Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

{audio:0:00:20} Jordy, can you explain your role and responsibilities at Microsoft in the last four or five years you were there?

{audio:0:00:27} Yes, I joined Microsoft to run the worldwide communications business. That entailed driving Lync into the cloud that drove our Skype for Business team. I think it morphed into moving from a global role into running an Americas time zone, which incorporated the entire Office 365 suite, which included all the elements I just named and all of the productivity tools that we had underneath the umbrella. As I left Microsoft, I was primarily running the Modern Workplace team across the Americas, which brought in the Enterprise Mobility Suite and some of the things we were doing around the analytics piece with Power BI and others. The world continued to evolve, and the Modern Workplace team was affectionately known at Microsoft as a black belt team. It was a semblance of an incubation organization used to drive the business's velocity and the customer segment that allowed penetration, success, and a move into the mainstream selling ecosystem. That was my role in the last four years of my time at Microsoft.

{audio:0:01:39} How was the team structured? Did you strictly sell Office 365, or did you also work with the Azure team, for example?

{audio:0:01:49} It was pretty siloed. We would operate the Office 365 productivity suite and elements of that as a standalone effort. It was very interesting because we had had such a head start on what we were trying to accomplish from a revenue, growth and share perspective on Office 365; as you looked at Azure at the time, it was well below size, scale, and resourcing than we were. I remember there were a lot of discussions about how large the Azure team was going to grow and how, in a year and a half, it would eclipse Office 365, and in five years, it would be 10x the size. We were somewhat skeptical of that happening, but that is all playing out. If you look at the revenue share that both organizations are driving right now, you see a massive eclipse on the Azure side of the business. They modeled it quite well, in my eyes.

{audio:0:02:53} How did Nadella change that when he came in as CEO?

{audio:0:03:03} I think Satya had the opportunity to benefit from a lot of what we call the hard yards put in place by Ballmer. The shift to cloud and the idea of creating Azure and driving that business was under Ballmer's watch. Ballmer had to deal with the stigma of real challenges between the product, the product management, the product engineering team, and this overall direction to cloud. There was a high risk of cannibalization of revenue. How do you sell against the current, on-prem business that's viable and doing really well when we needed to make a cultural shift?

{audio:0:03:47} About the time that was all going on, Satya joined. And Satya was almost like a spiritual Gandhi for the business. He was someone that took hold of this concept of being enlightened and being empowered with the work you do. He dived into a growth mindset taking a look, end to end, to see if we were looking at things from a closed mindset perspective or a growth mindset perspective? Did we fear failure? Were we learning from the things we were failing with? That sparked a very different direction, culture, and leadership style. It was amazing to be a part of how that cascaded down in the organization under his leadership. I think, to this day, it will go down in history as one of the fastest cultural transformations ever seen from a large company, that's talked about with many of my peers, friends, and coworkers that are still with the company.

{audio:0:04:47} How did he change the sales teams' incentives to be more ‘enlightened’?

{audio:0:04:54} He led the way to change to much more of an ARR type model, which is being able to move towards a net growth on your software sale instead of looking at contracting on a renewal, for instance. Paying an account executive or a team on a renewal didn't move the needle. We had to think about a cloud subscription model in terms of how you grow the business from year over year, transaction over transaction. That really shifted a lot of the compensation modeling plans and what ultimately landed down into the field.

{audio:0:05:26} Can we walk through exactly how you led this black belt team and sold Office 365 to commercial customers? Let's say I'm a Fortune 1000 company looking to switch on-prem to cloud. What is the first step or the entry point into the account from you, at Microsoft, leading that sales team?

{audio:0:05:48} If we take out that they’re on Office 365, let's say they were an on-premise customer and we were trying to move them to Office 365, the first thing you had to do was to move very quickly. We knew that there were certain elements of a go or no-go decision that we had to be very quick to identify. We didn't have time to waste on a lot of these accounts, so we had a customer success framework that we created, and we used that to quickly qualify in or qualify out customers. Whether there was buy-in or pushback from the chief information security officer had never been a criterion before moving to cloud. Now, suddenly this was an empowered individual inside the organization. You could get to the end of a sales stage, ready to close, and suddenly that individual had veto power. So if you hadn't discussed that or understood that earlier on, you were really in hardship because you had spent numerous cycles, resources, and what have you. Moving very quickly to that opt-in or opt-out was a big part of it.

{audio:0:06:54} As it related to the customer, you were in an interesting dialogue at the time because many of these customers had stood up large data centers. They were very proud of their data centers. They planned to fill their data centers with their own private cloud type of approach. And here we are coming in and telling them that that investment was pretty much null and void as cloud started ticking off, so you had the dealing with that capital cost, so to speak, moving them, and shifting their mindset to that operating cost.

