Information Worker Business Group
2003 Financial Analyst Meeting
July 24, 2003

JEFF RAIKES: Great. Good morning. Well, it's great to have the opportunity to see you all again and share with you some of our enthusiasm for the investments and the opportunities we have in our business that we call Information Worker. Information Worker is focused in on the opportunities of productivity within information work, in particular, centered around Microsoft® Office.

A year ago, I spoke with you about the three key pillars of our mission, how we were working to serve a broader audience. And, in fact, this has really shaped our thinking about the productivity opportunity going forward, and I'm going to speak a little bit more about that as we get into the presentation.

I'm going to share a little bit with you about how we focus in on creating new customer values through innovation and, in particular, integrated innovation. And a year ago, I emphasized how we were making investments in helping our customers realize business value. We have now, in this last year, grown a field organization that we call the Business Productivity Solutions Group that numbers nearly 400 people.

We have dramatically grown our presence online in helping our customers realize value. In fact, each month now, about 25 million unique users come to our Office Online site, known as Tools on the Web. We're about ready to change that branding. But basically, we're getting a lot of people that we're connecting with broadly to help them increase the value that they get from our products and technology.

Now, of course, as people who follow our company closely from a financial standpoint, I'm sure you're interested in: How is it that we are investing, and what does our portfolio strategy look like? I've been in this role just about three years now, and in particular, during that period of time, we have been transitioning—some might say transforming—this business around our opportunities, continuing to evolve our core assets: for example, this year, the introduction of the Microsoft Office System.

You've already had some exposure to that through my colleagues earlier, Bill, Jim Allchin, showing some of the great things that we're doing and then, also, continuing to invest in some of the categories that we have built—for example, Microsoft Project. Our categories business—that means aside from the core Microsoft Office—now exceeds a billion dollars. And, in fact, Microsoft Project exceeded $500 million this year in revenue, for the first time in its history.

So we're continuing to expand our opportunities, evolving our core assets and expanding our portfolio. This year, we're introducing InfoPath™ and OneNote™. InfoPath is focused in on the electronic forms market, in particular, centered around XML. OneNote you saw earlier—digital note-taking. We announced the acquisition of PlaceWare, now called Microsoft Office Live Meeting, which gets us into the growing Web conferencing market.

And we'll also introduce our real-time communications server this year, known as Microsoft Office Live Communications Server. So these are examples of how we are continuing to invest in the opportunities of information work, and both evolving our core assets and expanding our portfolio.

Now, one of the key things that we're doing is evolving our overall approach to really transform the business. You see us moving from Office as the box, as people used to think of it, to Office System, our brand name for the broad range of information worker tools that we're investing in. You see us transitioning from being thought of as client applications to the combination of client, servers, and services to support and enhance information work.

You see us transitioning, or transforming from a focus on document-centric productivity, to the combination of personal teams and organizational productivity. And, of course, we're focusing in on not just how broadly our products are licensed, but how our customers are deploying and adopting the great capabilities within.

Now, as part of this transformation, one of the key things we have to do—and we'll make a significant investment in this, this year—is to invest in establishing, most clearly in the minds of our customers, the Office brand. You've seen our company put more investment into branding in the last year, and we're going to ratchet that up with what we do in the Office area.

To give you a feel for how we think of this internally and how it will shape our messaging to the marketplace, we've put together a little video that I want to show you that will help you understand that transformation. Let's go ahead and take a look.

(Video segment.)

So that gives you a very good picture of how we are evaluating or how we are thinking about this transformation. But it really represents our view of the productivity opportunities. We are keenly aware that we have important competition in the marketplace, as well as a lot of opportunity to grow how we serve our customers moving forward.

In terms of competition, our competition is really focused in on an attempt to clone our document-centric productivity. But what we see is the opportunity to use integrated innovation as a way to provide new capabilities, really transforming from a focus in on document-centric productivity to having Office and the Office brand represent your workspace for personal, team, and organizational productivity.

But we have two challenges. One of our most important challenges is making sure that people are both aware of the opportunity of how these tools and technologies can impact in a positive way what they do in their information work, and also making sure that they understand the value, not just focusing only on cost, especially in a world where some of our competition is perceived as free, but understanding the value.

For example, a Gartner study recently showed that as compared to competition like StarOffice or OpenOffice, the deployment or migration within an organization to those competitors would cost dramatically more than being able to move to the latest version of Microsoft Office.

And, of course, Microsoft Office provides much more capability to enhance information work, and across all of these dimensions: personal, team, and organizational productivity. So we are very much taking on the challenge of helping our customers understand that their perception about the competition is that those competitors aren't good enough for information work, that, in fact, they are not cheaper than Office when they think about the total value equate.

So that's our focus. Our focus is on helping people understand this opportunity so that they see that—in fact, know—the software they're using today won't be the same in 10 years. We are continuing to grow this opportunity of information work in the same way that it's grown in the last 10 years.

