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UBS Global TMT Conference
Who: Corey Sanders, CVP, Microsoft Cloud for Industry and Global Expansion
Event: UBS Global TMT Virtual Conference
Date: December 8, 2021
Karl Keirstead : Well, thank you everybody for joining day three of our three day UBS tech conference. I'm probably most excited about the lineup of the software companies on day three. Not just Microsoft, obviously, but we've had MongoDB, Zoom, Informatica, DataStax, and DocuSign this afternoon. So really high quality lineup of software companies, but I would say led by a relatively large market cap company up in the Seattle area. So Corey, thanks for joining us. And for everybody listening, if you do have any questions you'd like to direct to Corey, there is a question bar in front of you you're welcome to use. I'll see it. If you'd prefer, reach out to me directly on my email, and I'll curate them and pepper Corey with a few investor questions towards the end. So with that, Corey, welcome. And maybe you want to take a minute to describe your role at Microsoft for those that haven't met you yet.
Corey Sanders : Yeah, absolutely. Thanks, Karl. Thank you so much for having me. So I'll explain actually my current role, but then also maybe explain my previous role to give a little bit of framing, because I actually just changed roles here in the last couple weeks. My current role is a team called Microsoft Cloud for Industry and Global Expansion Team. I am on the engineering side, I report to Scott Guthrie, and I'm accountable for the delivery of all of our industry solutions and partnerships, and our global expansion and deployments around the world. But like I said, I've been in role for a couple weeks, so I'll answer as best I can in that regard.
Corey Sanders : Previous three years, I reported the Judson Althoff, who's our Chief Revenue Officer. I was responsible for the go to market strategy and the technical delivery for all of our solution areas from Azure to Dynamics, and so have a good amount of experience in that area. And then prior to that, I actually was in engineering as well, building out the original Azure VM compute stack. So been a little bit all over the place here at Microsoft, but excited to be here.
Karl Keirstead : That makes you interesting to everybody, Corey
Corey Sanders : Yes, exactly. Maybe too interesting.
Karl Keirstead : Obviously, not everybody on Scott's team needs to do these sessions in a red polo, so I'm glad you've got an exception.
Corey Sanders : That's right. Actually, I don't think we're allowed to wear red polos. It's confusing if anyone but Scott wears a red polo, so it's been banned.
Karl Keirstead : All right. Well, terrific. Corey, maybe before we dive into Azure and some of the individual product areas at Microsoft, let's keep it a little higher level for a little bit and ask just broadly what you're seeing out there in the IT spending environment. The spirit of the question is something that tech investors are trying to grapple with, especially at year end as they look out to a new year and pick the right stocks and understand what trends might have been terrific in the last 18 months post-COVID, but that maybe the mix is shifting and the priorities are changing for the next 18 months. That's obviously very important for everybody to get right in their stock portfolios. So maybe I'll start there. How do you think the IT spending priorities are changing?
Corey Sanders : We've seen this for the last months, maybe even years, particularly accelerated by the unfortunate output of the pandemic. We've seen a big focus and a push towards digital transformation on every front, and I think with a particular focus on cloud to enable that type of digital transformation. This includes certainly productivity and the change of productivity, as our conversation right now. I can remember having done these three years ago and everyone was in a conference room. And so just the changes in how we approach productivity and engage and work with each other, both inside and outside companies, has fundamentally changed and has a fundamental dependency on cloud.
Corey Sanders : But that's just the beginning, right? I think that we've seen a push towards all aspects of digital transformation spawning from that. The way in which people work, the way in which people engage. Change is the way in which people buy, the way in which people want to use services and experiences, the way in which people want to build their solutions, even. Even the concept of building new technology has fundamentally changed. And so this is where I do see this digital transformation has accelerated at an incredible rate across all of the companies involved, which I think has been exciting in a very unfortunate time period. But I think that that expansion has been really something to focus on.