{audio:0:07:24} What also became quite interesting was that the organizational structures that had been stood up in these IT organizations over decades were pretty deep. They had many people. You would often go into these discussions where you were told flat out not to discuss headcount. Headcount was off the table to look at for dollars saved for some of these moves, and yet in many cases, it was probably the number one element of cost savings or total cost of ownership that would have swayed the Office 365 journey in your favor. So we spent a lot of time discussing elasticity, agility, how do you move quickly. We were using your typical M&A experience where it might take two and a half years to move systems together. When you get into a situation where both organizations are on an Office 365 platform, that could happen in a matter of weeks. That ability to move a team with velocity into a productive state was a lot of where we moved into what I'd say is the non-hard-dollar cost and much more of the soft dollar cost.

{audio:0:08:36} We also looked at a lot of the E SKUs and how you move a customer from an E1 to an E3 to an E5 type of SKU. The stair-step was quite honestly Microsoft's strategy; if you could anchor on three good products, you had the opportunity to afford all three of those plus the other ones in the larger bundles. That was a strategy we used as well. We tried to understand where we had the most traction in accounts for usage and model our licensing plans around those. Where some of it was refuted, for instance, if a customer was on WebEx or if a customer was still using Notes, you'd build your value proposition across a lot of different elements to make it one of the freemium pieces they had in the suite. Then you'd work from a customer success perspective to implement an adoption strategy around that. So that's how we found traction and grew that at light speed success.

{audio:0:09:36} Why does the CIO have so much power in that decision-making process today?

{audio:0:09:41} I think it's shifted a lot, but the CIO has been primarily an operations leader for many years. Their job is to maintain a high level of SLA around critical systems. At the time, there was no more critical system inside of a business than email. Before we had this confluence of video and strong use of Teams or Slack or other collaboration tools, email was it. If email ever went down, that was truly the lights-out situation for a lot of our enterprise customers. So by just the nature of having so much of that operational responsibility, it allowed them a ton of responsibility of making decisions that were important to the business.

{audio:0:10:29} At many times, though, we would find ourselves starting with the CIO and finding either neutral or even passive or active resistance to moving forward. We'd quickly tried to push it up to a business discussion with the CFO where we would start talking about what in business you want to be? Do you want to be in the business of managing emails and managing operational systems, or do you like to parse that off to someone who is creating a complete business model around this in such a way that Microsoft could demonstrate? Those discussions helped us move the needle very well in developing deeper relationships outside of IT that have continued to carry Microsoft’s journey in driving cloud business.

{audio:0:11:12} What was the decision-making process for the enterprise customer? You go in, and you have this suite of software. How do they make this decision to purchase Office 365 or alternatives?

{audio:0:11:24} One of the attributes we had working in our favor was, in almost every case, you had a customer that was already well entrenched with Microsoft’s on-premise productivity suite.Excel was ubiquitous across the organization; PowerPoint, ubiquitous; Word, ubiquitous. So you had this base already established with usage. Early on in my career at Microsoft, I spearheaded a lot of the movement from the Notes environment to the Exchange environment. We had already won that battle, so to speak. We already had the Exchange environment with an active directory and all the benefits. So you were starting from an enviable position anyway.

{audio:0:12:12} If you think about Google and their attempt to get into the enterprise productivity suite, Microsoft did a tremendous job of creating almost a paranoia in the business that we were going to lose to OpenOffice or that Gmail was coming in, and they were going to take share from us. That never manifested itself because we created, I think, so much groundswell of underdog even though we were the clear winner in that space that it never really manifested itself in reality. Still, the market share is so high there.

{audio:0:12:45} I think you start talking about the decision-making process. Every one of these organizations had a sponsor if you will, someone that owned the Microsoft suite. You'd start with the ability to show them the value proposition, financially, of what it would mean if we could move them. You'd spend a lot of time talking about their sunken costs in running this capital, the costs of an on-premise software solution related to everything from SharePoint to Exchange, and what have you. The numbers started to work, and then you'd find out where you were with the CIO at the time. Were they a supporter? Were they neutral? Were they somewhat of an opponent in the journey? From there, that strategy would entail, as I mentioned before, going up through the CFO to justify certain things.

{audio:0:13:37} We really found that we had to make it much less of what I could say is a religious battle and much more of a practical one. That's where that data centerpiece came in. It became how we took the legs out of a number of data center managers and folks that looked at this as the way forward. We debunked it. We said, why would you stand up this multimillion-dollar, $1500 million-dollar investment? This is not good business for you; this is not the business you're in. Shift to something you're great at, which is your industry, your focus area, and let others manage your IT environment for you. It crystalized the concept of a managed service, if you will, in a public or a multi kind of environment.

{audio:0:14:24} Would that infrastructure discussion come at the same time you were having the Office 365 sale? Would you be doing that as a salesperson, or would the Azure sales team then also come in?

