Acquired - Episode 8: Acompli, Sunrise, and Wunderlist (w/ Kurt DelBene)

Episode Date: February 29, 2016

Ben and David have special guest Kurt DelBene on to discuss Microsoft's acquisition of Acompli, Sunrise, and Wunderlist. Kurt is the EVP of Corporate Strategy and Planning at Microsoft, and joins to discuss Microsoft’s cloud-first, mobile-first strategy, and the importance of being cross-platform in the modern era. They cover: How the app of Outlook Mobile on iPhone and Android came to be.How to decide whether to build vs. buy, and how it plays into the strategy for Office.How to preserve a culture and a team, and how Javier Soltero came to run all of Outlook at Microsoft.The origin of Outlook on the PC, originally led by Brian MacDonald as “Ren”.How to balance a business with competing priorities, and a decision-making framework for acquisitions in a large company.How to measure the success of an acquisition, and how sometimes, it’s not by measuring revenue at all.Sponsors:ServiceNow: https://bit.ly/acqsnaiagentsHuntress: https://bit.ly/acqhuntressVanta: https://bit.ly/acquiredvantaMore Acquired!:Get email updates with hints on next episode and follow-ups from recent episodesJoin the SlackSubscribe to ACQ2Merch Store!

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seven years ago, our forefathers brought forth in this continent. How far can you go with that? I actually forgot. That's as far as you got? Oh, you didn't even get that far? What did you learn in civics in elementary school? Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down, say it straight. Another story on the way. Who got the truth? Welcome to episode number eight of Acquired. I'm Ben Gilbert. I'm David Rosenthal. And we are your hosts. Today we have a very special episode. We have a guest at Microsoft,

Kurt DelBene. Yeah, we are very lucky to have Kurt DelBene with us today. He's been a great friend and mentor to both of us in different ways. And actually both of us at Madrona too. So Kurt started his career actually at the very famous and renowned Bell Labs and spent five years there and then went to Booth and got his MBA at Chicago, went to a short stint at McKinsey after that, and then went to Microsoft and had an over 20 year career at Microsoft that culminated when Ben was there in curbing the president of office, which he was until December 2013. And then afterwards, he went to healthcare.gov

and did a stint there helping launch Obamacare. And after that, ended up with us for a little while. We were really lucky to have him at Madrona as a venture partner. And then last spring, Kurt returned to Microsoft and is the EVP of corporate strategy and planning. So thank you, Kurt, for gracing us. Hey, it's good to be here and good to talk to you guys again. Just one little correction on healthcare.gov. I came in after the launch to help them repair it.

You did. And for listeners, I had the privilege of waking up real early one morning and coming in to hear Kurt talk about that at Madrona. It is absolutely fascinating to hear how to mop up a gigantic software project like that and getting all the right people on the bus, all the right consultants and contracting firms that are putting that whole thing together. It is a crit that looked like an absolute ballet. Well, it was super rewarding and super challenging. So maybe we can do a future podcast just on that. It's an interesting topic. You needed to get some good R and R. So you went to a

venture firm for 10 months afterwards. Um, so today with Kurt, um, we're going to talk about, uh, hopefully a very topical, um, acquisition, and we're actually going to lump a few in here. But the main focus is going to be Accompli, which is now the mobile Outlook on iOS and Android. So I'm going to run through quickly. We're going to do Accompli and then we'll sprinkle in little bits of both Sunrise and Wunderlist, which are also office productivity apps that Microsoft all acquired in the past 18 months or so. And so I'm going to run through quickly the acquisition

history and facts. Accompli, founded April 2013 by Javier Soltero, JJ Zhuang, and Kevin Hendrickson. It's interesting, Javier was CMU engineer and then an early employee at Netscape. Javier spent three and a half years at VMware before kind of coming back to his productivity roots and founding Accompli, which I was a user from day one when it launched in beta and thought it was on my iphone and thought it was just a great um really the first mobile app that combined mail and calendar all in one app um the the magic that outlook had been doing for so many years and no one no one really innovation ios um what's what's uh old is new again um they raised a 7.3 million dollar series a from red

point um led by red point uh where javier had been in eir after vmware um uh and harrison metal and felicis uh and then about 18 months later uh microsoft acquired the company in december 2014 for a reported $200 million. It was interesting. There's actually a, everybody knew this acquisition was going to happen because Microsoft wrote a blog post about it and it leaked about two weeks before the acquisition actually,

actually went live. Yeah. Not a shining moment, not a shining moment, but, but it was successful. The acquisition happened there about 25 employees all based in san francisco they all joined microsoft um and david that was only i think

like seven eight months after launch nine months maybe i think it launched in april of that same year it was it was 18 months less than 18 months after the founding of the company um and uh so it was very quick and this was right after um dropbox had acquired mailbox uh so it was the era of email mobile email acquisitions begun the ios mail app wars have yes um shortly thereafter uh microsoft uh then acquired the calendar app Sunrise in February 2015. And then in June of 2015, Microsoft acquired Wunderlist, the to-do list app, which I know probably has a soft spot in Kurt's heart knowing how much he loves lists. I do love Wunderlist. It is a great app.

