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DOUG BURGUM: Good afternoon. It's my pleasure to be able to spend a few minutes with you this talking about our vision and our progress for a breakthrough in business solutions, but it's also my pleasure to start off with an invitation to all of you, because we're going to have a few minutes today to talk about our vision, and what we're doing within Business Solutions. But the story is much broader than what we can share today. And on September 7, just a few months from now, we are going to be having a Business Summit here in Seattle, and you'll all be receiving an invitation to come to that. It's a daylong event, where we're going to be articulating vision, products, strategy for all of Microsoft, not just for Business Solutions, about how we are going to deliver even greater value going forward for businesses, in particular for midmarket businesses. Bill and Steve are both going to be keynoting at that, as well as many other Microsoft executives, and we look forward to having many of you back here in Seattle for that event if you're able to join us.

But at the core of that strategy—the reason why Microsoft got into business solutions in the first place four years ago was because we all believed there was an opportunity, looking ahead, in the next 5 or 10 years to really deliver a breakthrough in value for customers. And at the core of that breakthrough is the connection of where people and processes come together. And, as Steve said this morning when he was talking about his opportunity chart, there's an amazing opportunity to deliver value across this area.

Processes are very structured. And that's been the heart and soul of what transactional business applications have delivered over the years. And, historically, one of the great strengths of Microsoft has been delivering solutions that help people with their unstructured activities, everything from mail to document creation, et cetera. But the way businesses really work is that it has to be the marriage or the connection between both structured and unstructured processes.

As we think about bringing together—and I'll show in this slide some of the high-level apps that we are bringing together in our current releases today to deliver integrated value for customers—but on top of the great work that's being done in the other groups, we also did extensive, extensive research with thousands of customers where we'd spend time with them, for days, on understanding how they work and where all the Post-it notes were stuck around their computers, and trying to understand how they tried to make sense of this work, particularly in small and midsize businesses. And one of the truisms that came out of that work is that people have roles. Even in very small businesses people have roles, and they want to have a role-based experience when they interact with their software. And so one of the core tenets that we have from designing business solutions is to be delivering role-based user experiences with a familiar user interface of Office and Outlook.

The next piece we found from our research with customers is that one of the key things that they're looking for is insight. One of the differences between mediocre and great performance in a business is often whether they have the insight to make the decisions in a timely manner that help them be more competitive. And, of course, we're doing great work across SQL Server and Excel and SQL Server 2005 to be able to deliver that and we're incorporating that capability with contextual BI across our next releases of business solutions.

The next area—again, you could spend an entire day just on the whole idea of being connected—but businesses today, even very small ones, want to be connected between themselves and their customers, between themselves and their suppliers, between an on-premise application and services that exist in the clouds. How do we make sure that we deliver those connections? Again, it's an example of great work going on with Windows SharePoint Services that we can incorporate those directly into our Business Solution products to deliver that connectivity and collaboration, because no one works alone.

And the last piece, of course, has to do with adaptability. One of the great Achilles heels, particularly at the enterprise level, of business applications is that they are just too expensive, and it takes too long, and it takes too specialized (meaning high-paid) consultants, to be able to adapt to the change that happens. And change happens. Change happens for small businesses, medium-sized businesses, all the time. And so, how do we develop and architect products that use industry-standard tools? You saw on Eric's slide the great penetration that we're achieving with .NET and Visual Studio. How do we take tools like that and really deliver Web service–based composition integration so businesses can have access to a broad range of technical help to help them drive that. So, again, we're taking all these and wrapping them together.

In summary, the way to summarize both slides is that the focus is around building solutions that work like and work with all the other great software from Microsoft. Underneath all that that we've got a core differentiator between ourselves and other traditional ERP systems, which is affordable adaptability; we can deliver a solution today that can also change and grow with them as their conditions change. So, that's the core strategy.

I want to highlight our progress against that core strategy by focusing on three major releases that we have coming up in the next six months. The first being small-business accounting, a whole new segment for us to enter into—a small-business, under $200 price point segment. CRM—we'll spend some time talking about that. But this represents not just a new release of CRM; there are actually full new scenarios in terms of marketing automation and service, and also that will be extending into new geographies as well. And Great Plains 9.0, we're going to talk about that today. It's a fabulous release, but it's also a proxy for the work that we've done under what we call Project Green in the sense that it shows the innovation by showing you Great Plains. You'll see the innovation that we're also going to be delivering in Navision, Axapta, and Solomon across all our product lines as they all advance toward a common point in the future.

So, let's take a look at those releases. First of all, Small Business Accounting. You may wonder why I have a screenshot of Outlook up. This is not Outlook; this is Small Business Accounting with this familiar and easy interface that small businesses are comfortable using with Outlook; but on the left-hand bar instead of your traditional Calendar and Inbox, you'll have sales financials and all the elements that they need there.

The other thing we're doing, which is really a breakthrough, is that typically at this point this has been two different products. There have been contact management products, which have sold in the millions, and there have been small-business accounting products. But many of these small businesses, through our research, want to use both. We've been shipping Business Contact Manager as part of Outlook 2003 for several years, and in this product we really bring together the concept of the integrated contact management with small-business accounting in a way that works the way small businesses work.

Ray and Bill were talking this morning about integrating on-premise services with online services, and one of the innovations we'll be delivering here is when a small-business customer wants to do payroll as part of this product, they go to the payroll module, they click on it and they're actually typing into a Web-based payroll service being delivered in partnership with ADP. We've also got great extensibility to this product, and it will be a platform for ISVs, both horizontal and vertical extensions, and we've already seen great interest in this product already. Again, this will be shipped in September.