{audio:0:14:35} That was before we even had a deep Azure footprint. It was operating before that. Today, the teams are much more tightly aligned, from my understanding. We're talking a little bit of history back from 2017, when I departed. At the juncture of where they are now, the two are synonymous. There was a lot of talk of bringing these two teams together and what's interesting is you have, as I understand it, two teams running particular workloads or focus areas that are still the same. You have a team running on the productivity side, you have a team running on the Azure side, but you do have an account executive, and you do have a core team that's focusing on both elements of the spectrum. They're really working to find the balance and much better synergies in the silos than there ever was. It's much more of an ecosystem type of sale today than it was back when I'm describing.

{audio:0:15:30} How important do you think Microsoft’s hybrid cloud strategy is to maintain in the 365 business?

{audio:0:15:37} I think it’s less important to maintain the hybrid nature of their offering in the 365 example than it is in the Azure example. There are so many cases in point where I am today at Teradata; the nature of having a multi-cloud offering is what we tout as one of our biggest differentiations. Why? Because very few customers want to lock in with one cloud vendor, very few customers have found a way to go all native cloud. In the case of Teradata, we're on a fast approach cloud journey. You still have a number of workloads and highly complex pieces of their business that are just optimized to run on-prem, and they're in no hurry to move that to the cloud at the risk of performance or at the risk of where we are or where the CSPs, our competitors are, of managing to that level of complexity.

{audio:0:16:31} Now, this will all change in the next two years as everyone's boats are lifted from the rising tide of figuring out how to do this well, but that’s really where the hybrid strategy comes in for Microsoft that is differentiating, and that's around the Azure business.

{audio:0:16:48} How does the Azure business or Windows in drive retention of the 365 business in the cloud?

{audio:0:16:57} The two are tied together very nicely. When we start talking about how the infrastructure is designed now and cloud-optimized both from an on-premise situation as well in the native cloud offerings, Microsoft’s and any large CSP strategy is how can you get the most traction and the most “stickiness” inside of the offering. Candidly, Microsoft has done a very nice job of creating that in a number of ways, whether it was through SQL or whether it was through a Windows server and the Office Productivity Suite, which we now know as Office 365.

{audio:0:17:42} So why do you think Google struggled to compete with 365?

{audio:0:17:48} We beat them back in the day because Google attempted to take a good enough strategy on a productivity suite while we would be constantly berated for having features, functions, and capabilities that were not used by everyone. Still, there were enough of those capabilities that might only be used by a few that became things they couldn't live without. Even though we only represent 10% of your population that use this piece, this is critical to doing actuarial calculations across our financial services business. That's a great traction and sticky point, and Google having a good enough strategy didn't work as well.

{audio:0:18:27} The other side is it made it very difficult to have a small subset of your organization that would run on Office 365 and maybe do a good enough strategy for everyone else. It didn't help with collaboration and productivity to run the two separately. I think the third piece is Google's strategy at the time. I can't really speak to their productivity strategy today. They really ran this view inside the market that they were commercializing as a search engine and trying to use data in a way that made a lot of enterprise customers uncomfortable. Whether that was 100% the truth or the perception or how maybe we were spinning it or others were spinning it, that became a real challenge for Google to break into the enterprise at the time with the enterprise offerings that they had.

{audio:0:19:25} When you came up against them, what were the main reasons you would maybe lose a customer, or they would favor G Suite?

{audio:0:19:33} This will sound arrogant, but I can't recall anyone I lost under my watch in the business because they have better technology. We lost some because of commercial reasons, meaning they were doing a lot of things with retail at the time, and therefore, it made sense for them to go all-in with Gmail because of other overarching partnerships they had. In any value-based relationship, there are points in time where the relationship piece becomes frayed or broken. Whether that's through contracting, negotiation, we had some frustrated customers that probably said, you know what, we're not going to work with Microsoft anymore because they're not listening to us. They're out of touch with our needs, and we think that we can save some money going in this direction.

{audio:0:20:25} We saw that more so in the small to medium and commercial space instead of the large enterprise size. It wasn't a place where we saw many losses, and as I said earlier, we operated with this almost maniacal sense of underdog. We had a mandate that we would not lose to Google, and you see this strategy play out when you have a pretty good war chest. You can buy some business at times, and I saw us buying some customers at really assertive discounting because it was necessary for the long-term viability of our strategy in the account.

{audio:0:21:04} You mean the kind of retail partnerships that they would even try and leverage their search business and sell Gmail or the G Suite to customers to compete with Microsoft?

{audio:0:21:13} Absolutely, that would be part of a way that the retail customer knew that they had a very favorable or a significant relationship from a search/add/monetization strategy, so, therefore, that was just part of their strategy to build it in. It came back to the old IBM strategy around Notes. They were pretty much giving that software away for the consulting business and the infrastructure business. It's an age-old strategy played out even to this day. I'm seeing it with some of our competitors today around Teradata.

