ANNOUNCER: Ladies and gentlemen, once again, Jon Roskill. (Music, applause.)
JON ROSKILL: All right. Super, super cool stuff our Public Sector team is doing with you guys, our partners, in CityNext.
So now is everyone ready to turn it up a notch? Yeah. I hear some people yelling. I have the coolest Windows 8 tablet deployment that you have ever seen. Get ready for this.
(Video segment: Windows 8 Flight Bag.)
JON ROSKILL: (Applause.) Awesome, awesome stuff. Please join me in welcoming to the stage, test pilot Eric Cornelius, call sign, Corny. (Applause.) Corny!
ERIC CORNELIUS: Thank you, Jon.
JON ROSKILL: Welcome to WPC 2013. Awesome, awesome video. It's so cool.
So let's talk a little bit about this application. You picked a Windows tablet. Why?
ERIC CORNELIUS: Correct. First of all, we wanted to get rid of all the paper in the cockpit. Pilots are using this in a bag, a lot of paper.
JON ROSKILL: A lot of paper.
ERIC CORNELIUS: We wanted to get rid of it.
JON ROSKILL: Cool.
ERIC CORNELIUS: Basically, we put this digital version on the Windows 8 tablet and you saw in the video it really works.
JON ROSKILL: And you keep it there on the leg?
ERIC CORNELIUS: Yeah, we keep it on the leg.
JON ROSKILL: So why this tablet?
ERIC CORNELIUS: Well, we chose Windows, first of all, our pilots already experimented with the iPad above Afghanistan. But the iPad didn't work properly.
JON ROSKILL: The iPad didn't cut it.
ERIC CORNELIUS: No, it didn't cut it. (Cheers, applause.) I will tell you why, first of all, the size. The tablet, the iPad is too big and the mini is too small. We actually needed an 8-inch tablet to do the job.
Secondly, it was very hard to maintain and organize the content on it.
JON ROSKILL: Sure.
ERIC CORNELIUS: And last but not least, it's very important in a military situation, security.
JON ROSKILL: Sure. Security. Yeah.
ERIC CORNELIUS: Security is very important, and the iPad was not fully capable of handling the classified content.
JON ROSKILL: Awesome.
ERIC CORNELIUS: That is why we chose Windows 8, and today with our solution, we can do the job and we've proven it.
JON ROSKILL: Excellent. So I know you guys also have some software sitting behind this, a hybrid solution, let's talk about that for a minute.
ERIC CORNELIUS: Yeah, that's correct. The hybrid solution, this looks maybe like only a checklist, but behind it there's more.
Behind it is something we designed with one of our partners. What we did is build a robust framework, actually a backbone in a hybrid cloud solution that will monitor and support all flight process. So from start, flying, and safe landing.
So today we want to launch this product, not only for aviation and military aviation and civilian aviation, but we're looking for partners to launch this also in other domains. And we're looking at police, we're looking at emergency first responders, government, and healthcare. So come and see us today and let's see how we can do business. Remember, if it works for us pilots, it will work for your customers as well.
JON ROSKILL: All right, thanks so much, Corny.
ERIC CORNELIUS: You're welcome. (Applause.)
JON ROSKILL: Awesome, awesome stuff. So been a great week so far. Lots of buzz out there in the Twittersphere, the blogosphere, the press on Microsoft and its partners and what we're doing with devices and services. It's been so cool to see.
We're really in an incredible position right now. And it's a very different position than where we were three years ago.
Three years ago, when I came into this job, it was quite a different scene. There was talk, speculation, even some skepticism about what would the future be for Microsoft and its partners?
Two years ago in LA, Steve B. declared, "We're all in." And we asked you, our partners, to join us. And you know what? You guys did, and we're here to say thank you. Thank you so much. Because today, the numbers are in. The speculation is over. Office 365, over a billion-dollar run rate. Windows Azure, over a billion-dollar run rate as well. You throw in Intune, CRM, other cloud-associated properties we've got, and you can sit back and do the math yourself. Who is the leader in the cloud now? We are. No doubt about it. (Applause.)
Windows 8, over 100 million devices out there now. Combined with the phones that we're putting out there, you heard from Tami the other day about how we're now the number-three ecosystem and driving hard for number two. We've got some of the best devices in the industry, some of the devices like the one that Corny was showing. And it's our ability to shift the form factor size. It's not a one-size-fits-all world. And that really is and always has been one of our key advantages.
We've got so many partners now working with us in the cloud. We truly have crossed the chasm.
I don't know about you guys, I didn't come this far just to kind of bump along life as normal. No, now is the time to go for it. You've made an investment in Microsoft. We've made an investment in you, and we all want to see that pay off and pay off big time. So the only question for us now is how far can we go? How far can we go?
Do you guys want 40 percent growth? Do you guys want 80 percent growth? How about 140 percent growth? What do you guys think? (Applause.) 140 percent growth.
