Acquired - Acompli, Sunrise, and Wunderlist (w- Kurt DelBene)

0:00All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired. LaGora, the agentic operating system that is redefining how the world's best legal teams work. Yup, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. LaGora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

0:30So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love, like tabular review where you.

0:49drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Lugora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work, and this means that the pie can grow even as each individual task takes less time.

1:09And they recently launched LaGora agent offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And LaGora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early LaGora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over a hundred thousand lawyers on the platform from 1200 legal teams in 50 countries. And crazily they went from one million to a hundred million in ARR in about 18 months. Truly insane numbers. And that is the real test.

2:01Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in house at a company, you can learn more at legora.com slash acquired. And just tell them that Ben and David sent you for scoring seven years ago. Our forefathers brought forth from this continent. How far can you go with that?

2:28I actually forgot. That's as far as you got. Oh, you didn't even get that far? Why did you learn in civics in elementary school? Welcome to episode number eight of acquired. I'm Ben Gilbert. I'm David Rosenthal. And we're your hosts.

2:59Today, we have a very special episode. We have a guest at Microsoft, Kurt Delbeni. Yeah, we are very lucky to have Kurt Delbeni with us today. He's been a great friend and mentor to both of us in different ways and actually both of us at Madrid, too. So Kurt started his career, actually, at the very famous and renowned Bell Labs.

3:26And it spent five years there and then went to Booth and got his MBA at Chicago. Went to the short-standing McKinsey after that and then went to Microsoft and had an over 20-year career at Microsoft that culminated when Ben was there and incurred being the president of office, which he was until December 2013.

3:49And 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 Padrona 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.

4:13Hey, 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 early one morning and coming into here. Talk about that at Madonna. 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 is crit that that looked like an absolute ballet Well, it's it was super rewarding and super challenging so maybe we can do a future podcast just on that It's a good it's an interesting topic. You needed to you needed to get some good R&R So you went to a venture firm for yeah 10 months afterwards So today with Kurt we're gonna talk about

5:10Hopefully a very topical acquisition, and we're actually going to lump a few in here, but the main focus is going to be a complete, which is now the mobile outlook on iOS and Android. So I'm going to run through quickly. We're going to do a complete, and then we'll sprinkle in little bits of both Sunrise and Wonderlist, which are also Office Productivity apps that Microsoft all acquired in the past 18 months or so.

5:39And so, I'm going to run through quickly the acquisition history in fact, Accompli founded April 2013 by J.J. Soiltero and Kevin Hendrickson. It's interesting. Havier was CMU engineer and then an early employee at Netscape. The Havier 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 from day one when it launched in launched in beta and thought it was on my iPhone and thought it was just a great If really the first mobile app that combined male and Calendar all in one app The the magic that outlook have been doing for so many years and no one really innovation what's what's old is new again

6:35There is a $7.3 million series A from Red Point, led by Red Point, where Javier had been an EIR after VMware and Harrison Metal and Felicis. Then about 18 months later, Microsoft acquired the company in December 2014 for a reported $200 million. It was interesting. Everybody knew this acquisition was going to happen because Microsoft wrote a blog post about it.

7:04and it leaked about two weeks before the acquisition actually went live. Yeah, not a shining moment. Not a shining moment, but it was successful. The acquisition happened there about 25 employees all based in San Francisco. They all joined Microsoft. 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 18 months less than 18 months after the founding of the company.

7:33And so it was very quick, and this was right after Dropbox had acquired mailbox. So it was the era of mobile email acquisition. Begun the iOS mail app wars have. Yes. Shortly thereafter, Microsoft then acquired the calendar app Sunrise in February 2015.

7:58And then in June of 2015, Microsoft acquired WonderList, the to-do list app, which I know has probably has a soft spot in Kurt's heart knowing how much he loves lists. 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 you'll have to tell us at the end what you're using these days. I am still using all of these products.

8:27That's an endorsement right there. There you go. What's happened since then, at the same time, right after the Wonderlist acquisition, Javier was actually promoted within Microsoft to be the corporate VP running all of Outlook, so not just the Outlook mobile app but Outlook on desktop as well. Shortly thereafter, After that, Sunrise calendar was rolled into Outlook. Wonderlist has remained independent today, but has been announced that further integrations may be coming on that front. So maybe Kirk can enlighten us on that. But with that, Kirk would love to hear kind of how you thought about all of these products. Sure. So the first thing I should say is the acquisition happened

9:26during my time away from Microsoft, but I know the whole history of it. The corporate strategy team which I lead now was intimately involved in the in the acquisition. So and I obviously know the space super well. I spent a ton of time in office. So when I saw it happen, I said, okay, this one makes complete sense. This is an example. I mean, 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 acquire the company to build out that adjacency. There are some more rare cases where we'll do it to get a particular

10:25set of talent, you know, we see a team that's super, super good. But I think that tends to be the exception. This one was the 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, you know, the office suite and by desktop, I mean, both the Windows PC and, you know, 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, there was a corporate strategy effort 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.

11:23And 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, you know, I think that from a high level, first of all, as a consumer and just, you know, from the public perception of Microsoft these days, everyone is loving that. I mean, the whole focus on building a really great cross-platform experience, have the same data with you everywhere, access to the same services, you know, the same core office services that you know, and love huge value-proper consumers.

12:21As 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 ways to look at it. The first thing you see after 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. 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. That model has stayed.

13:19Again, looking at a conflict 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, that's a natural, 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 will 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

14:14there'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 gotta have a 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, etc. 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 tear 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.

15:13And 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.

15:35regardless 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, and when you are working at Microsoft, you're working on Office Crypad, right?

