HOST: Good morning, everyone. Thanks for Being here. I'm Jen Lowe. I cover the U.S. software group at UBS. And with me I have Takeshi Numoto, who is the CVP of Cloud Marketing at Microsoft. So, thank you for being here with us today.
TAKESHI NUMOTO: Great to be here.
HOST: Maybe just before we jump in, it might be helpful to set the stage, if you could just give us a quick overview of your role at Microsoft and what falls under your purview.
TAKESHI NUMOTO: So, basically I'm responsible for worldwide go-to-market, directly responsible for many of Microsoft's cloud products, including Azure, business applications including Dynamics 365, our Power Platform that I think we get to talk about later today, as well as all the developer tooling products like Visual Studio. And then those are sort of products that I'm directly responsible for in terms of marketing responsibilities.
I also have sort of what I think of as horizontal responsibilities in terms of what we call business planning, which is all about packaging, pricing and licensing of sort of the entirety of the Microsoft commercial product portfolio, including Microsoft 365 or Office 365 and Windows, as well as what we call the Global Demand Center, which is basically our marketing operations for the commercial business at Microsoft. So, I have sort of a direct product responsibility and then two horizontal responsibilities.
JEN LOWE: Great. Maybe before we sort of dig into those areas of responsibility, just starting at a high level, one of the biggest questions I think all year that people have been trying to figure out is what's going on in the broader environment with the headlines being negative for the macro but companies like Microsoft, maybe even Microsoft in particular seemed to continue to do very, very well. So, can you just talk quickly about the demand trends you're seeing, when you meet with customers, you know, how are they feeling about their plans, just anything.
TAKESHI NUMOTO: Yeah. I mean, of course I don't think any company or any business can claim to be immune from the macro trends, but at least in the markets that we participate in we're still seeing really strong momentum. When you think about all the energy and the conversation we get to have with customers, particularly as it relates to their cloud journey, the energy is only intensifying. You know, they're coming at it both from the perspective of how do I save money and drive productivity, also to how do I just use the cloud as a catalyst for transforming their businesses and moving their business forward. So, both are generating lots of engagement with customers and driving a lot more consumption in the cloud.
And so, to me we're not really seeing sort of a dampening of the demand in the markets that we participate in, and we feel like we're in the right sort of place at the right time from a secular growth trend standpoint.
JEN LOWE: And maybe just to round that point out, one of the debates, and I don't know if it's an either/or but maybe a relative weighting, is the cloud offers a lot of advantages. There's the strategic advantages and agility and being able to do new things you couldn’t do before. There's also things like cost savings, moving cap-ex to op-ex, that kind of decision. Are the conversations sort of equally weighted between those strategic and forward-thinking versus trying to drive down costs? Is there one that maybe is more dominant than the other or any shifting?
TAKESHI NUMOTO: Not really. I think it's sort of it's really equally weighted. When you think about lots of migration discussions, a lot of customers start their cloud journey thinking about migration as a way to save costs, drive productivity, maybe even increase agility. And there because of the rich history we have with things like Windows Server and SQL Server, we basically get to provide a big economic advantage. We're basically 5X cheaper, for example, versus AWS in a lot of these migration scenarios. So, that is a set of entry points and some customers start there.
And then there's another set of customers that start far more on the, hey, I really want to innovate, change my business processes, get into new business processes or innovate in new applications, and how do I do that using cloud native technologies.
And often times a lot of the conversations that start in the migration sort of lead to these what I think of as the innovation agenda, too, and some customers sort of plan for both at the same time and do much more of a strategic partnership with Microsoft that basically says, hey, I really want a cloud journey partner that I partner deeply with, both on migration and innovation side, and that's tending to drive much larger top-down deals.
JEN LOWE: Great. And maybe just following up on that, I mean, Azure has been a star performer for Microsoft for a number of years now. We're seeing the scale get bigger and bigger and bigger, but we're still -- you know, growth rate is still hovering around 60 percent, which is pretty fantastic. From your perspective, just to start, where are we in terms of Azure adoption? Are we still early, mid-cycle, late? How far along are we, how much more could there potentially be to go?