{audio:0:21:47} What makes the 365 business so hard to compete with?

{audio:0:22:06} Like all these things, there are the elements of technology and people coming together. Microsoft has an amazingly talented sales force. In the early days in 2002, when I joined Microsoft, we used to hold up a survey of who were the best-recognized enterprise sellers across all of our competitors. Microsoft was always in the seven to 12 category of staff rank. Having that north star of what it's going to take to get to number one, I'm pleased to say that as I left that organization, Microsoft was number one in the last three years of that survey.

{audio:0:22:48} We focused on understanding the customer, understanding the customer's business, understanding how we evaluated deals and technology. Coupling that with a strong push from a technology innovation perspective and a strong M&A strategy all worked out well for them. We decided to take a pass back in the day on pursuing Slack at any level, and I was part of the team that said, well, we can build this. We can build a solution, and we'll call it Teams. What we created with Teams and how that rolled out and where it is today is a testament to just having a good understanding of the customer and also having a technology and engineering team that can pivot quickly to develop something that has clearly won some market share in that collaboration space.

{audio:0:23:47} It's interesting you brought up Teams because I was just reading an old earnings call from Microsoft and Nadella talks about Teams. He says something along the lines of the reason why they built Teams is that, effectively, it’s the glue that sticks all the tools together. It's become not only the collaboration tool with the customer, but it effectively collaborates the whole suite that Microsoft offers, which I thought was pretty interesting.

{audio:0:24:14} It takes a slant on SharePoint and file sorter. It takes a slant on email. It takes a slant on workflow, the one piece that I probably failed to mention earlier in your question, but it really holds true. One of the greatest attributes Microsoft brought forward was the integrated innovation that we could bring. Maybe there was a technology that was better at doing all of it, but when you brought the entire ecosystem together, on that ability to have integrated innovation end to end, no one could beat us.

{audio:0:24:46} Teams, by design, early on, wasn't designed for that at all. The original thinking was that we just wanted something to stand up that emulates the pervasive chat in a way that Slack does. Then the bright minds got around this and said we have something here that's pretty darn special, and it has continued to grow and blossom on capability. Here at Teradata, we have moved very heavily onto Teams and are using that across our ecosystem. It's amazing where it started and where it is just from a casual end-user now, and looking at it, it's a super powerful tool for us.

{audio:0:25:20} How do you compare Teams and Slack today, from a product point of view?

{audio:0:25:23} That’s a discussion probably others could do more justice to than I. I used Slack at a previous company for a while. I really liked Slack and where I liked it was if I was to stand up a way that I could communicate seamlessly in the organization across, say, a deal. We're trying to close a large deal, and we bring everyone into the chat, and we follow it that way. It was really good at doing that function for us, and I'd say even better than Teams. Teams takes a chat in a channel approach that makes it a little bit more clunky but uses Teams for all of the video and the conference calling capabilities. I don't think you can touch it with anything in the market for fidelity, stability, and the things that make this new world of work. We're all in a super seamless approach to doing business.

{audio:0:26:14} I’m just thinking long-term here and how it becomes a scaffolding for the whole Microsoft suite.

{audio:0:26:20} Think about why Salesforce still bought Slack? Salesforce is an amazingly powerful tool, but it is a bit clunky. Chatter is kind of clunky to use; I've used it now for five years, and I don't really care for it. I'd much rather use a Teams or a Slack UI with that kind of functionality for me to drop a quick note into someone to ask about status or talk about pricing. Even to view things or pull teams together in an ad hoc discussion that, to me, is really the benefit of the scaffolding and why it's so popular. When you look at where Teams is moving into Dynamics and Dynamics 365 and other aspects of the portfolio, I think they're just getting started with this as a – I like your term – scaffolding in the business.

{audio:0:27:18} How important do you think that is to convert customers from Slack to Teams?

{audio:0:27:22} I think it’s tremendously important. I look at those who are leading right now on this journey versus those who haven’t. I think Microsoft was very surprised by the success of Zoom; Zoom went like wildfire. Everybody looked at that business model and said, what was it about this business model that made it so good? Zoom is okay but has nowhere near the functionality, but there are tons of enterprise meetings I'm getting on with customers using Zoom as opposed to Teams.

{audio:0:27:55} I think it is WebEx and Cisco who have a real challenge here. They have not pivoted, and having spent a little time with those folks, I think it will be an interesting game of how important a product like Teams plays out versus not having that product but being in their collaboration suite, like a WebEx. That's going to be an interesting case study, over time, on how that works out. If I were thinking longer term, I’d be betting very heavily on a platform like a Slack or a Teams, or even watching what Zoom can do with their market share as they start to build up that strategy. It's super exciting to see in this space.