Let's take a look at a couple of our partner companies who are doing just that.
The first one, a gold partner from Australia, Object Consulting. They've been a partner -- I see Australia over here, yeah, woo! (Applause.)
They've been a partner of ours since 1989, so over 20 years. But in 2009, they made a strategic bet in Windows Azure. And they wrote a video-on-demand system that's streaming Australian-rules football to fans on mobile devices. Since they made that bet, they've grown 140 percent.
The second partner, SkyKick. SkyKick is in our booth over in the convention center. They're the startup cloud partner of the year. And SkyKick is really interesting because they've built a set of tools that enable partners like you to help migrate customers to Office 365. Together, working with partners, they've already migrated thousands of customers to Office 365.
So two stories, two partners, two of the hundreds of thousands of Microsoft partners that are now working with us in the cloud. It's an amazing position we're now in, really feels like we truly are at an inflection point.
My job every day is about thinking about how to help you guys, the partners, make more money. And I know right now is the time for us to double down on the cloud.
Two to three years ago when I was out here talking to you, a lot of what we were talking about was models, projections, theory. But I'm excited to tell you that that's not the case anymore. Cloud economics and partner profitability in the cloud, it's not theoretical anymore. And to quantify this, we engaged industry analyst IDC. And working with them, they've done a global study on partner cloud profitability.
They went out and they surveyed 1,300 solution provider partners. And what they found is they were able to split them into two groups: A group that is doing more than 50 percent of their business, the cloud-oriented partners, in the cloud. And the group that's still mostly focused on-premises.
And what you see from this study is truly stunning results that should make all of us sit up and pay attention. But before we get into the study itself, I want to just talk about a few industry data points that we really need to kind of ground us.
We all see the cloud as inevitable. It's happening faster than even we thought. Ask yourself. How many customers have been asking you for help in the cloud, figuring out a cloud strategy in the next year?
You've got to have an answer. And yet, 70 percent, 70 percent of IT will still be on-premises in 2016. So we know the cloud doesn't meet all needs. On-premises isn't going anywhere fast. And there are dollars to be made in on-premises. And remember, on-premises, it's our foundation. And so while cloud is the future, it's our ability to be able to stitch this together into hybrid scenarios, that's where we win.
So let's get into the study and kick it off here with Darren Bibby from IDC.
(Video segment: Darren Bibby.)
JON ROSKILL: OK, so the study is quite in depth, and you should dig into it yourself. Remember, it's posted up on Digital WPC and we've already had thousands of downloads.
There are many key insights, but there are five that I want to focus on with you guys this morning.
Insight No. 1: Lead with the cloud, close with hybrid. Lead with the cloud, close with hybrid.
We all know in business you need a door-opener, a reason to go in and talk to the customer. And cloud is that door-opener. It opens doors to new customers that want to have the conversation about the cloud.
What we see is the cloud-oriented partners in this study had an average of 34 percent, that's right, 34 percent higher new-customer acquisition.
Solidsoft, one of our partners in the U.K., they've been with us for over 20 years too. This year, they're cloud partner of the year. And they're a great example of a company that's using hybrid as their strategy to win. Let's take a look.
(Video segment: Solidsoft.)
JON ROSKILL: So you heard it from Darren, you heard it from Solidsoft, and I hear it every day from partners. Hybrid is our secret sauce. It is our differentiation. Nobody in the industry has the complete solution that we can offer to our customers. So cloud is that door-opener, and hybrid is the closer.
The next insight I want to share with you is about getting to know the CMO. The CIO is not the only customer in town anymore. It's the CSO, the chief sales officer, it's the CMO, the chief marketing officer, the chief operating officer. These line-of-business leaders, they now hold the purse strings on a large portion of the IT budget. And I can tell you, they think very differently and it's very important to understand that for the future of your business.
And here's why: 41 percent today, already 41 percent of IT budget is coming from line-of-business functions. And that's only going to grow over the coming years. Let's hear more about this trend, about the importance of getting to know the CMO from Tiffani Bova, an analyst at Gartner and a Microsoft partner Chris Hertz.
(Video Segment: Gartner Tiffani B/New Signature.)
JON ROSKILL: (Applause.) Thank you, Tiffani, and to Chris. Chris's success in talking to these line-of-business leaders really is an example of how to engage in this new customer type. Partners focusing on line-of-business leaders, or the CXO audience, are going to expand their access to budget by 41 percent. That's pretty incredible.
So your customers are evolving, but you know what? Your teams need to evolve too. What if I told you you could get 30 percent more return on each of your employees? 30 percent. That's what the third insight from the IDC study uncovered. These cloud-oriented partners are getting higher returns because they've optimized their teams for the cloud.
The good news here is you can do this naturally as an extension of the structure you already have. Let's take a look.