I joked when that happened i think with kurt that microsoft was trying to buy my entire iphone home screen exactly so what you'll have to tell us at the end what you're using these days i am still using all of these products that's an endorsement right there yeah there you go yeah so um with that you know what's happened since then in at that same time, right after the Wunderlist acquisition, Javier was actually promoted within Microsoft to be the corporate VP running all of Outlook mobile app, but Outlook on desktop as well. Shortly thereafter, after that, Sunrise calendar was rolled into Outlook. Wunderlist has remained independent today, but has been announced that further integrations may be coming on that front. So maybe Kurt can enlighten us on that. But with that, Kurt, we'd love to hear kind of how you thought about about all of these products.

Sure. So the first thing I should say is the acquisition happened during my time away from Microsoft. But I know the whole history of it. The corporate strategy team was which I lead now, was intimately involved in the acquisition. And I obviously know the space super well. I've spent a ton of time in office. So when I saw it happen, I said, okay, this one makes complete sense. There are different reasons that Microsoft makes acquisitions, as I'm sure there are for all companies. There are places where we look at our position in a particular area and say we need a technology, we need a particular product. There are other cases where we opportunistically look at a product or company that's doing well in a space and say, wow, we can see an adjacency to the business that we have. And so we want to we want to acquire the company to kind of build out that adjacency. There's some more rare cases where we'll do it to get a particular set of talent. We see a team that's super, super good.

But I think that tends to be the exception. This one was kind of, I would say, a strategic acquisition. If you think about the journey that Office has been on, the core competency has been on the desktop, the Office suite, and by desktop, I mean both the Windows PC and kind of leading productivity on the Mac as well. And so coming from that core, as other OSs became popular, particularly in the mobile space, actually it was a corporate strategy effort with the team, with the ASG team as well. We said, okay, this is clearly a place where we've got to make an acquisition or build ourselves, but we need to have a great app for the core Office 365 scenarios. And those are

email contacts, calendaring, and to-do. And so we said, do we want to make or do we want to buy? And is there somebody out there that we would love to have? And really just said, okay, what would, if we do want to acquire, what would that look like? What would it look like to make it internally? And are there candidates there that would be great for us to acquire? So that's what kind of got us started on the path. And it kind of went from there. Cool.

Thanks, Kurt. I think it's one of the things that you read a lot about these days is Microsoft shifting from the Windows and Office company to a mobile first, cloud first company. And I think that from a high level, first of all, as a consumer and just from the public perception of Microsoft these days, everyone is loving that. I mean, the whole focus on build a really great cross-platform experience, have the same data with you everywhere, access to the same services, the same core office services that you know and love, huge value prop for consumers. As you guys transition to these free mobile apps that are on platforms that you don't own, how do you look at that as sort of the revenue future of Microsoft? And how does that replace the giants of your with selling

Windows and Officebox software? The giants of your, I love that. I think there's a couple of ways to look at it. The first thing is you have to recognize that Office 365, the cloud versions of Exchange, SharePoint, and Skype for Business are strong and rapidly growing revenue streams for Microsoft by themselves. So in some sense, it's always been the case that when you buy Exchange, you get a client experience that goes with that. Go all the way back to the Exchange clients in the mid-90s, there's always a client that came with it. And that model has stayed. And so, again, looking at Accompli in particular,

they were really developing a very fast leadership position in terms of downloads, in terms of monthly active users that was very appealing to us. And so I think just that's a natural to something. When it comes to mobile, you've got to have a certain free experience. And then you can think about having a paid experience incremental to what the expectation in the market of what is free. So in the case of email, you know, the expectation is you're going to have a single client that will work against your free mail, but also work against your enterprise mail. You can think about features that you put behind a firewall, you know, a pay firewall. We do that by having certain tiers within Office 365 and then there's certain tiers within the client too, which is also available

as a subscription. So we think about there's a certain free thing that free piece that you want to give to everybody. There's a certain set of features that can be made available as add-ons. There are particular areas where that works well. So features where to communicate to somebody else, you got to have the paid one that doesn't work very well because you want to have a common capability across the, across all the people using the service. But things like enterprise features, like retention policies and anything around usage analysis, et cetera, those are all features where people will pay extra for them,

but you don't have to build it into the core product. So we definitely see the ability to kind of tier things that way. The other thing you have to think about is people have multiple devices. You know, they have a PC, they have an Android phone, they have a Windows phone, they have a Mac and an iPhone. And so you have to think about the client experience as being a single set of client experiences that go across all those different devices. And if you can package those together into a subscription, then you can sell the value proposition of the entire subscription,