Corey Sanders : Now, I think when I look at Microsoft in the context of that, I think one of the other things that as part of that, that customers are looking for is with that expansion of digital transformation, understanding how those components come together. This is where I do think when we talk with customers, the conversation on Microsoft Cloud has also really accelerated over the last two years. This isn't just one conversation on productivity and one conversation on infrastructure and one conversation on business apps. The conversation is around how all these products come together. Again, whether it's all our software, or oftentimes our software with partner solutions intermixed. And you mentioned some of those partners as other folks you're talking with even during the session. And that is actually, I think, another big change in the dynamic that we're seeing. How these solutions come together to deliver outcome is going to be a key focal point for both us and our customers as part of that.
Karl Keirstead : And Corey, within all those various projects that are part of this digital transformation, were there some, in your judgment, that were made an immediate priority in the six, 12 months after the pandemic hit that now might, in their life cycle, be leveling out? And conversely, were their prior priorities that were put on hold that were hit hard in the six, 12 months that are now having their day in the sun and are finally getting funded?
Corey Sanders : I think that there's probably two parts to this answer. I think part one is it's really dependent upon the customer and the business that they're in. And this is where my new industry role is so exciting, because it is so different. Retail, obviously anyone in retail that didn't have a vibrant online opportunity for purchasing and engaging and support and all of that, it was an immediate and critical need to figure that out. Whereas you may find some elements of, let's say, financial services maybe had less of that immediate, we need to completely rework how we're selling our products. And so the difference in that could very much be dependent upon those customers and the businesses that they're in.
Corey Sanders : I do think there has been the obvious ones. Collaboration technology, I would say security. There has been a few that have really popped up that were immediate requirements, I think, across the entire landscape. With the fact that everyone was working from home, you needed to make sure that all collaboration capabilities worked, your tooling all worked, and your securities models were all able to deliver upon those experiences. And that all was very immediate.
Corey Sanders : I would say there was immediate spike, but I wouldn't say it's necessarily leveling off because in some ways, just expectations are changing. If we all remember the first six months, it was just, could we get on a meeting together? And it worked. But now, it's very much a conversation of, I want to be in a meeting and I want to be able to transact this work and understand the data and look at all of this in one single screen. And so just the expectations of what it means to work collaboratively are continuing to go up with it. And so while I do think there were those spikes, I think there's increased focus.
Corey Sanders : There were some things that got delayed. There absolutely were some things. And again, it was customer focused and customer centric. And a lot of those are now starting to come back. I'll use retail as my example as well. Frontline workers, a focus on the frontline worker experience when all the stores were closed. It maybe could be put off a little bit, but now with a lot of retail back open, that priority has actually reaccelerated as a big area focus.
Corey Sanders : So I think there's a little bit of both industries really specific there. And I do think there was a big spike, but even those big spikes, I think with uncertainty about when the pandemic and when things "go back to normal," if there even is an original normal, I think the expectations on collaborative work are just increasing. Everyone's expecting more.
Karl Keirstead : Let's go back maybe to a point you made earlier in response to my question where you mentioned that you, in fact, partner with a lot of those companies that I mentioned we're doing fireside chats with today. So maybe the broader question is how all of these IT spending changes are changing Microsoft's partner ecosystem. Are you making any shifts, you and the team, on that front?
Corey Sanders : Absolutely. I think the big focus when we look at our partner ecosystem and our opportunity, and this is actually somewhat true even from our customer conversations, is shifting to not just selling our products, but actually going in and building together and building out solutions. If you look at some of the most exciting partner announcements that I believe that we've had and some coming up, just some examples, Schlumberger in oil & gas, I'll say Amadeus in travel, BlackRock for hosting Aladdin services in Azure. They all are co-build experiences. For all of them, we are bringing in resources, engineering teams, to work together with the experts in these fields to be able to basically take our expertise in things like collaborative applications, in things like infrastructure expertise or data and AI. And bring that expertise to the folks who know oil and gas better than us, who know financial services better than us, who know all of those elements better than us.
