Do you think customers want more clarity than "there'll be a service pack and there'll be an upcoming release"?
Turner: Not the customers I talk to. Most of them want to know why they need Vista in the enterprise. I mean, Citigroup is a great example. HP is another great example, going to all Vista everywhere. (What they want to know is) what they can do, how quickly they can implement it, how they can get it certified on their applications. So what they want to know is more about today. Fewer of them want to think about having to swap it out three to five years from now. They want to think about how they get it implemented today.
Emerging markets and antipiracy are pretty big opportunities for Microsoft. What does Microsoft need to recognize that's different about selling software in these emerging markets, versus the way you guys have historically sold products?
Turner: We have a new, Unlimited Potential offering for students and education and schools. We've really started there to attempt to build an ecosystem to get in there and help people. They can't afford to do the things that the developed world can. You know, part of our core beliefs, which go back to Bill Gates, our founder, is, how do we get out and help and extend the software in those markets? There are new business models for us in those markets.
(The goal) is not to lose money, but it's not to make a lot of money (either). It's to create an ecosystem that can help people get better. But, in turn, in doing that, we believe it's the long-term approach to creating a healthy, stable economy and creating the right ecosystem for PCs and for technology. So it's more about changing our approach and attempting to be more thoughtful.
You know, it's humbling knowing that every single day of the year, a billion people use Microsoft software. Every day. That's a very humbling thing to think about. The unbelievable thing about that is only 500 million pay for it.
It seems like you guys have really beefed up the technological means by which you're making piracy less practical. Is that starting to make a difference in the bottom line?
Turner: WGA--Windows Genuine Advantage--with Vista is really our first hard line to attempt to curtail some of the piracy efforts. It's still a little too soon to tell, but it will have an impact. And over this next year you'll certainly see us do different implementations and learning (related to piracy).
We have a lot to learn in that process, and we want to be thoughtful about it. We don't want to cause customer dissatisfaction; we don't want to push people away from Windows. But at the same time, we want to make sure there's an opportunity there to get paid for it. That's the balance of how we implement that, where we implement that, and how fast we go with the rollout of that. There's a lot of work going on within Microsoft to make sure that we're thoughtful and mindful about how to do it. But, yes, Vista gives us that advantage in the marketplace over time.
The software world's changing: if software is delivered differently, what does that mean for Microsoft and its partners? What changes will they and you need to make to current business models and the way they work?
Turner: One of the common themes I kept hearing in speaking to partners is, "Hey, I'm reading a lot about this software and services; is it a real deal and should I be looking at it?" I've heard it so much that today I was attempting to try to energize people to think about what we believe is imminent. We believe that it's happening and there are certainly great examples today of where it's evolving and where it will continue. We are a multicore company, so it's not going to be the only business model we have. But we believe that there's a whole new ecosystem that's emerging through software plus services for existing partners to extend their business and get into some new spaces. But it's also going to create a whole new ecosystem for partners that aren't at Microsoft today that we can invite into the fold as well. It's exciting.
It seems like the most painful aspect of that transition is for the partners that have been doing hosted services themselves. Initially, Microsoft really didn't offer direct hosting and, if you were a partner hosting Exchange or SharePoint, you kind of had that field to yourself. Is that what you're hearing?
Turner: No. Mostly it's about whether traditional services are going to become obsolete. Is everything going to that? Or is it going to be a mixture? We happen to believe it's a mixture, but an important choice. In our ecosystem of software-plus-services, we're offering different monetization models. Whether it's on-premise or hosted or hybrid, there are opportunities for partners in all three of those buckets, which I think is very important.
We know a lot more than we did a year ago about where software-plus-services is going to go and where we're going to invest. But by no means do we believe that we have it all understood and figured out. So these profitability models have got to continue to evolve. And next year, we'll be smarter than we were this year. But we want to invite our partners to get on the train with us and figure out what we think is a very important initiative.
One of the things you said is that 100 percent of what Microsoft delivers to business customers for its Dynamics software is through partners. Does Microsoft see more things that it needs to be able to offer directly, maybe with partners reselling it, but where the partner role is more of a reseller role for that particular service?
Turner: As you look at our business model, what's really changed is the company predominantly was a product-centric company. As we transition to more and more solutions, the complexity of those solutions creates opportunities for partners. To be able to make that transition from product-centric to solution-oriented is one of the things that the customers, particularly the largest customers, want to make sure that Microsoft is going to stand behind.
When you take a look at things like SharePoint and SQL Server implementations, we have great partners that help us do those things. But there are also companies--whether it's Citigroup or some other major company--that say, "Hey, where are you at, Microsoft? Are you at the table with me? Are you going to stand by this?" And, certainly, we have to participate with partners. But that ecosystem--and the amount of innovation we've got coming into that ecosystem--I don't think it's ever been better.
One of the things you talked about was a report card of how Microsoft is doing versus one year ago. Could you summarize that report card?
Turner: The one I think is really super strong is this idea of bringing innovation into the marketplace. It's great to see that happen. What does '08 look like? I feel very strong about our ability. We're investing $7 billion-plus on innovation in the marketplace, and then delivering that out for partners to create value. I feel great about that.
If I take the opposite end of that and say, "Well, where do you not feel as great?" I think we have opportunities to continue to make that software road map more clearly understandable by our partners. We're better now. We actually have, by business group, a software road map. But if you look at those, there are varying degrees of quality in that. And it is still a learning exercise for us to be able to chart, share and then make sure that we protect what's competitive intelligence. Being able to meet the partners halfway and give them what we can (so) they can plan their business is something that we're going to continue to improve upon.
Another one we talked about was creating profitable opportunities. I feel great about these partner models. Those are real. I mean, they're not perfect. Again, I don't want to say we have that figured out, because we don't. But it's a start. It gives partners the ability to walk through how they can make money. The thing about that tool that I think is interesting is by us creating the tool, it makes us work through the same math and logic that the partner does in making sure that we're thinking about everything from a monetization standpoint. So it makes us better, in turn, by providing the opportunity for that.
This is an online profitability tool that the partners use?
Turner: Yes. There are nine different models that we use today for each of the different types of partner.
Another goal you stated a year ago was to make sure that Microsoft is seen as acting as one company. I imagine that's something you're trying to work on, but don't have all the ability to do it all yourself.
Turner: It is a real challenge. I mean, we sell products out of 191 different countries today. The breadth of our portfolio is so broad. We sell from end users to consumers, all the way up to the largest enterprises and governments in the world. Because of the amount of products that we've got--in divisions, in departments, in things that customers and partners don't care about, like structure and governance--there is an opportunity for us to bring that together for partners is a big deal. For the first time, we actually have it all come together under a single person at Microsoft. I think we've got to get better at it. The partner and customers don't care how complex we are, how big we are or what we sell; they just want simplicity. I think that's part of my role: to make sure we keep driving for that simplicity.
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