Remarks by Bill Gates, Chairman and Chief Software Architect, and Orlando Ayala, Senior Vice President, Small and Midmarket Solutions & Partner Group, Microsoft Corporation
"Together, We Build Business"
Microsoft Business Summit 2005
Redmond, Washington
September 7, 2005

ANNOUNCER: Ladies and gentlemen, please welcome Senior Vice President, Small and MidMarket Solutions and Partnerships for the Microsoft Corporation, Orlando Ayala. (Applause.)

ORLANDO AYALA: Good morning. Good morning. It is a real pleasure and an honor to have the opportunity to deliver the opening remarks this morning. Before I start, I would like to take a minute to thank you very much for taking the time to join us here in Redmond. There are about 700 people attending this event from five different countries.

Also I wanted to take the opportunity to thank everybody around the world; there are 255 events going on at this point in time in different parts of the globe. We think we're going to be reaching about 25,000 customers and press and partners during this event, so thank you very much for making the time, we are really privileged to have you here.

I would like to start my remarks by saying there is no doubt that only customer understanding and deep customer understanding will bring true solutions to the marketplace. We take very carefully, very carefully the theme, not only for this event, as this event is for us a milestone, but what the company vision is going to deliver in the next few years in this sector of the industry, of the marketplace.

We picked the theme "Together We Build Business," and we did it in a very, very precise way, because we do believe there are three factors that have to come together to truly bring what we believe is unprecedented business value by using technology.

"Together," we say "together" because we want to bring our software assets together to deliver maximum output for the investments you make in our products.

Together, because we believe this is an opportunity for the industry to come and help us. We mean our partners, our network of 600 partners around the world, can help us to bring that value to the next level.

And last but not least, you, our customers. We have spent a lot of time in the last four years really trying to understand what it takes, where is the pain, how can we respond to software innovation, to the needs of you.

So it's these three elements coming together that we believe are going to deliver unprecedented value for you, our customers.

MidMarket Defined

Let me start grounding the discussion this morning with some statistics around this market. And I am not going to over-extend on this; some of this I suspect you already may know.

I want to say that this is a unique market, and let me just for the sake of again grounding the discussion, when we talk about mid-market, we're talking about companies between 50 and a thousand employees. With that, I am not saying that's a perfect measure, so I want to make that disclaimer; just for grounding the discussion.

These companies in this range have some very unique needs, and the 1.4 million companies worldwide actually represent in this segment 31 percent of the economy. Of course, this is a worldwide number. If you think of places like Italy, mid-market companies represent actually more than 50 percent of the economy, so it's a very important segment of the industry and the market.

Also these companies are actually ready to invest. It's one of the fastest growing segments, about 7 percent compounded annual growth rate on IT investment for this industry.

But let's look at the uniqueness of this market, and I'll say first these types of customers actually are in the middle of a very, very convoluted supply chain. They have to connect with your companies as their customers and suppliers. They have to connect with the smaller companies because they supply to the small companies. They have to be sure that they also reach out to consumers. So in some ways they are in the middle of the supply chain and there are tremendous demands for these people to truly enable business in very different dimensions.

So they are bigger than the small companies. We know that these companies actually have branches. In fact, if you look at the 1.4 million entities around the world, the average number of branches per entity is about three, so that makes them different from small businesses. And actually they have very concrete industry needs, meaning their solutions, they buy based on solutions and usually those solutions are very linked to the needs of the industry they operate in.

On the other hand, they are smaller than the big ones. That also puts a lot of pressure, because they're actually affected by all the macroeconomics, regulations, the need to compete globally, and so on.

At the same time, I guess one of the major challenges is they are very resource constrained. They don't have the big money like the big enterprises, the very large enterprises, to just try things, and I think this has showed how a lot of that try actually was wasted; these people don't have the time to do that, so they tend to be quite smart around how they're going to spend their IT dollars.

Somehow these companies are unique, are unique for the position they are in the supply chain where they operate in, and they are very unique because they must be connected.

Now, it is good to look at macro, and we all know about this, that in the last four years, in fact, since we acquired the Business Solutions assets - Great Plains, Navision, and so on - the company really started to do a lot of research around this segment. In the last two years, we have gone even deeper to understand what is the pain and the needs of this segment, because you cannot ground this just on macro. We as a company believe we have to go deeper to understand the uniqueness of what people do in these enterprises.

And when I say what they do, I am talking about people, what people do every day, what that sales manager has to do every day, what that IT professional has to do every day.

So it's not that we are just first, this is our first entrance in this marketplace. In fact, I think the company has actually a very large footprint already.

What People Do and How Software Should Respond

Now, to take it to the next level, today you are going to hear how Microsoft is actually centering the strategy around what people do in an organization and how software should be designed to respond to those very unique needs.

Let's start with the IT professionals. I am not going to go over all this pain around the IT professional but the reality is that one of the characteristics of medium businesses is they don't have a lot of cash and especially IT resources. A 1,000-employee-type company will have probably, what, 10 -- or that would be probably a very rich one, but you come down market and you will find one person that does everything. And although server technology has advanced a lot and Microsoft has made great strides, still there is a need to understand how to resolve the pain of this specific role within a mid-market organization that is all constrained by a thousand hats that they have to play in a daily basis. So you're going to hear from us today the innovation we're making to go and respond to the needs of the IT generalist in the marketplace - very, very important.

But this is not, you know, just the issue, this is just the IT side of things. I would say that one of the very big things that has been broken by the industry, and I think Microsoft has tried hard, and with this vision I think we are really kicking our roadmap on how we're going to respond to the unique challenge of doing the following, which I think is the area where things have been broken, and it's really how businesspeople - which also happens to be a role, the CEO, the CFO, the accounting manager, accounting clerk - how these businesspeople can also respond to the business pressure.

And I said it has been broken because although we have made great progress on personal productivity, the world of personal productivity, which is very unstructured, and the connection back to business process automation has been broken; today it's very hard to truly do even the basics.