Corey Sanders : And so those types of partnerships and us basically co-building and then co-selling has been a big shift for us. It's, in fact, what I'm really excited about my new job, because that's really where the magic happens, is bringing the expertise from the two sides and bringing that together. Example, even with our most recent Kyndryl announcement, and how do we bring this strong expertise that they've had in their industries and markets with our capabilities and our horizontal services and sort of bringing them to life. And so it's definitely changing and it's changed a lot. And we continue to see this opportunity as we work with these partners.
Karl Keirstead : Got it. Okay. Good perspective. Let's maybe use this as a jumping-off point to some of the individual revenue segments within Microsoft. And maybe we'll talk about the one that everybody wants to talk about, which is Azure, congrats by the way amazing success. And it sounds like you got your start and your Microsoft career as an engineer on the Azure VM side, which has turned into a pretty big business. So congrats to you and your team there.
Corey Sanders : Thank you.
Karl Keirstead : I wanted to ask you a couple of specific questions on Azure. One is a tough one for us on the outside to figure out and that is how to model the conversion of these big multi-year Azure commitments to actually usage and therefore Azure revs. I guess the supposition is that it probably takes some time that you sign a contract today and you probably really don't see the usage, the sweet spot of that usage curve maybe for another 12 to 18 months. But I'd love to ask you Corey, for your perspective about how that process works so that everybody listening can do a sharper job trying to model Azure revenues going forward.
Corey Sanders : Yeah. I guess the short answer to your point it's complex. Right. And I think it's complex because it's actually very much tied to the customer and their goals and expectations and to your point even from the previous discussion their prioritization. Right. And what I mean by that is it can go from a range of anywhere to they sign a deal and they have to get out of a data center in a year because that leases up. And so they're incented to heavily move quickly with that data center. But then there may be other elements where they're transforming their business. They're inventing a new business model, which is going to take time to not only build but then even scale. Right. They may start small in one region and grow. And every big customer and every big deal is typically a set of these types of engagements that will sort of add up to their consumption on the Cloud. And it is very, very, very hard to model frankly and I don't envy those who have to do it.
Corey Sanders : Look, the points that I'd maybe add that hopefully are helpful. One is, look going back to the previous point in general, there's urgency from customers there's urgency and there's passion around making these changes more so than I've seen since I've been in Azure which was 15 years ago is when I moved into the Azure team in the original product line. And so this energy around moving it's very, very high. And so we see a lot of passion around going quickly when something is signed sometimes even starting before it's signed. Right. I mean, the ability with a consumption service, you can start months before you sign and then move forward with those types of deals.
Corey Sanders : The other thing from our side that I'd say is, it does take time like you said, but we have a bigger investment that we continue to make in sort of two elements there. One is the resources we bring to these customers. Right. We bring sort of the engineering resources called the Cloud Solution Architects in with the customers immediately upon signing again sometimes before signing and before a single dollar of consumption is spent. And we work with the customer because the steps that they need to take are pretty involved. Right. They need to look at their reliability, they need to look at their security, they need to look at how their costs are going to work, they need to look at their operations. Right. Their teams typically need to be educated and have learning and skilling.
Corey Sanders : And so we have a framework that we've built out called the Well-Architected Framework that we continually improve, which is really all focused on again customers getting them to get the value that they wanted to get when they signed that contract as fast as possible. So there's work to do, we are shifting it to the left as we like to say and getting customers deploying as fast as possible, but it will always take time because those are always both people and technology efforts that need to be made to get the full advantage.
Karl Keirstead : And I guess it's those people elements that might be the constraint these days because a hot topic on the street in the media is the fact that there's a labor shortage and such a bit out there for engineers these days. Are you seeing any examples Corey, where sort of the struggle for talent and the lack of people is constraining the ability of Microsoft's large customers to ramp their use of Azure as fast as they'd like, or has it not reached that acute level yet?
Corey Sanders : Yeah. I would say at least from my experiences I think workforce shortage has not had that impact.
Karl Keirstead : Okay.
