Investor Relations Fireside Chat Series: Microsoft Teams
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Investor Relations Fireside Chat Series: Microsoft Teams
Jared Spataro – CVP, Microsoft 365
Jeff Teper – CVP, M365 Collaboration with Teams, SharePoint, OneDrive
Hayete Gallot – CVP, Modern Work & Security, WW Commercial Business
Michael Spencer – GM, Investor Relations
Mike Spencer:
Welcome everyone. My name is Mike Spencer, Head of Investor Relations here at Microsoft. We've heard a lot of questions from you over the past several months about Teams and Microsoft 365. So today we've brought together a number of our leaders to answer some of your most frequently asked questions. We have Jared Spataro who runs our Microsoft 365 business. Hayete Gallot who leads our Salesforce in this space, and Jeff Teper who leads product development for Teams.
Mike Spencer :
Today's discussion is focused on Teams and Microsoft 365. However, we are planning on this being the first in a series of videos focused on strategic areas for Microsoft that are top of mind for our investors. So we'd welcome any feedback on specific topics, the format, or other suggestions you might have after you've viewed the video. So please reach out to us directly with any feedback. So let's kick things off. We'll start with a question for Jared. Most investors and customers are familiar with Teams to some degree already. Could you please share how our investor base should think about Teams and how you pitch it to us?
Jared Spataro :
Yeah. Thanks, Mike. What's clear to me is that when historians look back on this year 2020, what a year. They're going to characterize it as the end of the post-industrial era and the beginning of the truly digital age. So we've seen video conferencing's quickly emerged as the immediate market need in response to COVID work from home restrictions. But really I think of it this way. The long-term strategic opportunity is winning the digital platform that's going to power work, life and learning over the next decade. That is Teams. We think it has such an opportunity here to be that platform.
Mike Spencer :
Great. It's clear that Teams is becoming a bit of a focal point for customers. So Jared, let me ask a follow-up. On our last earnings call, we actually called out two stats. Teams is now having over 115 million daily active users. And then Microsoft 365 users generated more than 30 billion collaboration minutes in a single day. So with these momentum points as a backdrop, could you help investors think about the importance of Teams within the broader Microsoft 365 portfolio, and why is this new collaboration metric important in demonstrating that?
Jared Spataro :
Sure. In talking with customers, one thing that's emerged is this idea of what I call the flow of work and staying in the flow of work. It's about so much more than just video conferencing. It's about recreating the way people get their work done in a really natural way when they're in their physical environment. So in Teams as an example, we see that flow of work really play out. We see meetings, of course, but we also see small group puddles, chats, calls, document collab, and even individual work. I think about it like this. You collaborate on a PowerPoint presentation just before a meeting. You share it with participants in SharePoint. If you miss the meeting, you can access the recording via Stream, you can catch up on what's happening via our Persistent Chat. Action items can be automatically assigned and Lists. With Power Platform and Teams you can build productivity apps using Lists as the data source, and you can connect Dynamics 365 to Teams. So you can even see line of business information and take action.
Jared Spataro :
So what makes Teams so exciting is that it brings all these things together. It's unlike anything that we've ever done at the application layer. I'd like to think of it as a shell and it has that platform effect that a shell has. I love the 115 million daily active users stat because it shows momentum. But daily active users really only tells a proportion of that shell collaboration story. So, as I think about this, I think that it provides this amazing base and those stats are important because 115 million daily active users show some reach. But then that minutes, the minutes metric for us really shows intensity of usage. And when you put those two things together, I think you get a much more complete picture of what we're doing with the product and with the product as a platform.
Mike Spencer :
Great. Well, thanks, Jared. I want to turn to Jeff for this next question. And so Jeff, beyond Microsoft 365, we've also been hearing a lot more around Teams as a platform, including extensibility points, app integrations, cross-platform capabilities. Could you help our investor base understand just exactly what platform strategy behind Teams is and what it means?
Jeff Teper :
Sure. So Teams is where work and learning takes place for hundreds of thousands of organizations around the world. And as Jared said, Teams is not just getting used for chats and meetings and collaborations, but customers are accelerating integrating their own applications and workflow within Teams for simplicity so that users can stay within the flow of their work and IT can have a holistic and security compliance solution.