What I'm going to do is, I'm going to drill down on each of these areas. I'm going to first start out with empowering productivity and people, because that has been the heart of our business for the last two decades. Yet, at the same time, the world has changed dramatically. If you look at work styles, people are much more mobile. All of you are the best examples of that.

You're using multiple devices. You want information across those devices. You want easy access to the information you need, when you need it. There are digital processes that are empowering productivity in analog processes like note-taking or paper form that have not previously been impacted; so, great opportunity in that area.

And, of course, there's a big focus in on efficacy. People feel overwhelmed by information, yet they know that they need to be connected. They need to be able to get to the information they need; they want more control. So you see with Outlook® 2003 a lot of the work that we've done is to help people be more in control of their own information flow—improvements in spam control, improvements in the way in which they can use their inbox to flag or set up the paths that they need to undertake.

And finally, we're going to continue to invest dramatically in online communities because we think one of the key ways to provide great value to our customers, as well as to compete very successfully in the marketplace against some of the new type of competition, is to deepen the experience for our customers.

So by using our broad community of people who are using Office as a way to understand how they work and improving that work, so if you're a financial professional and you come to Office Online, we help you understand the scenarios where we can most effectively impact how you do information work—tips, tricks, training, templates, content. So that's a big part of our investment in online communities.

Now, today, what I wanted to do was to go ahead and give you a sense of some of the examples, and I wanted to put them into the financial context. So as we go ahead and bring up the screen here, I'm going to start out with a brief demo of personal productivity. And this is something I'm sure you see quite commonly, a 10-Q. But one of the things that I think is very important to understand is the significant impact that XML will have on productivity within this kind of a scenario.

The magic of XML, and in particular, schema—Extensible Business Reporting Language, or XBRL—is becoming common now and soon will be, I think, a standard, de facto standard, within the financial community. And so, what you see here is a document, and we'll go ahead and we're going to just scroll through the document. You see the kinds of classic information.

I want to point your eyes over here to the right-hand side. This is an example of how the Microsoft Office System becomes programmable. That is a document action task pane. Effectively, that is a programmable task pane that can be set up for given solutions within an organization. And, in fact, what's represented here is an easy-to-understand taxonomy of XBRL.

So, for example, I can go ahead and show you the tags that have been assigned by somebody as a part of using XBRL with this document. So we can go ahead and see, you know, various elements. Now, just to give you a sense of what's underneath—and we don't recommend this for the novice users—I'll go ahead and show you that XBRL Schema. And that appears right here in the task pane.

And you can see how we are doing, is using XML to bring structure to unstructured information, which will be very important in terms of improving the overall business analysis and access to business information within organizations. That kind of approach leads to Office becoming the front end for business information systems and business process systems within organizations. So it's a great example of this transformation.

So let's go ahead and go back now, and I want to continue on, on this transformation next by speaking of what's going on in team productivity. Team productivity is really being shaped by a couple of important trends. One is the adoption of the Web. Web technologies are becoming the infrastructure for collaboration, sharing, and working together. And another important trend, one that I think is absolutely critical to spurring team productivity, knowledge management, is the fact that this is user-driven.

The kind of technologies that we're developing, in particular Windows® SharePoint™ Services, provide people throughout an organization the ability to set up collaboration without having to call upon the IT department to do it. A very powerful example is that inside our own company, we now have 25,000 Windows SharePoint Services sites. Those were not provisioned by our IT department. They were provisioned by the people who used them. And 4,000 of those are document workspaces, and another two and a half thousand of those are meeting workspaces.

What is a workspace, or what does that mean? It means that if I'm going to share a document, it's very common that people will e-mail that around. But then, you have six, or seven—or however many people you e-mailed it to—you have that number of copies, and it gets very difficult to keep up to date on what's the latest copy and trying to merge all of that together. I'm sure many of you have gone through that.

What we can do with the Microsoft Office System and Windows SharePoint Services, showing that integrated innovation, is when you go to send around a document, you can make it a document workspace, and that then brings people into that kind of team productivity. And it doesn't cost any additional money for the IT people to manage the infrastructure. In fact, in our own company, it is exactly one full-time person who handles all of our Windows SharePoint sites across the company.

It's on about 10, 12 servers. One person is able to manage that. And that means that kind of team productivity is available with very minimal costs to the company. In fact, in most cases, we've found it's lower cost than managing the traditional file- and print-sharing servers.

So Windows SharePoint Services becomes the foundation for all that we're doing in collaboration. Then on top of that we build in SharePoint portal capabilities, Microsoft Project Server, the Real-Time Communications Server capabilities. Microsoft Exchange connects in with Windows SharePoint Services. So that's a great example of how integrated innovation is making a difference in overall productivity.

