ANNOUNCER: Ladies and gentlemen, please welcome Steve Ballmer. (Applause.)

STEVE BALLMER: Weren’t they fantastic! (Cheers, applause.)

Well, it’s an honor and privilege for me to have a chance to open up this Worldwide Partner Conference. We sit here at a very, very exciting time. I want to share some of the reasons why I’m excited. I’m excited for what’s going on in the industry, I’m excited about what we’re doing, and perhaps most importantly I’m very excited about what we and you can do together to transform the world.

To have so many of our partners in one place at one time is really quite phenomenal. Across the world we have over 600,000 partners of many shapes, sizes, business models, and to be able to have over 7,000 of you gather in one spot, despite the traffic problems that we experienced here in Boston particularly, is truly, truly a great thing.

I titled this talk for today, “The Winning Choice.” Why? Because at the end of the day I think the thing that brings you all here is a desire to bet your business with a company that’s going to go forward with new technologies in the marketplace and win. The most important decisions we know that you make are the decisions on how to invest your time and your people’s time, what do you train people on, what platforms do you target, what products do you put your scarce resource and investment into. And there are a lot of things that determine the value of those investments that you make, but marketplace success at the end of the day is what it’s all about.

And so we know that when you come here you want to hear about the new programs, you want to hear about the new ways to work together, you want to hear about the new technologies and the new businesses and the new opportunities, you want to speak to one another, but when you leave you have to understand where is the opportunity for me and will Microsoft be successful in this endeavor, and do I want to invest my valuable time and my people’s valuable time.

And we take that trust and responsibility very seriously. When we suggest to you that there’s something new that’s important coming, that can’t be a casual statement and a casual commitment. We have to tell you something is important and we have to put our energy, our investment, our passion, our sales and marketing and market credibility behind it to really drive it.

And so I’m going to try to frame for you some of the choices that I think you have in front of you and some of the opportunities that you have in front of you to go forward, to add value to our mutual customers, to make money, and to succeed.

I want to, before I dive into it though, have a chance to say thank you. We know we have made a choice, as all of you know, to essentially base our business on a partner model. That goes back to the founding of Microsoft 30 years ago. We said we’re going to be specialists and we’re going to work with partners.

Today, the breadth of competencies in which you are engaged is truly mind-boggling. And wherever I travel in the world I have a chance to sit down with various committees and advisory boards of partners, and I’m always getting suggestions, which I share with Allison Watson, for new competencies, new expertise, new things that you have thought about that you can do to add value around our product set.

And so to all of you, no matter what your competency, what you do, where you do it in the world, I want to say thanks, thanks for your support, thanks for your investment of time and energy, and perhaps most importantly thanks for the business that you drive on our behalf, and the value you deliver to customers.

We had a good year. We’re waiting to close the books, so I’m not going to make any financial pronouncement, but I would say a double thanks in advance of the announcement of our fiscal year results. I appreciate everything you’ve done for us. (Applause.)

In the era of Sarbanes-Oxley it gets a lot harder to have these discussions, but stand by for news.

I want to frame what’s going to happen over the next 12 months, because frankly we are in the middle of the most amazing year of product innovation coming from Microsoft of essentially of all time. We have this year coming to market Windows Vista, and, of course, Internet Explorer version 7. We’ve got the new release of Microsoft Office, Office 2007. And we as a company are entering into a set of new markets, new for us: business intelligence, the portal, workflow, content management, collaboration market. Everybody likes to call it something different, but that’s really now one category, one market that we’re entering in full force this year.

Search from the desktop to the enterprise to the Internet is a business of great importance and a market of great importance to us.

Unified communications, including voice over IP and mobile and other phone devices, is an extremely important marketplace to us.

Security: We focused a lot in the past on improving the core security in our products. Really this year we will enter the security market in full force.

And last but certainly not least, our move with our Live initiative to take more and more of what we do, and create a platform out in the cloud that is hostable, is extremely, extremely important.

Each of these products and each of these initiatives to build a new market I think is very important for our partners to understand. You will have choices this year: You work with us on security, you work with your traditional partners, vendors on security, you work with both of us. Do you choose to work with us on unified communications and voice over IP or your traditional partners?

Some of these choices will probably be less comfortable than some of the other choices that we present you with from time to time. And, of course, we’re going to continue to cooperate and compete with a variety of vendors and a variety of suppliers that play in these markets.

But we’ve dedicated ourselves in a very end-to-end comprehensive way to providing incredible and innovative technologies in each one of these marketplaces.

I’m going to have a chance to talk about Windows Vista and Office. I’ll talk about our new market initiative in portals and collaboration, in search, in unified communications, security and live today.

Business intelligence is really still nascent for us, but with the launch of new reporting services in SQL Server, with new data analysis capabilities coming in Excel, in Office 2007, with our new Business Scorecard Manager and Performance Point product, we think we really do have a rich set of products end-to-end to let any of you go out and build value-added business intelligence solutions for system integration offerings.

So an amazing year, incredible new products, new innovations; we’re going to show you some of those today, share them with you, and hopefully excite you.

But the frame that drives all this innovation is really this frame that we started talking about of People Ready software, People Ready software. And in some senses this is the simplest of ideas, and in some senses fairly, fairly complicated.

We said to ourselves a couple of years ago, what is it that people really appreciate, really appreciate about Microsoft products, where do they see our real core value. And it came down to four things. People appreciate that our software is very familiar and easy to use. People appreciate, customers, partners and others, that our software integrates and connects with more other products than anybody else’s software in the world. There’s more applications written, more skills that have been built up, more connection to more forms of hardware than you’ll find with anybody else’s software on the planet. Our software is innovative and continues to evolve and grow and progress to meet the needs of our customers. Our software is very widely used and supported, thanks not only to customer presence but to you our business partners across the globe.

And we said, okay, if those are the four things that people value and expect out of Microsoft software, how do we take that to the next level. And basically we said, look, we’ve got to think through end-to-end a whole set of scenarios and apply the Microsoft value, whether it’s to unified communications or security, whether it is to portal and collaboration or to search. We have to build from the familiarity and ease of use of Windows and Office. We have to build from the strengths of the world in building .NET applications that integrate and connect this software. We have to innovate in ways that bring new value to people, new features, new capability. And, of course, we have to continue to work through the amazing group of partners that we have to bring these new end-to-end solutions to market.