regardless of what device you happen to have. But then again, you still have to think about, we need to have a leadership position in all of the devices that people find popular. And so we want to have Office be the best experience, regardless of whether you're on an iOS device, whether you're on an Android device. You know, we'd love to have you think of Windows as your home, but we need to have a great experience regardless of the devices that

you use. Well, I think, you know, this is something that Microsoft and you have really done a great job with. I mean, going back to the origin of Office 365. You know, Ben, when you were working at Microsoft, you were working on Office for iPad, right? It was. That was so much fun. Well, we finally, we did get around to shipping that. Yes. And, you know, the importance of, you know, as a consumer, a consumer, it's not about my experience with my mail client or with Excel or with Word on a particular device. Now, it's about how that works in concert across all of the areas where I'm curious if you guys thought about with the Accompli acquisition and the strategy is something that Ben touched on, the unified inbox. And I remember in my first job in finance out of college, I had obviously Outlook. I was working in a bank and all of my work email was on Outlook on my computer and my workstation. And the iPhone

had just launched and I loved it because it meant I could get my Gmail at work. And now, you know, the concept of having different inboxes, for me at least, is something I think for probably most of our listeners is something that we wouldn't even think about anymore it was that um was that part of the strategy here too yeah i think that accompli does a great job of giving you a single unified inbox windows phone also on its client also can get you can link together a couple inboxes together but if you go all the way back to when Outlook was first created, it was a total different look at what has historically been separate products for email versus calendaring. We had Schedule Plus. Those of you older in your blogosphere listeners will

remember Schedule Plus. It became a verb. It was so popular. And in fact, still echoes around the hallways of Microsoft about sending S Pluses around. Exactly. Every time I correct them, and I call it a meeting request because Schedule Plus is long since dead. But this notion that things come together and become unified, it really just follows how people expect to use the product.

So when you start building a bunch of meeting request capability into Schedule Plus, all of a sudden it starts to look a lot like email. And so Outlook and under Brian McDonald, who's the kind of the father of Outlook way back when it was called REN, as in Ren and Stimpy. He had this idea that you want to bring these different mail and calendaring and tasks all together into a single user experience, which clearly has been borne out. Early on, the versions of Outlook were not up to the task, really, I will say in retrospect, there was a period of time when Outlook was called Lookout, because you wanted to stay away from it, because it was pretty slow when it first happened. But it's become really the leader in this integrated set of products. And I think that's happening

on mobile devices as well because those scenarios are so deeply integrated together. I think you find calendaring deeply integrated. That's why Sunrise got integrated into Comply. Task management actually is a little bit different. And so we think that there's, you know, if anything, the mobile, the paradigm in mobile is different applications for different use cases. And so it's not necessarily the case that what you do for the PC is what makes sense to do on a mobile device as well. And I can tell you there aren't any particular plans to take Wunderlist and deeply integrate it with Accompli. Where the scenarios cross over probably makes a lot of sense.

But then, you know, the personality needs to be preserved of those different applications. And we think they're big applications in and of themselves. Yeah, and it's a great lead into, you know, we're talking about integration of software right now. Let's talk about integration of people. What were the different options you guys looked at for how you could integrate the teams in terms of location, in terms of hierarchy, in terms of, you know, focusing on retention? And what decisions did you guys make with primarily the Accompli team? It's a really, it's a great question. That it is super, super important for us to retain the both the particular talent, the fact that they're a team as well, but also the personality of the organization itself. So it is not this get integrated into

the collective and you are just part of Microsoft. We work really, really hard to keep the teams separate while we take the opportunity of being part of Microsoft to be an accelerant to the objectives of the team. And so a lot of folks, these teams come on and they're just super excited about being able to leverage the breadth of Microsoft to do more great things. And unless I'm mistaken, all of these teams are still in their original location. Well, that's the other thing. None of them are in redmond right right it doesn't make much sense to have everybody come uh to redmond it's it's not necessary we are already a broad um company that has locations everywhere and so there's not a need from that perspective and you know there's no purpose in the moving they have cool locations they have

homes where their family are and And so in most cases, we actually don't relocate them. And that's definitely been the case here as well. The Wunderlist guys are in Germany and they love being there. And we're just as happy to have them there as well. I mean, the nature of software is it is a global business now. And so we can definitely accommodate that. The other thing that we've tried to really do is figure out how do we take advantage of the skills that the team has and the vision that they have. That's why you see Javier become the leader of Outlook overall. And that's just a recognition that, hey, these guys did something really

incredible. And we want to make sure that we take advantage of that as much as humanly possible. And so we definitely look for cases like that as well. I mean, the third thing I would say is the trickiest aspect of it from our perspective is we have places where we want to drive synergy between their product and other products at Microsoft. And that's a very, very tricky piece because these guys all come in with a set of plans that they have in place that they want to accomplish. And if you divert them too far from that mission, you can ruin what's special that you did the acquisition for in the first place. And so we try to be really, really careful. I'm not sure we always get the balance right. There's sometimes when we over-index on the integration and we find that we lose a little