I'll ask you, and I don't know, probably I shouldn't ask for raised hands, because we don't have all the time, but if I ask you how many of you have basically the capability to approve an expense report with no paper involved, I am sure I will see very few people in this room raising their hands. So it's not even the basics can be done.

Millions of us have been investing in ERP and CRM systems, and that data continues to be locked, not available for people to make the right decision at the right time in the right context. That's the challenge that this company is set up to address.

We do believe it's about time, I think we have great assets already in place, Office being at 400 million users around the world, Windows at 1.2 billion around the world; we understand the world of business productivity and we will take it to the next level.

But today, today is about how we're going to connect business process automation and make this so integrated that we're going to remove all that cost that today it takes to be able to run a business. That's what today is all about.

So we'd offer the view, I just want to summarize on what's going to happen today. I'll say together we're going to come with the industry and your customers to tackle this challenge of bringing together the world of business process and personal productivity.

As I said, we are bringing those assets together with people at the center. I want you to hear this, and it is we as a company are committed to understand that you're going to see a little bit of the research, because we're going to share that with you today that we did, in what people do every day, not only to do better in personal productivity but really bring into that the capability, the magical capability of using business process automation systems together with that in a seamless way to reduce the cost, bring that money back to you so you can basically invest it in other things.

Three Dimensions Converging

Three dimensions, as I said, that are converging: software that looks like today's business, and when I say that it's role-based software, we believe in role-based software, and you're going to see today and Office is going to lead the charge, connected seamlessly to all the back-end infrastructure of IT and ERP and CRM.

No. 2, it's our partners. We do believe that our partners extend in a magical way the IP that Microsoft generates with their own IP, especially in the vertical scenarios that are badly, badly needed. As I said before, mid-market companies really require to respond with solutions that are very tailored to their market.

And last but not least, it's really continue to partner with you to deeply understand -- deeply understand how you work every day, how our software design has to reflect how you are organized, how your people work every day, to really unlock the power of insight within an organization.

The next speaker, I have the privilege to introduce our next speaker. Really this person doesn't need any introduction. But I just wanted to say that the reason why I do work with this company is because we have a vision that, in the end, software innovation can create magical things, especially on empowering people to do tremendous, tremendous things for themselves and for their companies.

I think Bill Gates was since day one committed to ensure that he puts the power of -- together with the industry -- put the power of software to enable people in a major way.

So again it is my pleasure to invite our chairman and chief software architect, Bill Gates.

(Applause.)

BILL GATES: Well, good morning. As Orlando said, we have some exciting announcements today, and a lot of great discussion about the great things software can do.

Before we get started though, I thought I'd just say a few words about the recent tragedy resulting from Hurricane Katrina. I know all of us are somewhat distracted by that, and it's a terrible disaster of large proportions, and I'm sure all of our thoughts and prayers go out to the many people who have been impacted by the storm. Recovery is going to take a long time, there's still a lot that's being learned. I think it has been great to see people rallying around to help out, including many of the companies in the technology industry, such as Microsoft and many of our partners here. And it's great to see that technology can help in terms of re-establishing communication, and tracking people, and hopefully helping businesses get going and get back on a strong basis. So it's good to see those things and appreciate everybody's involvement and participation.

Key Developments

What are the key developments that are driving technology forward, that are really changing the expectations of how we think about information flow in a business, how we think about partnering, how we think about connecting up with our customers? There are many things moving at a pretty phenomenal pace. At the base we always have Moore's Law; that's the prediction that chip technologies will double in power every two years, giving us processors with unbelievable speed, more memory space to process data, find patterns, disk drives that are actually growing in capacity even faster than Moore's Law type improvement. And so the cost of the hardware is coming down, and the hardware's capabilities are now such that even these very demanding tasks of dealing with all the information, finding the patterns in that information, are very straightforward.

So the performance of the Windows and Intel hardware is unbelievable. We saw that recently with the introduction of 64-bit machines that allow us to take that memory space up to a new level. We've seen that with the database performance that's running here. So speed will not really be a factor that holds these things back.

Now, we've also seen the information in those systems available in more locations, available on the next generation of phones where you can be notified of things going on in your business and interact somewhat, available through portable machines and very clever approaches like the cast e-mail that let you have the best of both worlds; if you have connectivity, you've got the latest information, but if the connectivity is limited or not available, you're able to continue to do your work there.

Those form factors are getting smaller, faster all the time, and people's expectations that you can, say for example, track the inventory while you're on the customer's site and talk to them about the delivery speed of their orders, that's becoming commonsense because those devices were out there.

We have a new way of connecting software up to other software, using Web-service-type approaches. The basic advance here was the adoption of XML as the data format that can describe data in a very, very rich way; far beyond just flat records or simple text, we get the hierarchy and extensibility that we've never had before.

So as we take that XML and we wrap it into protocols, for example, notification protocols like RSS or more structured protocols like the so-called Web services or WS protocols, we get the ability to connect any piece of software up to any other piece of software. And it doesn't matter what that software's written in or what environment it's running on, or where that computer is located, you can connect and exchange the information.

So the overall approach there is called service-oriented architecture, and that's very important because it lets you connect up to partner systems, it lets you have some software running on hosted systems, some software running internally, and yet still getting the richness of those connections.

Now, as all of this enablement for business is taking place, the use of technology, particularly personal computers, by your customer has also skyrocketed. The expectation about broadband, the expectation that they'd be able to check the status of things, and organize things in a rich way, we often talk about this as the digital work style. It's a move away from paper-based or phone-based approaches being the sole way of communicating to now expecting that your responsiveness through your Web site and your individual employees will take place on a digital basis.

Year by year, we have more digitization of the economy. This is not something that happens overnight, it happens through the adoption of more digital processes year by year. And this is something that is very exciting because the efficiency that comes out of it is very strong, but it's also an opportunity for the businesses that seize that and get involved first.

And so to allow all this to come together, of course, new software, a new generation of software, has to step up and provide these capabilities, provide it in a way that's incredibly reliable, easy to set up, and brings the information to the right people.