That’s what People Ready software means to us. It’s a way of thinking, a way of developing software, a way of explaining to customers what we’re up to, a way of marketing, a way of life.

We actually have driven our development from models of over 120 different personas inside businesses, what does a sales order entry clerk look like, what does a salesperson look like, what does a customer service person look like. We have over 120 different models, and we’re trying to drive the product lines of People Ready software end-to-end from the viewpoint of these various constituents and roles inside an organization. And whether that’s our Dynamics product line, what we’re doing in the server, what we’re doing with the end user, all of these things are being driven from the perspective of these 120 different roles or personas.

At the end of the day we don’t believe businesses information technology for information technology’s sake. People buy information technology for what it enables their people to do. You all know that. That’s the world you live in every day. Every day you’re out there trying to match the needs of the business with the capabilities of technology.

And so being able to tell a story to our customers about starting with people and empowering people and giving them the kind of software that empowers them to drive customer relationships or innovation or partner connections or improved operations, that’s what People Ready software is all about.

So as we talk about Windows Vista and Office 2007, as we talk about search and portals and SharePoint, as we talk about our Office Communicator software and what we’re doing in unified communications, rest assured that we have driven the model of what people need from this basic premise of People Ready software, software that works the way people work, familiar and easy to use, and really driven from the perspective of all of these different roles.

And we get asked from time to time, is this just a marketing campaign, is it six months. You know, marketing campaigns have a hard time going for many years. This basic People Ready software philosophy of development will last for many, many years, because it builds from the core essence of the value our company is able to deliver to you and to your customers builds from that outward if you will.

Windows Vista, IE 7, Office 2007: These are big releases. You could say in Vista’s case a long time in the making, if you want to, and I think that’s probably a fair statement, a long time in the making, but absolutely a blockbuster release. I think it’s probably important for me to tell our partners to rest assured we will never have a gap between Windows releases as long as the one between XP and Windows Vista; count on it. I could go through the history of how we got here; just count on it, we will never have this kind of gap again. But what we have is absolutely a phenomenal set of products, and frankly really together the whole is bigger than the sum of the parts.

I know people will want to ask me who should upgrade to Office 2007 before Vista, who should move to Vista without upgrading Office, and you’ll get our experts up here and you’ll grill them and you’ll ask them questions, and blah, blah, blah. And that’s all correct, everything they tell you will be correct. I’ve moved to both of them, and I’ll tell you it’s the way to go, people, it’s the way to go. (Applause.) Because together you really get what is really a very fresh user interface, you get a set of capabilities that bring value, whether to the individual end user, to the business customer, to the information technology professional, or to the developer.

We’re going to put massive effort into launching these products, a massive consumer launch, which is very important. I was backstage talking to some of our folks and they were saying, ah, partners aren’t going to care about the consumer launch, they care about the business value, and I said, “No, no, you’re all wrong.” If we have a strong consumer launch, it creates the air cover where people are coming in and saying I want this stuff at work. And that air cover is incredibly important to our IT customers and to our business partners. So this will get massive investment from us, both at the consumer level, as well as at the business level.

I get asked by people all the time, what are the specific benefits of each of the products, and the truth is these products are very broad. They have a lot of different capabilities for a lot of different people.
At the end of the day though if you go to why will end users, consumers want Windows Vista, clear user interface, confidence, which means better security, privacy, parental controls, and better connectivity to hardware, to applications, et cetera, those three things. And the way we’ve integrated in the new IE, the new user interface metaphor, the new presentation system, the new shell, the new way search is integrated throughout the user interface, all of those things will really dramatically improve the end user interface.

Below that there’s a lot for all of you who have IT professionals in your organizations to get interested in, but end users will be drawn by the new capabilities.

On the Office side we’ve really focused in on this notion of better results faster. And we have never frankly had a more significant release of Microsoft Office than this one. I can go back 15 years, and I don’t think there’s a release of Microsoft Office where we’ve done as much; new capabilities and new features, yes, but a new user interface.

Some people will say the new user interface is disturbing because it’s different than the old user interface. I’ll tell you, you put anybody down for about five or ten minutes in front of the new user interface, and while they may have one or two questions that can be quickly answered about where some capability is that they’ve used, the ability of people to really use these products, to really take advantage of the power that’s there will absolutely, absolutely skyrocket.

So it’s an amazing year, and Vista and Office 2007 are kind of the linchpins. We’ll have big launches for these products around the turn of the year. Both of these products are incredibly important, and both of these will be incredibly important to all of our partners, because they will be something that attracts attention and buzz amongst all of our mutual customers, and we want you to be super well prepared to sell these products, to support these products, understand these products, and to drive business opportunity that makes sense to you building from Windows and from Office.

I want to transition now to some of the new markets that we’re entering. I talked a little bit about business intelligence. The next market I want to talk about is really the market for portal and collaboration and search.

The word portal is a funny word. It means a lot of things to a lot of different people. A portal is a place to look for things, a portal is a place to see a personalized view of information, maybe a set of documents, there’s document libraries, there’s content management. We use the word portal quite broadly and under our SharePoint product line we’ve really created technology that facilitates enterprise search, enterprise content management, enterprise portal and personalization and display of information, as well as enterprise wide workflow capabilities. The range of opportunities for our partners to add value around the new SharePoint, which is supported by Office 2007, is really quite dramatic.

And to share a little bit of some of the capabilities of SharePoint generally but very specifically in the area of search, search from the Internet, through our Live Search, to SharePoint search, all the way back to the Windows desktop, please join me in welcoming Kirk Koenigsbauer, general manager for Office Servers at Microsoft. Kirk. (Applause.)

KIRK KOENIGSBAUER: Hey, everybody. I’m going to spend the next couple of minutes talking about some of the significant progress we’re making in the search space, particularly focusing in on some of the investments we’re making in the enterprise space with business scenarios, and the products that will be shipping over the next six months.

Now, I’m going to focus this demonstration in three core areas, search on the desktop, search across the Internet environment, and then I want to give you a glimpse of a new product that we’re shipping called Windows Live Search Center, which goes to beta in July, that brings it all together in a nice rich user experience. Let’s go get started.