TAKESHI NUMOTO: In terms of sort of the journey to the cloud, I still believe we're in early innings and have lots of opportunities ahead. Even if you just think about the opportunities and pipelines we see, we just continue to see a tremendous amount of growth. And I think you've seen Amy talk about increasing number of large deals we get to do, and that trend doesn't seem to be declining. I think we're still early.
JEN LOWE: Maybe just to focus on the large deal point, since it was something Amy did call out specifically on the last earnings call, when we were doing our diligence on this space a couple years ago, we would hear AWS is getting these big mega-deals, Microsoft is getting there but in some cases you didn't even want those mega-deals because of the composition of services.
If you look at the deals you're doing now, these big deals, how do those tend to -- what are they? I mean, are they still pretty compute and storage heavy, are you starting to see more premium services in those types of deals? And maybe contrasting it to a couple of years ago where maybe those deals weren't profitable or viewed as profitable as you would like or potentially profitable. Do those start to look different or you look at those differently in a way that just as you drive down costs and increase the portfolio?
TAKESHI NUMOTO: I mean, from a profitability standpoint I think in Q1 our commercial cloud, Microsoft overall or Microsoft cloud commercial gross margin I think was at, what, 66 full point improvement year over year, in large part driven by improvements in Azure. So, that's an area that we continue to improve in, particularly as we scale up and can start realizing some of the efficiencies from the infra investments we've already made. And for us that's sort of an ongoing subject and focus for us and something we'll continue to plugging at. But we are seeing far larger deals, and that I think is also in line with what the larger market trends are as customers look to use cloud in a much more aggressive way.
JEN LOWE: Maybe within that, a year ago or maybe two months ago, Satya used to talk about premium services growing significantly as in Azure overall. Presumably that's continued.
TAKESHI NUMOTO: Yeah. I mean, when you think about the overall revenue mix, it is true that sort of the compute and storage and network, sort of what you would think of as the more infrastructure pieces, are a big chunk of it. But from a growth rate standpoint, premium services, whether it be data services, AI, IoT, analytics, security, those are certainly outgrowing the core from a growth rate perspective by a significant amount.
JEN LOWE: And maybe just drilling into that, because premium services does encompass a lot, AI has been a huge focus, but we've also seen data points suggesting momentum around databases in the cloud and different flavors. Security has obviously been a big focus. Are there any areas in particular that seem to be resonating with customers or performing a lot better than maybe they were 12 months ago? Just any additional detail would be interesting.
TAKESHI NUMOTO: Well, certainly data services continue to accelerate. Whether it be -- and when you think about some of the documented third-party benchmark data, whether you look at multitudes of giga published data, as an example, whether both on database side, core relational database side and also on the analytics side with the data warehouse, we are seeing us being able to deliver substantial price performance benefits to our customers, and that's translating into more customer leads, more engagement, and therefore more consumption, and that's one area.
And so, we've actually had additional announcements that build on this momentum. At Ignite we announced a new service called Azure Synapse, which really -- Synapse Analytics, which basically is taking that next step in data warehouse to be able to handle both unstructured and structured data with a very comprehensive workbench that is getting great customer feedback.
JEN LOWE: So, we had UBS IT on stage earlier -- or yesterday, and one of the -- and we obviously have said publicly we've got a big commitment to Microsoft. And one of the things that they had a very strong point of view on was as we start to move our applications over to the cloud, they were very negative on the concept of lift and shift and said lift and shift doesn't work, you have to bring it over, you have to refactor; otherwise you're going to have the same issues.
As the provider of Azure, you know, how are you seeing companies successfully make that transition as they move their own applications over? Is it a lot of lift and shift? Are you seeing new workload development? Are they consuming more of those premium services as they rebuild their own applications? Just it seems like a big focus. How are you seeing that play out from your perspective?
TAKESHI NUMOTO: Yeah, I think customers really want to plan out their IT estate overall. And I think that has multiple pieces. There are applications that you just want to migrate, lift and shift and just driving efficiency, infrastructure, and getting out of some of the nightmares or headaches that you may have had on-prem. That is one element of it.
