Mark Murphy:  Good afternoon, everyone. I am Mark Murphy, enterprise software analyst with JP Morgan. We are thrilled. It is a great pleasure to be here today with Alysa Taylor, who is corporate vice president of business applications and global industry for Microsoft. Alysa, thank you so much for joining us.

Alysa Taylor:  Thank you. Thank you, Mark. It's a pleasure to be here. Really appreciate it.

Mark:  The pleasure is all ours. Before we get started, I do want to just mention to the audience, we may have time toward the end to take a couple of questions. You should be able to do that using a question button that I believe will be right below the video feed on your screen.

Alysa, with that, perhaps we can begin here with just a brief introduction of your background in your role at Microsoft.

Alysa:  Sure, happy to do that. I've been at Microsoft for a number of years. I actually started in our developer division way back when, and then moved to run our Azure division. It was, at the time, called Cloud Enterprise in the US subsidiary.

Four years ago, moved to be the global product marketing lead for Dynamics 365. As we were moving from an on-prem business into a cloud business and what we call mainstreaming the business moving it out of end-to-end business unit into a more functional model.

I was brought in to run the product marketing for business applications, which is inclusive of Dynamics 365 and our Power Platform, and then expanded the portfolio into our global industry unit as well. I have responsibility for business applications, global industry. As of this week, I have also resumed responsibility for our data AI and mixed reality business unit as well.

Mark:  Very well-rounded and expanding as we speak. That's great to hear. Alysa, maybe, we can begin just on the economy and IT demand.

I was thinking back to about a year ago when the pandemic was taking hold. Dynamics had solid momentum, but Microsoft was mentioning that there was this slow-down in new projects that had some of the longer times such as Dynamics.

My question to you is, if we're looking through that lens of these longer lead time projects, are you sensing any type of improvement today? Is it heading back towards normal? Could it be pushing back above normal just with all the stimulus out there and the economic rebound that we're seeing?

Alysa:  It's a great question. I'd say there's two things that I'll lay out for you. One is, when we started this journey with Dynamics 365, we took a very intentional approach to take what we're big monolithic CRM and ERP systems and actually converge those, rebuild them on the Microsoft Azure platform, and break them into very modular functions across sales, marketing, service, finance, operations, and commerce.

We did this very intentionally for two reasons. One was knowing that organizations needed faster time to value. The organizations with the rate of change didn't have 5 or 10-year deployment cycles, and so really moving to what our customers needed which was very specific functional applications that could be deployed very quickly.

We started on that journey, like I said, four years ago. When the pandemic hit, we looked at what was a historical view when it was these big CRM or ERP deployments. Those historically would because it took so longer lead times, and that type of stuff would be put on hold.

The most interesting thing happened with the pandemic, which was the organization's needed completely new digital capabilities. If you think about curbside pickup, or contactless shopping, that didn't exist.

Actually, we saw the exact opposite happened of what we have historically seen with business applications. We actually saw accelerated momentum to people rapidly adopting cloud-based commerce systems, new modern supply chains, being able to engage customer service that had to move completely to a remote.

The entire customer service departments were shut down and moved into a remote capacity, and cloud-based applications are needed to be able to facilitate that ongoing customer interaction, whether it be sales or service. We actually saw an acceleration of our customer-based and our business in the pandemic, which was very counter to what traditional business applications I had seen in the past.

The last thing I'll say, as we saw this, we actually partnered with the economist to quantify what we were seeing in the market. They actually came back in a recent study that we just published this week.

70 percent of organizations actually invested and accelerated their digital capabilities because of the pandemic. They actually quantify that in the first three months of the pandemic, $15 billion a week was being poured into these new digital capabilities.

It was invalidated what we've seen with our customer base of this acceleration and then showing that it is a real trend of both, what companies are investing in and the dollars they're investing in.

Mark:  Interesting. It sounds like this modular approach was resonating. If you look at what's happening a little more broadly, do you feel as though you're seeing customers reigniting some of the very big transformational projects?

To any extent, if some of those were held off on a bit last year, if any of that reigniting, are there any other kinds of patterns or signals that you see emerging today in this environment?

