JP Morgan Global Technology, Media and Communications Conference
Who:Kirk Koenigsbauer, Corporate Vice President,
Microsoft 365, Marketing
What:JP Morgan Global Technology, Media and
When:Tuesday, May 14, 2019 1:20 PM
MARK MURPHY:Okay, good afternoon, everyone.Thank you so much for joining us here at the
conference.I am Mark Murphy, Software
Analyst with JP Morgan.And it is a
great pleasure to have with us today Kirk Koenigsbauer from Microsoft.Kirk, thank you so much for being here with
KIRK KOENIGSBAUER:Thank you.I'm excited to be here.
MARK MURPHY:And we are going to be talking about one of
the most exciting, fastest growing products for Microsoft, which is called
why don't we start off with your background.
KIRK KOENIGSBAUER:Sure.So my name is Kirk Koenigsbauer.I've been at Microsoft since 1991.I spent a little bit of time at Amazon.com for about four years in the
middle of all that.I run our Microsoft
365 business, which is inclusive of Office 365, our Enterprise Mobility and Security
Suite, as well as Windows 10 in the enterprise and a bunch of other stuff.
MARK MURPHY:So I think people are familiar with Office,
they're familiar with Windows.They're
probably a little less familiar with the whole suite of products which you are
overseeing now.Can you give us a little
bit of an overview of Microsoft 365 and just how it fits into the overall
KIRK KOENIGSBAUER:Sure.So Microsoft 365 is a product that we launched just about two years
ago.As I mentioned, it is a product
that includes many products that you may have heard of before, but essentially
the cloud productivity version of them.We think of Microsoft 365 as sort of the world's productivity
cloud.And so, again, it includes all of
the value that you'd find in Office 365.So, for example, all the Office apps, SharePoint, a new product that
we've launched called Microsoft Teams, Exchange Online, and so forth.It includes this Enterprise Mobility and
Security Suite which has a number of different workloads within that around
management and security and compliance.And then, of course, it has Windows 10 as a core part of the offering as
we sell this as a part of our essentially what we call our Modern Workplace
sort of go to market which is really centered around productivity and
MARK MURPHY:So can you help us frame up the growth
opportunities that we may be looking at here with Microsoft 365?I think we've noted that the Office 365
Commercial revenue line, which is a very, very large one, has been growing over
30 percent recently.Pretty incredible
given the scale of that.Windows is
growing well; EMS is going well.How do
we want to think about the broader opportunities here with Microsoft 365?
KIRK KOENIGSBAUER:Yeah, no, it's a good question.So essentially the way I would start to frame
it is, we are repivoting our whole approach in terms of selling productivity
and collaboration value to customers with Microsoft 365.It has all of these workloads in it.It is the way that we organize our sales
force and our go to market.It's the way
that we organize our partner incentives, our channel incentives.It's the way that we're increasingly
organizing our R&D and our engineering and how we make investments, not in
a sort of siloed way in any individual product in these regards, but literally
thinking about the whole system across Microsoft 365 to deliver that integrated
terms of how we think about growth, this a product, you mentioned the 30
percent growth on the Office 365 component.I think we're up to about 800 million active users on Windows 10.We just crossed 100 million seats sold of
EMS.And so the sort of sub-stats
underneath are really quite impressive.We have about 180 million people monthly active in the commercial space
on Office 365.So there's a ton of
momentum there, which is just for me working on the business for so many years
is just really great to see.
we think about the growth prospects, in many ways it's a lot like we think
about the growth of or we used to talk about the growth of Office 365.It's essentially a play that is a P times Q
business.We look at the install base of
sockets.We constantly want to look at
how we can grow that socket pool.And
then we look at how we can increasingly drive the RPU for all those sockets
that we have.
the socket side from a growth perspective, certainly we're well positioned in
the enterprise and in corporate space, though we still see room to expand seats
in those businesses primarily as we think about entering markets like regulated
industries that we have historically had challenges selling into now with the
sort of cloud and unit economics of Microsoft 365 and so forth we're able to
reach pockets of users that we hadn't been able to sell to in the past.SMB is a very, very important socket growth market
for us.We see lots of white space there,
wide open space for us to drive more sockets, more cloud sockets overall.