And then there's also the aspect of, hey, how do I develop, modernize my IT infrastructure, develop new applications, and that comes into the picture as well. So, I don't think it's one or the other. Most times customers think about being able to take advantage of both sides.
JEN LOWE: And one of the other points they made was that learning, that skill set around refactoring applications and modernizing them and bringing them over, they said the first few were painful but now that we -- obviously they have an incentive to say they've learned a lot and it's going really well, but I think it is. They said once they got the first few, it got a lot easier, and they could start bringing more over, go faster, they've got the muscles built up.
Again going back to where we are on that adoption curve, as you look at your customers, how many of them do you think are kind of hitting that, you know, they've got the muscles and now it's just executing versus still that learning phase of how do we even do this in the first place?
TAKESHI NUMOTO: Well, I think every customer's journey is somewhat unique. Particularly it's also a function of we think often times in cohorts, like when did a given customer start their cloud journey. And some customers are well into their nth year, and so they've gotten quite deep. And some customers are still in early years. And so, I think that comes, sort of results in different prospects for different customers.
But what we are seeing, though, is this notion of I now have acquired some cloud skills and I actually want to extend that, inclusive of ability to manage my own on-prem environments and other places.
And that's why we've gotten so much interest in some of the hybrid and multi-cloud investments we announced at Ignite around what we call Azure Arc, which is a collection of technologies where if you've learned to manage and set policies on resources in Azure, you can onboard your own on-premises resources or resources in other clouds, and sort of bring it under the control plane from Azure so you can manage it and set policies against it in a consistent way. And that's gotten a lot of interest, partially because we have enough customer base now that actually are skilled up enough in Azure and be able to want to extend that skillset to manage other environments.
JEN LOWE: And that's a good segue, because that was one of the things I do want to talk about was in particular Azure Arc. And we've seen Google announce Anthos as well. Maybe just to start and to put context around it, how would you sort of compare and contrast what you're looking to do -- maybe not compare, but let's talk about it. I don't want to put you on the spot to talk too much about Anthos, but I'm sure you're very familiar with it. But I think people are trying to understand is this like Anthos, is it something different. How would you sort of describe Arc and how it fits into the multi-cloud strategy?
TAKESHI NUMOTO: I think the way you're even asking the question is quite indicative. It's like for some of the other players I think their approach to hybrid is often equated with one product. AWS hybrid is often equated with Outpost. Or for Google hybrid is equated with one offering called Anthos. And for us hybrid has always been a huge differentiator and we think about it very holistically from identity to management to security to even database technologies, developer tools. So, it's a much more comprehensive thing and it's not one thing. Arc is only one of the things we sort of do in terms of being able to set, you know, manage resources and services in a consistent way. So, I think sort of the overall posture and the aperture is very, very different.
And for AWS my perception is they're very focused on managing their own resources. Outpost is a piece of hardware you have to buy from AWS, no one else. You can't run AWS services on customers' existing hardware. And it always has to be connected and controlled by AWS. So, it doesn't support things like if you have a regulatory environment or governance issues and you want to run things in a disconnected way, you can't do that. So, it's a very sort of focused approach on essentially AWS resources.
And for Google I see it as being very much focused on containers, whereas customers, you know, not everything runs in containers, customers need to run virtual machines, too, they need to manage servers, too. And so, our approach is more comprehensive, reflecting sort of the years of investment we made in this space.
JEN LOWE: I guess one of the questions people are always trying to figure out is we came from this old generation of technology which was basically predicated on once people are on my platform, I never want them to leave. And so, now we've moved to this world of people can leave, I want to convince them to stay.
But I guess as you think about building business models, what gets you comfortable with the idea that once they come and if they'll stay, and sort of making things like Arc work in a way that you don't run the risk of getting into a price war or any of these other -- you know, what makes people stay? What do you think as the areas of stickiness?
TAKESHI NUMOTO: Actually, for us this openness is a key portion of how we want to continue to attract customers and trust our platform. And so, even in our support for containers, in Arc we support not just one container, we support many containers, whereas Anthos, for example, requires you to use just GKE. And so, like for us we think of our ability to be able to be broad and very open-tented is actually a huge customer value proposition and one that enables us to attract more customers.