And that's why when you look at Microsoft's R&D, it's growing at record rates. It's increasing, particularly our investment in this so-called Business Solutions space, but also our investment back in the basic platform, around Windows and Office, to make sure those are the tools that allow for these new digital approaches.

Now, we've made a huge commitment to the Business Solutions space. The two biggest acquisitions that Microsoft ever did were the acquisitions of both Great Plains and Navision. And that was tremendous for us; it brought in experienced people, a customer base, a set of partners, and really became the foundation that we build on with our commitment to really revolutionize this space, to take not only the capabilities of the applications but the idea that there are standards here that people can learn and use, that will drive the pervasiveness of these applications to a very, very high level; often competing with a fragmented set of applications that are out there before, often competing with non-digital approaches where things have still been very much paper-based, often competing in cases where people have found their older software not flexible enough and yet they wonder if making a change will bring the flexibility they want. We believe that by taking business processes and making them very visual, very explicit, so people see what their processes are, they can edit those processes, they can see the status of various transaction in those processes, we can do something quite different than has ever been done before here.

But we also believe that taking that idea of the business process and connecting it up into the world of personal productivity is something we have a unique opportunity to do. After all, over in that personal productivity world, you have all the ad-hoc communication. If an order doesn't make sense, if something's out of stock, you're sending e-mail to those people, and yet you'd like to track that within that structured environment. If you're trying to analyze trends and see what's going on, the tool that you're familiar with is Excel, and yet you'd like Excel to have enough richness to understand the concept to let you pivot and change views and change the assumptions that are being used to present the information to you. So we need to take the rich structure that's always been over in that business process side and make sure that it's accessible through these personal productivity tools, so we have data flowing in both directions and a very rich architecture that brings those things together, again using the advancing technologies that we've had in the XML environment.

Now, to make sure that as we're taking our Business Solutions work to record levels of R&D, to make sure that we're really aimed at the actual needs and activities of our customers, we engaged in the deepest customer research activity that we've ever done. And it was a very exciting process, going out literally and doing thousands of interviews, going on-site with the customers, seeing some very interesting things, like all the sticky notes they write down, where they're still using paper, and every one of those is something to look at and say, OK, why is it necessary to do things that way, why are people organizing their priorities outside these systems, why are they tracking the exceptions about who's going to take charge of this, or if somebody's goes on vacation, who takes over that, why are those all happening outside of the digital model that exists inside that system?

Well, part of it is the business software itself not being strong enough, part of it is that connection over to those personal productivity tools.

Two Distinct Worlds

Many of the people who we went and looked at, literally had two screens, one for their business application and the other for Office, and they would manually move data back and forth between those. You know, we saw lots and lots of notebooks out there, lots of e-mails being printed out and passed around that way, and there was no correlation between the different activities going on, it was up to the user to make those correlations.

And so people were clear to us that they want software built for their companies around their roles. If they're handing off work to someone else, they want that modeled inside the system; if there's a timeout event where they should be notified that they should get back involved in something, they want that built into the system, they don't want to always just be checking things and understanding that relationship of the workers to the activities outside of the software itself.

And so the software doesn't understand enough of these activities to really be as helpful as it should, and particularly when it comes to making a change, when there's a new branch or a new set of products that's being handled in a special way, or a contract that requires doing things a little bit differently. And so we want the software to model every one of those things, to make the software understand what the people are trying to do, and to work according to the roles that they have within that organization.

Now when you think about this, of course there's some key areas of taxonomy that jump out, you know, what does that company look like? No matter how small a company is, in some ways it's got aspects of the five major categories that we're describing here: the operations area, the sales and marketing activity, the finance activity, the IT infrastructure, and then the general empowerment of all the professionals to find information and to engage in processes that go on throughout the company, personnel, management processes, scheduling type processes, all of those things really cut across those areas and can't be categorized within any single one of those.

The sizes of these departments are, of course, dramatically different according to the business, and part of the idea is to have software understand that so you can, in a very simple interview describe what you're operational needs are, what your finance needs are, what your sales and marketing needs are, so that those roles get developed. And so if they're combined so that one person that's doing many of those things, they get that all in one screen, they don't have to go to many different places to see it.

Within each of these areas, we have sub areas, so we actually had about 40 scenarios that we would talk through with the companies that we were serving to see how they would do things, how many people would get involved, how complex the approval or review process was for those various things.

All the findings from this survey got written up for me; in fact, it was the most interesting papers I read on one of my biannual Think Weeks where I go off and look at new ideas and think about our vision and the future directions we're going on. I'd been looking for something like this for a long time, because, of course, I myself am not in these businesses, but the idea of having a lot of data that can show the variety and where you need to have the flexibility was something I'd been hoping for, for a long time.

And then, the discussion began about the architecture that could capture that richness, so that it was explicit inside the software the ways that people wanted to work, so that if a new person came in, they would see exactly the software interface that made sense to them. If the company changed, the idea that you could visualize how you'd set up those roles, how you'd set up those process exceptions, again that became an editable thing, not something where you'd have to go off and write massive amounts of code just to do something that was very straightforward.

Inside the Company

And so this overall framework drove the surveying work we did. Once we had the framework that we got by being in the field, then we decided that we'd scale it up in terms of very large numbers, and make sure that we understood the richness of it.

And these were over 750 companies, lots of interviews inside each company. Every one of these were what we called mid-sized companies, companies with multiple servers and looking at how IT could make a difference for them.

Now, instead of the typical approach where you simply ask companies how much they spend on IT, here we went through and created a checklist in terms of what sort of IT enablement do you have; for example, the ability to close an order in the field and understanding that the inventory is there; for example, an ability to track the history of a customer across these different areas of the organization. And so we were able then to correlate what IT enablement a company had and see how that related to the kind of business results they were getting.

And it was very interesting. There was absolutely, not just across the whole, but within each industry, a correlation of the IT enablement richness and the kind of growth and profitability that company was experiencing. This is a fairly significant correlation, it was over 28 percent faster when you had the higher IT enablement across these different factors than the lower amount.