Corey Sanders : But I will say and this has been true I think since the Cloud started, I think skilling is an area of acute attention for us. I mean, it's an area that we invest significant amounts of money to go in and helps customers skill because it is going to be different. It's going to feel different. And so my experience is less about sort of having the people it's more around making sure that we're helping people take the full advantage and understand and learn. And look I'm sure everyone on this call appreciates it is a fast-moving market and that's kind of the point. Right. There's a lot of new technology coming out all the time, and we're really invested with customers to make sure they're keeping up because it's in our best interest and their best interest to do so.
Karl Keirstead : Got it. Corey, another part of the Azure story that's tough for us on the outside to get a handle on is what the mix of services looks like on Azure. I think everybody's impression is that as customers on board, there's probably a pretty heavy use of Azure VM compute and storage called that the Core Infrastructure. And then as they become more mature Azure users, they graduate to the premium services. But we really don't have a good sense for what mix looks like or within the premium services. What are the more popular bigger buckets? Can you opine on that a little bit?
Corey Sanders : Yeah. Absolutely. Well, I think maybe two points that I'd say one is, from my experiences at least it's less about sort of a maturity curve and it's more about a customer need. Right. And that even comes back to my previous... A large customer that I work with. I have two parts of the customer that I'm working with simultaneously. One is I need to close this data center. Can you get me under your VMware service in Azure as quickly as possible? And we're going to stay there for a while. Right. So how do I do that? How do I get that done? Because I got to get out of this lease. Right. And in parallel, I'm talking with them about their manufacturing line and how we can leverage IoT and data to modernize it and enable them to be able to use AI to predict outcomes of their manufacturing line.
Corey Sanders : And so at the exact same time, the same company, same maturity position, very different conversations based on their needs. Right. And I do think there's a big element of just customer need and what's pushing the market and how. Right. And so I think that's at least one key component it's less about, hey, nine months in customers move from IaaS to PaaS it's actually not like that. There are even within customers workloads that are 100% PaaS from day one. There are workloads that are IaaS and never move to PaaS. And so it's also what makes I think the mix hard to predict you can't sort of see a curve on it. Right. It's in some ways per customer. And then you said…
Karl Keirstead : What are the popular premium services?
Corey Sanders : Specific areas. I think Data + AI-
Corey Sanders : Yeah. Absolutely. Data + AI has been really sort of one that's... We've seen sort of a gigantic shift and focus for customers. And I think the realization and sort of the digital transformation push starts where the conversation on, I got a lot of data and I don't really know what I'm supposed to do with it. And so the conversation around sort of getting the data up into the cloud, enabling sort of modern analytics based-solutions, enabling AI-based predictive capabilities. These are almost always a part of any digital transformation discussion. Right. No matter whether it's retail customer information or whether it's oil and gas seismic information, or whether it's manufacturing IoT-based information. The data strategy is a part of the discussion. And so that is a really big area focus on attention for us.
Karl Keirstead : So maybe let's hit right on that actually because that's a hot topic for tech investors-
Corey Sanders : Yeah. Should be its good. Yeah.
Karl Keirstead : Even today I've had MongoDB, Informatica, fireside chats. Yesterday I did fireside with the CEO Ali of Databricks the day before that with Mike Scarpelli at Snowflake.
Corey Sanders : I think I know all these folks actually.
Corey Sanders : Exactly. Yeah.
Karl Keirstead : Well. In many cases their products live on Azure-
Corey Sanders : Sure. In all cases, I think that you just mentioned. Yep. They all have services on Azure. Yep.
Karl Keirstead : All of them seem to be doing fairly well. So it's pretty clear to everybody that something super interesting is happening around the Data + AI space. But maybe where I can ask you to weigh in a little bit is how Microsoft's own products compete with all these vendors. So on the one hand, you're a partner with all of them, largely because they all want to run on Azure. But on the other hand, you're not just going to sit back, and sort of seed that market to all those vendors and merely collect the compute resource consumption. You're going to chase that opportunity too. So how do you compete actually with all these partners of yours in this big opportunity Corey?