CRM 3.0 is a very, very exciting release, and a major release for us. As I said, it's got new modules, hundreds of new features. It's got enhanced extensibility for vertical extensions, in addition to the standard platforms we ship on. And Eric talked about the success of Small Business Server—we're also going to be shipping a CRM release on top of Small Business Server, and, again, it's a fabulous product.

There are three things you want to remember about CRM 3.0. First, it works the way people work; it's a very immersive experience in terms of how it integrates and works with Outlook. If you want to think about the role-based concept we talked about, and you think about CRM, and you take a look at this interface, you can think about this in some ways as Office for salespeople, Office for marketing automation people, because we've got the capability and the roles built right into that interface that people are used to using.

Also, it's highly adaptable. People are able to adapt to these processes within CRM to work the way their businesses do. So it works the way people do, it works the way business wants to work and, lastly, it works the way IT wants to work. It's got high performance; it's got simple, one-click deployment; it's got easy management and all the infrastructure capabilities that have been challenges for CRM products—we're tapping into that great capability from the Microsoft server products and delivering that in CRM, and because of those capabilities, we've got terrific channel momentum coming out of the partner conference a couple of weeks ago in Minneapolis.

One of the hits of the entire conference was the number of Microsoft infrastructure partners that want to pick up and start selling Microsoft CRM on top of their Exchange practice, et cetera, so there's great, great momentum within the channel.

The last of the three products we want to cover is Great Plains 9.0. This will be shipping later this calendar year. Again, this is industry-leading integration in terms of tying in with the other products, and this is a role-based user experience. This is a screen shot of Great Plains 9.0. It will have the SQL Server 2000–based BI. It's got SharePoint Portal Server built right in, and of course a .NET and Web services development environment. Take a look at how beautiful these products are and you can see the excitement we're going to see with our target customers. Because they're very excited about not only the way the products work, but about how well and how easily they integrate with the other great work from Microsoft.

So that's our product lineup, which is, again, a strong wave of innovation. We're making progress relative to building capabilities through a channel-delivered model to really get some acceleration momentum in the business. One of the things we've been working on since the acquisition of Navision, and one of the things that Navision brought, was a terrific vertical model that it had pioneered.

So with the experience we've refined from that, we've brought it up to scale for Microsoft. We did some more pilots in some larger markets like the U.S., and we are now in the process of helping drive our channel distribution to have our channel partners become more vertical in nature. And when they become more vertical in nature, the customer sees more value, partner marketing efficiency goes up, the sales cycle goes down, their close rate goes up, and it becomes a more profitable model for partners. So that's all good for customers and partners.

What was our success in the pilot in the U.S. this year? We had 47 percent year-over-year growth relative to government and education, and in the nonprofit, which were the two pilots. We've got over 500 deals in the pipeline. Today we've got about 1,000 vertical solutions delivered by our Microsoft Business Solution partners around the world. We have an aspiration to get more than 10,000 solutions in that thing. So we have a big aspiration to drive lots of IP across the ecosystem to deliver that last mile of capability for partners, and we think this is a great thing for customers, and a great way to reach the millions of customers that are in the small and mid market.

In terms of summarizing all this, you could say, "Hey, what has been at work here at Microsoft?" Part of what we've been at work on, in addition to building great products, in addition to building a formula for execution in the field, is laying the infrastructure for a business that can scale to a multibillion business for Microsoft. In terms of Business Solutions R&D, we continue to invest very, very heavily—more heavily than if we were a standalone company, in terms of our percentage of spend relative to R&D. And this is reflected in the integrated innovation. It's reflected in what we're delivering in terms of new functionality across the products.

Let's talk about the vertical ISV and partner IP. As we build this accelerating platform of business solutions, we have more and more partners that build IP on top of that, and we build up the largest collection of great solutions for our customers. We enable that through systems where partners can come to a solution finder, or customers can come to a solution finder on the Web, and find the right partner with the right solution anywhere in the world to help them deliver. So this is, again, a broad-scale approach to delivering the right solution to millions of businesses.

In terms of the brand, last year we spent more money than we've ever spent. Next year we'll spend even more in terms of investing and building the brand for Microsoft as a player in business applications and around our product specifically. On the field sales and marketing side we continue to invest in specialized field roles, and pushing more marketing dollars to the field, and having some of those field marketing dollars become more vertical in aligning with the efforts within the countries that we're pursuing.

In addition to all the great work that the Microsoft partner team has done in terms of laying out the best broad partner program, we've got an MBS competency within that, verticalization within that—and we've got our partners more enthusiastic than they have been in years, in that they've got a clear business model, a clear path, a clear way to interact with Microsoft to build a business delivering solutions to customers. As we get those customers and work with them, as you know, there's a great business opportunity in selling to existing customers. And we're getting the machinery and the data and the systems in place to work with our partners to really build that machine for continuing to build that relationship in selling to customers new solutions, new scenarios, cross-selling, upselling other Microsoft products into that install base, where we know 100 percent who our customers are.

So what we're really seeing is that on the growth factors we're investing broadly across Business Solutions on everything from R&D to the field. We've got new segments, like Small Business Accounting, that we're entering for the first time this fall. We've got new categories and new scenarios, examples including how we're extending CRM, and the new geographies, where we've entered many new countries with CRM, and many new countries with ERP. We continue to see lots and lots of growth, and that's why we are investing so heavily.

In summary, as we pursue this breakthrough in business applications, we have a tremendous opportunity to help over 41 million small and midsize businesses around the world realize their potential. We are delivering today on a breakthrough road map. We do have a proven vertical and field execution model, which we're going to drive hard in the next year.

Thank you for your attention and we hope to see you on Sept. 7.

END

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