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June 9, 2011 at 7:15 AM

Q&A with Microsoft’s Kurt DelBene on Office 2010 and Office 365

kurt delbene.jpg

This story ran in the print edition of The Seattle Times on June 9, 2010. -Sharon Pian Chan

In a mashup of Microsoft management last year, Kurt DelBene became president of the Microsoft Business division, the group that makes $18.6 billion a year selling Office and other software.

DelBene became president in October, after his predecessor, Stephen Elop, left to become chief executive of global phone-maker Nokia.

On June 28, DelBene will launch his most significant product yet, Office 365. It’s a cloud version of Office combined with email, collaboration and communication services, and it’s important enough that CEO Steve Ballmer is flying to New York to hold a launch event.

Here is an edited interview done Wednesday with DelBene.

Q: How’s the job going?

A: We’ve been on a roll now for nine months. Things are going well overall for the whole business. We have been one of the standout areas in financial performance, growing [the business] 21 percent overall.

A lot of that is the strength of the Office 2010 release. We’re moving from the desktop product being about the PC, to being about the PC, phone and browser. Office 2010 is being adopted about five times faster than Office 2007.

Q: Why are people buying Office 2010 so much faster than Office 2007?

A: It’s just a really strong value proposition in terms of particular features: doing rich editing of digital content inside PowerPoint, inside Word. OneNote [note-taking software] is continuing to pull forward. Outlook and ability to focus on the email you need to triage. … The next natural extension is not just about servers, but services. We started with BPOS [Business Productivity Online Services included online versions of Exchange and SharePoint].

Q: How old is BPOS now?

A: Three years old.

Q: What’s in Office 365?

A: It is the 2010 versions of servers Exchange, SharePoint and Lync — available as a service. It’s also a subscription version of Office 2010. …

We think it expands our business. In our traditional software business, we compete for 15 percent of the total IT budget. We think we can go up to four to five times that with Office 365.

We estimate the average 1,000-user business can save $350,000 a year by moving to Office 365 as a service.

Q: How much would a small business save? [The company is looking to Office 365 as a way to expand sales to small and medium-sized businesses, with monthly subscriptions to the software starting at $6 per user.]

A: The opportunity for small and medium business is capability they could never have otherwise. A 50-person shop is not one that would run Exchange today or Sharepoint and Lync. What we are delivering is a set of features — to have rich calendaring, where you can invite people to a meeting and book a conference room, or [hold] online meetings that are well integrated in with your desktop. Those are all capabilities small businesses need as much as big businesses.

For a small, medium business it’s an order of magnitude of improvement without an increase in IT complexity. They can scale up as they grow. They don’t have to think, “Do I have to add servers?” To add 10 to 25 people, they just go to the website and add people.

Q: The last time we talked, you predicted Microsoft’s unified communications software Lync would enjoy growth similar to SharePoint collaboration software [which became Microsoft’s fastest product to hit $1 billion in sales]. Do you still see that potential for Lync?

A: Yes. We have been very happy with the rate at which Lync has ben adopted. We saw 30 percent growth last quarter.

Q: BPOS recently had some email outages. What do you say to prospective Office 365 customers who ask about that?

A: The recent issues we had were email delays for less than 1 percent of BPOS users.

However, we take those very seriously and we are constantly improving our processes to both catch issues before they become issues, and also to change our engineering processes to improve the service overall. …

Q: When will you build Office apps for the iPad and iPhone?

A: We’ve already released OneNote for iPhone. Our overall approach is to make sure we have great product experience across the PC, phone and browser. We invest in those devices that people say are popular. …

If you think about the mobile phone in particular, the first thing you want to make sure works really well is email and calendaring. The first thing you saw us do was license Outlook Active Sync protocol to all smartphone vendors, including Apple. …

Our view is to have the best and first experience on Windows Phone.

Q: Should we infer from that strategy that you won’t come out with an Office app for the iPad until you release an app for tablets running Windows 8?

A: I don’t have anything to say at this point.

Q: Who is your major competition for Office 365? Is it Google Apps? Open Office? Star Office?

A: We continue to have rich competitors; you’ve named some of them. We are more focused on what is the experience we want to deliver to customers.

We have some distinct competitive advantages over our primary competitor. If you’re thinking about moving to online services, the capabilities you want are the leading ones today. Whether it’s Exchange or SharePoint or Lync, the natural person you would go to would be Microsoft.

We’re already seeing how we’ve been doing with BPOS. State of California, city of San Francisco, Minnesota, city of New York, you can continue to rattle off success we’ve had there.

Q: Is your wife planning another run for office? [Suzan DelBene lost a bid to unseat U.S. Rep. Dave Reichert in 2010.]

A: You’ll have to ask her.

(Photo of Kurt DelBene: Mark Harrison / Seattle Times)



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