Corey Sanders : Yeah. I mean... And it's going to sound maybe a little bit repetitive. But it all starts with the customer. Right. And making sure that we're delivering the capabilities that the customer wants and needs. Right. And as you mentioned, sort of all of those products that you mentioned, we have some products that you could argue compete, but they all compete with just an element. Right. Of those discussions. And so the opportunity to support our customers on the path that they want to go, if they have experience and a love of Snowflake enabling Snowflake but enabling it with Power BI. Right. And enabling it in sort of Teams collaboration with Power BI and supporting that customer on that part of the journey is a great outcome for us, for the customer for Snowflake. Right. And we're certainly going to continue to do those partnerships and make sure these services run great on our infrastructure and then have integration across the entire stack. Data and AI is a giant surface area. Even the products that you just mentioned is even just that as a subset, of the surface area of what customers are trying to do with compliance, with analytics, with spark, with operational data, it is a very complex and broad surface area. And our real strength comes in in being able to offer solutions across that entire surface area. Being able to offer integration with third parties, when customers would prefer them, and being able to offer great first party solutions when they prefer to just buy from us or they're already using our services and solutions.
Corey Sanders : I think it's in some ways kind of a complex answer, but that's the reality of our customer's environments. They may have reasons, they may have passions for each one of those services. And I do think that end to end story is really our strength, and our willingness to partner across each one of those partners, excuse me. I'd love to hear whether those partners said the same thing about us and about me, but we can maybe take that privately.
Karl Keirstead : Well, they did, frankly.
Corey Sanders : Okay, good.
Karl Keirstead : There may be a couple more on Azure.
Corey Sanders : Sure.
Karl Keirstead : This is taking you back Corey to your early Microsoft days when you were helping to build out the Azure VM suite. But I think if you asked the average tech investor today, they would argue that there's little to differentiate compute resources, rented, so to speak, on Azure versus AWS EC2 versus Google Cloud Compute, but you were part of the team that actually built that Azure VM suite. My guess is you would probably disagree with the notion that they're all the same. Maybe what I'd love to ask you is, what's actually different about Azure on that core compute side.
Corey Sanders : Yeah. And I think there absolutely is differentiation in the core compute. I think that there are certainly elements that you'd probably argue would be commoditized... but frankly, I would probably argue that with any service there's elements that are commoditized and elements that are differentiated. The places where I think we offer some really unique value and we see a lot of interest on, in that specific component of core compute, is actually some of our GPU capabilities and our VM interconnect capabilities. We've seen with the growth of data and AI story that I just mentioned, one of the elements of that is being able to run complex AI solutions. And our AI stack spans from self-service super easy to deploy cognitive services all the way down to scale-out compute for super custom requirements.
Corey Sanders : And we've seen the custom requirements part of the story is of course dependent upon having the right GPUs, having the right VM interconnect, having the right connectivity, and our Infiniband-based connectivity has continued to be a big differentiator for us in the market. We see this as a really big positive, we see as the opportunity for both HPC and AI based solutions, but that's just one. You could go surrounding that storage performance and the different tiers of storage capabilities and ease of use. And then I actually think networking ease of use is becoming a really important differentiator in that part of the stack. How easy is it to leverage networking and use it with your hybrid environment? This is something we see all the time, actually, particularly from banks that I work with, the networking is very complex, and so getting that right and simple is a big differentiator. And I would argue is deep in the infrastructure.
Karl Keirstead : That's good.
Corey Sanders : Maybe one thing I'll add just super fast. Of course the bigger points of differentiation are the fact that at this point, we also find people don't make decisions on infrastructure only, as everything we just talked about.
Corey Sanders : You don't want your HPC or your AIBMs to be running in a different cloud than your data services. And you want your data services in the same cloud with your insight experiences, in your same cloud with your collaboration experience. And so more and more we're seeing that, for us at least, the Microsoft Cloud is a differentiator all the way down into what VMs are going to go buy. And so that is also an element that I would probably add to the conversation.
Corey Sanders : Sorry my answers are so long.
Karl Keirstead : No no...
Corey Sanders : Hopefully that's helpful.
Karl Keirstead : All good.
Karl Keirstead : I'm going to ask you one more Azure question.
Corey Sanders : Okay.