Jeff Teper :
There's a spectrum of options that customers are using to transform their organization with the Teams platform. They can use apps like Adobe or ServiceNow, or Workday and hundreds of others from the Teams App Store. They can build low code business solutions with our power platform tools inside Teams to address their rapidly evolving business needs. And they can integrate their own custom line of business applications and content management solutions that their IT department or partners build in one solution. So we see that happening across multiple industries, from healthcare to financial services, to retail, to manufacturing, with big name customers like Kaiser Permanente, ABN AMRO, Accenture, and many others.
Mike Spencer :
Oh, thanks, Jeff. Staying on that customer theme, then let me shift and ask Hayete a question here. So Hayete over the last eight months, the timeframe certainly has pushed our customers to rethink how they approach productivity for their employees, especially in this remote environment. Can you walk us through the dynamics you've seen in our customer base over that time? And more specifically, how the customer's conversations changed and how is Microsoft responding to those?
Hayete Gallot :
Yes, for sure Mike. For a long our customers have worked with us to become what I would call more efficient. But now what they want is to become more resilient. They want us to help them build capability in their org, and their people to adapt to a volatility. And in that context, customers are prioritizing technology as a critical factor to their success. And this is accelerating their decision-making. NHS in the UK is a great example. We moved 1.2 million users to Teams in a span of a week. Helping the NHS become a connected org. And as work becomes more digitized, there's even more data and devices to protect, and our customers are concerned about their security posture in protecting their IP.
Hayete Gallot :
Zero Trust, [inaudible 00:06:40] Threat Protection, Modern Security Operation Center, and data loss preventions are becoming key discussion topics for every one of our customer. And this is an opportunity for them to consolidate many point solution and reduce cost.
Hayete Gallot :
And with the shift to remote work, CEO's are trying to understand what is happening with what they call their invisible workforce. They're asking, "Is my organization still connected? Are people overworked? Are we still engaged with our customers?" And with M 365 and at Workplace Analytics, we actually have a feedback loop and we're able to provide behavioral insights so that those customers, those CEOs can make the right decisions.
Hayete Gallot :
And finally, customers are looking at this new technology to empower their cultures, and they're leveraging capabilities like Teams, Live Events, Yammer communities, and SharePoint to enable engage with both their information workers, but also their first-line workers, which is very new for our customers.
Mike Spencer :
Building on that customer dialogue. A common question we get from investors is on differentiation in the market for Teams versus other solutions. So first, can you share a few key points of differentiation, and along those same lines, where do you feel like Microsoft still has work to do? To give you an example, external collaboration is one of the more frequently asked about features in Teams. So how do we address those feature gaps and how does the dialogue with customers go? So why don't we turn to Jeff for this one.
Jeff Teper :
One of the biggest differentiators we have in Teams is, we said this, it enables you to do everything in a single place, your meetings, collaboration calls, and workflow. That is an important functional difference. But Teams is also unique in how it delivers each one of these experiences. So for example, we've designed Teams to provide virtual interactions that are much more natural and engaging and ultimately more human. With new capabilities like Together Mode, it makes meetings more fun and helps you focus on other people's body language and faces and makes it easier to pick up verbal cues that are so important to human interaction.
Jeff Teper :
In addition, we're adding new capabilities like Virtual Commute, which will provide much needed structure for the remote workday. All of these and more contributes to employees wellbeing in the workplace, which we hear is top of mind for our customers.
Jeff Teper :
And then to answer your question about cross-organization collaboration. We built Teams to help break down barriers inside and outside organization, including a cross collaboration boundaries with customers and partners. We've enabled this in a number of ways today with External Access, Guests Sharing, and of course, organizations can have external participants easily join meetings in Teams without the need for any download or plugin with best in class security. We know there's more that we can do, and we're working on making cross-organization collaboration even more friction-free and more secure. So we're constantly refining Teams based on what we hear from our customers.
Mike Spencer :
Thanks, Jeff. So let me then turn back to Hayete. Within our customer base, are you finding that customers are using Teams alongside other collaboration platforms or do you see more customers focusing on only one? And then if I could double click a bit more looking at video calling specifically, because I know that's top of mind for investors. What is the dialogue for those customers who may have already chose a competitive place?