JEN LOWE: Great. So, maybe just sort of extending to the other side of the hybrid world, looking at the on-prem business, I think one of the things that has continued to surprise positively is the ongoing strength of the traditional licensing business, because everyone just assumed it's either/or. We're seeing both, which is fantastic. But I'd be curious to get your perspective, why are people still buying on-prem licenses and is there a point at which it becomes incompatible to continue to see the growth you are being in Azure and still grow the on-prem business?
TAKESHI NUMOTO: Well, for us one of the things that has been a very helpful construct, both for our business and for our customers, is this notion of an Azure hybrid benefit. The fact that you can buy licenses that essentially have optionality and option value for being able to essentially consume services in the cloud at a discounted rate basically essentially has helped us encourage customers to continue to renew their software licenses and also pave the way for them to use Azure in a very natural and linear way. And so, that's worked really great for us as a way to basically keep both balancing, growing on both sides.
And the other factor on the servers business is an increasing premium mix. We talked about premium mix both in the services sense, but we're seeing it in the software sense as well. So, instead of Windows Server Standard, increasingly customers buy Windows Server Data Center, because they're using more virtualization technologies and running more virtualized machines in the same node, and that essentially drives premium mix. Often we see the same thing on SQL Server where the SQL Server Enterprise Edition mix is going up, and that's also helping on the revenue side as well.
And then on sort of the server, server software license revenue side there are two sort of temporal impacts in the sense that we've had end of service, end of support for SQL Server 2008 that happened earlier in the year, and that sort of prompted a set of purchases that may not be durable. And then we've also -- this I think Q1 is the last quarter in which we had GitHub's on-prem acquisition, GitHub on-prem revenue sort of be counted towards as a software license, and this is the last quarter in which it's not in the baseline. Moving forward it will be, so we'll normalize a little bit.
JEN LOWE: Okay. And maybe just to double click on the hybrid use benefit, as customers look to take advantage of that program or look at that as a way to get comfortable buying today and then have a vision for the future, what's sort of the horizon on that? Are people buying with the view that, hey, maybe in five years this will move to the cloud but I want that flexibility or is it a bit more immediate or a spectrum? I'd just be curious in to the extent you see it.
TAKESHI NUMOTO: Again, I think this whole sort of the benefit is actually quite durable in the sense that if you want to run Windows Server or SQL Server, the way to pay for that IP, even in the cloud, is to continue to renew your Software Assurance, and that's kind of the balance we've struck. So, we think of the hybrid benefit sort of impact as being quite durable over time.
JEN LOWE: Maybe switching to another part of the business, another reporting unit, Power Platform is something that falls under your purview. And there's a lot of different pieces there, there's been a lot of new announcements there. But maybe at a high level what is the Power Platform? Because I know it encompasses a lot, but maybe just to start there, why is it sort of carved as its own distinct entity?
TAKESHI NUMOTO: Great. Power Platform comprises a product like Power BI, Power Automate, Power Virtual Bot we just released recently, and Power Apps. And these are all products characterized by what we would call a deep support for effectively power users and citizen developers. When you think about the application needs of the world, we believe in the next five years more applications will be created than perhaps in the last 40 years. And when you think about tech companies, actually more developers being hired outside of tech companies than in tech companies, the need to grow applications to support different business processes and frontline issues is just only going to explode. And so, then the scarce resource that non-tech companies do hire in terms of professional developer capacity have to be really leveraged.
And Power Platform is unique in the sense that it enables sort of power users to develop their own applications, subject matter expertise closest to the business process, closest to the business issues to develop applications that really addresses their needs, while also basically leveraging the scarce professional developer capacity every organization has, and the two work in tandem.
And that's one of the key differentiations of Power Platform as being kind of a so-called no-code/low-code product platform that also is built in a way that's very synergistic with all the deep professional developer capabilities Microsoft provides with Azure.