Karl Keirstead : When we listen to Amy and Brett, they don't disclose Azure gross margins but they've discussed how they have improved over time. And one of the sources of improvement are efficiency gains inside Azure. You were one of those guys, sleeves rolled up in the weeds. Can you give everybody listening an example of an efficiency gain that's still left in Azure that might squeeze a little bit more margins out of all those servers? It seems impossible that you haven't squeezed the lemon to the maximum yet, but what's left that might be an efficiency gain, maybe just give us one example, Corey.
Corey Sanders : I think just like innovation in any space, there is always going to be an opportunity for innovating in these areas. The scale and the magnitude and the amount of efficiency gained may vary over time, but there's always opportunity to gain. And part of that is with our work with providers. When you think of the work and the improvements that are happening at a chip level, at a memory level, at a networking level, all of these elements come together in how we are using our resources in the most optimal way. And some of it is even AI based, how are we understanding customers' usage in the right ways, and making sure we're making decisions based on that, that is then optimizing either power consumption or placement protocols that is going to result in us saving money.
Corey Sanders : It is an ongoing effort. It is an effort that requires constant innovation and work, but I think it's an exciting effort. And I think especially for people down deep in the stack, it's a fun place because given the scale that we're working in, the joke that we always make is it doesn't take a big change to have a big impact. This is something that I do think we do an effort on. We do planning twice a year and margin is a big component of decisions that we make around what features we're taking and what work we're putting in place and how that will apply to the bottom line, quite literally.
Karl Keirstead : Okay. Super helpful.
Karl Keirstead : Let's leave Azure for a moment and talk about another exciting product area and that's Teams, Corey. Everybody listening is trying to figure this out. There's a number of variables, collaboration was such a huge priority, as you even said earlier, as we look in the next 18 months, will that fade a little bit, will it flatten out? That's one thing we're trying to figure out. We're trying to figure out how Microsoft Teams versus Zoom versus WebEx versus Salesforce, Slack, how that competitive environment's going to play out. Maybe you could set the framework for us with your views on how usage and adoption of Teams is changing and what you see in the next year or two.
Corey Sanders : There's probably a few areas that are worth touching upon, like you already said the growth and expansion of Teams usage over the last two years has been somewhat mind blowing. I think it's been super exciting to see it and watch it and even going back to my previous role, since it runs all on Azure and VMs. The whole company is behind this and it's just such an exciting place for all of us to be. And I think the latest numbers, nearly 250 million MAU as of our Q4, FY 21.
Karl Keirstead : Yeah.
Corey Sanders : For your question, which is about, "Okay, that's so great? That's a big number, but where do we go from here?" I think there's probably a few areas.
Corey Sanders : One is, there is still an opportunity to grow the user base. And one of the things that I already even mentioned with frontline workers is the ability to think about how are we enabling and use retail. Shifts and how are we enabling walkie talkie usage? How are we bringing some of these capabilities such that Teams is an experience that literally every employee at a company can use and will use. And will love. This is work that needs to happen and it ties back into with my industry charter, because the work is industry specific. There's different requirements for someone who's working on an oil rig than someone who's working in a local store. And so we've got to work through those requirements and deliver upon it independently. That's an opportunity for base that I think we could grow.
Corey Sanders : I think there's also a lot of opportunity for us to increase value and then results only increase revenue per user. This is some of the things that I've even already talked about in collaborative applications. Enabling some of these partners that we already talked about to have collaborative experiences in the Teams environment. Enabling those experiences, integrate with additional services like voice or contact center. And enabling some of those capabilities to really shine as part of that Teams experience.
Corey Sanders : And then perhaps the other area that I think is really important is continue to expand on our trust and security story, when it comes to Teams and then across the entire platform. This is a big reason why people choose Teams is they believe in the trust that we're offering. They believe in the support. I think it's a really good opportunity for us to both continue to add value and of course continue to gain revenue as part of people buying those new services.