then the last area on the socket side that I would say is a big growth area for
us is, I would think about first-line workers, a category of workers that
historically, again, have been underserved by technology.They might be in manufacturing, they might be
retail sales professionals, they might be in hospitality, they might be in
certain segments of healthcare, even financial services, where they're not
tethered to a desktop machine, they don't have their own dedicated laptop,
maybe they are on a shared device.We
have opportunity there to reach those customers as well.
then on the RPU side, you know, we've talked about this before, we have the
opportunity to then move these customers up the stack in terms of value, and so
whether it's moving from on-prem to cloud as sort of that first step, that's an
RPU driver for us given the LTV that we derive from those customers, to then
selling increasing tiers of service within Office 365 or within Windows, and
then getting them to Microsoft 365.
we see quite a bit of growth on both of those dimensions with this new
MARK MURPHY:So, you've talked a lot, Kirk, about building
modern experiences.You've talked a lot
about security in the past.You've
talked a lot about compliance in the past.I think it's apparent to us that there's a lot going on here in the
componentry of the stack.Where do you
see Microsoft's core differentiation today?
KIRK KOENIGSBAUER:Yeah, so putting aside the workloads that you
reference, and we could certainly jump back to those, I think there's a few
things that customers talk to us about in terms of differentiation.One is the integration value in the sense of
for sure customers don't want to go to just one single vendor, but the
opportunity to have all of these workloads on a common platform from a
management perspective, from an interoperability perspective, from a broader
TCO perspective.All this stuff just
works better together.That is
increasingly an important differentiator for us.
by the way, it's not just at the Microsoft 365 level, when we think about
security and how fragmented that business is, you know, we see CISOs and SecOps
really valuing that notion of integration which is a key one.
value prop that has been resonating for us, particularly on the enterprise side,
is the position that we've taken around data privacy and trust.And increasingly with all the sort of things
that are happening in the world today, that's a message that's resonating
really quite well.And so we've
benefitted from our investments and work around GDPR and other regulations that
you see sort of happening all over the world.Customers trust, whether it's public sector customers or of course large
organizations, they trust our hyperscale cloud infrastructure and the work that
we're doing there and that's a big deal.
big differentiator that we are seeing increasingly is around data and AI.And as we -- I'll just pick security as one
example.When you think about all the
signal that's out there in the world, all the security signal that we have,
whether it's coming through our e-mail system, whether it's coming from our
identity system, whether it's coming from the variety of different endpoints
that we have, being able to look at all that signal and reason over that with
our AI capability and our investment that we have in security professionals at
Microsoft, that is a differentiator in and of itself.
so for a number of these reasons, let alone the work we are doing with products
like Teams you referenced on the experience side, the work we're doing in
security, the work we're doing in compliance, those are some of the things that
we hear from customers.
MARK MURPHY:I want to come back to Teams in just a
MARK MURPHY:Before we do that, I wanted to mention that,
so my team attended your Build Conference last week.Incredible, amazing event.Satya spent quite a bit of time talking about
the Microsoft Graph.And I think this is
something that has really captured our attention.Can you explain to us what is Microsoft Graph,
and then how is it going to be leveraged across Microsoft 365?
KIRK KOENIGSBAUER:Great.Maybe I'll start with what it is and then what it does.What it is, so basically the Microsoft Graph
you should think of as an API into a database that sits in our cloud
service.It's secure.It's tenant-based, meaning the data is only
available to that customer.It's
secure.It's their data, they get to do
what they want with it.But essentially
think of it as a collection of all of the activity that people do inside of the
organization, whether it's they are a collection of e-mails and the meetings
and the tasks and the people that go to those meetings.We have essentially a graph of all of that
then on top of that sort of raw information, we also derive insights on top of
it.So, for example, if you and I aren't
spending as much time as we used to spend before, that's information that we
can derive, or if one organization within a company is doing a better job at
collaboration than another those are insights that we can just derive from that
so this is a pretty powerful capability that's available to customers both in
the sense that we can us the graph for our own first-party experiences.A good simple example would be Microsoft
Search that we have.Microsoft Search is
a great example of an app that uses, that we built, that uses the graph on the
back end, where I can search for people, content, apps in my infrastructure,
whatever I might need, all of that is really provided to me via the Graph.
what's also really interesting is the ecosystem that's building up around the
Graph, whether it's ISVs that build solutions that they want to sell into
businesses and those solutions can be made better by accessing Graph
information.One example I think that
Satya used at Build was Survey Monkey, where if a company wants to do a bunch
of surveys they can better target their population of people by integrating
their tech with the Microsoft Graph to have it be more precise or for that
matter even just building simple line of business applications, integrating
them into experiences like Microsoft 365, they can use that Graph data to make
those experiences better for their people.Those are some of the ways that we think about the Graph.