I want to start with search in the operating system. Now, the Vista team has worked incredibly hard to deliver results that are highly relevant, highly performant, and highly secure. Let’s go ahead and take a look.

Now, watch as I start typing a set of keywords here, fitness and then bike, how the results instantly pop up inside of the taskbar itself. So Vista searches all the files on your system, Word, Excel, PowerPoint files, any system files that you might have. But you can also use it to search the programs on your PC as well. So I’ll go ahead and type Outlook as an example, and you can see at the top here I get Outlook. I can go ahead and just click on enter, and that will go ahead and load Outlook right in the environment itself.

Now, of course, Vista does a great job of searching things like your e-mail and your contacts and so forth, but we’ve also built search directly into Microsoft Office 2007, because there are times, of course, where you want to have search in context of the work that you’re actually doing.

So, for example, here in Outlook you’ll notice that we have a search bar right at the very top of the page now. I can go ahead and type a search. Again, I’ll type that same search, fitness bike. And watch as those results pop up instantly. You see things like hit highlighting, you see things like preview. You can actually go ahead and click this link towards the bottom that says try searching again in all mail items, which will search your entire Outlook store from your contacts or tasks, all your folders and so forth.

Now, there’s one thing I want to point out about search in Office and search in Vista. We actually use the same index on the PC, and this is important for a couple reasons. One, it improves performance. You don’t have multiple indexes running, which is a common scenario that you find today. The second thing, of course, is that for you all that are doing deployment and management work, it’s a lot easier to manage those images with just that one index itself.

Now, I’ve spent some time talking about search on the desktop. I want to shift gears a little bit and talk about search in the enterprise environment inside of SharePoint itself.
Now, Microsoft Office SharePoint Server 2007 has completely rebuilt its search index. It’s highly relevant, highly scalable, upwards of 50 million documents in a single index and, of course, highly, highly secure, which is incredibly important for us for the enterprise space.

I want to go ahead and do a couple of searches for you here. I’m going to go ahead and type bike, go ahead and do a search, and you see the results on the page. Now, SharePoint searches not just SharePoint sites but file shares, Web pages, content that you have in repositories like notes databases or enterprise content management systems from, say, Documentum, Filenet, OpenText. You can search all this content with SharePoint Server 2007.

Now, another thing that we’ve done, too, is made the interface a lot easier to customize. It’s a simple style sheet now. So you can go ahead and decide how much information you want to put on the page, take advantage of different features like RSS or alerts if the content changes. You can go ahead and notify your customers in your organization.

Now, besides just searching for unstructured data, SharePoint has new innovations to unlock data locked up in structured repositories or line of business systems. And this is enabled through a new capability that we have called the Business Data Catalog. Now, you can use the Business Data Catalog not just in search, but you can use it to get information across all these line of business systems inside of SharePoint, depending on what you’re doing. Let’s go ahead and take a quick look.

I’m going to go to the search center tab again, and I’m going to do a search for, say, customers. Now, what I’m actually doing here is searching my CRM system and bringing those results directly here inside of SharePoint itself. Now, out of the box we will provide connectors, these Business Data Catalog connectors for Microsoft Dynamics CRM, for SAP, and for Siebel. And with no code you can set these solutions up for your customers to get this kind of content.

Now, I’m actually going to go ahead and click through the fitness bike customer here. Now, along with bringing back the customer record, you can also bring back all this rich information from the line of business system itself, information like —

STEVE BALLMER: This is data that’s actually stored in the database of those applications.

KIRK KOENIGSBAUER: Absolutely right. This would be data that comes from the CRM system that we’re actually able to expose here, things like the contact information, the sales that they’ve got, when we started doing business with them. You can actually see as I scroll down here on the page we have a number of open service requests, so we can actually get a sense of the customer’s service history.

In fact, we can actually take the data that we get from the Business Data Catalog and from those back-end systems and we can actually perform custom actions against that data. So, for example, here I could actually go ahead and create a service request for those open requests that I see here. If I wanted to find out where this customer was actually located and see a map of it, I can go ahead and click on the view map button. This actually takes that data from the CRM system and in this case passes it over to Windows Live Virtual Earth.

Now, there’s another area of innovation that I want to point out that’s truly unique to the SharePoint environment, and that’s the ability for you to search across people and expertise in your organization.

Now, it’s important, of course, to be able to search for documents, structured and unstructured, but there’s just a tremendous amount of knowledge called tacit knowledge which is locked up in the minds of people, and SharePoint is a platform that can help you get access to that information.

So let’s say, for example, I wanted to perform a search to find someone that could help me with a bike manufacturing project that I was working on. I’ll just go ahead and type in bike and hit enter. And on the page what you’ll see is listing of people that can help me perform that particular task, and it’s sorted by social distance, so in other words the people that are closely connected to me. You can see it says my colleagues’ colleagues as an example. On the right side of the page you can see there’s external people, so you can actually search across things like partners, vendors and suppliers that you might have in the system.

Now, this information is either implicitly or explicitly created inside of the system through things like Active Directory, we crawl things like content on your MySite, distribution lists, even contacts from your e-mail file, if you want to expose that to the system itself.

Now, if I want to —

STEVE BALLMER: It’s kind of like a MySpace for real business use.

KIRK KOENIGSBAUER: That’s a good way to discuss this.

If I want to narrow this down a little bit, I can actually click on and refine the search by, say, title, so I can find someone, say, in the manufacturing field or the marketing field and so forth.

Now, related to your point about MySpace as an example, we can actually then go link directly to the person’s MySite. Now, this is a personalized page created by SharePoint that has all kinds of information about the person. You can self-describe, and a lot of it is also automated. But you can see here their contact information, where they sit in the organization, you can see the documents that they’re working on, different SharePoint sites they’re a part of.

But we also expose some social networking information as well. I can see that this person is actually separated from me by two degrees. I can see the distribution lists that we share, I can see the managers that we share and so forth; so some really unique capabilities here in the people and expertise search as a part of SharePoint itself.

So I’ve talked a little bit about search on the desktop, I’ve talked a little bit about search across your intranet environment. What I’d like to do now is to focus on search, a new search capability we have called Windows Live Search that really brings it all together, results from the Web, results from the Internet, and results from your desktop.