Karl Keirstead : Got it. Let's hit on the most recent Teams announcement where just last week, I think, you announced Teams Essentials. That's clearly targeted downstream at small mid-size businesses. The stated price points' $4 per user per month. Can you describe what the strategy is there? I was hosting Zoom a couple hours earlier. Corey, I certainly asked them what they thought of Essentials, but I'd love to ask you.
Corey Sanders : Darn I should have watched that. And maybe you can again tell me offline. But look, I mentioned a little bit about the expanding of the base and when you look at Teams Essentials, I think it's another opportunity to do that. Small businesses are different, their requirements are different, their needs are different. And I think with Teams Essentials we see a big opportunity for those companies that are 25 employees or less. That they're looking for some sort of meeting capability with, again, all the aspects that they'd expect from Microsoft around trust and so on, but are not yet ready to purchase the broader O365 or M365 suite. And so this capability to sort of Teams standalone, we think is quite appealing to be able to offer that platform to those smaller business customers and enable a lot of the other points that I mentioned around expanding out to other collaboration changes that they may want to make in their business, but offering the platform, offering the meetings experience is really a great opportunity for us and I think can offer a lot of value to a market that is looking for that value right now.
Karl Keirstead : Corey, how would you rebut the view that Microsoft is taking Teams for at least for this customer segment, from free to $4 per user per month? Is the difference that that's not the same product, that Essentials is actually a beefed-up version of what you would otherwise get for free? Is that correct?
Corey Sanders : That's right. I mean, there's quite a bit more value. Group video calls for up to 30 hours, group chat, file sharing. And even calendaring, the capabilities are well beyond just I can call one person and talk with them. I mean, the concept is focused on what a small business needs and a small business needs more than just person to person phone calls. And so that's really the strategy. And that would be my rebuttal, if that was what was told to you in the other call.
Karl Keirstead : Let's talk about Office, obviously, one of the franchises inside Microsoft's portfolio. The bigger news there is that Microsoft has elected to as of March 1st, raise the price points across, not all, but some important SKUs. So maybe you could help frame that. Why do you think this was the right time for Microsoft to make that move? And Corey, as you've been interfacing with customers, what's the reaction to the price increase? Is it a little bit of pushback, is it a shoulder shrug? What's happening in terms of the reaction?
Corey Sanders : So with the price increase, and just to share a little bit of background, we've actually not increased the Office 365 price since June of 2011. And so a pretty astounding time period. And yet over that time period, over the last four years, since Microsoft 365, we've added 24 distinct full apps, including Teams, PowerApps, Power BI, Power Automate. And so there's always a deep conversation that we have about how we're adding value and how the price point matches the value that we're adding.
Corey Sanders : And it's a constant conversation and decision point that needs to be met. And of course, our primary goal is about getting the right value to customers, but then making sure that it is at the right competitive price point. And so that's the background, at least on the changes and again, I think the timing of those changes. From a broader customer perspective, and I want to be careful about speaking holistically about every customer in the world, but with the customers that I work with, the conversations are so much broader than one seat pricing.
Corey Sanders : Again, even coming back to my previous discussion, the conversations are always about the full Microsoft Cloud. They're about this element of Dynamics and this element of PowerApps, and this element of M365, and this element of Azure, and this element of data. And so these conversations are really around what are the outcomes that the customers are getting, and then what's their total ROI for that type of outcome.
Corey Sanders : I'm not saying price isn't important for customers, but the price conversation is much less line item by line item, it's much more, what am I paying Microsoft and what is the ROI that I'm going to get from that? And those conversations, this is sort of a blip, right? Because the conversations are so much bigger and so much broader. And again, I want to be careful saying, that doesn't mean there aren't customers that are going to want to have a conversation about this. I want to be realistic about that, but at least the conversations I've had, they're always bigger, broader, and much more of a total ROI conversation than they are line item, price items.
Karl Keirstead : Got it. Perfect. We've probably only got five more minutes, so let me take a couple of questions. So one that came in Corey, I'll just read it back to you. And it references a, I think a customer anecdote you made about wanting to get out of a data center and move onto VMware on Azure. So the question is, why would a customer lift and shift onto VMware on Azure without actually rewriting the underlying code or data to take advantage of what the cloud can offer?