This is a now paper that we are putting out and making available, and later today you'll hear more about this from John Lauer, because I think the approach of going through capabilities rather than total expenditures, that's very important because the total expenditure approach is often hid in the fact that taking older systems, maintaining them, the older type of hardware available there, those people, you can spend a lot without being very enabled. And so the goal has got to be the enablement and the simplest path to get there, and that's now really where we're driving with the software is to make the best practices very evident so that people can say yes, I want that enablement, here's a very straightforward way to get that.

Now, we've had many product lines within our business solutions group, we've had Axapta, Navision, Great Plains, Solomon, a number of product areas, and we've been very committed to everyone of those customer bases, but we talked about a roadmap where we are bringing those products together, preserving the work that the customers have done, but getting more and more leverage as we have deep commonality.

We've had a codename for this work that many of you have probably heard, it was codenamed "Green," and we talked about how we rolled that out in different phases and we've got a very concrete strategy for that.

Announcing Microsoft Dynamics

Today, we're announcing an actual product name that we'll use, and replacing that codename "Green," and that term is Dynamics. And so right away we'll take the module that's common, which was our CRM capability, and we'll relabel that as Dynamics, and as we roll out more and more of these steps moving forward, this Dynamics name will be used in a broader way.

Dynamics speaks to some very specific architectural capabilities that we are uniquely defining into our software, things that we do not see in the competitors' software and things that have come out of all the time and investment that we've put into spending time with customers.

The word role-based is used by many people, but here we're talking about it in a very deep sense, the ability to define roles, go in and edit those things, and change them, and the very interface you see to navigate your information is driven off of that roles definition.

Now, we're also saying that the Dynamics platform will have a richer connection to Office than any application software has had in the past. We do that by understanding what sort of extensibility is necessary in Office, we make those extensibility capabilities available broadly, but it's our Business Solutions team that's going in from the very beginning and committing to that full exploitation, and there are some very impressive things that are coming out of that. Particularly as we've been collaborating together and making that the next wave of Office that we talked about as Office "12," that that in our investments in our Business Solutions work, are coming together in a very powerful way.

Microsoft Dynamics CRM Demo

One of the first places you'll see this is in CRM and how it's using these rich data formats, rich integration, things like RSS to drive processes that often required a lot more steps for the user down to just be a single screen.

So to really see the impact of this, let's go ahead and take a look at our Dynamics CRM product, in particular we've got our release coming out in October this year, so let me ask our director of the CRM Program Management, Alex Simons, to come on up and show us how it works. Alex. (Applause.)

ALEX SIMONS: Thanks Bill.

Good morning. What I want to do today is take the time to show you two different demonstrations of Microsoft Dynamics CRM version 3.0. In the first demonstration we're going to take a look at how by using Office as a platform and taking a very roles-based approach to our development, we've been able to build a much easier and more natural way for salespeople and service people and marketing professionals to access CRM information.

In the second demonstration, we're going to take a look at how using the power of .NET and a modern service-oriented architecture, we're taking the data that traditionally has been locked up in the CRM system and moving it out so that it can be used across the enterprise, and even across a partner or customer network In a way that greatly improves business productivity.

So let's start with the first demonstration here. This is the Microsoft CRM Outlook client. Now, the first thing you'll notice here is that I'm going to be able as a sales manager in this case to access all of my CRM data without ever having to leave Microsoft Outlook, which is really for sales managers the place they start the day, I check my e-mails, I check my calendar; why not be able to check in and see how my business is going and what's going on in my CRM systems.

So here what we're looking at is a SharePoint portal site that comes with Microsoft CRM, right inside of the Outlook screen here, and you can see that as a sales manager I've got a bunch of information here available to me. Now, because this is based on SharePoint, it's totally customizable and personalizable. So, for instance, if I don't like this, I can rearrange it. But this one's well-designed for me as a sales manager of Avondale Communities, which is a company that is in the business of managing leases for apartments around the northwest.

So let's just take a look here. As the sales manager for the state of Washington, I have to learn a bunch of information really quickly here. So, for instance, you can see over here on this Web part, which is just using the Web services of Microsoft CRM, that I've got a problem where I have a lot of apartments that are coming off of the lease, and I don't have very many new leases starting.

There is some good news. For instance, I can look at this over here and see that I have a lot of leads, in fact 171 leads, right here in the state of Washington, so that might help me. And then as I scroll down, I can also see here that in the city of Seattle, I have a bunch of open apartments available, but I don't have very many rentals.

So maybe there's some hope here, and as a sales manager, I have to hit my quota for the end of this quarter. What I want to do is a little marketing campaign, see if we can't goose up our apartment leases for the next couple months.

So I'm going to click into my leads area, and you can see right inside of Outlook now I can access all the leads that I've been collecting. These are from our Web site, from corporate relocation services we provide, things like that, and you can see I've got all my leads here, and this is kind of interesting, but it's not really helping me to plan my marketing campaign. Let's go ahead and narrow this down a bit by doing an advanced find.

Now my advanced find, I'm going to go ahead and pull up just leads, that's what I want to look at, and I want to look at the ones in the area that I'm responsible for, which is the state of Washington, so let's take a look at those, and I'm going to run my search. And you can see real quickly now I've been able to filter down to just the ones that are applicable to me in my state. That's interesting as well, but still I want to be more targeted than that, how could I learn some more about this. Well my favorite tool for doing analysis is Excel. So let's go ahead and take this data and move it out into a live Excel pivot table where I can go ahead and some more work.

Now, what you're going to see here is awfully cool. The first thing is Microsoft CRM has automatically built this pivot table for me, I didn't have to select the data, the fields, anything like that; it's just been taken care of. The second thing is that this is a live pivot table, so all of the data that we're about to see came directly from my CRM system and any time somebody makes a change, that will be automatically reflected here in the spreadsheet for me. This isn't a dead pivot table, this is live data I can send around the company and work from.

So you see here I've just quickly put up my pivot table, that's kind of interesting, but let's go ahead and graph this. And now you see I'm really starting to - okay, now I can really start to understand what's going on. Clearly most of my leads are here in Seattle.