MARK MURPHY:So, this is something that's leverageable for
both your corporate customers, as well as these third-party app providers,
third party developers?
KIRK KOENIGSBAUER:That's correct.I want to be really crystal clear that it's
the company's data and I should say the customer's data.And only if the customer says yes, this ISV
app can plug in and access the Graph they can use that data.But that is the model.It's something that's available for ISVs and
something that they can use on their own.
MARK MURPHY:Okay.Now, I want to come back to Teams now.You mentioned this a moment ago.It appears to be making great progress, something we've heard, when have
gotten out and done our checks and interviews with your ecosystem of your
partners, your resellers, the SI firms, they are telling us that when Teams
goes in they will see a few months later that the seat count is doubling,
tripling, quadrupling.Satya said
something about it's the fastest growing app that they can ever recall
seeing.He said that last week at
Build.How do you see Teams first of all
differentiating, and second how do you see Teams competing against companies
like Slack and Zoom?
KIRK KOENIGSBAUER:For sure, so starting with the
differentiation piece, and maybe I'll also talk just a little bit about what it
is in case everyone is not familiar with it.Teams is a product that we launched, I guess it just hit its two-year
anniversary as a product that went general availability in March.
a product that brings together a number of different workloads to help people
in organizations communicate and collaborate.Think of it as a hub for teamwork, essentially. And the teams can be
really of any size.You can be a
participant in many different teams.A
core part of the value proposition of this offering is that it provides a number
of different workflows integrated into a single experience.
so, for example, it's got collaboration capability.It's very conversation-oriented from that
perspective.You've got chats and you
can use bots and you can integrate content with that.It's got meetings capabilities.So, you could host a meeting like this, you
could do ad hoc one-to-one meetings.You
can do things like record meetings; you can do audio conference meetings.There's a lot of meetings capability that's
built into the product.
has capabilities to communicate, as well, not just using chat and so forth, but
through phone system technology.So, if
I wanted to call a customer or call my wife, call a cell phone number, it has
PSTN services integrated.There's a dial
pad and so forth.There's a bunch of
work we're doing with third parties to create Teams-oriented hardware devices,
whether they're or meetings, for conference calls, whatever, what have you.
then also we've integrated the Office applications into Teams.And when I say the Office apps, I don't just
mean Word, Excel and PowerPoint.Those
are, of course, integrated into the experience, but also things like OneDrive
for storage, or SharePoint.You can
literally take a portal page, an Internet page and you can include it, you can
integrate it right within Teams.It's
super-super easy to do those sorts of things.
BI dashboards, analytics, all that can be wired into Teams. And so this sort of four in one combination is
a pretty powerful differentiator for us, because customers will tell us I might
have some legacy meeting solution, or I might be using Slack, .or some other
solution, but the idea of being able to come in and offer a single tool for end
users that's integrated where all of these different workloads are coherent
across them is really quite a differentiator for us.
differentiator that we've really seen, again, the product is only just a couple
of years old, but in the last I would say 6 to 12 months we've been
super-enthusiastic about how customers are responding to the scaffolding that
Teams provides to integrate line of business processes and workflows into that
experience.I referenced first line workers
earlier, that's one use-case.But we're
seeing companies, again going back to the Graph that we talked about a few
moments ago, using Graph data, integrating their line of business applications.
those business applications can be built on Azure, but they front end them
inside of Teams.Those experiences can
also be front ended with thigs like Power Apps, as well.And this is a really great experience for
customers, because you can have this notion of these horizontal workloads, the
ability to be able to just do a meeting.But then simultaneously have that line of business application, or that
business process integrated right into that experience.So, it's super, super sticky.It's a much cleaner environment, because
everything is integrated into one space.And customers are really resonating with that.