of the secret sauce because the product starts coming out more slowly and the innovation doesn't come through as well. And we're learning all the time too. And so I'm not sure we always get it right. I actually think on these acquisitions that we're talking about, we set the balance pretty well. Yeah, and I can speak to that. I just put out a tweet a couple days ago sort of asking about who's using Outlook for iPhone. And I got a response from someone I knew on the team over there. And you know, that his response was something along the lines of, let me know how you like it. We move fast. Yep. And I want feedback. And it seems like that team and I not certain, but I think he was at Microsoft pre acquisition. So it seems like some of that DNA sort of bleeds into the existing team

and kind of lights a fire. Yeah. Even simple things like if you, if you use Outlook for iPhone, there's a way actually for either platform, you can give user feedback on the product directly from within the product, from the context that you're in, and it'll bundle up everything that it knows about what you're trying to do and basically send it directly to us. And so that's a place where we'd love to take those learnings of how they got that 360 feedback loop and really, really intensely follow it and collect the data. So as your friend said, they can move super, super fast. Yeah. And from a leadership perspective, when you have people that have made their whole career and their life's work outlook, and then you do an acquisition like this, and the leadership of the broader outlook becomes

someone from this new and outside team, how do you make sure that lands organizationally? Well, it actually, it's not as hard as you might think that probably the biggest challenge is if you've got particular people who were in line for that job or a job in specific. It's you know, I think it's a misconception that people at Microsoft are are not, you know, are not open or embracing of of new things that come in. I'm not actually even sure if it's a misconception. It's definitely not the case. And so when a new team like this comes in, and in Comply in particular, or any of these products, Sunrise, Wunderlist, it's like the overall view is, oh my gosh, this is a fantastic thing. Let's bring them in. Let's embrace them as a team. Let's learn from them and we'll all do great things together. So it's not as hard as you might think. Absent the particular positions where somebody from the entering team might get a

position that somebody else might have thought they were in line for. When, I mean, I remember when Javier was promoted to corporate VP and hearing, you know, hearing about it in the press, but then also hearing friends at Microsoft talk about it, you know, so often, you know, you see, you know, we see looking at lots of acquisitions, the CEO or the management team of the target company will end up, you know, with some meaningless VP title at the inquiry and they'll stay for 18 months until they best. And then they're gone and onto their next thing. I mean, this is a major, major role at Microsoft. Um, and really was, you know, I don't know if promotion is the right word, given that he was CEO of Accompli, but a real recognition of a scope that really was much broader than just the Accompli mobile app. Absolutely. And it truly was a recognition that he has skills that we want to leverage more broadly than just within the Accompli team per se.

And it's working out really, really well. Actually, I was going to bring this up later, but Javier wrote in the blog post announcing the acquisition. He wrote these sentences here that I'll read. He said, 18 months ago, we started building a team and a product around the idea that we could make mobile email better. Today, that journey continues as part of a larger organization with the technology, talent, and market reach that will help us take the vision of Accompli to hundreds of millions of mobile users across the world. And I just thought when I read that as we were researching this episode, you see some version of that in every acquisition that gets announced. Oh, yeah, we're going to get the scale and the resources that are really going to enable us to impact many more users. And usually it's pretty hollow. But here, kudos to you and to Microsoft

for really giving them that in truth. But it's really rare to see the team embrace this as much as Javier and the Accompli team have. Yeah, no, I appreciate that. And it really was the intention. You know, there is a bit of a scale difference too, though, because there are a billion users of Office across the planet. And so if you were somebody who wanted to see your vision get delivered, just think about it just in the context of business users that say, hey, I'm running Office. And now Microsoft says, we have a great Outlook client for iPhone and for Android. You're basically just sanctioning that product as being the product that they should use. Now, the great thing about Accompli is it had a huge user base or quickly growing user base from a strong core.

And so we were both able to take advantage of that in terms of getting a stronger footprint in mobile right there. But there, you know, Javier was right in terms of the leverage that came from just announcing it and starting to distribute it with the office, etc. We gave them a big boost and we took advantage of the boost that they gave us as well. I'm curious as you were, when you made the acquisition, did Javier's background from Netscape and then from VMware especially, did that play into it? Did you Microsoft see him as a potential leader when you bought the company? And was that a factor? Well, we definitely look at the specific talent as part of our due diligence process. I would not say that we, there are times when we actually do look for talent as I discussed earlier, talent as the primary reason for doing an

acquisition. The primary reason for this acquisition was they had a great product in a space that we thought was super complimentary to us. And so, you know, that's the reason to do it there. But we definitely look at the talent and figure out how do we retain those key people on the way. The other thing that I would say is there's this whole question that often comes up, at least at Microsoft, and I'm sure elsewhere, is there are times when you think you can buy the second best or the third best person or product or company. And there are times when you know you just need to buy the best. And this is a case, all three of those are the case where we wanted to buy the leader in the space. And in that sense, if that's your first and foremost goal, and you believe you got a great