{audio:0:28:36} But Slack and Zoom can't integrate the suite that Microsoft has or integrate with Teams.

{audio:0:28:42} Who knows what collaboration looks like 10 years from now.

{audio:0:28:47} Back to 365, what is the biggest competitive threat in the next 10 years for Office 365?

{audio:0:28:53} I think it’s disruptive business models. We’ve always tried to do our best to understand and to, in the famous Wayne Gretzky term, skate to where the puck is going. I think that there's a reason that companies like Microsoft have people that are in the basement level of some buildings whose only focus is what is the five, seven, 10-year plan and war-gaming those things out. They'll probably see less than 10% of their efforts come into a product. They’re willing to invest and spend that much revenue, that much R&D to only be right less than 10% of the time on a direction. That's a pretty interesting hurdle rate for a company, but the fast movers and the surprises that we see coming up are amazing to me.

{audio:0:29:45} I'll use two examples that I mentioned. Zoom caught a number of large-scale organizations in the collaboration space by surprise, but when I was at Splunk, there was a small company called Cribl. Cribl found a niche to enter and is growing like crazy right now. They're figuring out a way to take some of the cost out of a Splunk implementation by cleaning the data, so it becomes a much less capacity-on-demand going through Splunk. That's a very disruptive business model that I think we’re going to see more of as agility and quick cycle time development continues to come up into the markets, where it's very hard to predict where those niches come into a real-world product or a real-world company.

{audio:0:30:39} How do you think Google Cloud could impact the threat of a G Suite on 365?

{audio:0:30:46} Google is not lying idle by any means. They've hired a bunch of enterprise sellers from Microsoft and other tier 1 software companies. They've got some bright minds in that go-to-market space. They have great technology. I've used Gmail, G Suite and Google Drive, and other elements, and it’s formidable. I think it will take something else that they do and something else that they disrupt around that will give them that opportunity for another chapter to be written in that space. It might be around data, AI, ML, who knows. We’re just seeing the beginnings of how that comes to light inside of whether it’s workflow or productivity or ways its companies are operating from a predictable analytics perspective. We’re just at the beginning here, and I think Google has a unique value proposition on having a lot of that underway that might be ahead of its peers.

{audio:0:31:43} I look at Office 365 and the franchise has been going for so long and it's still growing rapidly. If we look back in 10 years, 2031, and again Office 365 declines to only 10% market share, what could be the reason?

{audio:0:32:15} Microsoft wasn’t born in the cloud; they still have on-premise assets. Google, born in the cloud, cloud-native offering. What if there was some sort of – I hate to give a conspiracy here – but a cataclysmic situation where the public cloud was irreparably corrupted in some way, and it took weeks and put people into a downtime situation? What if it completely reshaped the landscape of what we considered to be stable, structured, and secure in a way that we lost trust, we lost security, we lost stability. And maybe that’s your nuclear point. If that happens, it's all bets are off at some level.

{audio:0:32:58} I also think a lot of these companies go through leadership changes. I'm dealing with one at Teradata right now. We're making up quick ground on some leadership decisions made in the past that, candidly, probably hurt our ability to compete in this day and age, so we're playing catch up there. That is something where you can have a few, dare I say, bad decisions that are made in a business that take you down a path, and it's hard to recover quickly on that.

{audio:0:33:25} I think Microsoft was on that path at one point in the late 2000s, from 2008 to 2010, and there was a lot of chatter in the markets about how Microsoft has lost its way, it missed cloud, it's a has-been, it's client-server focused, it's not going to recover. It took them some time to recoup on that, and you can kind of follow that by looking at their stock. Their stock was 16 in the 2000s, and what they had to do to move that back to a viable company really came from, using Satya’s term, probably some pretty heavy growth mindset; failing fast and figuring out how to get it back on track.

{audio:0:34:11} So moving through this process, you’ve converted the customer; how do you think about upselling seats for commercial 365?

{audio:0:34:28} It's been some time since I was there, but they always operated on a maturity of their suite offering or their E SKUs. So you have E1, E3, E5, and as you moved up into E5, it allowed you to have some of their real-time collaboration technologies as part of it, which would be Teams or Voice Video or utilizing a phoneless system, if you will. Nothing could be, in some ways, better for Microsoft than what we’ve just been through in the last two years. With working at home and Covid, we've seen users that never would have needed this come on board. What you might call a deskless worker or someone who only needed a few of the things in the collaboration suite suddenly went from needing some of it to needing all of it because we no longer have a world of work that represents it. That would increase your seat growth based on the maturity of the sale, so to speak.

{audio:0:35:23} Then you start seeing that Microsoft stood up in recent years which was a strong push in areas where they saw some erosion. That was in the small or medium business and that commercial space. They had to pivot very quickly to stand up an inside sales organization that had a very high number of individuals, at a cost to the business that they'd never had before, to come back where Google was making some really good inroads to driving their G Suite footprint into the business.