In addition, we're working on how we can improve security. That's a very big issue in flow of information work. So with our Windows Rights Management technology, we can set permission on documents, or you as a user can set permission. We integrate the notion of presence, so you can see if the colleagues that you're working with are online.

So these are all great examples of what we are doing to use integrated innovation in team productivity. What I want to do now is go ahead and switch back to the demo screen, and I'm going to show you what team productivity is like in a financial context inside our own company.

Here we have an e-mail that's come in, and I believe this is a cost-control statement. So instead of opening up the Excel spreadsheet, which I can certainly do, what I'm going to do is go to the document workspace. And when this document was sent around, that was the method that was given to everybody. This workspace was automatically provisioned. And here you see all of the core elements that people need in order to work together on this document.

We see all of the relevant shared documents. We see all of the people who have received the document and their presence information—for example, Kelly, one of my colleagues who's working on the document. We see the task information. This is two-task information, so that everybody can view it. Now, what I'm going to do is I'm going to go ahead and open up this cost-control statement and show you that when I go to the document workspace, I open up the document, what I can do is, you know, take a look at the information associated with the document.

So here, for example, I see in the shared workspace page, while I'm working with Microsoft Excel, I can see that there are permissions set on this document. This, in a financial context, is so much more effective than where we were. Typically, in our environment, what we would do is send the Excel spreadsheet around, and we'd send it around with a password. But then, everybody has a password to be able to send it around to others if they want.

In this case, we use our digital rights management technology to set permissions. So on this particular document, I have the permission to view it, but I'm not allowed to edit it, copy it, print it, save it, or access programmability. Now, there's a rich set of opportunities. If I am the creator of this document, I can set these parameters to the team that I want to send it to.

So that's a great example of using the advances in Windows Rights Management technology to improve the Information Worker process. Also, by integrating presence, I can see all of the folks that are online, as well as those people who might not now be online. And so, if I need some information from Kelly, I can go and immediately instant message him in order to be able to get an update on something related to the work that I'm doing.

I also have the ability to see the path. I want you to look very closely, because as I click on this pane, it actually goes out to the server and gets the latest set of task information that I need to be working on. I can go to the shared documents. And this is all within the context of my work. So you can see the tight integration between Microsoft Office System tools and our collaboration point, Windows SharePoint Services. And I also got my response back from Kelly.

So another great example of integrated innovation is the way in which we can go in and use Web services. In this particular case, I'm going to do a lookup, which calls on SharePoint Portal Server, to look up our people's policy information. Now, this is very common in any financial environment. What you'll want to do is to have a set of policy statements related to how you do the—or what's the policy for people, for expenses, so on and so forth.

And one of those that will go out—it will search across the Web. I'm going to go ahead here, and in particular, I'm going to focus in on the finance information. And I can bring up policy statements from the finance group as a way to be able to test whether I am properly doing the cost-control statements. So those are great examples of how what we can do is bring together team productivity within the context of the Microsoft Office System with Windows SharePoint Services.

So let's go ahead and switch back to the slides. I want to take this to the next level: organizational productivity. A key thing that I would emphasize here is how Office is becoming integrated in with business systems and business processes. CIOs are under tremendous pressure. They're trying to figure out how to do more with less. And by thinking of Office as an extension of their development platform, they're able to move forward in terms of their key business initiatives and actually save money in the development process, and provide a richer experience to the people within their organization.

Portals is a key topic for most of our customers right now. SharePoint portals embodies what we're doing for the Information Worker area, but it connects in with our broader set of portal technologies, which would include Content Management Server, things that we do with Commerce Server, so that our customer can build a very rich portal solution much more cost-effectively than the competition. Connecting it with business processes, use of XML Web services—these are opportunities to bring the integration into the organization.

And again, we'll go ahead and take a look at some of the things that we're doing in that regard. Let's switch back to the demo machine, and as we do that, I'm going to bring up a classic example within our own financial organization. This is a pivot table, and this particular pivot table is within Excel. It's a way to view some of the key information regarding the cost-control statement.

Now, here I have a particular line item, the appreciation expense, and I'm not really sure about the details. Well, by integrating in, very simply, into Excel, our finance department has a set of actions, which are in the context of what we need to do relative to our internal orders. So I'm just going to go ahead and get the details on the internal order system. And here you see that I can see the person in charge relative to this particular element of our finance department.

What I've done here is I've actually gone from Excel directly to SAP system. It uses a set of technologies that we have built to open up our SAP systems to Web services. We call that "Calypso." But it means that it's very easy for me, right from within Excel, to have access to our SAP system and get the information that's relevant. So I think that gives you a good sense of how we are making sure that people have the opportunity to use Office as a front end in the system.