Now, here you’re looking at Windows Live Search, and again this goes to beta in July, and on the left-hand side of the screen I’ve already done a search here for bike, and you can see a listing of all the different results. But there’s a really nice graphical user interface here, so I can do things like sort just by simply clicking, I can do things like drag and drop items to my desktop. You see these nice previews here on the page. In fact, if I actually click on some of these files here, not only do you get a preview of the first file, but just inside of Outlook itself I can actually browse through and look at all the different slides in the presentation itself without actually loading it.

Now, what’s important about this too is that not only can I bring together in the environment all this nice, rich environment here, but I can also bring together results in a federated way from the Internet, from Live.com, or from any combination of those, even my intranet or my desktop or perhaps the Web, the intranet and the desktop experience itself.

So here you’re looking at commingled results, results from the Web, results from my desktop, and, of course, results from my intranet environment. You see the preview here for this Word doc, we’ve got a SharePoint site here that we were just looking at, and then, of course, here are some results from Live.com, the bike.com Web site.

Hopefully here —

STEVE BALLMER: I think it’s great.

KIRK KOENIGSBAUER: All right, good.

Hopefully here you got a chance to see — it’s okay, you can applaud, it’s WPC. (Applause.)

Hopefully here you’ve gotten a chance to see some of the unique innovations that we have, things like Business Data Catalog, things like the ability to bring all these results together in the Windows Live Search Center, things like people search. We are really positioned well to have a very competitive solution in the enterprise space.

Now, search is a good opportunity as a standalone business for you, but it’s also a great opportunity for you to get into these broader categories that Steve was talking about around things like collaboration, enterprise content management, portals and so forth.

Thanks very much.

STEVE BALLMER: Thanks, Kirk. (Applause.)

I think for our partners this year this represents — the system integration partners particularly — this represents perhaps one of the very best opportunities out there. You put in place SharePoint infrastructure with Vista and Office 2007, the customer gets immediate value from the integrated search capabilities across desktop, enterprise, and Internet, and then over time you can add more capabilities in terms of customized portals, Business Data Catalog connectors to other data sources. But having that kind of SharePoint farm and infrastructure in place with a desktop deployment of Vista and Office 2007, I think that is a powerful selling opportunity that we all can get behind.

We are announcing at the conference that there are over 35 partners, primarily focused on the enterprise, that will be joining us in attacking this opportunity. We think that there is about a $13 billion opportunity out there today in information management, a very large partner opportunity, and companies like BearingPoint, FileNet, Mondosoft, Tata Consulting, Wipro and others will join us in pursuing the very large opportunity we all see out there in SharePoint and enterprise search.

We’re also announcing a new quick start program for the Microsoft search. You can sign up at no cost, and that hopefully we can build the ecosystem and the knowledge in your organization to take this customer value proposition to market and really make it meaningful.

The second new market I wanted to talk about is unified communications, and this is a very big deal. We all love to talk about how the Internet is transforming the world. What that really means is that more and more things that people used to do with some analog technologies are moving to IT Internet-based networks. It’s happening in the video space as more and more people deliver TV over Internet like AT&T, British Telecom, Deutsche Telekom. But an area that will perhaps be the most profound is the move for all communications, conferencing, video conferencing, voice, e-mail, instant messaging, all of that will integrate and all of that will run and drive value on top of IP-based networks.

It’s a big deal. It’s a big deal to us, it’s obviously a big deal to some of the other partners that you work with. It’s another example of a place where you’re going to have choices that you need to make where there’s going to be coopetition in the marketplace. But we have a very strong offering in voice over IP, in unified communications coming through Office 2007, coming through our new Exchange Server, coming from the new Office Communications Server, which is a renamed version of Live Communication Server, coming from a new peripheral that we’ll be bringing to market called Roundtable that really makes interactive online meetings, and coming from Windows Mobile devices. We’ll have the built-in voice over IP capability that we’re talking about here available in handset form factor.

So what I’d like to do is to invite Paul Duffy from our real time collaboration, unified communications group to come on stage, share some of this with you. I think it’s another huge horizontal opportunity for all of our system integration partners around Vista and Office 2007. Please welcome Paul Duffy. (Applause.)

PAUL DUFFY: Hi, Steve. Good to be here.

So I’d like to spend the next few moments giving some demonstrations of some of our unified communications products, both those that are currently shipping today, as well as those that are going to be available in the near future.

But before I do that, I’d like to ask Steve to do me a bit of a favor here. I’ve got a new Windows Mobile device made by one of our partners, HPC, and a very cool form factor. I’m just wondering whether you can hold onto that for me. We might be using it a little bit later on.

STEVE BALLMER: It would be my pleasure, of course, Paul.

PAUL DUFFY: Thank you.

So we’re going to start off here using —

STEVE BALLMER: It’s pretty nice. I recommend them to all of my friends. (Laughter.)

PAUL DUFFY: I like it, too.

So we’re going to start off here in the spirit of Windows Mobile with the Communicator Mobile client. And that’s a Windows Mobile version of the Office Communicator product, which you might be familiar with on the desktop. I’m projecting this device here using SOTI software so that you can see it more easily at the back.

STEVE BALLMER: But this is just a Pocket PC based device sitting right here.

PAUL DUFFY: That’s right, with a great keyboard.

So I can see my contact list, I see similar consistent icons to what I would see on the desktop. I can then see over here that my colleague Kyle looks like he’s available.

So there’s a number of ways I could choose to communicate with him. Maybe I could send him an IM. I could have a voice over IP call using that device or even send an e-mail. But for now we’re going to send him an instant message.

And in the spirit of instant messaging, Kyle is going to respond to me pretty quickly with some kind of message.

STEVE BALLMER: We hope so.

PAUL DUFFY: We always hope so. And it looks like he has this time.

Now, I could also have communicated with Kyle in a number of different ways. Maybe I could have used the telephone device, the underlying cellular phone that is in this Pocket PC device. I could also have sent a text message using again the underlying cellular phone that’s in there.

And the key thing that Communicator Mobile is doing here is bringing together all of these different forms of communication in a way that’s very easy for me as the end user to do that.