{audio:0:35:56} The other interesting piece is that I think Microsoft still has a lot to learn about how to work inside higher education and get mindshare at an earlier age. If you think that the people 10 years ago sitting in high schools and colleges, who are now in the workforce probably grew up more with Gmail and suites of free products than they did with the Microsoft Suite. I can speak to my journey with my children watching that. Microsoft still has really not been able to capitalize on that as much as they could, but at the same time, these individuals joined organizations and learned about how to use the more robust suites, so it almost became like a rite of graduation. Okay, you've made it. Now you get to use Microsoft's productivity suite. You don't have to use the good enough anymore. There's been a big play on that; we used that play as we talked about new hires in some of these corporate trainings that we would do as a CSM, which is, here's the enlightened suite you now get to use.

{audio:0:36:57} I'm thinking of our company. We're obviously a very small startup. We use G Suite but I have a consumer Excel because I do modeling in Excel. How did you see any potential pressure of the younger startups growing? What's the ceiling they hit when they convert to the enlightened package of Microsoft and is that changing now because, as you say, Google is a cloud-native business, and maybe younger people today are starting on more collaborative cloud-based productivity tools?

{audio:0:37:33} It was a problem statement I didn't have to focus on very much because I was in the enterprise space, but it was one that we knew was coming. I don't know what they've done or how they've combatted that, or what progress they've made outside of really standing up a much deeper, we'll call it touch, on to those individuals that are moving from university and into the corporate ranks but also in companies your size, where they would actively campaign and try and win you off of G Suite. Whether it's through price point or capabilities that fit your needs better, maybe around the fringe so suddenly you're looking at a tool that Microsoft has, you know you could acquire that tool very easily through Office 365, or you could buy it for $30 a month by subscription on a standalone.

{audio:0:38:21} Suddenly, if it's integral to your business success because of what you're in, guess what? You're going to flip your whole business to moving Microsoft Suite because it just can’t be handled from the G Suite. I think there’s some of that to their strategy as well, but I’m speculating.

{audio:0:38:36} It's a much harder sell now. There are so many tools available like Zoom and Slack. We can stitch together our own enterprise stack, but obviously, we're a drop in the ocean for these companies. Really, it’s the fact that Microsoft had the server business that enabled them to shift to the big enterprise and keep that business in the cloud.

{audio:0:39:00} Yes, the classic model of incumbency, in some ways, is key. Someone told me this recently, and I thought it was interesting. When you think of the term legacy in the context of how we use the word, we talk about legacy leaders, that’s a great leader. Or we talk about legacy athletes, like Michael Jordan. But when you talk about software and technology and legacy, it’s just a flat-out downtrodden view of the world. I'd argue where Teradata was for 40 years being called a legacy is, at this point, giving us a little bit of a differentiation because we figured out over 40 years how to manage the most complex of environments that still are not being touched in any way, shape or form by our competitors. So we're going to be using that same plan, if you will, to use our incumbency to move into the cloud in a way that, over the next few years, should not only gain much more market share but also retain those that are considering going to an alternative maybe cloud-native strategy. So it played out very well for Microsoft. It should play out pretty well for us, too, here at Teradata.

{audio:0:40:09} What were the biggest challenges upselling from E1 to E3 to E5?

{audio:0:40:13} At the time, getting a customer to E5 was around the real-time communications piece I talked about. Getting to E5 gave you the Skype for Teams environment. If you back up to about the time I took over the worldwide communications business, that was when we had acquired Skype, and we did something very interesting there. We liked how they were working within Skype; it was much more what we aspired for. They were using agile methodology; they weren't using waterfall. They were developing almost on a model of, the user needs this feature so we can put it in and go. The agility Skype had was really of interest.

{audio:0:40:58} However, we moved the Lync team underneath the Skype team, and I think this was a real critical mistake that we lost some traction on. We dismissed all of the enterprise skillsets, all of the know-how it took to operate in the trustworthy computing environment that Bill Gates had spent an entire year really refocusing Microsoft on. We lost that for this speed and agility and maybe the sexiness of being on the Skype team, and it was an absolute oil and water miss. That resulted in what I felt was a pretty kludgy product and pretty shaky stability in the early days of that E5 journey.

{audio:0:41:45} So our chance to come in and knock out a Cisco/WebEx at the time was super hard to do because they were pretty tried and true, pretty trusted, pretty stable. We were using a lot of our negotiations and a lot of our concessions on taking down the price point on E3 to move someone into E5 with the idea that customers wouldn’t have the best of experiences early on, but with most things Microsoft, gen one is usually not the place in which to invest. That is generally in the gen two, gen three, as you can see from a long history of their product roadmap and life cycle; they get it figured out over time. They are adept at modifying and adjusting, and that's exactly what they did. That was a big hurdle for us; a real hurdle on moving them and also understanding the cost models.