Corey Sanders : Actually going back to, I don't know, four questions ago or five questions ago, I mean, the primary reason is both skillset and then dependent tooling. Customers, and this is why it's always so hard to make generalized statements, some customers have built a really extensive tool set dependency chain on products like VMware, right? And this is why the partnership with VMware is fantastic.
Corey Sanders : And VMware offers a lot of modernization capabilities on top with their container based solution. So I want to be careful saying VMware isn't a modern solution, they're offering those capabilities on top. And so you can modernize in that way. And customers have that dependency and some customers don't have that dependency and then they will look at some of the other services and capabilities.
Corey Sanders : And so it is really about the customer starting point, their skillset, what they're comfortable with and what they've built into their environment that is going to dictate some of the first steps they take. And this is why these partnerships again, so critical, because they're all about just helping customers in their journey with whatever starting point they're on.
Corey Sanders : And those starting points are oftentimes going to be different partners in different places. And VMware is a fantastic partner in this regard. Offering modernization, but also offering really fast lift and shift capabilities for customers who have deeply invested in VMware, which are many customers.
Karl Keirstead : Exactly. Okay, maybe I'll finish with another question on a subject we haven't hit on, and that's the core Windows franchise. And the spirit of the question is that Microsoft's done a great job over the last five, 10 years, taking a lot of its traditional businesses and essentially moving into the cloud, moving them off of traditional license maintenance models to one that's more ratable, subscription and usage base, but a large portion of the core Windows business is still sort of that Windows OEM, that upfront license sale.
Karl Keirstead : So I'd be curious what Microsoft is doing to try to take the Windows business into the cloud and ratable subscription era. And two things I've noticed recently that seem to be efforts would be Azure Virtual Desktop, as a way to marry Windows and Azure. And then I think Microsoft has recently launched a cloud PC product that might have that same effect. Can you touch on the traction you're seeing so far on those products and who they might be disrupting?
Corey Sanders : Yeah. And the combination of those two products is actually a pretty exciting set of solutions that we offer, especially given even, I think question one, which was this digital transformation movement with security and trust as a central point, it has created a lot of demand for cloud-based desktops, right? To be able to run your desktop in the cloud, to be able to leverage that to create a zero trust environment on your local machine. And we found many, many customers have built dependencies around that.
Corey Sanders : And then with the expectation that it integrates with your collaboration capabilities like Teams, like Office 365, et cetera. And so this has been a big shift, and I think the pandemic has, this has been actually one of your big spike questions that we've seen from the pandemic, which is how do I get all of my employees into a virtual environment in the cloud for my desktop to create this zero trust opportunity in the cloud.
Corey Sanders : And so that's what these solutions really offer. And the combination of the two of them offer, again, this full range, even taking the previous question and applying it here, Windows 365 offers a really actually exciting and new way to run Windows experience, including apps and data and settings, all automated and managed by the cloud. And it's just a fantastic way to truly get that Windows based experience natively in the cloud.
Corey Sanders : Azure Virtual Desktop is one that we've seen a huge amount of traction and excitement around and particularly around our strong partnerships with Citrix and again, VMware in offering their solutions natively in a cloud experience for those customers who use them, who love them, who want to grow on top of them and allows them to be able to deploy those experiences directly on Azure infrastructure with a scalable and cloud based expectations.
Corey Sanders : And so that range, again, gives customers choice. It allows customers to pick, and it accelerates their movement to that digital motion, which is again, offering Windows based experiences in a fully scalable and cloud based way.
Karl Keirstead : Yep. Corey, I can talk to you for another hour, but unfortunately, we got to cut it here and I'm sure you've got a day job that you need to get back to anyway.
Corey Sanders : Sooner or later. Yeah, exactly.
Karl Keirstead : Thanks for carving out time for us. And thanks April and Brett for enabling Corey to attend the conference and tell the Microsoft story to UBS's clients. So thank you all and happy holidays.
Corey Sanders : Thanks a lot.
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