MARK MURPHY:So, it sounds like this is the core
differentiation is the comprehensiveness, the integration points.Office is woven in with this.Graph is woven in with this.I presume Cortana is woven in with all of
KIRK KOENIGSBAUER:Yeah, I would say one other piece that I
didn't mention that's important is the enterprise grade capability around it,
whether that's, again, the fact that we operate in data centers worldwide, the
fact that we've added DLP types of capability, things like ethical walls, the
sort of security and compliance around the Teams infrastructure is one where
companies love it, because it's got this great sort of new experience for end
users that they love, but then also it's something that can be controlled and
managed in a way that works for that business.
MARK MURPHY:Now, is this going to be one of the hooks for
pulling enterprises into your premium SKUs, like the E5 SKU.Maybe you could talk to us about how the
customer conversations are shaping up around E5 or even E3?
KIRK KOENIGSBAUER:Sure, well, to the first part of your
question, we do see Teams as something that will help us drive that sort of RPU
growth over time, in the sense that, as you mentioned earlier in our
conversation, once people start -- organizations start using Teams we do see
usage rates increase dramatically across the board, not just Teams.But Teams pulls through all this other
Microsoft 365 value.And that's a good
thing for a couple of different dimensions.
of course, is that the more people that are using the products the more
satisfied people typically are, retention rates and renewal rates are higher
and so forth.But the really great thing
about it is it helps us with that upsell approach as we look to sell higher
tiers of service, which then would transition to me I guess to the conversation
for folks that don't know much about it is essentially -- I'd take a step
back.When we sell Microsoft 365 or
Office 365 or EMS components, even Windows, we have different tiers of service,
E1, E3, E5.On Microsoft 365 we have these
two tiers.The E5 set is the premium set
of value that we offer for customers.There are essentially four core workloads that are there.There's a workload around security.There's a workload around compliance.There's a set of workloads around communications
and there's a set of workloads around analytics.
the value proposition around all of these is interesting to different customers
at different times, depending on where they are in their lifecycle.I would say right now, in terms of driving
growth of E5, security and compliance are the top conversations that customers
want to have.Security is just so top of
mind for every customer that we go and talk to.They want to hear about Teams, and they want to hear about
security.And that's got a lot of pull
for us in the enterprise.
referenced E3.We still have a lot of
room to go in moving customers, whether it's an on-prem to cloud to that E3
tier or from Office 365 E3 to Microsoft 365 E3.And so that's another RPU driver for us, essentially, and we still see
that as having legs.So, again, going
back a little bit to the first part of your question, whether it's a socket
play or the RPU play, we feel like there's good growth opportunity here.
MARK MURPHY:You would put Teams and security in the kind
of one and two position, or maybe you can interchange them.Those are both critically important in terms
of driving the gravitation upward toward E3 and E5?
KIRK KOENIGSBAUER:For sure, absolutely.
MARK MURPHY:It's just interesting that Teams would be in
that context already at this early point.
KIRK KOENIGSBAUER:Yeah, it maybe not intuitive initially, but
again if you think about it as a something that is driving just incredibly
rapid usage inside of accounts, that in and of itself lays the foundation upon
which you can go and drive that upsell to higher tiers of value.
MARK MURPHY:Okay.So, switching gears a little bit, there was a very interesting
announcement in the past week or two, it was a partnership between VMware and
Microsoft.Clearly, it's something
significant happening there.And it did
have some very specific references both to Microsoft 365 and Office 365.So, I want to make sure that we're kind of
thinking through what that's going to mean, specifically for Microsoft 365 and
the portfolio of products that you oversee.
KIRK KOENIGSBAUER:You bet.So, for -- first I guess I would say and you referenced Build earlier,
one of the key messages that we wanted to land at Build and we've been really,
with Satya's leadership I think in particular, doubling down on the notion of
interoperability, the notion of openness.We want to do super-well in the industry, but we also want to create a
platform that other companies can integrate with.And I think Scott had mentioned at Build just
over half of the VMs on Azure, as an example, are running Linux these
days.So, the shape of the company has
really changed from that perspective.
relationship that we've just announced with VMware, we're excited about.There are sort of two components to it.One is around Azure, which is essentially
helping customers move from their on-prem environment, if they're using VMware
tech, in hybrid ways to Azure, which is fantastic.
the Microsoft 365, to your question, there are sort of two related things that
are happening there.One is with the
workspace one product.That product can
now manage the Office applications on mobile devices, devices like these,
Android, iOS, and so forth, and also integrate in with Azure Active Directory
for things like conditional access.Conditional access being a really foundational sort of security
other words, if I've never been to Boston before and I'm logging in with my
device, we can sort of detect that' s different place than Kirk has been to,
let's actually throw up a multifactor auth or something along those lines.That's some of the kinds of scenarios that
VMware will now be able to participate in with Microsoft 365.