Alysa:  You know what? It's always a balance of both. We see both. You see organizations that particularly where they have on-prem systems, understanding the value of cloud, and allowing cloud-based services to drive more agility with their operations, with their customer base.

You do see organizations modernizing their entirety, modernizing their ERP systems, modernizing their supply chain or their customer service environment from either line of business or on-prem competitive basis. You do see those big transformational projects happening.

You do see where organizations need new capabilities. Chipotle is a great example of a customer that invested in the customer data platform, which was Dynamics 365 Customer Insights. They have other systems of record.

Using Dynamics 365 Customer Insights to be able to connect in to those systems of record, to be able to create a 360-degree view of their customer base, so they could actually create an entirely new loyalty program. You see both modernization and investing in new capabilities happening simultaneously.

Mark:  When we look at how that was translating recently into the numbers, in the March quarter, Dynamics 365 growth accelerated to 40 percent in constant currency. There was this comment about particular strength in Power Apps and the finance operations offering, which was a new insight.

When we think about that business line, it's roughly the scale of a Workday or a ServiceNow, but it's growing faster here at about 40 percent. What do you attribute that type of acceleration to? Were there any particular workloads or verticals where you are seeing pronounced strength?

Alysa:  Yes. When you look at our growth rate, we are growing from a growth rate standpoint faster than any of our major competitors. We are newer to the market. Dynamics 365 is four-and-a-half years old, but we're very pleased with our growth rates. Even more so when you look at, 97 percent of the Fortune 500 are using our business applications products in some capacity.

Our customer adoption and the associated revenue, we are very excited about both. It is also a strategic asset in the Microsoft Cloud. When you ask about particular workloads, there's two ways I would answer.

One is we see adoption because of the ability to have, if you think about the Microsoft Cloud with the...our Hyperscale Cloud platform being Microsoft Azure, our extensibility and our tooling layer being Power Platform, Visual Studio, GitHub, and our application layer being Microsoft 365 and Dynamics 365.

These cloud services are all constructed and integrated in very unique ways where we share data business processes, and the ability to have global scale all wrapped with security and compliance. Being able to have that integration is something that we see customers really gravitate to.

The breadth of our portfolio, we've invested heavily. We started in two TAMs. We're now in six very large expansive TAMs. We have products that are both what I would call core systems of record, and then like what I talked about with Chipotle and Customer Insights, where we have products that are augmenting existing system, other investments that customers have.

With the breadth of our portfolio across customer engagement, finance operations, commerce, customer data platform as well as business intelligence, RPA and low-code/no-code really is what's given us our growth, is the offerings across all of those large major TAMs.

Lastly, what I would say is, in the earnings, when we cited things like our operations portfolio, that's very much what we were just talking about with the pandemic, where people are investing in commerce capabilities, to be able to modernize their supply chain, to be able to do things like curbside pickup.

That's where you see growth in those areas. We also saw it very heavily in our service lines as well. Being able to do remote service was a very unique workload to the pandemic that people have been heavily invested in.

Mercedes-Benz, USA is a great example where they used Dynamics 365 Remote Assist to be able to, with a mixed reality environment, collaborate with subject matter experts around the world, and be able to communicate with their customers in a completely augmented way.

That they kept their service department up and running, when you couldn't physically be in the same location. Those types of workloads are what are really fueling our acceleration and our growth.

Mark:  The range of these use cases and how quickly companies pivoted, it's just amazing. There's so much in that portfolio. You mentioned Power Platform which I want to come back to in just a moment, because I think there's a lot to talk about there. There's one other element, I think, of what you've been doing with the applications. There was this comment about proactive versus reactive business systems.

That vision has been pretty intriguing to us. Can you help us understand what is involved there in making these systems become more proactive? Are you talking about the cognitive services, are you talking about machine learning predictions and algorithms? Maybe you can just help us understand some of those scenarios that you're making possible.

Alysa:  Absolutely. I talked about...Our vision for business applications was a modern portfolio of these very specific, purpose-built applications. Really what underpins that is what I would call a data first approach, which is very, very different.

If you think about business applications, they've historically been...I've talked about the system of record, right? It's forms over data. You input, data into a system.