JEN LOWE: I think one of the attractive aspects of the Power Platform is it seems pretty easy to use, pretty end user centric. I go to Build and I see a demo and I think I could do it. I probably couldn't, but I at least pretend I could. So, it is very much designed to appeal to the user, but the user may or may not be the ultimate decision-maker on whether there's something to be purchased. Can you just -- you know, who do you sell to in the organization? Who's the buyer?
TAKESHI NUMOTO: Well, before talking about the buyer, I think it's actually really important to talk about how we earn usage. One of the first things that makes, gives, maximizes our opportunity for end users to become familiar with our Power Platform products is that many of those capabilities are seated with Office 365. So, Office 365 comes with some basic capabilities of Power Apps or of Power Automate. Then people can start automating basic tasks within their Office 365 environments or basically create simple applications using SharePoint as an example. And so, that really gets customers and end users going and sort of indoctrinated in how you use these very easy to use capabilities to start building applications.
And then that essentially then allows us to sort of then say, whether it's central IT and say, hey, there's a wealth of usage that's happening, would you like to essentially create more business applications and last mile applications using this, in a way that's highly manageable by IT. That's one central IT sales motion and it's successful in many places.
And then there are other cases where we go talk to the line of businesses and then say, okay, well, you're really trying to help with a given frontline or sort of subject matter expertise problem, and here's how you can help. And we have a collection of both what we think of as departmental sales, as well as centralized IT sales, and both are sort of synergistic with each other basically.
JEN LOWE: And I think there was a datapoint out there that there's 2.5 million users on Power Platform currently. And if I understand it, a lot of it sort of happens, I mean, the purchase decision, as we talked about, is sort of made at a certain level of the organization and then people sort of organically come to it and build.
What are sort of the points that sort of get that flywheel going? Is it people just discovering the product, is it someone sort of providing the education and getting people familiar with it, what the value is? How do people sort of build that excitement and get the programs going and drive that adoption?
TAKESHI NUMOTO: Well, I guess like there are multiple entry points, but, for example, if you sort of -- if I recall the history of Power BI as an example, Power BI was the first Power Platform product, that really built its momentum based on lots of customers trying the service on the web for free and we had a very strong community that essentially self-perpetuated the product excitement, the things they can do in building dashboards and sharing that, and so that was one way where it really took off.
And the fact that we also created an offering with Office 365 and E5 that included Power BI also sort of essentially tried to create end user excitement with a sales motion that was a little bit in the traditional Office 365 sales motion piece.
And then when you think about newer Power Platform products like Power Automate or Power Apps, a lot of that is coming from organic usage first and foremost from within Office 365 tenants where customers start using effectively the limited versions of Power Automate and Power Apps that comes with an Office 365 subscription. And then that gets usage going into more sophisticated scenarios that then give us an opportunity to upsell to fuller versions of the product.
JEN LOWE: And since you touched on it, you have the automate capabilities, you've got some of the technologies around virtual agents that you rolled out, which seem a little bit more sophisticated than -- I mean, not that Power BI is not sophisticated, but a little bit more AI. I guess where do you -- because there's companies that build their whole practices around automating that functionality, you know, you guys have made it sort of easy to consume. Where do you see Microsoft's role within markets like RPA? Do you want to be the market, do you see areas that make the most sense and areas that pure plays can innovate? How does that kind of come together?
TAKESHI NUMOTO: I think we tend to go after very horizontal broad markets, and there's always room for different players to add value on top or do more targeted solutions for given industries or given business processes. And that's kind of existed forever in different market when you even think about the history of Office. And so, I don't think it's any different there.
One of the key advantages that we bring to the table versus sort of the traditional no-code/low-code kind of tooling is that with them you start with something and then you want something really sophisticated, you kind of hit a brick wall. You have to redo the app all over again using a different set of tech.
Power Platform is built natively on all the underlying capabilities of Azure. So, if you want to go beyond what the Power Platform product can do, you have a very synergistic path to basically dip into sort of unlimited flexibility that Azure provides to extend those abilities without redoing your applications all over again.
And this is what I talked about earlier is as an important element of creating that synergy between basically the citizen developer or the power user that is essentially the subject matter expert using applications to solve their problem being able to work closely and synergistically with professional developers who can essentially deliver Azure-based solutions and APIs that can be consumed by Power Apps or Power Platform products in general.