MARK MURPHY:Okay.Again, going back to some of our survey work, we have been seeing in
recent months that there's a lot of feedback about EMS, growth and adoption of
EMS, very strong momentum for EMS.Could
you maybe talk about how the mobility and security are fitting in as part of
this broader Microsoft 365 conversation?
KIRK KOENIGSBAUER:Sure, so it's a core -- so EMS the Enterprise
Mobility and Security suite is a core component of Microsoft 365.Think of it as one of the three legs of the
stool, essentially.And for folks that
aren't aware, EMS essentially has four core workloads as a part of that
suite.There is a workload around
identity.And identity is just so core
today, particularly from the security perspective, although there are also
other important ways that identity is used in organizations, but with sort of
perimeter-based security sort of a thing of the past and identity and sort of
zero-trust identity, with Azure Active Directory, our service, is very, very
core to the EMS value proposition.
also a value proposition around management.There's a management plane that EMS provides.It uses technology that we have called Intune,
for managing a wide range of devices on iOS and on Android.
also a part of EMS that I've referenced around security.So, in addition to identity there's a bunch
of security value that's a part of EMS, whether that's protecting those Azure Active
Directories, the people within those directories, threat protection capability,
cloud app security capability.So, for
example, an organization can understand all the SaaS usage that's happening
inside of its perimeter, or inside of its boundaries and can put policy against
those and so forth.And then on the
compliance side, EMS also is a very, very important element of how we protect
customers' information with something called Azure Information Protection as a
part of that solution.
there's a number of different workloads there.The growth, the business model is such that it's obviously high attach
to Office 365 and then of course Microsoft 365 all-up.But increasingly, too, we see EMS sold
standalone, as well, which is good to see, again, for its identity and security
value proposition.I referenced earlier
we just crossed 100 million licensed users for EMS.So that's doubling year-over-year, more than
doubling year-over-year.So, really,
really strong growth rates with EMS.
MARK MURPHY:Impressive, 100 million.So, let's continue down that path a bit.You're getting into the domain now of
security.And this is a topic we've
heard Satya and others at Microsoft spending a lot more time on.I think there is a notion out there in the
marketplace that this whole world of security spend for the typical company is
maybe an area of inefficient spend.Perhaps there are too many point solutions, too many companies charging
a little too much money in the security arena.So, how is Microsoft, if we kind of zoom back and take a 30,000-foot
view, how is Microsoft thinking about security and maybe how is that going to
fit into this, again, Microsoft 365 conversation?
KIRK KOENIGSBAUER:Sure.Taking a step back, it is an area we think that has a lot of opportunity
for some of the reasons that you reference, which I'll get to.From the customer lens, what we hear over and
over again is it is just the number one risk or blocker that they have to
achieving this notion of digitally transforming their business.
want to move to cloud.They want to move
to these SaaS apps.They want to have a
variety of different devices that their employees can use for whatever tasks
that they're working on.But, at the end
of the day they relay are quite concerned about the risk on the security
front.So, that's why this is such a hot
topic, is that it is that thing that's getting in the way to their digital
so, the other pieces you referenced in this space is that this is a hard
category, in the sense that there are just simply not enough security
professionals in the world to keep up with the sorts of cyber threats that are
out there.As you referenced, it is highly,
highly fragmented.There are hundreds,
thousands of apps that are out there, many of them are very, very narrow in
terms of what they do.Many of them are
also on-premises based.They're not
native, cloud-based solutions and so this is a space that we see as really
right for us to tackle.And we're making
major investments in this space across the board.
referenced EMS and how important that is.When we think about security we really think across the board in terms
of, again, identity.We think of
endpoint, endpoint security meaning across all these different devices, whether
it's Defender on the Windows platform, which we're taking, by the way,
cross-platform to Mac and others over the course of the next year.
think about information protection, again, as another important part of the
story.Compliance always comes into
these conversations as well.And so it's
not that we're just talking -- when we think about security super broadly, it's
not that we're just talking to CISOs and SecOps, but we're literally starting
to have more and more conversations with chief risk officers, chief compliance
officers, chief legal officers, CFOs and so forth that are super, super
invested in the information protection of their content within an organization.