Let's go ahead and go in just and take a look at Seattle. So we're going to drill into the Seattle market and then what you can tell is, hmm good, so most of my leads in fact are willing to pay about 1,200 bucks a month or more here in the Seattle area. Perfect. Let's go ahead and do a quick marketing campaign to those group of people so that I can make my quarter end.

So I'm going to go back to my query, and I can just take this now and say well, first of all, I only want people in the city of Seattle, and I only want folks who are willing to pay that 1,200 bucks a month or more, because that's about the price range that I can make a nice commission on. And I'm going to go ahead and run that search.

And you'll see down here at the bottom, aha, perfect, I've filtered down to the 33 - so we we're looking at thousands of leads before. By using Excel to learn some information I didn't know before, and the advanced find here in CRM, I've filtered down to the 33 that I want to target, and I can quickly go ahead and launch a campaign just against those 33 customers.

Now, the quick campaign is a new feature in this version of CRM which lets me as a sales manager very quickly get out and try to generate some new business. So in this case, what I want to do is I'm going to offer $200 off the first month's lease to any customer who signs this month. And I want my salespeople to go out and make phone calls next week to the leads that have been assigned to them to see if they can drum up some more business. And obviously this is going to be a $200-off offer.

Now, what I've done here is I've filled in some of the text for my deal, I'm ready to go, I want all of my salespeople to get this done by next Monday.

And there you go, I've now created a marketing campaign that's ready to go.

Now, the even cooler part here is the CRM system is going to go out and it's going to create tasks, assign them in Outlook to all of my salespeople according to the leads that they need to call by next Monday, and then I'll be able to track in the CRM system how are they doing, are those phone calls actually happening.

So you can see a lot of power here through the use of Office and through the use of a very roles-based approach to give that sales manager a kind of capability they've really never had before.

So now rather than running that campaign, let's go ahead and get out of this, and we'll go back into CRM.

Now, let's say I'm one of those salespeople; how can we help them do their jobs easier. So I come in this week, I make those phone calls that have been assigned to me, and now, ah, I've got a hot opportunity, I'm going to go out and try to close this deal on this customer who's looking for a penthouse apartment.

So all I had to do was convert that lead into an opportunity, and here I can track it through my sales process.

Now, one of the things especially in apartment rental that's hard, a lot of work is that I have to fill in tons of documents: the lease forms, the credit checks, things like that. In this case, Microsoft's CRM workflow system has automatically gone out and created a SharePoint site for me, a SharePoint collaboration site for me, and you can see here it's filled in the documents that I need to get ready for this customer. It's also, though, by putting this in SharePoint it's created a space where my teammates and coworkers can help me get this deal closed. So if I need a credit approval, if I need someone to go get an apartment clean and things like that, they can all now access that same CRM information about that deal right from here inside SharePoint without ever having to go into the CRM system itself. For instance, you can see here we're pulling back all of the different pieces of CRM information that you might want for that person who maybe isn't always a CRM user.

So that's the first demo. So what you've seen here is how by taking a very roles-based approach and using Microsoft Office as a platform we really have created a much easier and more natural way for people to use CRM and really get things done they never could before.

So let's go ahead and switch over, and now I want to show you a different set of demonstrations. This one is going to show you how by using a very modern service-oriented architecture and the power of Microsoft .NET we're able to solve problems by getting business data, especially that CRM data that's been locked up traditionally in systems, out across my enterprise and my partner network.

So here I'm inside Microsoft Word now. Now, one of the things as a salesperson I spend a lot of time doing, we were just talking about this, is filling individuals. I have to fill in proposals and quotes and RFPs, all that kind of stuff, and that takes a lot of typing and a lot of double data entry, the kind of things that Bill was talking about where I have Word on one side and my CRM app on the other. We want to get rid of that and have it all in one integrated environment.

So here you can see I've got a proposal document that we've created using the XML capabilities in Microsoft Word, and as a sales rep I don't want to have to go and fill all the text in here. But I have been working in my CRM system on this proposal, so let's just go ahead and use the Web Services in CRM to pull that data up, and automatically build my proposal for me.

So here you can see it's pulled the customer information, the bill to address, the ship to address right out of the CRM system, as well as the quote that I was working on. You can see my prices here have been automatically filled in, and my discount amount as well, but also I have access right here from within Word to the background information on this customer. So I can see, for instance, who they are, what the contact I'm working with is, even their credit score, and I can see the history of my whole interaction with them. So you can see here, for instance, I have another opportunity to sell them 25 bikes, and I have some customer service cases open against that customer as well.

So this looks like a customer who we do quite a bit of business with. I tell you what, I want to increase their discount to 15 percent. I can do that right here in my Word doc. I just click update, this is going to go out to the CRM system using those Web Services, it updates it in the CRM system, and then when I click Show again you'll see the prices are automatically recalculated for me at that new discount amount, I never had to do any new data entry, I didn't have to switch between systems, it's all there seamlessly for me. It's a lot better than the world of two screens and double data entry and faxes printed out and things like that; it's all in one integrated solution.

So that's the first part of the demonstration, I think very cool.

Let's switch over now and take a look at another capability. Now, some of you have probably heard a lot about RSS. It's a technology, a very simple, nice technology for alerting that's gotten a lot of traction in the world of blogging. What we have done is we've looked at RSS and said, you know what, we think there is some real potential here to help solve business problems as well.

So in this case, let's say I'm Avondale Communities, I've managed these apartments like we were talking about, and as obviously apartments come off of lease I need to get them cleaned. Right, but I don't do that myself, I have a partner who goes out and provides the cleaning services.

So now right from within CRM I can expose out an RSS feed of all of the apartments that are coming off of lease so that my partner who does all the cleaning can go and make sure that they get those apartments cleaned at the right time.

So what you can see here is a bunch of RSS feeds coming out of the CRM system that Avondale has made available. So if I were the cleaning company, I can now come to a corporate portal and just say, hey, I want to subscribe using my RSS reader, in this case InterVnews, which is my favorite because it works so well inside of Outlook. I can subscribe to that feed. Now, obviously this is business critical data, so I'm going to have to give it my credentials. And I'm going to tell it where I want it to go in Outlook, I want to put that in my "apartments to clean" folder, and now we're set.