Hayete Gallot :
That's a great question, Mike. When the crisis hit, customer said, "I need devices. I need solution to conduct online meetings." And in many cases, they just run multiple solutions in parallel. They're now moving to a new phase. They're actually trying to rationalize those solution, looking for a platform that can do more than meetings and actually deliver run their collaboration needs, while addressing their security and compliance needs as well. And it is not just about video conferencing, it is about providing chat, meetings, voice, whiteboards, office apps, third party apps and business processes. People just don't open Teams to join a meeting and close it when the meeting is over. They work in Teams all day.
Hayete Gallot :
As an example, look at Honeywell. They extended Teams with real wear and wearables so that their field technicians can collaborate with other workers with hands-free voice and live streaming. Same at Telstra. Their field technicians use Teams and Power Platform to help improve their customer service.
Hayete Gallot :
For customers beyond the employee experience, it's also about the total cost of ownership and we cannot underestimate that. And we can uniquely help our customers with TCU. With our Teams platform approach and our built-in security and compliance capabilities. And now coming back to your question though, on competing platform, it's worth noting the Teams integrates with such offering and we can provide that within Teams. So even if a customer is using one of those services today, they can use it right within Teams. And customers are seeing the value of an integrated suite and they're starting to opt for a single subscription instead of paying for multiple subscription. So we think it's going to shift in the near future.
Mike Spencer :
Got it. Super helpful. Thank you. So now I'm going to shift back to Jeff here for a moment. And Jeff, one of the most common questions we get is around the telephony strategy for Teams. So can you walk our investors through the voice and telephony product strategy for Teams and how does Microsoft differentiate in the competitive landscape and what does the customer have to do to fully move to Teams being their softphone of choice?
Jeff Teper :
Yeah, so our vision, as we said, is Teams is a holistic communication and collaboration platform, and that definitely includes voice and telephony. Customers have moved from seeing Teams as more than just chats and meetings, and now are increasingly betting on it and shifting their strategies to us for secure, cloud-based calling. Teams users can place and receive voice over IP calls between colleagues in their organization without needs for any additional licenses. And since Teams serves as your softphone, calling it is a great way to get things done in the flow of the work. If you need to have a more in-depth conversation from a chat with one click, you can turn that into a call with full audio and video.
Jeff Teper :
I think this is really an elegant level of integration that's possible because Teams as an all in one collaboration platform with first-class voice and much more. Many users need a phone number and the ability to place calls outside their organization for example, that's key. So Microsoft phone system provides legacy and modern call control capabilities that turns Teams into a complete calling solution with phone numbers.
Jeff Teper :
So yes, phone system replaces existing on premises PBX systems, it's included in E5 licenses or a standalone licenses, and this will give customers a better experience and save them a lot of money. It also provides customers the flexibility to place and receive external calls by connecting Teams with their existing voice carriers using our direct routing capabilities or by purchasing a Microsoft calling plan to make Microsoft their carriers. So a lot of flexibility. And while Teams is a great softphone team supports a number of endpoints from personal displays to traditional phones so that everyone in every organization can have a phone solution that works best for them centered around Teams.
Mike Spencer :
Great, thanks. So Hayete as you think about then the key go to market motions and the customer adoption path. How does Teams and Teams adoption benefit from the overall Microsoft 365 sales motion versus Teams acting as the key driver for customers purchasing the Microsoft 365 subscription? And then one follow-up on that would be, are you seeing Teams open up new scenarios for customers that go beyond just the core subscription offerings?
Hayete Gallot :
Yeah. So what's changed over the last eight months is that Teams went from being important to being a hard requirement. And as you called it out, actually Teams is opening up new scenarios for us beyond our core subscription. Team is leading customers to our advanced security and compliance offering. Earlier I mentioned data loss prevention, customers can define policy that permit users from sharing sensitive information in a Teams channel or a chat. With threat protection, they can protect users from malicious software and with cloud app security, they can identify and prevent some suspicious activities.