So we’re going to say goodbye to Kyle for now, but we’ll probably speak to him again a little bit later on. So I’ll just end this.

STEVE BALLMER: So this is a look at your buddy list and presence information all from your mobile device. And really with Office 2007 and the communications server some of these technologies have been nascent, but we really bring them together in a powerful form factor across mobile and communications.

PAUL DUFFY: That’s right. And Communicator Mobile is also available today, it’s a shipping product, and for customers who are using Live Communication Server. The usual customers, they can take advantage of that right away.

So what I’d like to show you now is one of the new capabilities in the next version of Exchange Server, Exchange Server 2007, and that is unified messaging. So not only the ability we already have for e-mail in our inbox, but now also the ability to have voice messages and fax messages all within that same inbox.

Now, I’m going to show you this experience through the next version of Outlook Web Access as well, to emphasize that this experience stays rich, even for people who might not be using the full desktop.

And I can see here in my inbox that I’ve got a message here from my colleague Mike Bronston. Now, a few different things I could do here. I could make some notes about the voicemail, which is always handy, given people I might not know, I could add some notes which will make it easier for me to search later on to find out what that message is about. I could also choose, if I was in an environment where I wanted some privacy, to play the message on the phone, which would have the Exchange unified messaging server call me, and I could listen to that message on the phone. Or instead we have an embedded Windows Media Player, and I’m going to play the message right now using that.

MICHAEL (from voicemail): Hey, Paul, it’s Michael. I’m in Boston for the Partner Conference. Can you give me a call?

PAUL DUFFY: So we heard Michael, my colleague, who’s leaving me a voice message saying that he’s going to contact me.

So I’m going to show you how we can contact him in a very seamless way now. Moving forward to the desktop version of Outlook where again it’s the voicemail that we just played, I also seem to have an e-mail from Michael, which I’m just going to look at now.

So in this e-mail, as well as the text that we’re used to in e-mails before, I also see these presence indicators, these little green icons next to both Mike’s name here, telling me that he’s online, but also he’s giving me more information, he’s telling me that like me he’s at the Worldwide Partner Conference, or his colleague Kyle, who we spoke to before, who’s also in Boston, which is very convenient for the demo that we’re going to do.

STEVE BALLMER: All new capabilities in the Office 2007 product line.

PAUL DUFFY: Absolutely.

So these things now, we have the ability in the ribbon over here, we have the ability to either IM these people or call them straight from Office. So I could make a phone call, if I wanted to, using voice over IP straight from an Outlook e-mail without having to switch to a different system, and just going ahead and doing that straightaway.

What I’m going to do right now is start off with Michael with an IM.

Now, we see a window pop up, and this is a window of the new Office Communicator 2007 product, and what we can see at the top of that window, we now have a subject line, so I can make that conversation in context, so that when Michael gets my message he knows that it’s not just some random instant message, he has some context that it’s about the mail he sent me.

So we’ll start speaking to him now, again with the same level of hope that he’ll type us a message back pretty quickly.

Now, IM is a great form of communication. I’m sure that many, many people in this room use it. But it’s not necessarily the best form of contact that human beings want. So what we’re going to do now is add a video to this conversation. It’s very easy for us to do. It’s just another form of communication that we can seamlessly add just by clicking this video icon here.

So just give it a minute, and Michael will be getting a popup now asking him whether he wants to start a video conversation, and in a moment we’ll hopefully see his face on screen. So we do. Hey, Mike, how’s it going?

MICHAEL: Hey, Paul, good to hear from you. You know, there’s a lot of excitement here in Boston for the Partner Conference, and when I arrived on Sunday there was a lot of excitement because of the soccer game. Did you happen to catch the World Cup final?

PAUL DUFFY: Well, potentially atypically for my fellow English countrymen, I’m not really football fan. (Laughter.)

STEVE BALLMER: I can understand that. (Laughter.)

MICHAEL: Now, Paul, that wouldn’t be because England was knocked out of the tournament last week, would it?

You know, I think Kyle watched the game. Let’s bring him into the conversation.

PAUL DUFFY: Who’d believe it, that England was knocked out.

But anyway, so what we’re seeing right now are one to one videoconferences, something that we do deliver with shipping products today.

What we’re just about to show you is a multiparty audio and videoconference. So I’m just going to add in a third person, in this case it’s going to be Kyle. So we’ll just find him in my contact list, so I’m just going to drag him over into this window. So it will take a few moments for that conference to be established.

So one of the things that we can note at that time is these little icons at the top left of the screen are all changing color, and they’ve gone red, and that’s indicating that we are in a conference. That’s happened automatically, so other people who are now trying to communicate with me or with Kyle or with Mike know that we’re in a conference and we’re not likely to want to be disturbed.

It looks like Kyle is here. So, hey, Kyle, are you here?

KYLE: Hey, Paul. Well, at the first I almost believed we would win, but we did not even make it to the quarterfinals, so I had to think about it.

But, you know, in a country where a big part of the population is French and Italian, it finally became real with that.

PAUL DUFFY: So in this case Michael is my colleague from Switzerland, truly international conversation we’ve just been having, so he’s happy in some way.

Now, one of the other things that we noticed just then was when Kyle started to talk, the video switched just to show him. And this is what we call active speaker detection, so only the person who’s talking is the one we’re interested in.

So we’re going to say goodbye to these two colleagues now, so thank you very much.

I’m going to show one more thing, and this, Steve is where this telephone I gave you before comes in.

And so one of the capabilities that we’ve introduced in Office Communicator 2007 is what we refer to as call management, so the ability to both make and receive telephone calls from the Office Communicator client.

So I’m going to make a little personal phone call of my own right now.

STEVE BALLMER: So you’re using the PC as your phone.

PAUL DUFFY: That’s right.

STEVE BALLMER: You’re initiating a call, and what’s the software that’s going to be the PBX through the switch — oops, I’ve got a call, sorry. Hello?

PAUL DUFFY: And that was my little personal phone.

STEVE BALLMER: Paul? Hello? Anybody there? Gee, this must be using essentially Office Communicator and Server 2007 as a PBX.

PAUL DUFFY: Effectively that’s what’s happening where you’re using Communicator 2007 and Communication Server 2007 to manage our voice calls.