Now, check this out, this is pretty cool. I've done that, let's switch over to Outlook. And what you'll see here is all of a sudden all of those notifications from Avondale Communities just come right into Outlook, simple protocol using RSS to tell me as their service provider, hey, I need to get people out to start cleaning up these apartments and getting them ready to come off of lease.

A great way to take this kind of great Web-based, simple protocol, and use it to solve real business problems that up until today you had to have complex kind of data interchange and services; this is a much, much easier way to do it. So what we've shown you here in this demo is how through a modern service-oriented architecture and the power of .NET we can really open up that CRM data that's usually trapped out through the whole enterprise and across the partner network as well.

Thanks for your time today. (Applause.)

BILL GATES: Well, it's great to see the CRM product leading the way in terms of connecting up to Office and letting information be available exactly in the form you want it for the role that you're playing.

Delivering Value Through Innovation

One thing to emphasize is the level of investment that's going into the platform software that allows our Business Solutions to innovate at a very rapid pace. We build on not only Office but what we're doing at the database level with SQL Server, big emphasis there has been on business intelligence and having a full understanding of the model of the different products, time, currency, geography, things that databases did not understand before. And so the richness we're getting out of things like reporting services are simply by having our Business Solutions, the Dynamics product connect up to the full richness of SQL Server there.

Likewise, when people need to go in and do custom things, the ability to connect into Visual Studio, to know that's the development tool, that's a place where you can write small snippets of code that intercept events and decide exactly what logic you want to apply there, we make that very straightforward.

When it comes to presenting the information, we present both through the client Office software and through SharePoint up on the server. SharePoint is an increasingly important part of Office. In fact, the new collaboration, the new workflow, it's really built around SharePoint. SharePoint is taking what would have been file servers in the past, replacing those with a much richer environment, and it's by building SharePoint Web sites and having standard tools, standard user interface there, that we get even more leverage out of that Office environment. With the SharePoint and Office "12," that lets our business applications do something dramatically better.

I mentioned that it's all segmented by these roles. We've got 50 of these different roles that you can edit and combine and change in various ways, but that's the base level that you build off of with the very simple interface.

We've got Office "12," which comes out next year, as a foundation that many of these Dynamics capabilities are assuming and will actually be the best way to show off the practical benefits of what we've got there.

We also are bringing Windows into the picture, Windows itself in terms of having less number of screens that you have to deal with and having a search capability that then actually impacts both Office and the Dynamics product so that expectation of what the search user interface looks like, the ability to call up lots of things, have that happen rapidly, although that's built down into the Windows platform, it shows up through the interfaces of Office and the Dynamics software as well. So it's a vision of bringing those three things together.

Announcing "Centro"

Another announcement we're making today is that we will be creating a special server package that's codenamed "Centro." This will come out in the same timeframe as the "Longhorn" wave of products, "Longhorn Server" wave of products that's somewhat after the Vista client. That was part of the same wave, but the client is somewhat earlier there.

What we're doing here is taking all this data we got from the interviews and saying how much setup are midsized businesses going through, taking our various server packages and installing them. How much overlap is there in terms of the role description they're doing as they put together those different server products, and we're saying let's have a unified setup, unified management screens, automate for the typical things that go on in midsized business, and a packaging approach that makes the licensing simpler and more effective as well.

Now, I'm sure many of you recognize this is very similar to what we did several years ago; in fact, going all the way back to 2000 we came out with a thing called the Small Business Server. That product runs only on a single piece of server hardware, was updated a few years ago with the Small Business Server 2003. It's been phenomenally successful, the new version even more so, actually selling about double the older version.

A recent Gartner survey, when they went out to small businesses to talk about their IT practices, they found that over half of those businesses had the Small Business Server installed.

So that's been a runaway success for us. In fact, at the time we were first doing it, many people were looking at alternate platforms, UNIX-based solutions, a variety of people coming out. The one product that's really survived and thrived in that space has been Small Business Server. And so we just keep taking the feedback of the roles and what they need there and improving that product.

Now, to do this for midsized business is not as straightforward. For example, we can't have the restriction that things run against a single server, we can't have much in the way of restrictions in terms of the limits or the richness of the software that gets defined. But we can simplify things quite a bit and so we've got a team doing this today, they've even got some prototypes going, but this will be one of the significant new additions in that Longhorn server timeframe.

Microsoft Office

In a somewhat earlier timeframe, late next year is when we'll have Office "12." Office "12" is something that we're starting to expose to the world. I've never been more excited about a new release of Office. The architecture, the user interface, the things we've done, particularly at the sharing level around SharePoint with that workflow engine, tie in perfectly to the kind of Business Solutions capabilities we want to bring forward to our customers.

This is the version of Office where you will say business intelligence is built in, this is where you'll see things like the ability now to take Excel and have that as a server product and access that even though a browser means that business information is getting out not just within the company but exposing the subset you want to partners as well.

You'll see things like the presence information about users exposed through the software, so the idea of anytime you're seeing a document that relates to somebody you can get in touch with them through instant messaging, through a phone call; you'll just think of that as commonsense that it's going to drive people to be far more productive.

The idea that if one user is working in an application that they can take the context they're in and share that with somebody else in an e-mail so the person just clicks on that and comes back to see that view that the other person wants them to look at and not have to go through a lot of steps to get into that information. That's also something that will become commonsense here.

So we're building up the richness, the idea of application context, the idea of workflow, sharing by using the deep investment that this next generation of Office makes available.

Now, we have a multiyear rollout here of the breakthrough capabilities. We've upped the R&D that we're putting into our Business Solutions well beyond what even the combined R&D of the companies like Great Plains, Navision, Solomon, Axapta would have been.

We're getting a lot more efficiency out of it for two very big reasons. One is, of course, we're driving towards commonality across that work; and the second is that we're able to assume the platform and use that platform.