We really want to turn that on its head, and start with a data-first approach, which means that you're able to ingest large amounts of data, and then have the applications be in service of that data.

What we did with Dynamics is when we broke it down into these modular functions, marketing sales, service, finance, others, we underpinned it with a common data service, which we call data burst. That allows you to adopt, at the time of need, have a data platform that spans all applications including Power Platform and Teams.

That data then is aggregated. You can apply intelligence over that data. Then the application, because it's in service of the data, does exactly what you said. It becomes proactive. You can service things up. You can use cognitive services to be able to understand call sentiment in a call center, knowing that you have the cognitive services is reacting to the transcripts, and knowing that the person on the other line might not be the happiest person that you're dealing with.

You have the ability to see the entire lifecycle of the customer, all the touch points, and then be able to have the application service up, things like what you would do to be able to proactively help them, move them forward in their customer service complaint or request.

That's a very different world of business applications. It's using data and intelligence, and putting that in the hands of a customer service, a sales, a field service, somebody on a supply chain to be able to predict things like customer sentiment, what you should be selling a customer, what might be happening on a supply chain that may be potentially harmful to a supply chain.

That's the new world of applications that are proactive, that are in service of the data, that use intelligence to be able to really empower people in a very unique way. That's what we're doing with Dynamics...this data-first approach with intelligence, and having these new modern intelligent applications that are proactive in nature.

Mark:  It sounds like a very skillful way that you are leveraging a lot of the common core services that are up and down the Microsoft stack. I think we're starting to understand that Power Platform is going to become one of those layers.

Interestingly, in our most recent Microsoft partner survey, these Power Platform products rated almost as strong as Azure in terms of the product momentum that Microsoft partners are seeing. We were surprised by that. I think we have some understanding. It spans across RPA low-code/no-code, virtual agents. Power BI is in there, so you have analytics.

How would you describe, if it's possible to do so, the role of those products in the future to just to someone in the audience who hasn't put their hands on them yet in this Power Platforms? What do they look like? What's their role going to be, and what's driving this growth?

Alysa:  Absolutely. You can tell me how I do here. When we think about the Power Platform, it goes back to what I was saying, which is if you take this data-first approach, the same data service that I talked about with Dynamics underpins both Teams and the Power Platform. What we aim to do with the Power Platform is very simply put the tools in the hands of those closest to the problem.

What that means is, if you think about the old world of application development, it was very much a developers and enterprise developers that would have to, over a long period of time, build out an enterprise application to meet the need of an organization.

There are more apps needed than there are developers. There's the scarcity in the market of developers. With things like Power Apps, which is our low-code/no-code development platform, what it does is it makes those that are closest to the problem, whether you see something, like, if I look at T-Mobile.

T-Mobile's a great example, of when the pandemic shut down the stores, and they went to limited capacity, they had to do resource planning, putting employees where they were needed the most in stores, and being able to manage those capacity constraints. The operations manager built an application using Power Apps to do just that.

It wasn't waiting for an enterprise developer or a central IT to build an application that would have taken months, if not years. It happened in days. It was the operations manager that was able to do that. That is the example of putting the tools in the hands closest to the problem. That's Power Apps from a low-code/no-code.

Power BI is the same thing. It's about aggregating disparate data sources and having people like financial analysts be able to very easily aggregate that data and then analyze it, visualize it, and be able to act on that data as the business intelligence.

Same thing, it's in that very citizen analyst, having people that aren't considered developers be able to use these tools to be able to analyze and visualize and act on the data.

Power Automate is our robotics process automation and business process automation tooling. The same exact, you're hearing a theme here, which is allowing end users to be very quickly able to automate manual tasks, things that take a lot of time and drain productivity.

Being able in a very quick and easy way, in an if-then type statement, be able to automate data and take out a lot of that repetitive nature that happens in organizations every day. That's Power Automate.

We announced in the springtime making Power Automate available to all Windows users, so getting that tooling out into the hands of those users to be able to automate whatever tasks they deem as manual and repetitive.

When you think about, my guess is, why you're seeing the sentiment in the survey, is that it is a very viral nature. We're doubling our monthly active user base across the Power Platform on a regular basis. Organizations are then standardizing on these tools because they have such a groundswell of users using them.