STEVE BALLMER: So you’re saying the new Office Communication Server 2007 and the new Office 2007 and Windows Mobile we really have a full voice management solution?

PAUL DUFFY: Yes, combined with offerings our partners will help us implement, we have the infrastructure, we work with many different partners, PBX vendors, other partners to provide that full management capability that’s right within the applications that information workers are used to using.

STEVE BALLMER: Well, that’s great, and I miss most of the calls, and there is the one where you did in front of 10,000 people in an auditorium.

PAUL DUFFY: Yes, exactly, exactly. Next time I’ll call you when you’re not quite so close.

STEVE BALLMER: Thank you very much. (Applause.)

The level of call control that we have built into Office Communications Server 2007 is really quite phenomenal. We did an acquisition about 12 months ago, and it’s really been an area of incredible investment for us.

PAUL DUFFY: Yes. And just to recap what we saw there, we saw shipping today Communicator Mobile extending some of these rich communication capabilities to Windows Mobile devices. We saw the unified messaging capability in Exchange Server 2007, which is coming soon, to deliver voicemails and faxes in the inbox like people are used to with e-mail, and then we also saw with Communication Server 2007 and Office Communicator 2007 multiparty audio and videoconferencing as well as call management with this phone here.

So that’s it, thank you very much, Steve.

STEVE BALLMER: Thanks, Paul, appreciate it. (Applause.)

That’s what they call a surface scratcher. The depth and richness of functionality in unified communications in the phone, in the new Exchange, in the new Office Communications Server and in the new Office is really phenomenal.

The capability to call, have your e-mail read to you, the way in which we can really do a very rich multiparty calling, multiparty meetings, multiparty video, this is another broad horizontal opportunity. It’s another opportunity where Vista and Office 2007 with the right server infrastructure that you instance can really have very powerful horizontal impact. These are not narrow opportunities. The search and portal opportunity should touch literally every persona in most companies. The unified communication scenarios should touch virtually every role, every person in the companies that you work with. And I think these create broad opportunities where Vista and Office 2007 helps create demand and the demand that you create around these scenarios will also help bring Vista and Office 2007 into those businesses.

The next opportunity I want to talk to is another broad horizontal market opportunity that we’re trying to build this year, and that’s in the area of security. We’ve introduced our Forefront product line, and really what we’re saying and what we’re doing with Forefront is moving beyond just this notion of improving the security in our core products. Yes, Vista is the most secure release of Windows we’ve ever done; yes, Longhorn Server, the next release of Windows Server, will be the most secure release of our server infrastructure. But we made a concrete choice under the umbrella of this People Ready software to say we need to provide an end-to-end solution for security, which really means clients, server and edge protection. And this year we will roll out, in addition to the current edge product, which we are enhancing, we will roll out a full suite of products that you can use to help our joint clients protect their servers and all the way down to desktop client protection, meaning antivirus, anti-malware, all the way down to the client.

I think this is an exciting opportunity, I think it’s one customers push on us hard. They want the kind of integration that Microsoft uniquely can provide in the security world. And while there’s going to be very healthy coopetition in the security business, I think having a rich and complete security offer from Microsoft will provide incredible value to our customers and give you incredible new alternatives to build business.

In addition, starting initially with Exchange, we have a set of hosted alternatives for security and protection, hosted anti-spyware, mail archiving and data encryption services, and we will continue to extend out the range of security services that are available both on a hosted basis as well as on an on-premise basis that you go forward and instance.

It’s also my pleasure today to announce our new Small Business Server product, Small Business Server 2003 Release 2. And what we really do with this product is bring client side updating, the software, we have a bunch of people here I think who are Small Business Server specialists, congratulations. (Cheers, applause.) But we’re bringing essentially auto updating to the client through our Software Update Server technology directly and building it into Small Business Server 2003. We have new mobile capabilities, the SQL Server 2005 Workgroup Edition is built in. This becomes a very rich foundation for a company of up to 50 or 70 employees and a need for only one server to really move forward.

There are new capabilities in this product so that you can augment SBS with an additional Exchange Server or SQL Server, so it starts to expand out to slightly bigger customers, but we think really this provides yet another major step in our focus and our focus with our partners on small businesses.

Live. Live is an important new initiative to us. Live is all about essentially using the Internet to remake the software business itself. We think about it as extending essentially our platform, which has been client and then client and server, so that our platform embraces client and server and the Internet. It means embracing subscription funded offerings and ad funded offerings. It means hosting in our datacenters services for search, content, collaboration, communication and business services.

We have some pretty good momentum. We will introduce by this fall over 20 new Windows Live services. We’ve introduced the first version of Office Live in beta test. We have approximately 100,000 users already for that service. We’re adding over a thousand users a day to our Windows Live OneCare service for security and protection. We have over 250 million mail and IM customers online and over a hundred million unique users for MSN Spaces, our online blogging, sharing and collaboration facility.

With all of that, we are certainly aware of the fact that we’ve got a lot more work to do. The opportunities here are great. The chance to really bring Windows, Office online, the ability to really build out new services like search and entertainment services is dramatic. The need for a strong advertising infrastructure with what we’re doing with adCenter and our point system is high.

All of that is interesting, but a lot of partners say what does it mean to me, is there a role for me in your Live strategy. And the truth is we are 100 percent convinced that the transition our industry will make over the next five to ten years, because this isn’t going to happen in the next one year for most of our business customers, but that transition is going to require that we bring you, our partner community, with us. We don’t see this as a world in which we do everything ourselves. There are going to be services we host, and services you host. There are going to be services that get sold by you on a commission basis. There is going to be value add that you deliver in system integration and application development around these hosted services.

We’re announcing today the formulation of a Live Partner Advisory Council. I don’t think most of you should expect any major impact plus or minus from Live to the core of the business that we do together in the next year, but as now is the time to build out the platform, now is also the time for us to come together and define the business model and the way we work together.

Our industry is an industry that is full of change. Some might call them disruptions. I remember when we first integrated TCP/IP protocol stacks into Windows, and I had a bunch of partners say to me this is terrible, this is the end, our business is writing TCP/IP protocols tacks and integrating them with Windows. And somehow here we are 15 years later and we still have a lot of partners making very successful business.

