnership. It starts with Satya and I coming together, our companies coming together, but mostly it’s for getting our customers together. This is also about us extending our use of Microsoft’s technologies like SQL Server and Office 365, and it’s also absolutely thrilling for me to hear that Microsoft is going to extend their use of the ExactTarget Marketing Cloud. And what I’ve seen them do with Office 365 has been amazing.

The strategic partnership with Microsoft fundamentally advances our goal of making our customers more productive and successful, and it’s really the best of both worlds.

So I’d just like to open this up now for questions.

(Operator Direction.)

BRENT THIL (UBS): Thanks. Good afternoon.

Past partnerships like this have faded over time. From your perspective, why does this marriage last?

SATYA NADELLA: I’ll take that first, Marc, and then you can add to it.

I think Marc said it well when he said that this partnership is about starting with customers first and their expectations. And having two leading SaaS applications, one in productivity and collaboration, and the other in CRM, coming together with the integration, is what I believe our customers expect of us. They expect us to work great in a heterogeneous environment.

And so that’s what’s going to make this last. It’s about keeping customers first and then really reinforcing each other’s platform capabilities to serve our mutual customers is what I believe is the long term stable part of this partnership.

(Operator Direction.)

MERV ADRIAN (Gartner): Hi. That’s Gartner, just to be clear. Hi, guys.

Very interesting announcement, and Satya, I have a question about how this will work for Office 365 users. There have been prior attempts to link some of these tools to other environments in the app space before, and I think a lot of us probably believe that those things were hamstrung because of the additional cost to connect to those other sources. Do you envision making this available to anybody using Office 365 who’s also a Salesforce customer or will there be an additional charge levied on them?

SATYA NADELLA: First of all, one of the things that’s fundamentally changing is the cost of integration between different systems, I think, in this cloud-first and mobile-first world is coming down radically, and it’s coming down because of some of the technology advances that we’ve had across the industry. And the fact that Office 365 today has great REST-based APIs for anything from SharePoint lists to single sign-on authentication to Exchange contact information makes it so much more possible for anyone to have great integration with Office 365.

So in terms of cost itself it’s about anyone who’s today a subscriber to Office 365 for a business can absolutely take advantage of the integration that we do between Salesforce and Office 365. So I think that this is going to really remove a lot of the friction that exists and make it much more seamless for them to be able to integrate because of the modern nature of the integrations themselves.

(Operator Direction.)

CHARLIE COOPER (CNET): Marc, you’ve had sharp criticisms of Microsoft in the past. You’ve questioned its relevance, as well as its vigor to compete. What’s changed, in your opinion?

And if I may also pose a question to Satya, in terms of your strategy going forward, is this the start of more collaborative arrangements with companies that have technologies or functionality where you think Microsoft customers now are not being adequately served?

Thank you.

MARC BENIOFF: Well, thanks for that question. I think what you really start with, you know, I really believe that relationships are eternal, and it’s the technology itself that’s temporal. I started working with Microsoft first in the mid-1980s and our relationship, of course, has changed and evolved as the technology has changed and evolved over the decades.

Today, we’re announcing a very important interchange between our technologies, and first and foremost when we acquired ExactTarget, we acquired a stronger relationship with Microsoft. That changed.

And when Satya became the CEO of Microsoft, that gave us the opportunity to have an even stronger relationship with Microsoft, and that changed.

And today, we’re making another change, and the change that we’re making, just first and foremost, we are committing to integrating Salesforce more deeply with Microsoft’s core strategy, which is Office 365.

And that’s especially exciting for us because ExactTarget is also embedded within Office 365. Its Journey Builder capabilities provide users the opportunity to move through Office 365 workflow. And we’ve been so excited to work with Microsoft in embedding ExactTarget into Office 365. So to see them using more ExactTarget within Microsoft is exciting.

And that encourages us to use more SQL Server. SQL Server is something that I’ve watched grow from just an idea at Microsoft to a $6 billion business, and I’m sure will be a $10 billion business and one of the very largest and most important database products in our entire industry. And Salesforce is more committed to using SQL Server today than ever.

And Azure that Microsoft is investing in its own cloud infrastructure as a service is something that we’re starting to use more of at Salesforce. And we think that Microsoft is doing a lot of the right things to encourage its customers to move to the cloud, to move to the mobile world with some of the advancements in Windows 8 to move to new social computing and connect in a whole new way.