JEN LOWE: Okay, great. And I still have a bunch but I know we've already got a couple questions from the audience. So, maybe I'll ask one more and then if people want to send in and I'll look at these two. Maybe just around Dynamics, I guess I think just going back to the history of Great Plains and Microsoft way back in the history of Microsoft in the application space --
TAKESHI NUMOTO: You can ask Satya about that.
JEN LOWE: I'm sure he has views.
But, you know, maybe just to sort of look at where you are today, because the story in the last 18 to 24 months feels to be very different than the traditional story of Microsoft in applications, if we look at where you are today, where do you see the natural fit for Microsoft, because you clearly partner with SAP and have strong relationships in the enterprise space with SAP running on Azure. Traditionally, it's been more midmarket oriented, but you also do see some large organizations using Microsoft. So, where's the natural home for Dynamics, where are you really looking to win with that product?
TAKESHI NUMOTO: Well, I mean, only at Microsoft is a business larger than a billion dollars growing well over 40 percent get somehow sort of talked about as needing to find a place. It's already a large business, a SaaS business growing 41 percent year over year. It's pretty substantial and we're really excited about it.
It is worth noting that the journey we've been on when you think about Dynamics of old, Great Plains, Solomon, Navision, Axapta, and then we also had a homegrown, Microsoft homegrown CRM product, but all the assumptions were very much on-prem.
And so, starting with Dynamics 365 we sort of put ourselves on a journey of making all of our capabilities natively cloud-based, natively Azure-based cloud applications, and also unifying the applications so that we actually have a suite of SaaS offerings that worked well together that can manage different business processes, whether it be marketing or sales or commerce or operations and finance, and made it such that you can consume just the pieces you want, but also can extend it so you can actually get the full picture as you expand the business processes covered by the SaaS application. That whole strategy and shift I think has really been catalytic and driving much more accelerated growth.
JEN LOWE: Okay, great. So, we have a couple from the audience, so I'll hit on those. And again if there's others, feel free to send them in. One is around where are in the cap-ex buildout for Azure. There was a huge wave of cap-ex investment a couple years ago into a bit more run rate. I think people have gotten data points from different suppliers that things maybe -- you know, hyper-scalers may be buying less. Obviously, you guys seem to feel pretty good about what you're seeing.
But maybe you could talk a little bit about how -- and if this falls a little bit outside of what you focus on, that's fair, too, but how you think about the process of the cap-ex buildout with Azure, any sort of change in how that looks, what you're investing in. To the extent that that falls in areas that you look at, there's some interest.
TAKESHI NUMOTO: Well, from a cap-ex standpoint we want to continue to be very, very close and driven by customer signals. And so, we continue to put efforts into basically shorten things, shorten our supply chain, just as an example, so that we can be as sort of just-in-time, so to speak, in terms of delivering additional capacity as humanly possible.
But our goals are really to make sure that we're essentially serving customer needs and how do we actually stay just ahead of it enough so but not too far ahead, and having that agility is what we continuously work on.
JEN LOWE: Okay, great. And maybe just to round it out, I mean, I think the message is it's not a change in sort of how the company is investing into Azure or any sort of signal that there's a change in demand. I think it seems like it's more of a change in how tightly you manage and what the lead times are.
TAKESHI NUMOTO: Yeah, it's just an ongoing improvement in how we can actually manage it as closely as possible. But at least in my role I'm certainly not feeling constrained to serve customer needs.
JEN LOWE: Okay, great. And then the other question is around SAP, and SAP had talked about making a very big commitment to Microsoft, and so that's sort of out there. But maybe -- and I'll kind of broaden the question a little bit, but first is what are you seeing in terms of moving SAP workloads to Azure, and then maybe broadening it out, just tier one workloads in general, what are you starting to see in terms of those moving over to Azure?
TAKESHI NUMOTO: We certainly have a deep partnership with SAP in the Embrace project that we announced recently. They're certainly leading with Azure as the preferred cloud as they help customers basically set their journey from on-prem SAP to SAP Hana on Azure in the cloud. And so, that's sort of a tremendous opportunity for us and one that we see lots of both existing growth, as well as future growth opportunities.