Hayete Gallot :
Customers are also rethinking their business processes to automate repetitive tasks, to provide bots and simplify workflows. And with the power apps native integration within Teams, both professional developers and low-code, no-code developers can build in deploying apps directly within Teams. Customers are also looking to enable learning in the flow. In addition to the traditional learning methodology. And coming soon, we're connecting Teams with LinkedIn Learning, with GitHub and third-party learning providers. And finally, customers are looking to Teams to provide voice capabilities and replace their legacy PBXs. So many, many opportunities beyond our core subscription, for sure.
Mike Spencer :
Thanks. And let me turn to Jared for this next one. Jared, given the value and usage Teams is driving on the platform, can you walk our investors through how Teams is being monetized? How do you think about prices lever given the value being provided as we continue to add features and capabilities to Teams?
Jared Spataro :
Sure. There really are three big ways that we monetize Teams. But first let me just take a step back and talk about what inspired us to build a product. We heard from customers that there already was a lot of value in Microsoft 365. They love the experiences that they are already paying for like SharePoint and OneNote, but they also found that they needed a single place to reduce the context switching. That single place then inspired us to create Teams. It allowed us to pull things together to capture that flow of work.
Jared Spataro :
Now, when I think about monetization, the first way that we monetize is by including Teams within those core subscriptions. So let me just take a step back and talk about what inspired us to build the product. We heard from customers that they already loved the experiences that they were already paying for in Microsoft 365, like SharePoint and OneNote, but what they wanted was more in a single place, a way to reduce the context switching that comes with moving between those different apps, and that inspired us then to build Teams. With Teams, we have the shared workspace. It brings together the best of Microsoft 365. And in fact, what we see is that customers as they use Microsoft 365, get more value and use more of the rest of the Microsoft 365 product.
Jared Spataro :
Now going back to the three ways in which we monetize. We really see first E3, second E5 and then finally on top of that, we have other opportunities as well. Let me address each one. With E3 what we see is that as people use Teams, they use more of the rest of the stack, and that means that when it comes renewal time, they not only renew at a higher rate, they also add additional users and scenarios, and that's very valuable for us.
Jared Spataro :
Second, we're able to then also walk them up the stack from E3 to E5. This is where we use security, phone system and audio conferencing to walk them up in value. And finally, because Teams really is this platform, we have an ability to sell on top of it. We already have skews like Advanced Communications or the Power Platform that we can sell, and we see lots of opportunities to go beyond E5 as well. Pricing, going back to that question, certainly has a lever that we could pull, but we strive to add value first to that customer experience and then to monetize that value as we add it.
Mike Spencer :
Great. Thanks Jared. So I want to end with a question here for Jeff and given the success Jeff of Teams especially over the last eight months, what's next for Teams? When you look into the future, what should our investors be thinking about? And could you give us a bit of color of what you have top of mind?
Jeff Teper :
Sure. I am incredibly excited about the strategy we have for Teams. Of course, the usage has been great for validating the bets we've made in product design and architecture, but we've got really exciting plans for improving the core value you see in Teams today for chat, for meetings, for collaboration, all getting better. There are a few areas that you're going to see us invest even more deeply. So first we're investing in addressing the needs of users in healthcare, first-line and other industry specific scenarios. That's new value for them and a growth opportunity for Microsoft's business.
Jeff Teper :
Next will help every organization move their mission critical processes into Teams so that users are starting and ending their days there, making it indispensable. The work with power platform that Hayete talked about is a key part of that. Another area I'm excited about is learning. We're focused on employees' need to grow their skills, to keep pace with the rapidly changing environment. This is top of mind for companies and customers are really excited about us bringing learning into Teams. That peak performance of every individual and every organization is a place we're really excited to partner with so many customers on. We're building new features into Teams to enable wellbeing in the workplace so everyone can focus and be at their best. There's a lot of work to do, and we are incredibly excited about it.
Mike Spencer :
Well, thank you, Jeff. Thank you Hayete and Jared for your time today and insights, and we thank everyone for watching. We're excited about the value that customers are seeing in Teams and Microsoft 365, and we're glad we got to take some time with you to talk about it today. So thanks for spending it with us.