But even so, even despite those incredible sources of efficiency, because of the opportunity we see, we've made that R&D spend a record level of spending activity across multiple sites where we have experts in the various pieces that go into a modern Business Solutions.

Microsoft Dynamics Demo

What we want to give you a glimpse of now is how we're taking this modeling type approach, the richness of describing these business processes, and really bringing that down to a level where business users will understand it and feel like they're in touch with their business applications and able to deal with them in a way that's never been possible before. So this is about the model driven design that connects up to the way the business works.

So in order to show you that, let me ask David Dennis, who's our group manager for the MBS ERP to come out and show us the model based approach. Welcome, David. (Applause.)

DAVID DENNIS: Thank you, Bill.

Hi. Good morning, everybody. My name is David Dennis. I run the Microsoft Solomon business unit. But what I'm going to be showing you is kind of a sneak peak of the next generation version of Microsoft Dynamics, which is really the convergence of the existing Microsoft Solomon, Great Plains, Navision, and Axapta product lines.

And what I have in front of me here is a process flowchart. It really models a specific business process. We're going to be shipping a number of these out of the box to automate all sorts of different processes. Orlando talked earlier about expense reports, for example. You can imagine expense reports, time reports, purchase orders, all sorts of different processes throughout the organization automated through a process flowchart just like the one that I have here.

The one that I'm showing here is actually driven from Visual Studio, and you're going to see how this actually drives the user interface and how people work together. We'll be showing roles-based user interface, we'll be showing a process model, and we'll also be showing in context business intelligence that provides people the data that they need when they need it in the context of their work.

Now, this process model shows, for example, the ability to select a number of invoices for payment and then the ability to go ahead and approve those invoices, and there are a number of other steps in the process as well; again, a flowchart that actually drives the business application, and this flowchart, even though we'll be shipping with a number of these out of the box, can be changed by partners or changed by IT managers in an organization to meet the exact business process that a company has and so that a company doesn't need to adapt itself to the software, rather the software can adapt itself to the business.

So let's go ahead and show you an example of that roles-based user interface. I'm going to be showing you two primary roles here, April, the accounts payable coordinator, and Ken, the comptroller.

What I'm looking at here is April's homepage, and basically I'm only seeing those things that are specific to April as the accounts payable coordinator's role. So she can do specific tasks, for example, create supplier invoices, manage supplier information, or pay invoices. She sees her Outlook calendar, she sees news that's specific to her role. And again when we jump to Ken, he'll have a different set of things that are specific to his role in the organization. We envision shipping 50 or more role-based pages out of the box when we ship this next generation version of Microsoft Dynamics.

So April notices that she has a number of invoices that are ready to pay here, and the communications center has brought in some new faxes, new invoices as well. She's going to go ahead and jump in and pay those invoices.

Now, remember we looked at that flowchart earlier, that process model of the organization that they need to go through to get these invoices ready for payment, and that actually generates this user interface for April and shows her exactly the steps that she needs to take in her role with in-context data, in-context business intelligence over here on the right hand side that shows her exactly what she needs at that point in time at this point in the process.

She sees that she has 32 invoices, almost $32,000 worth of invoices to pay, but she only has a budget of $15,000. And so what she's going to do here, we're going to click on this, and we're going to do a quick filter here to see what we can actually pay. So we could filter on one month, what's due in the next month, the next quarter, the next year. We're going to take a look at what's due in the next two weeks. And she can see down here that she has $12,000 in invoices that she's going to ready for payment, a budget of $15,000, so again she can see that data shows her that she has enough money to pay what's due in the next two weeks.

Now, April is going to try and get a 2 percent discount on all of these invoices, and that's sort of the theme that we're going to have throughout this demo. She's trying to get a discount for early payment.

And so we're going to go ahead and submit these invoices that all get a 2 percent discount for approval, and we're going to go through the next step here. And this is automatically going to go through the next step in that process that we saw defined by the model earlier. We'll do a quick synchronization and there they are. Now, we have 15 invoices or close to $13,000 that have been selected for payment, and they're now going through the next step in the process that we had defined earlier.

Now, interestingly, these have been assigned to someone named Phyllis. Now, Phyllis is an accounting manager. Now, because I'm doing the demo, I happen to know that Phyllis is out of the office. Now, in many organizations this would be a bottleneck, this would just stop the process in its tracks, and we wouldn't be able to get that discount, we would cost the company money, Phyllis would come back to a load of approvals in her inbox from the time she was out of the Office. And so for demo purposes we've set this to automatically within one minute go to the next person in the approval train. This could be set for a week, two weeks, a month, whatever. And so what will happen here in a second is that this will automatically get moved to Ken, who's the next person in the process. And notice we can see presence information about Phyllis as well, that shows that she's out of office. And automatically it's moved on to the next stage.

Ken is now available to approve these. I can even see that Ken is online, the integration with Live Communication Server, I see that presence information about Ken, and I can even send him an instant message directly from within the ERP system using Microsoft Office Communicator.

So let's go ahead and jump over to Ken's homepage and there's Ken, the comptroller. And again remember I mentioned earlier the different set of features that are exposed for Ken in his role. As the comptroller, he's interested in a slightly different set of things than April. He can see orders that are delayed by insufficient supplies, something that's of interest to him as the comptroller. He can see monthly invoice statistics as well.

Now, this is interesting, this is actually showing him how effective the process is. He can see how long it takes for invoices to get turned into payments through this workflow, through this process that we've created within the organization, so he can learn how effective the processes are over time. For instance, if he sees that all invoices that are under $250 are taking too long to be turned into payments, he can actually adjust the process such that all of those maybe are auto-approved. So you can learn from the effectiveness of your processes over time and make adjustments to the system such that it grows and evolves and makes your business more effective as time goes on.

So let's take a look at this alert that's come in. Remember, we had automatically reassigned this, the system has automatically reassigned this to Ken, and he can drill in and look at some summary information without having to dig throughout the ERP system to find exactly the summary detail that he's looking for.

Right there from within the alert I can see I've got 13 invoices that are ready for payment, what the total amount is, from which bank, the information that he needs to get an understanding of whether he really wants to approve this or not.