Mark:  That's the best explanation I have heard of the Power Platform. Thank you for helping to make that become tangible. I want to switch gears a bit because a big portion of your role includes global industry concept.

I've noticed that you have been talking about an industry-first cloud focus at Microsoft. I think part of what you had mentioned in the past is the concept of vertical-specific data models. Many of us are trying to understand this. What does that notion mean? Why is this being done? What do you have to engineer to enable it?

Alysa:  We've always had a very industry-first approach as a company, but what we haven't had is what I would call the vertical product capability to bring that to life.

Mark:  Our first instantiation of that was the Microsoft Cloud for Healthcare that we came to general availability in the fall. You're precisely right. It is not about another product that is a health care product.

It's about data models, connectors, apps, and workflows that are very specific to that vertical. An example of that is virtual visits in healthcare, again, back to the world of virtual care exploded overnight.

With a Microsoft Cloud for Healthcare, you can actually use the portals capability in Microsoft Power Apps to be able to aggregate patient data, to be able to understand all of the inputs of the data, and then have a predetermined workflow that brings that into Microsoft Teams so that the caregiver and the clinician can actually seal the patient information, have it at their fingertips.

Actually create in Teams a virtual visit, and these predetermined...Rather than having to build that, these workflows and these common data models allow you to very easily stand up a patient portal to be able to have the workflows to bring that into Teams to be able to see that data and then stand up a virtual consult.

That's the type of capabilities that we are building. We came to general availability, the Microsoft Cloud for Healthcare, and then we've announced four other industry clouds, all with that same capability, in retail being able to do curbside pickup and contactless shopping.

In manufacturing, how do you build out a digital factory and how do you do out-of-the-box process automation on your factory floor, looking at not-for-profit and having discreet donor management capabilities.

In financial services, doing things like loan management and doing the work flows for how you actually take loan origination, and then move it very quickly through the loan life cycle, decreasing the lead times to getting a loan originated into the hands of those that are doing the lending.

Those are the type of workflows and very specific vertical capabilities that we're bringing to market with the Microsoft Cloud for industry. The way to think about it is it is those workflows and APIs and connectors bring that vertical relevance across the Microsoft Cloud. That's very unique.

If you look at somebody like Salesforce, they have an industry cloud, but it sits on their CRM system versus our industry approach is lighting up the entirety of the Microsoft Cloud services and integrating all of that vertical relevance and capability across your cloud platform, your business process layer, and your collaboration layer.

Mark:  I see. That's the core differentiation. Alysa, since you mentioned patient portals in healthcare, maybe that's a pretty good segue to try to talk about the proposed acquisition of Nuance, which it proves again, despite everyone's best efforts.

No one is able to accurately predict Microsoft's next move in terms of M&A. No one has predicted really any of these in the past. There's something you're seeing here that must be helping you to accelerate that roadmap.

I'm wondering, is that going to be completely specific to health care, or could you not take some of Nuance's core IP? For instance, their very strong and voice recognition cannot help to strengthen Azure's voice recognition, I believe, with Nuance, also biometric user authentication.

Can you not take that and apply it across many verticals?

Alysa:  Oh, absolutely. I'll start with healthcare, then I'll go into with the other expanded use cases. In Healthcare, as we talked about how do we enable physician productivity, I talked about this with the Power Platform, so it's a very common theme. There's a lot of heavy lifting that caregivers have to give in terms of transcription.

What Nuance does in a very unique way is bring in their transcription services and this notion of ambient intelligence to be able to not only improve the clinician and physician productivity, but also use intelligence to be able to provide greater care.

I'm glad we're keeping you on your toes with acquisitions. When you really think about where we want to acquire, it's acquiring for the future and what can we do that provides unique value for healthcare institutions going forward. This notion of both physician productivity and better care, Nuance has just an incredible ability to do that in the healthcare space.

Now, to your point, they have also a very rich portfolio of voice recognition, voice transcription, and bio recognition that plays into of the large set of scenarios. I've talked about customer service, but how do you do transcription and voice recognition to improve things like your interaction between the customer service agent and the customer.

How we have a set of fraud, Dynamics 365 Fraud Protection, using their Nuances capabilities to really augment that portfolio and predict fraud before it happens.