team, then the acquisition kind of writes itself. It just makes a ton of sense and it works out super well. And that's what kind of what happened in this case. I want to push on that a little bit. Why is it so important to have the absolute best clients, Wunderlist and Outlook for iPhone, and Sunrise, I guess that'll eventually just be an Outlook, when those are free products that can access both Microsoft services and other services, and the money is made on Office 365 subscriptions, which can also be accessed by a variety of clients? That's a good question. I think above all, we now live in a world where individual pull of applications is, in particular categories like email, is incredibly important and in some ways more important than the push that can happen from Microsoft saying, this is our solution for email.

And so that's a big piece of it. So when you see this- That's a big mindset shift. Yeah, it is. It is. There are places where we think we can, quote unquote, make the market by defining innovation, delivering on it, and making a category. I think SharePoint was probably an example of that. And there are other places where other people are establishing what that category looks like, particularly on form factors like mobile. And you just recognize it and say, you know, this is a place where we we just want to get the best. The other thing is you always want to give yourself every advantage to do well. And in that case, if you're also having to overcome the fact that there's a leader in front of you that's got incredible end user pull, it's just not worth settling for that second

best app. It's true. And if you're kind of following in the footsteps there, I mean, the client app is really the front door to the consumer experience. So I guess there's always that risk that that client app could start prioritizing a different service. I mean, you don't own that customer relationship at that point unless you're the leader with the client interface. Yeah, I think that's a different kind of acquisition,

which isn't unheard of. There are some times when you can acquire an application and I don't think we ever do it. I can't think of a case where we have ever acquired anything purely for the sake of getting it I can't think of a case where we have ever acquired anything purely for the sake of getting it out of the hands of a competitor or keeping it from being independent. It is a kind of nice byproduct in some cases where we think there's a good reason to have this application.

And by the way, we'd rather the other guy didn't have it. But I can't think of a single time when that has been a predominant reason. It's kind of a nice bonus, if you will. It's really interesting that you say that. The last episode we did was on YouTube. And one of the really cool things about YouTube is there's all of this publicly available information about the company and about the acquisition because of the lawsuit, the Viacom and YouTube, and then ultimately Google lawsuit. Um, and, uh, it's interesting. Eric Schmidt testified that one of the key reasons, both, both for the acquisition and for the price they paid for YouTube was the opposite of what you're saying was to keep it out

of other people's hands. Really? Did he say whose hands they wanted to keep it out of? He, I don't believe he named specific competitors, but implied that they were other very large technology companies. I stand by, I can't think of an acquisition that we've done for that reason. You know, at the heart of it, the other thing I would say is, you know, Microsoft is a we are a product and a technology driven company. And what we're trying to do within each of the product groups is what is the, you know, the the dominant meme, if you will, about the discussions that we have. It's like if you own the office business or you're part of the team, you're always thinking about your own product and how do you make it stronger? How do you make it better? You're not thinking about how you use it as a chess move, how you would make an acquisition

to be a chess move to keep something out of somebody else's reach. I don't know, Ben, you were there. Do you remember ever having such an acquisition? No, not while I was there. And I can't imagine, too, just thinking about the rest of the Office for iPad team, if we had bought one of the weird kind of like Office clones for iPad that we were looking at as sort of like the not doing so well but decent competitive landscape and tried to bring them into the team, that would have been really messed up. Yep. You know, the other thing about it is it's, there's a certain

amount of risk in an acquisition period. And so everything, you want everything going for you because there's always going to be things that, that help mess it up when you, when you bring it in. So, um, you know, having some ulterior motive, which is pulled out of somebody's hands versus being led by what you want to proactively and positively do with the product. It just doesn't seem like a very good calculus to me. But maybe that's what Eric really had in mind when he bought YouTube. I don't know. It seemed to work out for him pretty well. Well, we graded that one not super highly. Is that right? Yeah, we gave it a C, or at least I did.

Wow, you guys are tough graders. YouTube, 10 years later, is a break-even business. They've lost a lot of money on that business. Well, I guess that is true. And, huh. Is it break-even on an annual basis, including advertisements? As far as our research could determine, yes. Interesting.

I don't follow that space super closely. A lot of cogs in that business. I suppose that's true. Both on the technology and on the content and talent side. Alright, listeners.

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We assign a category to each acquisition we're looking at. And the categories we typically use are people, technology, product, and business line. And we give ourselves an out of an other. But Ben, you want to go ahead? Yeah, absolutely. This is a product acquisition. There's nice things that came along with it, but OWA, the Outlook Web Access app, was just not good. And as someone that was at Microsoft and using it for quite a while, I was getting a lot of encrypted mail in IRM.

