Microsoft News: Microsoft Lauds Cloud Biz

WASHINGTON — In the final keynote session of Microsoft’s annual Worldwide Partner Conference, COO Kevin Turner did everything but put on the war paint as he rallied the troops — some 14,000 partners converged here from all corners of the globe — for a year of what promises to be epic battle with the software giant’s major rivals in numerous business lines.

Turner’s marching orders for the year ahead ran along four points, but two received particular emphasis: that Microsoft (NASDAQ: MSFT) is betting the farm on the cloud, and the competition must be crushed. (Driving the adoption of Windows 7 and improving customer satisfaction fleshed out the list, but couldn’t match the frenzy that gripped Turner as he outlined the other two.)

Turner described Microsoft as a company at an “inflection point” with its transition to the cloud, the prevailing theme of this year’s conference.

“For the next 20 years, we’re going to be working on this next big aspiration for our company,” he said. “Our big, bold goal for the next couple of decades is we want to have a continuous cloud service for every person and every business.”

Turner explained that Microsoft is in the process of “rebooting” as it focuses more and more of its energies on the cloud. Some 70 percent of the company’s in-house developers are currently working on cloud services, and that figure is expected to swell to more than 90 percent next year.

Company executives have spent much of the conference urging the systems integrators, retailers, developers and other players who comprise Microsoft’s sprawling network of global partners to get on board with the cloud, at times more telling than asking.

“There is an opportunity for every partner in the cloud,” Turner said, though he acknowledged that for both partners and customers, that shift will upend many firms’ established business models.

“It’s a different revenue stream. It’s a different licensing model. It’s a different everything. But let’s get in and figure it out together.”

Turner exhorted his audience here at the Verizon Center to reach out to customers to shepherd them through the migration to the cloud, handling complexities such as shifting items on the balance sheet from capital expenditures to operating expenses, developing tailored applications on Microsoft’s Azure platform, and providing guidance about which processes should move to the cloud and which should remain in-house.

Parting shots

Turner’s enthusiasm for the cloud was emphatic, if a little familiar to attendees into the third day of the conference. But he seemed to take a special pleasure as he arrived at the point in his presentation when it was time to address the competition.

“I love to compete,” he said. “[To] compete boils down to a test of will.”

A PowerPoint slide appeared on the Jumbotron listing Microsoft’s principle rivals: Google, Apple, VMware, Linux and Oracle.

Turner took them in order, offering the partners selling points to overcome the objections they might hear in similar pitches from Microsoft’s rivals.

“Don’t let customers get Googled,” he warned. “In the productivity space, they’re coming after us, guns blazing,” he added, quickly betraying his sarcasm as he pointed out that Google (NASDAQ: GOOG) had only recently added a ruler feature to its Docs word processing product, “an application we’ve had for 14 years.”

Then he turned to search, touting the gains in query volume and market share Microsoft’s search engine has enjoyed since the introduction of Bing last May. Citing comScore data, Turner said that Microsoft has seen its share of the search market grow by 51 percent since Bing debuted, noting that the company will vault forward again once the integration with Yahoo’s (NASDAQ: YHOO) search engine is complete.

But corporate sparring by the numbers can get a little dull. Turner quickly seized on the recent controversy over Google’s camera-equipped Street View carsinadvertently collecting transmissions from unsecured Wi-Fi signals to make a broader point about the search giant and privacy.

“I’ve got news for you. We don’t read your e-mail and invade your privacy. We’re not soliciting vans to drive through neighborhoods to spy on you, snoop [on] your Wi-Fi. That’s not what we’re doing,” he said. “We don’t have a mission statement that says ‘Don’t do evil’ to remind us not to do evil.”

Next up was Apple (NASDAQ: AAPL), which Microsoft is fond of characterizing as offering overpriced products that seem to prize form over function. Turner invoked what Microsoft has dubbed the “Apple tax,” and cited data from market researcher IDC indicating that Microsoft had notched incremental gains in share of the laptop market since 2008, while Apple’s share had dipped.

“We’re just killing them on value,” he declared.

He admitted that the smartphone sector has been a “lowlight” for Microsoft, admitting, as CEO Steve Ballmer had on Monday, that the company had missed a cycle with its Windows Mobile operating system.

But Microsoft is now on to Windows Phone 7, releasing the final beta version of development toolsyesterday and planning to bring a bumper crop of handsets to market in time for the holidays.

Here, too, it was time for a friendly jab at the competition, this time picking up on the trouble Apple has been having with its new iPhone 4 dropping calls, which the company has suggested could stem from an antenna issue related to the way users hold the device.

“One of the things that I want to make sure you know today, is that you’re going to be able to use a Windows Phone 7 and not have to worry about how you’re holding it to make a phone call,” Turner crowed. “It looks like that iPhone 4 might be their Vista. And I’m okay with that.”

He had kinder words for Apple’s iPad, but only to a point.

“When you look at content creation and content consumption, the iPad is fabulous at content consumption. It is very, very good. It’s lousy at content creation. That’s a documented fact,” he said. Microsoft this week affirmed its commitment to seeding its Windows 7 operating system across an array of tablet computers, which will inevitably compete with the iPad.

“This marketplace is not determined. Because what you’ll find with content-consumption devices is they don’t replace anything. They’re generally a third device for people,” he said.

Turner explained that Microsoft is focusing on finding the “sweet spot” in the tablet sector that will strike a balance between the production and consumption of content.

And on it went down the line, as Turner defanged Microsoft’s rivals to the applause of the partners in the audience. (VMware’s overpriced Hypervisor solution is losing share to Microsoft; Linux managed to lose market share amid the steep economic downturn, exposing the “myth” of free open source software; Oracle is a corporate pirate that holds its customers hostage and CEO Larry Ellison still doesn’t believe in the cloud.)

Remembering Windows 7 and the customers

Aside from the cloud and a little friendly denigration of the competition, Windows 7 ranks high on Microsoft’s agenda for the coming year. Turner described the new operating system as the “highest quality product we’ve ever put out,” and urged his partners to lean on their customers to upgrade.

Turner said that the majority of Microsoft’s install base is ripe for a “triple-play refresh,” with 85 percent running older versions of the operating system, while 52 percent are still using version 6 or 7 of Internet Explorer, and 63 percent are using Office 2003 or an earlier version.

Turner also hit on the message of customer satisfaction, and urged the partners to get their own IT shops in order with the latest upgrade before they make their sales calls.

He said that Microsoft’s early experiment with retail stores (four, to date) has been a success, and the company is planning “dozens” more.

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