Their securities and biometrics is an incredible asset into coming together to help organizations be predictive, bolstering security and fraud protection, and then largely across the transcript capabilities, an enormous amount of capability both in our productivity suite as well as integrating in with Dynamics and Azure communication services.

There was a lot of different things that we can do with the enterprise portal. It's known as the Enterprise Portfolio Nuance. They're driving portfolio on the health care side really helping us meet the needs of the future for our health care organizations.

Mark:  Since you mentioned meeting the needs of the future, can you maybe provide us just a bit of a window into some of the key investment areas in business applications that you are most excited about moving forward?

It sounds like there's a whole range of initiatives. We always get this question of, where do you want to invest most heavily into Dynamics? People tend to think of it as more in ERP or more in CRM, but the reality is you're touching on so many other areas including commerce and such a range of use cases. What are you most excited about?

Alysa:  The thing that I'm most excited about is the world of what we would historically call back office and front office, which is CRM and ERP, is blurred. For an organization to be able to serve their customers, you have to digitally connect all aspects of your business. You have to be able to connect your back-end operations to your front-end experiences.

In retails, this notion of bridging the digital and physical worlds, and you have to be able to get the information real-time in the hands of your employees. You have to have this great feedback loop into your products and services that you're building.

You can't do that if you're just investing in one area or the other. That's why you see us investing in all aspects of what I would call the customer experience, the operations piece, as well as the integration into the employee experience, and tooling to make sure that there's a feedback loop into things like product development.

What we call...It's called a digital feedback loop. It's the ability to connect all facets of an organization, and that's why we're investing in all of these areas because we believe that organizations that do that are the most agile and the best position to be future proof and serve their customers in the best way possible. That's where we were and why we are investing.

Some of the things that new areas that you asked about, customer journey orchestration is something that we just recently announced, and that's the ability to connect all of the marketing signals into the sales environment and be able to do things like real-time attribution and real-time targeting of a customer, really highly personalized thing, the acquisition layer, and then bringing that seamlessly into how you either digitally sell or bringing again into the physical sale as well.

Intelligent order management is another area of investment for us. Again, it's around that modern supply chain and giving visibility both to the supplier and the end consumer, the life cycle of when you order a product to when it is in your hands, all those updates of where it is in the life cycle. That's very important both to the customer and the consumer and the end customer.

Intelligent order management is an area that we also are bringing to market. It's all in that vein of these very proactive intelligent applications that connect across the entirety of an organization, and it's really this notion of being digital first and helping organizations be digital first.

We'll continue to invest both in acquisitions like Nuance and building features like customer journey orchestration and intelligent order management.

Mark:  There's so much happening there. It's a lot to wrap our minds around. Say that we have maybe just a couple of minutes left, I was wondering if you want to try to close the loop on this discussion by just underscoring the key areas of structural advantage or the core differentiators for Microsoft, as you think about this holistically across these key areas of business apps and Power Platform.

Alysa:  Thank you for the opportunity to do that. Yes, I would say there are two things that I would want to underscore, which is this notion of modern set of business applications that allow organizations to break down their data silos, to have proactive applications that enable them to be digital-first leaders.

At the end of the day, that is what we aim to do. It helps organizations be more agile, to cost out of the system, and ultimately and most importantly, serve their customers better. We are doing that across Dynamics, the Power Platform.

It's this notion of a data-first application that is highly proactive and intelligent and allows organizations to be more agile and ultimately better serve their customers. That's what we're doing on the business application side and then bringing that to life through an industry relevant lens.

Those are the things that I would want people to understand. That's what our strategy is, and where we aim to both invest from a product standpoint, and how we serve our customers.

Mark:  Alysa, I can't thank you enough. You have provided incredible clarity of thought and truly helped to enable us to understand how quickly Microsoft is moving in all these areas and really make it tangible and bring it to life.

Thank you so much for carving out of this time with us. We certainly hope that, one year from today, we'll be able to do this event back in person in a physical format in Boston. We look forward to learning about the enhancements that you've got between now and then. Thank you again, and hope you have a wonderful night.

Alysa:  Thank you for having me. It's been a pleasure.