Microsoft Inspire 2019: The 6 Biggest Statements From Gavriella Schuster And Judson Althoff

Microsoft executives used the opening keynotes for the Inspire 2019 partner conference to outline channel investments and address the company’s decision to retain internal use rights.

Microsoft didn't sidestep a recent controversy over a popular channel incentive at Inspire 2019, with Channel Chief Gavriella Schuster addressing the dust-up while kicking off the partner conference on Monday.

At Inspire, Schuster received applause from partners when she reiterated that Microsoft will continue to provide free product licenses for use with partners' businesses. The move, which was first announced on Friday, reversed a previous decision to scrap the "internal use rights" program as of July 2020.

[Related: The 9 Biggest Microsoft Announcements At Inspire 2019]

After receiving “overwhelmingly negative” feedback from partners on the plan to eliminate internal use rights, "there was really no choice but for us to walk back on that change," Schuster told the audience of thousands of partners in her keynote at Inspire, which is being held this week in Las Vegas.

Schuster, who is corporate vice president for Microsoft's One Commercial Partner organization, went on to spend much of her keynote looking ahead to key partner opportunities for the coming year—including in Azure and Office 365. She also outlined a number of channel investment areas the company will be focused on, with Microsoft planning to invest about $3 billion in partners over the next year, Schuster said.

Meanwhile, Judson Althoff, executive vice president of Microsoft's Worldwide Commercial Business organization, previewed the company's innovation priorities for the next 12 months.

What follows are the six biggest statements from Schuster and Althoff's keynotes at Microsoft Inspire 2019.

Internal Use Rights

Schuster: "As you may know a couple weeks ago we announced changes to the program competencies and internal use rights. The response from you, our partner ecosystem, was overwhelmingly negative. We clearly underestimated the value of those benefits and the impact that that would have on you and your businesses. You know, your partnership means more to us than anything. And we value the relationship and the trust that we've built in that partnership. Because it is based on commitment, integrity and trust. And it requires us to have ongoing communication, collaboration and accountability. When I heard your response, and I listened to what you were saying—and I read every single blog and tweet and article—in my mind there was really no choice but for us to walk back on that change. So we are going to keep the FY19 competencies and internal use rights just as they are. And you have my commitment that I will continue—we will continue—to listen, to learn. And though we may stumble, we will grow together and we will celebrate our wins together."

Innovation Priorities

Althoff: "All of our solution areas will get better in FY20. The innovation that we're bringing forward is simply fantastic. You're going to see more collaborative capabilities in Teams. AI capabilities enriched in Teams. Differentiation by industry. Investments in security, in compliance. True richness in the modern workplace. Our business applications will have AI out of the box. Mixed-reality capabilities, open data, common data models for the industry to innovate on top of and unlock new business solutions at scale. In apps and [infrastructure], we're going to invest in IoT, we're going to invest in the hybrid capabilities. DevOps has really got to be, for us, something that we all work on together, because it is really what unlocks this notion of democratizing digital and empowering developers. GitHub is a first-class citizen for us here at Microsoft. And of course, in data and AI, you're going to see some just fantastic things. We're going to bring you limitless data, unlimited analytics. HoloLens 2 will come to market, mixed-reality services will be open and available for you to innovate on top of ... Our AI services will become richer and more powerful, so that you can bring the future forward and enrich the work that people do."

Office 365 & Teams

Schuster: "There are 76 million customers in SMB. It is an $80 billion market opportunity. And Office 365 is in less than 10 percent of those customers. That is a lot of upside for all of you. And now, once you have that secure socket from which to build, then you can start to add additional services, like Teams ...

How many of you remember the explosive growth of SharePoint about a decade ago? Teams is already on a faster trajectory than that ... You are able to bring the entire business process, and create a whole new user experience [with Teams]. You can bring all the business applications to the forefront of that user experience in one single shared workspace."

Azure Migration

Schuster: "You know that we estimate about 60 percent of our server installed base is still on Windows Server and SQL Server 2008. That's 24 million instances. That is a $50 billion market opportunity that you should be going after right now, this year. Because those customers are vulnerable and exposed. They are on server technology from 2008 ... You run the risk of breaking trust with your customers if you leave them on that server technology. Because you leave them unsupported. And you know you could easily migrate those VMs into Azure and remove that vulnerability for them. And many of you are already going a great job. We have moved a lot of customers this past year ...

That Windows Server / SQL Server conversation really is a catalyst for a whole new set of services and book of business with that customer. Once you're in, you're in. And that earns you a way into the real conversation that you want to have. Because every single one of us knows that just moving legacy workloads into the cloud is not really what the cloud is all about. What the cloud is all about—where you get the power of the cloud—is when you can drive digital transformation ...

And you have to earn your way into that conversation. And we have barely scratched the surface there. Because if you take all of the work that we've all done, that every cloud service vendor has done over the last few years, we are still only 5 percent of that total addressable market. And that market is poised for explosive growth. And we want to help you take advantage of it."

Azure Lighthouse

Schuster: "We're investing in you, with a new service that we call Azure Lighthouse. Azure Lighthouse builds partners in by design into Azure, by enabling multi-customer, multi-tenant management, at scale in a secure environment with automation. So that Azure becomes your best platform to deliver those managed services to your customers. And we're going to continue to invest in that service for you. And once you unlock cloud migrations, you unleash the customer's data. And data is the currency of the cloud. Then you have the opportunity to start reasoning over that data, to build intelligent design with AI and analytics, and help customer to re-look at their whole business and think about it in a totally different way, and think about their business decisions completely differently. And that moves you from being a strategic supplier to a strategic advisor. And I know that that is a place that we all want to be."

Marketplace & CSP

Schuster: "Last year I told you that you want to be in the Marketplace. And many of you heeded my advice. And we now have over 12,000 applications and services in the marketplace. We are delivering over 350,000 leads every single month on those solutions out to you. And we're doing about $90 million a month in the Azure Marketplace, which is really enabling services. We started a pilot on what we call transactable offers in AppSource. And that's really where you want to be. So this year I'm going to say, that not only do you want to be listed in Marketplace, but you actually want to have a transactable offer. Because that enables us to activate three additional channels to market for you. One is, the Marketplace itself, where the customer can buy directly on your paper. The second is enabling us to pull your services through our sellers on our Microsoft paper. The third is to enable all those partners transacting CSP to be able to pull your services through their paper in CSP. So that is not only activating 22,000 Microsoft sellers all around the world, but the 70,000 Microsoft partners that we have transacting through CSP on your behalf. And, we are going to incent our sellers on your services. We are also going to incent our partners through CSP on your behalf. And we will put more go-to-market dollars in for every service that you have listed in AppSource as a transactable offer. So I talked a little bit about how our relationship has changed. The tables have turned, and we have become your channel ...

The flip side of marketplace is CSP. If you are delivering services, CSP is the way that you want to deliver those services into the marketplace. Because CSP enables you to embed not only Microsoft's first-party services, but any of those third-party Marketplace services into the packages that you offer to your customers. So you can make them completely unique and differentiated out to your customers, and then provide managed services on top of that. This year, we've already crossed the $4 billion mark in CSP together. And we have over 3.5 million customers under contract in CSP now. And those partners transacting CSP are seeing 40 percent year over year growth. This year, we're moving CSP onto the modern commerce platform, which enables us to actually collapse that delta in the Azure engineering roadmap—so that we can deliver all of those Azure services to you through CSP. And it enables the customer to be more mobile on their purchasing. And we are building in, by design, security and data privacy, through multi-factor authentication in Azure Active Directory."