And those are the things that have changed, and I couldn’t be happier. I’ve always wanted to have a closer relationship with Microsoft, and now we do. And it’s because all these things have come together.

So Satya, do you want to comment on that?

SATYA NADELLA: Great. Thanks, Marc.

I think that Marc really covered the spirit and the depth and breadth, I think, of both what we intend to do and are doing, and the key circumstances that are leading to it.

The only thing I would add specifically to your question is, we want to be a broad platform provider in this mobile-first, cloud-first world, so partnerships like the one that we are talking about with Salesforce today is very, very important to us. And we want to have this be mutually reinforcing for our businesses, but most importantly for our mutual customers. And so with that spirit in mind, I want to approach partnerships that really add value to the entire industry. And that’s I think the spirit you can expect more from us.

(Operator Direction.)

DOUG HENSCHEN, InformationWeek: Yes. There’s been a number of reports on this deal, but I just want to make sure we get some clarity on exactly what appears on Azure as a platform provider. Is this strictly the integration of the Salesforce apps with Office 365, the integration of cloud services, rather than making available Salesforce apps on Azure?

MARC BENIOFF: That’s right. This announcement is not about making Salesforce apps available on Azure, though Salesforce is going to start using Azure as part of its development environment, and how we build software.

This announcement is about taking Microsoft’s core strategy, Office 365 and Windows, and integrating it with Salesforce’s core strategy, our CRM apps, and making a combined offering that offers more value to our users. So the key is that we are integrating as step one the Salesforce apps with Office and Windows at a deeper level than was previously available. And we’re also continuing to use and expand the use of SQL Server in Salesforce’s core services as well as this first step in development on Azure.

(Operator Direction.)

WALTER PRITCHARD, CITI: Thanks. Just one quick question for each of you.

For Satya, you haven’t talked much about your own CRM products here, Dynamics. Just wondering if you could give us an update if there’s any relevant impact on your sales and sort of strategy around Dynamics CRM?

And then to Marc, you’ve done a few acquisitions. You’ve sort of acquired yourself a few platforms and underlying pieces of infrastructure you’ve been trying to bring to the ecosystem. I’m wondering how you weigh off development on Azure versus all the work that you’ve done in integrating there, and you’re adding another platform here. It seems like it’s a bit more complexity at a time when you’re trying to simplify things.

SATYA NADELLA: Thanks, Walter. So today’s announcement is about our partnership with Salesforce and the many areas of collaboration for us between Office 365, Azure and SQL Server. And I think us being a great platform provider to Salesforce with those three components, and also our use of Salesforce technology and ExactTarget for our own use. I think that that partnership is what we wanted to talk about today.

There will be some areas that we will compete in. But at the same time, I think as being anyone who has got a broad partnership and a platform approach, you will expect us to do exactly what our customers demand of us on those respects.

So, Marc, I’ll just turn it over to you.

MARC BENIOFF: I think that’s really well said. You know, Satya and I have both been in this industry a long time and the reason that these relationships work is because Microsoft’s core strategy is Windows and Office, that’s where the revenue comes from. And Salesforce’s core strategy is our CRM apps. That’s where our revenue comes from. And we both want to grow our revenues, so we know that we need to be investing in our core and in our strategies.

Two, we do have different development environments at Salesforce, but those development environments truly are transparent to our users. Today, of course, Heroku is built on AWS, Salesforce’s core services use its core development centers in our own core data centers. And ExactTarget runs in its own data centers and also in other heterogeneous cloud services. This is an opportunity for us to bring in new services from Azure, as appropriate. Our customers themselves don’t necessarily need to know about that. What they need to know is that Salesforce’s platform is integrated and works well together. I think our Heroku Connect announcement last week was a great example of that, where there is now transparent integration between Heroku and

You’re going to see similar integration between ExactTarget Fuel and and Heroku. But, in no cases do the customers have to be aware of what is underneath. Those are decisions that we’re making. They don’t need to know are we using SQL Server, are we using Oracle, are we using something else. They need to know that they’re having a great experience in Office 365. They’re having a great experience in Salesforce. That’s what’s important.

JIM CUMMINGS: All right. I think that’s all we have for today.

I want to thank everyone for joining us and if you have any follow-up questions you can reach out to your usual contacts at either Microsoft or at Salesforce, or those listed on the press release issued earlier today.

So thanks, and you may all disconnect.