so we're investing big time in this space.And it's tough to say what's one and two.Typically whenever it's about the end user
conversation around Microsoft 365 that's all about Teams and then when it comes
to infrastructure our customers care about management.They care about interop.They care about a lot of things.They really, really care about security and
that's first and foremost what they'll want to talk to us about.
would just mention briefly, and we announced this recently, there's a lot of
what we're doing on the sort of end user compute side with Microsoft 365, but
Azure is also investing deeply in this space as well.And so, for example, the Azure Sentinel
product that we announced at the RSA Conference a few months back, that's a
great example, too, of a space that is largely on-prem, fragmented, really ripe
for disruption, really ripe for using AI across the vast amount of signal that
we have and that's going to be a real differentiator.
MARK MURPHY:And how would you position Sentinel for
anyone in the audience who is not totally familiar with that?
KIRK KOENIGSBAUER:Yeah.You should almost think of it, most simply think of it as, again,
cloud-based, think of it as a tool that allows a CISO or SecOps people generally
to be able to look across their infrastructure, all the signal that they have,
to be able to identify threats across, again, literally all of their different
security systems.So it's something that
is -- you should think of it almost as an aggregation layer across their entire
estate.And it's just critical for every
company.And we were quite humble
because it's early, but also really enthusiastic about what the opportunity is.
MARK MURPHY:So Microsoft is going to tackle security
across all levels of the stack from the core of the data center out to the
endpoint and it's going to be something that is extremely overarching, it
sounds like, and pretty well thought out.
KIRK KOENIGSBAUER:Yes.We hope so.
MARK MURPHY:Let's move on.I want to touch on Windows 10.I know this is an important topic for
people.In our work I think we have been
trying to assess when would be the peak of the actual activity for the typical
enterprise that's going to be in this motion of upgrading and moving their environment
to Windows 10.
feeling is that the peak of this kind of migration activity is coming up
sometime soon, it's coming up in the next kind of few months, a handful of
months.How do you view this opportunity
to kind of drive additional customers to adopt Windows 10 if they haven't
already done that?
KIRK KOENIGSBAUER:You're right in sort of the context.We're within a year of Windows 7 reaching its
end of support, and then within really 12 to 18 months by the way Office 2010
reaching end of support.So that's
creating a real nice tailwind for us and a real important need for customers to
get current, to get modern on the desktop with both Windows and with Office.
so on the Windows side, specifically to your question, I would say we're
probably roughly halfway through the sort of upgrade cycle that's there.There's quite a bit of room and work left to
go do.But this is really important to
customers, it's really important to us from the perspective of not just having
the latest and greatest value that is in Windows, but also to our conversation
that we were just having it's lower TCO, it is a more secure operating
environment.We can do more with
customers if they're on Windows 10 in terms of adding additional security value
on top of that.
this notion of getting current has both these end user benefits but is also
really important in terms of the infrastructure itself.And the way customers are approaching this is
that some customers, of course, will operate existing machines, many will be
Windows 10 machines on the refresh cycle, but the next 12 months will really be
quite a bit of activity in this space.
MARK MURPHY:Kirk, if you were me, how much would you be
thinking about growth versus the PC market at this point in the cycle?
KIRK KOENIGSBAUER:Yeah, you know, we don't share too much on
this.I would say folks should expect
our growth rate to be in line with the market essentially and performance over
the last couple of quarters is certainly consistent with that.
MARK MURPHY:We have about five-and-a-half minutes left,
let's check with the audience now for questions, if you would, raise your hand
and we're going to get you a microphone from the back of the room.
Okay.Pretty packed room, but not a lot of hands
going up quite yet.We can come back to
that.We can come back to that in a
me try and ask you a final one on a broad topic, innovation, future
investment.We've heard Satya now
talking, he's been using this term "tech intensity".I feel like he might have coined that one.
KIRK KOENIGSBAUER:I think he did.
MARK MURPHY:The notion that companies are just going to,
increasingly they're going to have to adopt software technology to kind of
maintain a competitive edge, if you will.He has spoken about how that is going to be -- this is kind of what's
driving Microsoft today and into the future.If we go back to the last earnings call, Amy was talking about investing
pretty aggressively in this upcoming fiscal year, Fiscal '20, to try to capture
do we want to think about Microsoft 365 and how it plays into this notion of
innovation and future investment?