And so I had that old Outlook Web Access installed on my phone just to read the encrypted mail. And then I'd get out of there as fast as I could. And I'm like rooting for the home team. I'm trying so hard. And it was, you know, it was a shame seeing all these other really great mail clients out there. And this is right when mailbox and Accompli were popping up and,

you know, useless for a lot of my mail. So I remember even just as an exchange user at Madrona, I mean, it was, it was really frustrating, because all my friends who are working at startups, you know, we're using mailbox or the Gmail app, and, and they were great. And look, like it came not a moment too soon. I think that for me, Accompli, I was using it before the acquisition, I was using it after the acquisition. I was using it after the acquisition. I thought it was super impressive, the turnaround time from going from being an acquisition where they were trying to work out exactly what it was going to turn into and what the timelines were

going to look like and what the people were going to look like. You always figure all that'll take six months or so. Within two months, it shipped as Outlook for iPhone. And all the news stories were kind of funny that, oh, they just slapped a new label on it. Maybe they did, but who cares? It was great. That's a really good point. At some point, you don't want to mess with success. And there's a certain set of legal things you got to do to make it a Microsoft product, and that's probably what took the time know, keep giving people what they love. Yeah. So I'll go next. And, uh, I'm curious, uh, Ben and particularly Kurt may, uh, may beat me up for this one, but, um, I'm going to go out of the box on this one. I'm going to call it an other. Um, and, uh, and I wrote down, um, combo meal, uh, because I, not only because it was multiple acquisitions, if you include Sunrise and

Wunderlist. But I actually think there are elements of this that as there are in every acquisition, but here that really hit on every category. We've talked about a lot of them already. I would say the reason for this is it was really a revitalization of a business line, not a creation of a new one, but a rethinking of an entire business line, in this case being Outlook as part of the broader office future in a mobile-first, cloud-first world. And part of that is technology. Um, and part of that big part of that is people as we've talked about, um, and product as well. Um, so I'm going to, I'm going to go with combo meal. I think there's something to that. I mean, there is, there's clearly, I would say it's predominantly a product acquisition because that was, we, we had in mind something very specifically we wanted to acquire, but there's clearly synergies with the other parts of the office business and office products.

So think about the fact when you download a piece of email, it has an attachment. You want to fire up Word to read that attachment. There's a way of kind of linking those scenarios together that kind of goes towards your combo meal theory. But it also says you need to establish a footprint on mobile devices. And the first workload, if you will, that people use, or the first three, I would say, are the three that we acquired in these three acquisitions. And so in that sense as well, it was re-energizing the businesses also. So I guess I think there's something to that. Maybe it's a combo meal

that has at its heart a product deal. Maybe we call that a happy meal. That is interesting. You talk about the key scenarios on mobile there it's like you know now office is a full productivity suite and a mobile lightweight productivity suite and those are dramatically different applications i love the framing too that you have heard of workloads and what's your mobile workload and um i i think the Office mobile apps, Word and PowerPoint and Excel are great, but I almost never use them. My mobile workload is email, calendar, to-do. Yep. No, I think that's right.

The usage, we find that the applications are primarily used for great viewing, which the fidelity of viewing in our applications is better than others. And then light editing, which means, you know, there are scenarios like imagine if you're reading a document in Word and there's a set of comments that or edit revisions that you've got to take a look at and react to and edit with others that are working on the document. It's those kinds of scenarios for which you would use Word, Excel, and PowerPoint. PowerPoint, you know, presenting, presentation mode works really well, but you have to rethink the scenarios. It's not just that you imagine doing the same things on a mobile device that you do on your desktop. They're just different. Um, let's move on to, I want to make sure we have enough time for,

uh, my favorite part of the show, which is our, um, our, our technology themes segment. And, uh, and Kurt, so what we do here is, uh, each of us talks about, and again, you're please join in, but love to get your thoughts. What does this acquisition or these acquisitions highlight for you in terms of the eternal truths about our business and technology? And Ben and I usually take a startup, Ben, on this, but I'm curious on your take, having been at a big tech company for so long, having done a stint with us, you know, in the venture world, what themes are. So maybe Ben and I will go first, give you a little time to think about it. But, you know, for me, I'll go because this will be quick. We've really already touched on it. But one big theme that all of these acquisitions

highlight for me is, I I think Kurt, I think you said it, you know, innovation is distributed. It's global today. Um, you know, uh, uh, accomplish in San Francisco sunrise was in New York city. Wunderlist is in Berlin. Um, we haven't talked about it yet, but, uh, and it's not in the same group, but Microsoft also recently acquired SwiftKey, um, another part of your strategy to take over my iPhone. Um, but, uh, they're in London