{audio:0:42:37} We all were moving on this cloud journey, and it wasn't like we had a blueprint on how to cost this. We had the challenges of a dedicated versus a multi-tenant; we had all the challenges of running in a federated environment that we had to figure out and price. Microsoft was a profitable company, and we didn't create a lot of things where the margin was super low. We had a history of really high margin success, and that was one of the bigger hurdles we had on gaining mindshare with a product engineering team on why they needed to shift to a cloud model was just that. Your profitability will hit bottom pretty hard for the next couple of years as we build this asset up, and we had to do that at the expense of some of them.

{audio:0:43:20} How did you price E5, for example, as you were switching to cloud?

{audio:0:43:25} It was part of selling something that was a bit hybridized because, in the earlier days when we were driving the Microsoft Suite discussions, the E5 was about okay, all this is in the cloud, but this piece is kind of in the cloud but kind of not. As soon as you start talking about some of the other things you had to do around SIP and the real-time communications pieces, that took on a number of things and endpoints we didn't control. As you started talking about the move to PSTN and these types of things, those were kludgy solutions that weren't necessarily designed for born in the cloud. The pricing took on teams and teams of people that took some ways that not only did we price, but how we built comp plans around it; it was an iteration process each year, so to speak. I wasn't as close to the pricing and the modeling as probably some others you could find.

{audio:0:44:20} On this E5 communication piece, you mentioned how you struggled with Skype. After you co-added with Lync, how do you think Teams changed that conversion from E3 to E5?

{audio:0:44:34} Born in the cloud. They have found a way to integrate this into the entire stack where they took the assets from all of those other builds and made this from the ground up. That was a unique place for us to take a lot of the lessons learned on our journey from PlaceWare to Lync to then to Skype, and how do we take all of the learnings that were good and bad and create this product that allowed us to have a fairly lightweight collaboration tool known as Teams? I remember I was starting to get ruminations that we were going to sunset Lync and Skype for Teams, and I thought, wow, how will that happen? And I think it's gone off quite well by all stretches of the imagination. I think they've been very pleased with the journey they've been on to get this userbase predominantly into a Teams environment.

{audio:0:45:31} This also seems to be a larger reason why we see that Office commercial revenue growth, which is that conversion to E5, and Teams seems to be a large part of that. Is anything else potentially driving that?

{audio:0:45:47} As I said, there was a massive shift they told us was coming that we never believed in, which was that Office 365 would be a small subset of what Azure had the potential to be. I think we were using Office 365 to set the stage to sell Azure in the early days. Now I would say it's completely flipped. I think Azure absolutely is the vehicle we're driving, and we're just benefitting from that growth of the Azure footprint across the commercial space and obviously into the federal, state, and local government. It's amazing how these models come together with some very smart people making calls on things that your average layman of a sales leader would say. I don't see how that's ever going to come to pass. This one was just spot on. I pride them on their success there.

{audio:0:46:42} What experience did you have in upselling or cross-selling Dynamics in the other enterprise products with Office 365?

{audio:0:46:51} Really early on, we decided to take on a black belt team that was the Dynamics global black belts. We had a team across the Americas that was probably 40 people, and we started that for a year and ran that for one year. We brought in a new leader that came over from Salesforce, and we determined that the model didn't fit as well as we wanted it to into the Office 365 black belt team, and so we spun it out. They continued to run a Dynamics black belt team, but it wasn't connected to the Office 365 black belt team after year one. So we had some early success with it. That was a business call that was made.

{audio:0:47:37} I was a recipient of having created that team and having it spun off and watching it find its success, which was fun, but I would have liked to have had it for a few more years. I think we could have done some good stuff with it. Look at the success and the market share that they've successfully done to grow; not necessarily against Salesforce, but we always looked at Salesforce's market share at the time. Maybe it was around 25%. The perception was that they had 60% to 70% of market share, but when you started scratching the surface, there was so much of the other in that market share. There was Siebel in there, and there were all these other homegrown proprietary systems.

{audio:0:48:17} The value of moving the focus from trying to compete against Salesforce to just trying to take out some of those proprietary and legacy, using the term legacy systems, that didn't have a roadmap of success, really started to hit home. What a change in strategy that was for Microsoft. They spent so much time early on thinking they were going to be competing against Salesforce; that was just climbing a greased rope. They weren’t going to be successful there, so they pivoted. Then they've gained a share in the overall space nicely.

{audio:0:48:49} Is that sold separately to enterprises, or does that also come with E5?

{audio:0:49:00} It was never part of E5. It was standalone at the time. What they've done with it today, you'd have to ask my CIO. She's procuring all the Microsoft products for Teradata these days. I think it probably is still standalone. Microsoft, years and years ago, went through a real challenge with bundling. There was a DOJ decree. We erased the word from everything we talked about, and so they've always been very careful of getting caught up in anything that could be construed as monopolization on pricing through a bundling process. We were super cautious not to get over our skis in any of that journey.