And as it relates to tier one workloads, SAP is just one of the examples where we're increasingly getting these tier one workloads that drive significant consumption, and that's also highly correlated with an increasing number of large deals. When you have a big enterprise deal that's large, often times that is catalyzed by a tier one workload and a strategic alignment with the customer. And so, those all go hand-in-hand.
JEN LOWE: Maybe a related one to that, SAP is one example but we've seen Microsoft partner with a lot of software vendors. Adobe is one.
TAKESHI NUMOTO: ServiceNow.
JEN LOWE: We have ServiceNow presenting next; they're one.
How are those relationships coming about? Are those companies approaching Microsoft and looking at ways to potentially reinvent how their infrastructure is operating or is Microsoft going out and advocating for these companies to work more closely with Microsoft? Maybe it's a mix. I'd just be curious to know, because there seems to be a bunch of them now.
TAKESHI NUMOTO: Yeah, it's certainly a mixture of both, but one of the things that is important to know is in conferences like this, and press people also, there's often times a very sort of narrow comparison that people want to do between AWS versus Azure or Google GCP versus Azure. But in many cases customers need, when they think about their journey to the cloud, they need a lot more than infrastructure. And the fact that Microsoft gets to have a conversation broadly from M365 to Dynamics 365 to Azure in a collection of capabilities we can deliver comprehensively puts us in a very different dialogue with the customer.
And then that also provides for lots of opportunities for ISVs to participate in that dialogue, both from an Azure utilization of Azure in delivery of their service, but also integration with things like Office 365 and a user experience that they can deliver in the day-to-day work of 200-million-plus monthly active users of Office 365.
And so, those collection essentially enables us to have a conversation with ISV partners that says, well, not only do you have an opportunity to align with us from what cloud would you use to deliver your service but you can have a more comprehensive dialogue of how would you integrate with Teams, how would you integrate with Office 365, how would you integrate with Active Directory in a way that effectively furthers your value to your customers.
And then we have programs like programmatic approach to support co-sell with our ISV partners. That's also another part of the facilitate how it's easier to afford these ISVs to get themselves aligned in their joint sales motions with Microsoft.
JEN LOWE: And that's a good segue, because we've got another question in, and that was somebody asking about Teams. I can't believe I didn't ask about it. But yeah, I mean, obviously Teams has been an area that Satya's pretty focused and talks about quite a bit. Can you just give us a quick update on Teams, the momentum you're seeing, maybe some of the partnerships, because there has been a bunch of news.
TAKESHI NUMOTO: Yeah, we recently announced updated DAU numbers, I think from 20 million, and we continue to see lots of momentum. And we also announced a set of new capabilities at Ignite, too, and it's something that we continue to invest significantly in, both in R&D and go-to-market.
JEN LOWE: And actually just on that, because just having gone to a lot of industry events over the last six months, Salesforce talks about Teams integration, Workday, there's a lot of excitement around Teams integration. Is that a particular push or is that -- I mean, we talked about sort of broadly where there's sort of push versus pull in the partnership, but it feels like that one in particular has been very visible. Is that a fair observation that a lot of these companies that even don't partner with Microsoft in other ways seem to be really finding -- is that customer led or is that sort of part of Microsoft's broader push to evangelize Teams as part of the platform?
TAKESHI NUMOTO: Well, we think of Teams as a great place for people to come together and collaborate and have business process be infused into the way people work together. It is natural for many ISVs to want to integrate with Teams, because then one of the -- I think in the tech world the canonical -- there's been a sort of canonical separation of structured business processes and ad hoc world of collaboration and communication, and Teams basically gives you a harness for the two to come together. And so, that does give us a lot of opportunity to invite ISVs to participate.
JEN LOWE: Okay, great. Well, I think that's basically our time. We will wrap it up there. Thank you, everyone. Thank you.
January 29, 2020 2:30 PM - PT
Microsoft Fiscal Year 2020 Second Quarter Earnings Conference Call