Change is the nature of our industry. The change that will go on from all infrastructure that runs on a customer site to infrastructure that also runs out in the Internet is inevitable. We at Microsoft have to embrace it, our partners have to embrace it. The key is being willing to embrace it together, to work together to find the new opportunities. The level of customization, the level of personalization, the level of service our customers want and expect is not going to change in a hosted world. And so the level of opportunity for all of us together will be strong and let’s start now through this Partner Advisory Council in really defining it together.

Today, I want to announce a new product in our Live lineup, Microsoft Dynamics CRM Live. This is a product that people — (Cheers, applause.) This is an offering I would think that most people would consider the single-most inevitable announcement in the history of Microsoft, and despite the fantastic momentum you’ve all given us with CRM on premise, we are not going to be out-hustled by anybody. And to share a little bit with you, what we’re going to have here within a very few months with Dynamics CRM Live, please welcome Brad Wilson from our CRM team. (Applause.)

BRAD WILSON: Steve, good morning.

STEVE BALLMER: Good morning.

BRAD WILSON: I’m going to do a brief demonstration of CRM Live for people here today.

STEVE BALLMER: Wet their whistles just a little bit.

BRAD WILSON: A bit.

It will be available in North America in Q2 of next year. I’ll go ahead and show people exactly today how partners have tremendous opportunities as we move from on-premise and partner hosted and into the Live CRM space as well.

And I’m going to go ahead and give you an example of how things are going to look. First, I’ll open up in Internet Explorer here, type in my password, and log straight into a browser-based version of CRM Live. I’ve got a complete CRM suite: sales, service, marketing. I have my own workplace here where I’ve got my activities, my accounts, my contacts.

STEVE BALLMER: This would be kind of an Ajax style implementation basically of our CRM UI?

BRAD WILSON: Yes, pure thin client. You can get it from a Starbucks kiosk somewhere if you just want to go ahead and check in and log in through there.

Let me go ahead and show you how we can do even cooler things if you integrate this into the Office environment here.

So here’s CRM Live being rendered right through an Outlook desktop. You get the same sales, service and marketing over here. You can get all the same abilities built right into your normal desktop.

STEVE BALLMER: This is the logical equivalent of Outlook talking to Hotmail for e-mail, and this is Outlook talking to CRM Live for —

BRAD WILSON: Absolutely, you’ll have CRM Live. Right now I’ll go ahead and click on the CRM Live homepage. I’ve got a customized dashboard here. And in this scenario I am the sales manager for a company that builds and sells homes. And so just so you know, this isn’t out of the box, this is what partners do today with CRM, and we’ll do in the CRM Live environment. So we don’t ship this, this is all things our partners are able to do —

STEVE BALLMER: So we have a partner-based customization model right out of the gate for CRM Live.

BRAD WILSON: Absolutely. I mean, it’s not a solution of partners aren’t involved in the CRM space in general, you’ve got to have that level of value add.

So here I’m selling in my Westlake community. I’ve got different models of properties, accounts by construction phase.

Let me scroll down here though. This is a Windows Live local map of my residential area that I’m selling properties and building properties into. Pretty cool; it would be cooler though if we actually could overlay this with the actually lots and the status from a sales perspective of these lots.
Let me click on sales data here. This is a mash-up of Windows Live local being overlaid with geo RSS data coming out of the CRM system. (Applause.)

And it’s showing you exactly which properties are sold, which are available, but we have a problem here.

STEVE BALLMER: What’s the problem? We have some that aren’t sold. That’s the problem.

BRAD WILSON: Exactly, that’s the bigger problem.

There’s one of them here that has an issue. As I mouse over this, I get a notification that there’s a final price needed. We haven’t actually priced this lot and this floor plan. I’m going to go ahead and scroll down here, and I’m going to get some more information.

STEVE BALLMER: And that’s talking now to the CRM system to get the info on the lot.

BRAD WILSON: Pulling up the CRM Live pages directly from clicking on a Windows Live Local map. If I pull this up, I’ve got my information here, I’ve got my customer name, my realtor, my floor plan, et cetera. I haven’t got a price set yet. But before I set a price, I should look at some local prices. Let me click on price comparisons. And again using Windows Live Local I’m going to pull up a map of the area where this home is being built. Let me go ahead and grab some RSS feeds of prices of homes being sold in the area. Let me go ahead and click on these first three and grab some home prices, get some comps on what these houses cost.

Pretty good, but I’ve got a pretty broad brush. As you know, this goes from Seattle out to Snoqualmie. Let’s bring it in a bit and get it kind of closer to my specific range. I’ll bring it in here. The map will narrow down. I see my average price here is about $347,000.

STEVE BALLMER: That will be an expensive place to live.

BRAD WILSON: Exactly right.

So what we’re going to go ahead and do is go back over here. My floor plan is a bit bigger than what we have right here. I’m going to go ahead and price this thing at $360,000, and I’m going to go ahead and save and close this. And what you’re going to find is the Windows Live Local map is going to come up and now it’s moved from having an issue to being pending availability to sell this.

Now, this is not out of the box, this is what partners can do very easily in Microsoft CRM today either on premise or partner hosted, and CRM Live will have the exact same partner solution model. You can build solutions very easily and sell them to a broad range of customers, any of these models.

Let me go ahead and take this to kind of the next level. Here’s my Windows desktop with my sidebar gadgets over here. See how many sold lots I have right up through a gadget, how many leads I have, how many notifications I have.

STEVE BALLMER: So these are just little gadgets that a partner wrote for you that talks to the CRM system.

BRAD WILSON: Absolutely.

STEVE BALLMER: On Vista.

BRAD WILSON: That’s right. We don’t ship a sold lot gadgets; a partner will create a sold lots gadget using our information to make this screen come alive for somebody. Okay, that’s the key.

We’ve got one notification here. Let me go ahead and click on that. And this notification, what you’ll see is our customers want to have an independent property inspection. That’s okay, it’s routine for us. Based on this, we have already recalced using our workflow all the construction dates here. We’ve got the groundbreaking, framing, move-in, et cetera, all this stuff is all laid out.

So this is great, we used the workflow in the system to automatically set up this whole process. It would be great though it we could collaborate with the customer, with the home buyer, and give them a way to share the information.