KIRK KOENIGSBAUER:Yeah, no, it's a good one.I would go back to what we chatted about a
little bit.When I think about the top
two things we're hearing from customers that they're interested in, it really
gets around how can they create these sorts of modern experiences for their end
users, and Teams is at the forefront of that and we are shifting more R&D
resources to Teams.
are increasing the number of sellers that we have on Teams and folks that do
customer success around it.We're
working in the channel to ensure we have incentives aligned properly and are
recruiting partners to build the kinds of ISV solutions and so forth.So there's a huge investment around Teams
across the board on so many different dimensions.It will be really big 12 to 18 months for
Teams, I think.
we talked a little bit about, a sort of similar profile.We're investing quite a bit in the security
space from R&D through sales and channel and partner and investing quite a
bit there.There are other investments
that we're making as well.Those are the
top two, but I would highlight things like we were just talking about, it is an
important year for modernizing the desktop, and the Windows 7 end of support,
the Office 2010 end of support, that is all within the sort of next fiscal year,
next 12 to 18 months of growth for the company.Again, that's important for customers, it's also important for us to get
customers modern.It allows us to do a
better job of upselling to higher tiers of service and so forth.
a lot that we're doing in the AI space underneath all of the investment that we
talked about.Every single one of these
products is benefitting from AI, and the opportunity to use AI to make these
products better, to make them more relevant, to help people with automation,
everything from automation to decision making to insights to identifying
threats on the security side to helping lawyers with e-discovery processes,
reducing the cost of those, all using AI is sort of really front and center to
what we're doing.
reference a couple of examples of things that we're quite bullish on.The idea of delivering within Teams or using
Power Apps or the Power Platform, these industry-specific line of business
solutions, I really think there's something that's going to be quite important
here that happens over the next 12 to 18 months as companies lay down this
infrastructure from Microsoft 365 by wiring in their business process, their
workflows into that, and that's going to be something that's going to deliver
more business value than we've ever been able to really do before in terms of
just sort of laying down vanilla infrastructure for collaboration.I think that's going to be a big deal.
there's a ton of stuff.
MARK MURPHY:I'm going to check one last time.Now we have a lot of questions.We have one in the far back.
QUESTION:Hi.How much functional overlap do you see between Teams and e-mail?Said another way, to the extent people use
Teams, how much less do they use e-mail?
KIRK KOENIGSBAUER:Yeah.It's a good question.It's a
question that comes up a bunch.You know,
so far they are different products in terms of the problems that they're trying
to go and solve.E-mail, Outlook,
combination of Outlook and Exchange Online, and so forth, that's going to be
around for a long time.People use it as
sort of a ubiquitous way to reach sort of whether it's anyone inside an
organization or anyone outside of an organization.Our growth rates in terms of usage for e-mail,
they continue to go up.They continue to
increase year over year.Not the rates
that we're seeing the growth of something like Teams, but we expect e-mail to
be around for a long, long time.
Teams, the use case is a little bit different.Teams is really designed around how you work -- how an individual works
with the broad set or collection of teams that they're a part of.And so, you know, in my work environment, I
have -- I'm probably a member of, I don't know, 40 different teams that I
participate on, and there is a conversation sort of ongoing all the time about
any of those.And I can or of use Teams
to sort of tick through those and stay current and share content and
is in many ways more of a hub.It's much
more of a hub, I should say, for teamwork.Whereas, Outlook is much more of a sort of pure communications-oriented
tool, communications and calendar and so forth.But the integration between these, we're doing more and more of it,
where you can get notifications for e-mail of Team activity.We show you your calendar information inside
of Teams for meetings and scheduling.There's quite a bit of integration.
talked a little bit earlier about bots as an example, we have sort of a
write-once bot approach where you can write a bot that shows up in Teams.It can show up inside of Outlook.So there's going to be increasing integration,
but we do think of them essentially as two different use cases.
MARK MURPHY:Very well said.Apologies, we have multiple questions now,
but we have just run out of time.
I want to thank you very kindly for sharing the vision and these insights and
spending this time with us.
KIRK KOENIGSBAUER:Thank you.
October 26, 2021 2:30 PM - PT
Microsoft Fiscal Year 2022 First Quarter Earnings Conference Call
Satya Nadella, Chairman and CEO and Amy Hood, EVP & CFO