and, and again, don't know about SwiftKey, but the plan with, with all of the previous acquisitions is keep these teams where they are. And I think in a world of, you know, in the consequence of this mobile first cloud first world is, you know, with GitHub, with Slack, with Dropbox, with AWS, and yes, with, you know, Office and Skype, you know, innovation can come from Redmond and Mountain View and San Francisco and Seattle, but also Berlin and also London and also New York. And what's important isn't so much the location, it's about the quality of the products. And I think about when we talked with Ed Fries about Bungie and how important it was to keep the Bungie culture, but they had to move them down the street to Redmond. Today, they would have stayed in Chicago. The one for me is, you know, translating a

theme that we heard about over and over and over again, five years ago, kind of one level up the stack. So, you know, it's, it's been out of the news cycle recently, the phrase bring your own device, because we all know that, yes, the BYOD world is here to stay. And people choose their own hardware, bring their own hardware to works. And for long time and kind of still it's a nightmare for IT folks. I think we've taken one step further on the stack and it's really bring your own client. And to the extent possible for except for, you know, certain very secure applications. The consumer expectation is that I choose the view in which my data is presented to me and I view that data that is from a service that is mandated. So either you choose your own service as a consumer and

you choose Office 365 or Dropbox or a variety of different mail services, or you work for a company and that company has a set of services, you don't necessarily assume that that set of services comes with a mandated set of clients. And you sort of expect, I choose my own software to consume those services. And I think for me, like the reason why I think that, um, that this was so important is, you know, if, if, uh, there are three best in class applications that people are going to choose to consume their services, it's kind of great to own the unified experience and be able to provide all the best connections between the two or the three possible. Yeah, this is really important. You

know, certainly the desktop operating system wars have been over for a long time. But, you know, the mobile operating system war is over, too. And nobody won like the points of interest and dynamicism in in computing and technology, the sort of technology meeting consumers and products these days. It's not, you know, iOS or Android or Windows or Mac or platforms or even browser versus desktop versus mobile. It's really shifted to the app layer and it may soon shift to the messaging layer. We'll see. No, I think there's something to what all of you said. And I think those are all correct things. For me, it's hard for me in this one. The thing that if therei, like Sunrise, like Wunderlist,

and you just look at them and say, wow, this is a great product. And, you know, it's that excitement that we all have when we download a new app, and it just, it changes how you, it changes how you work. It changes how you work with others, et cetera. And each case of these, these were products like that. So as a theme, I think it is these products well crafted by creative artists that, you know, really think deeply about how the user uses them, have that passion. opportunity to be in tens and hundreds of millions of users across the planet. So that's one theme. It just seems like that recurring, that excitement that you get when you see a product like this that's really well done and to have those teams succeed by part of the acquisition, I think is one key part of it. And then the second one for me is just that we are constantly learning of what the best way to

execute these kinds of acquisitions is, and we constantly get better at it. And I think we as a company took another step at getting better at it with these acquisitions, recognizing how do we keep the people energized? How do we, as you said, David, it's a global world and let's keep the teams where their families are and where they are. It's not about bringing them all to Redmond. And so we continually get better about it as well. And consistent with that is, you know, we're a bunch of engineers and product people. And we just love to, you know, you get these talented teams, you bring them in. And again, part of this getting better is to having them become in leadership positions too,

in our company and help us all get better and deliver better products as well. Yeah, it's really interesting. There's an interesting question that comes to mind in just thinking about some previous Microsoft acquisitions and then, you know, the world that exists today. Microsoft is a company that has like a diverse portfolio of businesses across many different customer segments from enterprise to consumer and kind of all the way up the chain. Not all these businesses have aligned priorities. I mean, for Windows, it's to have all applications be best in class and first on Windows. And for, you know, Office, it's to have the best possible integrated experience across all platforms. How do you, when you do an

acquisition like this, make sure that the leaders of all those organizations and that all the organizational priorities align around spending, you know, what comes to in total near half a billion dollars on a productivity suite that for iOS when you're a Windows, you know, an executive over in Windows. Yep. Well, you come in with a set of premises that or the fundamentals about what the fundamental assumptions under which you're making the acquisition. And in this case, for these apps, it was clear the cross platform was a key part of the acquisition premise. And so in that sense, one, it has to be championed by the leader of that particular product group. So Chi Lu, in this case, and there has to be strong support there. And it has to be championed by the CEO as well. And so Satya has to look at the acquisition and say,

you know, I like this acquisition. And Terry Meyerson, I understand this doesn't specifically help you. I think it indirectly helps you by making our services strong and making Windows and Outlook for Windows a great experience that also works on mobile devices. And this is relevant. Terry, for our listeners, is head of Windows, right? Yeah, Terry leads Windows. But there's always a balancing that

happens. And you go into it not thinking that there may not be as strong a value proposition for some of the businesses as others. And any time you have a company that is as large as ours, and we're not the only one of this size, there's always going to be this balancing of priorities that comes out. The thing that we are constantly pushing towards is don't let that balancing of priorities mean that you're mediocre in everything. And you really have to say that, for example, in cheese business for office to be the leading productivity solution on the planet, we've got to have a great story around cross-platform. And so you really do, it's excellence for all. It's not about the balancing out at some mediocre level where nothing is great.