Let me go ahead and create an Office Live workspace here.

STEVE BALLMER: Now, this is something one of our partners could do, they could create their own SharePoint or Office Live site that talks to CRM Live.

BRAD WILSON: That’s exactly right. We have all the enabling technology. We don’t ship this out of the box; these are all things that partners can do across the Windows Live platform, the Office Live platform, the CRM Live platform, and all these things we have working together.

So as I click on this, this will go ahead and create an Office workspace and it will e-mail the recipient. Let me switch over to the home buyer’s environment. As I come into here, if I click on Outlook, they will have received an e-mail from me saying there’s a new Office Live workspace created here that gives them information about their property. If I click on that, I come out to a customized Office Live page. This could be any hosted SharePoint facility, in fact. It’s a great example of how we can customize, how our partners actually can customize this environment to give you your construction dates, information, documents, et cetera.

STEVE BALLMER: And this is being fed, this is an independent Web site, this is kind of being fed as mash-up style data out of CRM Live.

BRAD WILSON: That’s absolutely right. It’s a great collaborative environment of Office Live, Windows Live, and CRM, in this case in the CRM Live environment.

So it’s got great opportunities for our partners, because again this is how partners can easily create solutions by mashing things together and using great technology underneath it. I think it’s a great example of how our investments across the entire company are giving partners tremendous opportunities.

STEVE BALLMER: Super.

BRAD WILSON: Terrific. Steve, thanks a lot.

STEVE BALLMER: Thanks a lot, Brad. (Applause.)

If you hadn’t applauded at that one, I would have thought there was something wrong with the audience this morning. I was like that stuff is so exciting.

It partly though also helps dramatize how important it is to make this move to our Live platform. It gives you and us both new challenges maybe but much more in the way of new opportunities.

Scenarios like the one that Brad showed you, which are not farfetched, which are economically affordable customizations that our partners can do for our mutual customers, is really quite amazing. And the range of ways in which we’ll be able to partner, partner on advertising revenues, partnering on referrals where you want to sign somebody up for one of our Live subscriptions, and we want to compensate you for that, there’s going to be people who want you to host their infrastructure or instance their infrastructure, not us, and so most of the services that will be available from us in a hosted form you’ll be able to instance with our server products. There’s going to be a resale model and, of course, a customization model like the one Brad showed you where you can do add-ons and customizations to Office Live, to CRM Live, and to other products.

So I think there’s a broad set of opportunities that will exist for you and us together in this Live era. I actually think we’re going to have an opportunity to give birth to a whole new set of partners writing new kinds of applications that are much more able to target small businesses, micro businesses, which are not always economic for all of us to target today, and we’re excited and enthused to work with you to define our joint partnering model.

Before I wrap up, I want to give you just a little bit of context on where I think we are, since I said we’re in the middle of an amazing and exciting, a fantastic year. But, in fact, what we’re really in the middle of is wave two of three major waves of innovation. Last fall, last November we launched an amazing set of products, a new version of Visual Studio .NET, SQL Server, really targeted at software developers, people building applications. And it was an amazing wave of innovation, which many of our partners are using.

Today, we’re in the middle of the wave of innovation really focused on the end user in some senses, anchored in Vista and Office, but complemented with Exchange, with SharePoint, with Office Communications Server, and with Live.

Next year at the Partner Conference we’ll be talking about the next version of Windows Server, which we have codenamed the Longhorn Server, and that wave will bring with it a whole new range of infrastructure and management solutions that I think are very important.

So every year, every year in this context of People Ready software I think it’s important that we have an amazing wave of innovation, that provides the foundation for you and us to go forward and deliver value to our customers and to build profitable business together.

What’s your role? What are we expecting of you? Well, I don’t know that we can expect anything, but I’ll tell you what we’re encouraging you to do, we’re asking you to do. I’m going to tell you what we’re up to, and if you want to dovetail your efforts so that we’re really driving forward in the marketplace together, I’d focus you on these five things.

Number one, we have new versions of Windows and Office, and our Client Access License coming to market. We have, of course, the versions that we have in market today, but with Vista and Office 2007 we have an enterprise version of Windows, we have an enterprise version of Microsoft Office, and we have an enterprise version of our Client Access License that includes not only SharePoint and Exchange but also includes a rich set of security and business intelligence and unified communications facilities.
Our sales force is going to be out there trying to really establish the value in Windows and Office, and in these enterprise SKUs. We’ll ask your support, we’ll ask your partnership, and we’ll seek to drive demand and make money together.

Number two, we continue to have a major effort to drive applications around .NET using SQL Server and managed by our System Center product set. And particularly for System Center on the desktop, as we drive new Vista and Office 2007 deployments together, we should get a strong System Center infrastructure in place for the management of our mutual customer environment.

Number three is Microsoft Dynamics. I had a chance to do a launch event for Dynamics AX 4.0, and I’ll tell you we have got a phenomenal product line today in business applications. And we’re going to drive strongly down that path and add I think really quite a substantial number of customers, ERP as well as CRM.

I talked about the Live Partner Advisory Council, and last but certainly not least we want to build new businesses together. Search and portal, unified communications, and security: Those three businesses we want to go build together. You’ll see us put our sales and marketing energy behind these things. We’ll ask for your support, we’ll ask you to get your people trained and up to speed, to make a bet with us, to have that bet be a bet that drives new customer value and provides new sources of opportunity for you, and also fits comfortably under the umbrella of all of the Vista and Office 2007 marketing that we’ll be doing.

People Ready software: That will be the overall message and marketing campaign. That’s the overall design philosophy. That’s the message that we’re taking out to our customers. We have People Ready software for a business that desires to really empower its people, to empower its people to do their very best work, to empower their people to make their company maximum amounts of profit and customer satisfaction.

But we’re also going to carry the message that we’ve got partners who are ready, partners who are ready to take these products to market, partners who are trained, who are skilled, partners who make a difference, who have intelligent ideas and points of view, and together Microsoft and its partners really can help our mutual companies, our mutual customers be People Ready Businesses.

Thanks again for your contribution, thanks in advance for all the contribution you’ll make to these initiatives, have a great Worldwide Partner Conference. It’s been my pleasure talking to you today. Thank you.

(Applause.)

END