But we can also go a little bit deeper. I can bring up those invoices and again I see in that in-context business intelligence for Ken's role that he's got a little bit of additional budget here. Ken also wants to try and grab some 2 percent discounts on early payment for invoices, so he's going to go ahead and add one that may not be due within that two week window, but he can see that he's got the budget to pay this one. So I'm going to go ahead and click that and approve those for payment.

So let's jump back to April and see what's up in her world.

So notice that those 13 invoices are ready here on her side to make that payment. So we're going to go back in to pay the invoices, and notice that they've moved to the next step in the workflow, the next step in the process, as was defined earlier, as you saw in that Visual Studio diagram.

All of this is driven by the Windows Workflow Foundation, which will be coming in an upcoming release of "Longhorn."

So we can create payments from these 13 invoices that have gone through the process. You can see that icon, I don't know if you can see that from where you're sitting; there are arrows that basically show this is going through the process.

And 11 of these invoices are actually going to move to the next step. Two of the invoices are actually going to be rejected, and because I happen to have done this demo before, I know that the reason for that is that those two invoices are on hold, and notice two of the invoices have been rejected, and 11 of the payments are actually going to go on to the next step in the process.

Now, again this could be a bottleneck in an organization where if there's anything rejected in a workflow like this, everything else gets rejected and it really stalls the process. In this case we can send those things that match the business rules through the process for payment, and the two things that aren't can actually kick off another workflow, and I'm going to show you how that works right here.

These two invoices, I'm going to go ahead as April and request an override. So there's a reason why those vendors are on hold. She's going to kick off another process now where someone is going to review the vendor status and hopefully be able to send those invoices out for payment and get that 2 percent discount on early payment.

And now the final step in the process, April can go ahead and generate payments, and based on the rules that we've established for the vendors, some of those will go as printed checks, some of those will go as electronic funds transfers.

So basically what we've seen is role-based user interfaces that are delivering information to people relative to their specific role in the organization, in-context business intelligence that serves data to people in the context of their actual work as they're going throughout the day, and adaptable processes that help the business improve over time. These are the sorts of breakthroughs that you'll expect in the next generation version of Microsoft Dynamics.

Thanks for your time today. (Applause.)

Microsoft Dynamics Roadmap

BILL GATES: Well, it's thrilling for me to see that model-based approach actually running. That is real code there, obviously still a lot of work before that ships in all the applications, but that really gives you a sense of the new architecture and the new way people are going to think about business applications.

Let me quickly show you the roadmap here on a timeline, and it's pretty straightforward. We've got two different waves that we're talking about here. The wave that we're in right now, in fact, some of this has already shipped, and the rest of it, most of it is next year and a little bit of it out in 2007. This is where we get the role-based experience, and these 50 roles are identical across the entire product line.

We get the SharePoint exploitation, obviously supercharged by the release of the Office 12 wave where SharePoint steps up to the new level, we get the full exploitation of SQL, all the business intelligence, reporting capabilities for what we call contextual BI there, and then we get the extensibility that uses XML, uses notification that is designed around this Web Service type approach, and you saw some of the flexibility that generates there. All of those things are in wave one and across all the different products.

You're also seeing on this slide the way that we'll designate those products going forward. It's been Great Plains, and now we'll talk about Dynamics Great Plains or Dynamics GP, likewise Dynamics AX for Axapta, Dynamics NAV for Navision, Dynamics SL for the Solomon piece, showing that the newer pieces are now the pieces that are in common there.

Of course, we have the Dynamics CRM is shared across every one of those and, in fact, it's kind of our lead development and it gets a lot of the way to capabilities are becoming available in it now, including things like the extensibility.

Out in the second wave that's where we've fully implemented what you've just had a glimpse of, and that's the idea of models for all the business processes, and all the UI is generated from those models. If you edit the models, you're editing the UI, and then that UI maps through the roles so that the people who need to be notified need to see the rich visualization to have that just immediately as part of their screens.

These models will be quite rich. The idea of delegating things, handing things off, sharing things with partners, all of those things will be explicitly understood in these models. The models need to really capture the real world so that you're not going outside of them to try and track things and using your own understanding; the software and your model will match there.

We'll get the full connection up to Visual Studio to go into any event and be able to have the extensibility that makes it easy to customize this software, we'll have that rich kind of user interface you saw there with the great visuals and very clear way that the information is laid out, and all the different process libraries. That's part of these models for the different business activities. And so that is really a different kind of application software than anybody has got in the market today.

It's to move along this roadmap absolutely at full speed that I mentioned we've got record R&D, even with the great efficiencies we're getting out of the shared approach and the platform assumption approach.

Looking Ahead

So I hope it's very clear to you that this is a space that we see as critical to our vision. If we're going to empower people in the best way possible, we've got to get into actual business processes, into the business roles. If we're going to take personal productivity software to a new level, we have to understand why there's been so much that people have had to do outside of that and why that breakdown of information crossing from the structured world of the applications to the unstructured world of e-mail and instant messaging, why there's been a huge impedance loss and the need to switch to too many screens and go back and forth that has limited what people are getting out of that software.

So it's a challenge for Office to step up to these things, it's a challenge for the overall platform, Visual Studio, SQL Server to step up to these things, and a clear understanding from the user as they're sitting in front of our applications, driving the requirements back down that architectural chain.

We do have a number of these advances that are very much in the near term, the version of this CRM that you saw here, the 3.0, coming just in the next month, and for smaller business we have Small Business Accounting. We're also talking about this launch we're doing right now.

Next year, of course, is where you get the Office "12," you get Vista; that's in the same timeframe that the Centro special server will come out there, and then out in the future the modeling type capabilities. We're investing in all those different timeframes because of the value we see generated out of those things.

So a huge commitment to business applications, a lot of ambition in this space, a lot of excitement about the strengthening of the partners that we have, people who do the extensions, who support the products out there, and really an approach that is very global in nature here.

So it's exciting to share that with you and thank you for coming today.

(Applause.)