God, that's a great point. That's a really good way to think about it. Thanks, Kurt. Sure. Should we wrap up? Yeah, yeah, yeah. Render our grades. Yeah.

Before I do that, I have a question for Kurt. So, you know, this acquisition is typically too, probably too early for the ones we usually do on this show. I mean, usually we like to see a little bit of proof in the pudding that you can like look at some spreadsheets and see, hey, you know, they bought the company for this much. And it turns out, you know, there's a lot of other ancillary value, but we can definitely attribute this value gain to the acquired property. And there was a multiplier on the value of the acquisition for the acquirer post acquisition. Great, clean math. Nice to justify. We can look at Instagram being a multi-billion dollar business inside of Facebook right now and being acquired for a billion and go great investment guys. How with this business, you know,

it's, it's definitely too early to say for sure one way or another, I think we need to wait a few years, but you know, how do you look at the success metrics of, you know, we dropped some number of hundreds of millions of dollars on this, this suite of applications. What are you looking for from a financial perspective on a return? And how could you possibly measure that? You can't. And we don't look for a financial measurement on everything that we do. In fact, we very explicitly have a set of metrics that are around performance and others that are around, are we making progress in our category or so-called power metrics of, do we have strength among users in using our products? And this one,

the metrics around these products are all in that latter category. It's all about how many people are using and loving the product. And you can't even draw the indirect mathematical connection to greater office sales. And we don't even try. So we set goals for these products that are around how many monthly active users do we want to have? What's the level of engagement that we want to have with the products? Because we have confidence in the premise that if those are strong users, it will pull through sales of office. Now, the place where we do do some measurements is around customer sentiment about, you know, do you what fraction of the office users are also using our mobile clients?

You can also make a measurement of what the value is of a customer that is both a user of the core office applications and the users of the mobile applications as well, or do they use OneDrive, for instance. And we do find that the value of those customers are higher because they're more highly engaged users of office. And so that if you want to come up with a mathematical equation, I suppose you could. We don't tend to look at it that way, but we do to come up with a mathematical equation, I suppose you could. We don't tend to look at it that way, but we do tend to do these, you know, conjoint analyses of of, you know, if of the connections of the different products today and what that implies about the strength of that person, that particular user as a customer. Fascinating. That is very cool. And, you know, it's great to, you know, I think this is one of the reasons why we started this show is to talk about stuff like this. You know,

it's so opaque what, um, what acquirers are looking for and what happens to companies post acquisition. And, um, it's just, yeah, it's thank you for that. And it's, it's, um, great to, great to get that insight into how, you know, we talk about categories of acquisition and we're thinking more from a theoretical perspective. But yeah, what really is the measurement that you guys are using for different kinds of acquisitions? Yep, definitely differs by acquisition. Grades, Ben? Grades. So I'm going to allow myself a plus or minus factor.

That's the tolerance in which my grade can go up or down in notches over time since we're kind of early. And I'm going to rate it a B plus right now with a two notch variation. So it could go to an A or B minus, but it's solidly right now with a two notch variation so it could go go to an a or b minus but it's it's it's solidly an a or a b uh i'm gonna go um you know i've been thinking about this for the whole episode um i'm gonna give this an a and i'm gonna say that because i'm thinking about this in contrast to uh we did an episode on siri and ben and i were both so well we were both quite uh quite harsh in our judgment of of that um and i and i and one of the reasons is clearly uh virtual assistants and voice-based computing is a

um major uh paradigm that is important for technology companies going forward. You know, Amazon, blah, blah. But Apple's really not done so great on that. And I think about, in contrast, Office think Microsoft was under a lot of threat from a lot of different areas, from Google Docs to startups like Evernote to the other mail and calendar clients and task lists out there, of which there were several. And here we are several years later, and I am 100% an Apple guy. And I love my cloud services and Dropbox and Slack. And Dave, you are looking at a Google Doc right now. And I'm looking at a Google Doc.

And yet, you know, I've joked about it several times, but Microsoft basically owns my productivity on my iPhone. I use Wunderlist every single day, all day. I use Out use wonder list every single day, all day. I use outlook for iOS every single day, all day. Uh, and the calendaring features are, are the real differentiator for it. Uh, I use Swift key. Oh my God. Send availability in outlook is like the best feature. Um, and, and I, I contrast that with, uh, with Siri and I just think it's been a huge, huge win. So a lot of work to do to keep it up, but good job, Kurt. All right.

Well, I'll take those. I think I'll take those and go grab a beer to celebrate. But I hope you'll ask me back, and Ben, we can celebrate you changing your grade to an A. All right. Sounds good. All right. Thank you, Kurt.

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