Here's a typical on-premises engagement model. Yours might be a little different. You've got distinct technical staff working on an individual project, an architect, perhaps a project manager, and maybe a DVA.
The structure works, and it's pretty efficient for on-premises. As you add other projects, you scale out laterally. You add another team. But selling in the cloud changes the game. These top-performing partners said cloud orientation allowed them to restructure their team. The results are fewer people driving more business to more customers.
First, they re-allocate their senior technical staff across more projects. This means that their skill sets have to evolve, though. Technical delivery people, they have to become more well rounded because, guess what? They've got to go out and interact with customers now. By optimizing these teams, you need fewer project managers, fewer DVAs.
The top-performing partners in this study, they also were able to charge fixed fees on projects. This allows them to drive down the cost of delivery. It's really impressive what this cloud delivery model is able to do, and yes, there is an opportunity cost here, and that's that you're going to have to do some retraining. But these partners are seeing the value.
Again, cloud-oriented partners in the IDC study are seeing 30 percent more revenue, 30 percent more revenue per employee than the traditional IT partners.
So partners ask you, how should I get going at this? And what we've seen is partners have started perhaps by testing out this model on some of your nonprofit or some of your pro-bono work where there's not as much exposure.
Now, let's move to what may be the most impactful insight from the study. Scaling with your own IP. When you think about the future of your business and the way you're going to make money with Microsoft, you have to think about the value add that you, your company, is going to bring to the cloud conversation with the customer.
Our most successful partners are scaling with their own IP. And so can you. So what does that mean? Traditional partners are still going to see respectable growth by providing these project-oriented services. But the first step is to start doing managed services. Start doing a managed service offering through the cloud. These are things like billable, packaged services. Maybe a help desk. This allows you to start seeing annuity streams of revenue.
But the next step, the real Nirvana point to get to here is taking your own unique IP and packaging it up as a product service that you can then deliver to customers. This will offer the opportunity to achieve those higher margins, and really, ultimately, the higher valuation for your companies.
Let's hear about this from the experts.
(Video segment: Darren Bibby - Catapult Video.)
JON ROSKILL: So great success from Catapult, and they aren't alone. The partners in the study who act on these insights saw 1.6X, that's right, 1.6X higher gross profit margins. Isn't this something that you guys would all like? Think about what that would mean to your business.
So following any of these insights will make a significant impact on your business. But let's look at what happens if you put them all together. When it all comes together, you get increased customer acquisition, greater access to budget, higher revenue per employee, and even more gross profit margins. Adding it all up, you get the growth rate of 2.4X. The cloud partners in this study, again, 2.4X faster growth than the traditional IT partners, 2.4X. Think about it. That is powerful, powerful stuff.
So partners, we've been talking about this over the last couple of days. Partners ask me: How do I ease into this? How do I get started? What should I be aspiring for?
And what I tell them is the aspiration should be what these cloud-oriented partners are showing. 50 percent or more, that's what you should be going for.
But the key is to get started, you've got to start somewhere, so just get going. Those of you who aren't doing it yet, I know you can do this. And these insights, these insights are here to help you. So, again, the study is up on DigitalWPC.com.
But we're also here to help you with the benefits that you get from being a member in the Microsoft Partner Network. Did you guys know that the average value of the membership of Microsoft Partner Network is $320,000? $320,000. Technical service benefits, internal use rights. I've been telling you guys, use the cloud to sell the cloud. Get up there. Use your internal use rights.
We've got the best training of any company in the industry, and of course incentives. So if you're not using your MPN benefits fully, go check it out at the MPN booth over in the convention center, or all of the information is up on the MPN portal.
Interestingly, IDC also found out that these cloud-oriented partners were succeeding for another reason. And that is because they use their MPN benefits more. Turns out, those successful cloud-oriented partners are using their benefits 1.5X more than the traditional IT partners. So I thought that was quite interesting.
So now, MPN, we're ready to take it to the next level. We've been running these separate cloud programs, and I'm here to announce today that it's all coming together this fiscal year. The cloud programs will come fully integrated into the MPN competencies and into the MPN subscriptions by January 2014. You're going to see specific cloud support, training, assessments, sales and marketing tools all integrated into the competency model because we want every partner, every partner to be able to go out and have that cloud conversation with their customers.
So as I told you at the beginning, we truly are at an inflection point. Together, we have emerged as the leaders in this cloud world. But there's still a long way to go in this transition, and we are just getting started. There's a lot of opportunity for all of us ahead. And the time is now. The time is now and we can do this together.
Remember, we go to market with partners. We go to market with partners more than anybody in the industry. And what changes in this word of devices and services? What changes in this world of devices and services? Nothing. Absolutely nothing changes. We have a winning combination, Microsoft and its partners.
So the only question left now is: How far can we go? How far can we go, guys? Thank you very much. (Music, applause.)