But we also want people to have the opportunity to use Office as part of business processes. Here we have a set of people within cost centers, and let's say I'm involved in activities for people moves. Again, now the context is in FinWeb, or our financial Web, are the things that are most relevant to work locations, or people details. So I can go ahead and select Change Work Locations, and now it's contacting a Web service that allows me to go in right from Microsoft Excel and change the building number, and now I have initiated our SAP activity for moving this person from one part of the company to another, and the request number is issued immediately.

So this is a great example of how Office is transforming to support organizational productivity, connecting to business information and to business processes. So again, let's flip back to the slides. And I want to show you some other examples of how we are using our technologies internally.

We have switched Microsoft Web, our primary employee portal, over to SharePoint Portal Server 2.0. We haven't released SharePoint Portal Server yet. That will come as part of the Microsoft Office System launch. But already, we're using these technologies internally for all our 50,000-plus employees.

Here you see the moves to the Microsoft Web screen that our employees are seeing. Plus, in addition, because of the personalization capability in SharePoint Portal, every one of our employees has their own site that is an extension of SharePoint Portal Server. So that way, people can have access to contact information, to shared documents, shared links. It's an easy way to make it possible for people to contact you or have access to key information that you share within the organization.

Here's another example—little bit hard to read, probably, in the back. But it uses InfoPath. InfoPath is our new application as a part of Office Professional that allows you to do electronic forms that are centered around XML. We are using this throughout our sales and accounts management processes. In this particular case, the example is our customer and partner experience focus. That's one of the things that you've seen Steve talk about as an increasing area focus for the company.

We have a significant effort to focus our marketing activities around a set of solutions or go-to-markets. Here we have moved all of that activity in the field organization, tracking it to Microsoft Project. So this is an example of where we're using Project as part of those elements of Information Worker. So each of these are good examples of how technologies that we're developing in the Information Worker Group, in conjunction with other parts of the company, are really shaping the future of information work.

And we really are investing in the long term. One of the things that I hope you're somewhat aware of is our investment in Watson technology. For the last 15, 20 years, there have been lots of debates about what would really improve reliability of software. We think we have found the best example, the thing that will do more to impact reliability than anything that's been done in the last 20 years, and that's this technology called Watson.

Sometimes you get a little error message up on the screen. We feel bad when you get that message. Maybe it says that the software crashed. But we ask you if you'll send us an error report. We take all of the information from those error reports, and what that does is it helps focus our development effort on fixing the things that most significantly impact user experience.

So now what we're doing is we are dramatically improving our ability to connect with people, using the beauty of the Internet with our Watson technology to improve the reliability of our software much quicker, much faster than any of our competitors are doing. And we can now apply that concept more broadly. For example, in the Microsoft Office System we have content Watson. When you need help on a given topic, the first thing we do is take you to our online experience. Why? Because it's most likely that that will be the best, most up-to-date help, where we actually get your feedback on whether the information has been helpful or not, and if not, you can tell us what it is that we can do to improve that information.

So we're applying that Watson concept to continuously improve our content, in conjunction with Office Online. We're taking a very long-term view for productivity. We're looking at how productivity broadly affects business, or how information work productivity broadly affects business productivity. In this council, we have assembled a set of companies within our industry, companies like Cisco, and Intel, and IBM, as well as academics, who are leaders in evaluating business productivity, as well as companies who are the end customers of these technologies.

And we are looking at how we can better help people judge the investment that they make in information worker productivity, what that will do for their businesses, and what are the best practices to get the most out of the investment in those tools. Right here, in this briefing center, next month, we will open up the second phase of our Center for Information Work, which is how we show our customers the next generation of Information Worker tools and what they can do to take advantage of them.

In one year—we just opened one year ago, about the time of this analyst meeting—and in one year, this has become the second most popular activity or request from our customers when they visit Microsoft, the number one being a visit with a Microsoft executive. I'm not sure we'll ever get to number one, but we're right there where I want to be, in the top two of requests. That means our customers are intensely interested in the future of information work and how that's going to have an impact on what they do.

And we continue to invest in how the Information Workers tools will evolve and take advantage of great innovations. You've seen that with the Tablet PC. Also, Jim showed "Athens." And there's a great example of what the workstation environment will be for information work in the future.

So we're very much investing in the long term of this opportunity for information work, because we think that those are great opportunities ahead: to serve a broader customer audience, creating great value through integrated innovation, and helping our customers realize business value. Thank you very much.

Next up, we have Orlando Ayala. I have had the opportunity to work on our Microsoft Business Solutions business with Doug Burgum, and also, how we broadly sell the broad Microsoft product line to small and medium businesses. We think this is such a big opportunity for our company during this decade that Orlando chose to take on the great challenge, the great opportunity of advancing how we reach the millions and millions of small and medium businesses out there, not only for Microsoft Business Solutions, but also for all of our products in the small and medium business area. So join me in welcoming Orlando Ayala.

Thank you.

END

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