{audio:0:49:36} After your experience with Splunk, how do you think Microsoft is positioned in the DevOps layer?

{audio:0:49:43} Formidable. They came out with Sentinel, and I can think of other products at Microsoft that are truly in a good enough strategy for doing some things. Sentinel is gaining ground very, very nicely. They're a formidable competitor; and when we were at Splunk, it was pretty well known. I wasn't concerned about the niche players, I wasn't concerned about the Datadogs of the world so much, and I wasn't concerned about the Cribls. They were going to find a path. It was Sentinel I was worried about, and it was really where our senior leadership, which I was part of, were all worried about what Microsoft’s plans were around Sentinel as it related to the footprint we had with Splunk.

{audio:0:50:27} What worried you exactly about Sentinel?

{audio:0:50:31} Microsoft has a history of taking a product that's good enough and making it great. They'll do that through a giant war chest of acquisition. They'll do that with the ability to have integrated innovation and control points. They just happened to have the second-largest footprint with Azure in the world, so they stand a good chance to be able to impact and influence customers on how they would manage that space with a tool that they've created around that, as opposed to a third party like a Splunk.

{audio:0:51:07} Why didn’t the likes of Datadog worry you at Splunk?

{audio:0:51:08} I think the engine is better, and someone that's deeper in the technology footprint could probably challenge me on this, but the way we would talk to customers, our greatest problem at Splunk was on our UI and our ease of use and how you could do things quickly and elegantly. Datadog nailed it. They had a great UI, and they really spun that up, and they were also born in the cloud. They were a fast mover to be born in the cloud, and Splunk was not. Splunk was converting to cloud, so they were dealing with that nascent ability to convert themselves in the eyes of their customer, to some degree.

{audio:0:51:46} Splunk had some great M&A activity right about the time I joined, and that made them a real viable competitor to be much more of a platform company than really just something within the security ranks, but I do think that the engine was better and that's why I wasn't as worried about Datadog. I wasn't losing big customers at Splunk to Datadog. We were losing around the fringe. Success around the fringe was where Datadog was eclipsing into my space which was, again, the large enterprise business.

{audio:0:52:20} It was mainly to Microsoft that were cross-selling their Sentinel service.

{audio:0:52:24} We weren’t losing per se to Microsoft when I was at Splunk, and this was just a year ago. What was happening was we saw where they were going. What's the term; winter is coming? We just saw where it was going, and I've seen this playbook before, I helped create maybe some of that playbook, and I just knew what Splunk had in store for us, and it was going to be a rough one.

{audio:0:52:50} How do you think these companies like Splunk are positioned in the DevOps layer versus all players like Microsoft?

{audio:0:53:03} Some of it's the general anxiety a company has about being all bought into one vendor; that's an age-old concern that should still be viable. If you've got your entire productivity suite, your entire AI, ML, all your data living in that same customer realm such as Azure, you start looking at how you’re managing all that with all of their tools. You suddenly can look down the road or look back over your shoulder and you realize you are an 80% Microsoft shop, and you didn't even notice it. That vendor lock-in is real. You benefit, at some level, from your ability to negotiate, but once you get wedded to that, how hard is it to unravel the commercial opportunity that you might have had as a way to negotiate better deals or less risk in your business? That's a real problem.

{audio:0:53:59} Again, at Teradata, we're playing to that risk because we have a multi-cloud strategy. If you want to run parts of your business in Azure, parts in Google Cloud Platform, parts in Amazon Web Services, we can accommodate that. Do you want to run part of it on-prem along with it? Great, we can accommodate that. Not every company has that flexibility, and I think a big part of it, in my eyes, is that vendor lock and risk. Also, Splunk has some very, very unique technology that works and something else that's very different from Microsoft. When I first joined Splunk, I was surprised that they had a user conference, and they had the fez-heads. This was a user group of MVPs, if you will, so they did a nice job at Splunk of creating real zealots. People that lived and breathed and loved Splunk at the developer level, at the hands-on level. Microsoft struggled to have that. They were much more of a commoditized, good enough, good price point, maybe playing more to the business. We were constantly running into challenges with architects that didn't buy into our strategy at Microsoft or looked into it as being looser than they wanted it and not as capable or not as buttoned-up.

Selling Microsoft Office 365 Commercial

Former Modern Workplace Leader, Americas at Microsoft

inpractise.com/articles/selling-microsoft-office-365-commercial

Executive Bio

Jordy Almgren

Former Modern Workplace Leader, Americas at Microsoft

In Practise Notes

Interview Transcript

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Selling Microsoft Office 365 Commercial(October 5, 2021)

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