16:03It was. That was so much fun. Well, we did get around to shipping that. The importance of it, as a consumer, it's not about my experience with my male client or with Excel or with Word on it, on a particular device. Now, it's about how that works in concert across all of the areas where I'm doing my computing.

16:32Related area that I'm curious if you guys thought about with the Accompli acquisition and the strategy is Something that been 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. Was that part of the strategy here too? Yeah, I think that...

17:22A company does a great job of giving you a single unified inbox. The 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. You know, we had schedule plus those of you.

17:50Holder in your blogosphere listeners will remember schedule plus and became a verb. It was so popular and in fact still still echoes around the hallways of Microsoft about sending us pluses around exactly every time I correct them and I call it a meat it's a meeting request schedule pluses 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 requests capability into schedule plus all of a sudden it starts to look a lot like email and so outlook and under Brian McDonald who is 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 and do a single user experience which clearly has been born out

18:45Early on, the versions of Outlook were not up to the task. I will say in retrospect that 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.

19:12I think you find calendaring deeply integrated. That's why Sunrise got integrated into COMPLEE. 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.

19:37And I can tell you there are any particular plans to take Wonder List and deeply integrate it with a compley with a scenarios crossover. Problem makes a lot of sense. But then, you know, the personality needs to be preserved with those different applications. And we think they're big applications in and of themselves. All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture.

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21:42We'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 focusing on retention, and what decisions did you guys make with primarily the accompli team? It's a great question that it is super, super important for us to retain both.

22:11the particular talent, the fact that there are 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 were 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 the bread of Microsoft to do more great things unless unless I'm mistaken all of these teams are still in their original locations well that's the other thing none of them are in Redmond right right it doesn't make much sense to have everybody come to Redmond it's it's not necessary we are already a broad company that

23:10has 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 so in most cases we actually don't relocate them and that's definitely been the case here as well the Wonderless 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.

24:05And so that's a, 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.

24:58And 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 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'm not certain, but I think he was at Microsoft pre-acquisition. So it seems like some of that DNA sort of leads into the existing team and kind of lights a fire. Yeah, even simple things like 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.

25:55And 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 friends 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. Probably the biggest challenges if you've got particular people who are in line for that job or a job in specific. I think it's a misconception that

26:52people at Microsoft are not, you know, are not open or embracing 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 come, this comes in and in comply in particular, or any of these products, centralized, wonderless, 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.

27:22and we'll all do great things together. So it's not as hard as you might think. Yeah, absolutely. A particular position where somebody from the entering team might get a position that somebody else might have thought they were in line for. I mean, I remember when Javier was promoted to corporate VP and hearing about it in the press, but then also hearing friends of Microsoft talk about it. So often, You see, you know, we see looking at lots of acquisitions, the CEO or the management team of the target company all end up, you know, with some meaningless VP title at the inquiry and they'll stay for 18 months until they've best and then they're gone and onto their next thing. And this is a major, major role of Microsoft. And really was, you know, I don't know if promotion is the right word giving that he was CEO of a company, but a real recognition of

28:20a 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 you know, Javier wrote in the blog post announcing the acquisition. He wrote these sentences here that I'll read. 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

29:09the vision of a complete to hundreds of millions of mobile users across the world. 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. Yeah, we're going to get the scale and the resources that are really going to enable us to impact many more users. Usually it's pretty hollow, but here Kudos to you and to Microsoft for really Giving a giving them that in truth, but but it's really rare to see the team embrace this as much as as Have you are in the accompli team have? Yeah, no, I appreciate that and it really was the intention You know that there is a bit of a scale difference to 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

30:05Hey, 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 a company is it had a huge user base or quickly growing user base from a strong core.

30:29And so we were both able to take advantage of that in terms of getting a stronger footprint and 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 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 talent, 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.

31:27as a 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 along 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 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,

32:19a goal, and you believe you got a great team, then the acquisition kind of writes itself. It just makes it ton of sense, and it works out super well. And that's what kind of what happened this case. I want to push on that a little bit. Why is it so important to have the absolute best clients, WonderList, and Outlook, Outlook for iPhone, and Sunrise, I guess that'll eventually just be an outlook. When those are our 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, and 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.

33:18And so that's a big piece of it. So when you see this. That's a big mindset. Yeah, it is. It is. It's not, you know, there are places where we think we can quote unquote make the market by driving innovation, you know, 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.

33:45And you just recognize it and say, you know, this is a place where 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, you know, it's just not worth settling for that second best app. It's true. And if you're kind of following the footsteps there, I mean, the client app is really the front door to the consumer experience. I guess there's always that risk that that client app could start prioritizing a different service. 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 sometimes when you can acquire an application. 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 out of the hands of a competitor.

34:43keeping 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.

35:06that you say that the last episode we did was on YouTube. 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 ultimately Google lawsuit. It's interesting, Eric Schmidt testified that one of the key reasons 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 you say whose hands they wanted to keep it out of? 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 Microsoft is a

36:03We are a product and a technology driven company and what we're trying to do within each 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 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?

36:24You'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. Then you were there. Can you imagine? Do you remember ever having such an acquisition? No, not while I was there. I can't imagine, too, just thinking about the rest of the office for iPad team. If we had bought one of the weird office clones for iPad that we were looking at as sort of like the not doing so well but decent competitive landscape and like tried to bring them into the team that that would have been really messed up. Yeah, 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 you know having some ulterior motive which is pulled out of some of these hands versus being led by what you want to proactively and positively do with the product.

37:24It 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. You know, it seemed to work out for him pretty well. So we created that one not super highly. Is that right? Yeah. We gave it a C early side. Wow. You guys are tough creators. YouTube 10 years later is a break even business. They've lost a lot of money on that business. Wow. I guess that is true. And huh.

37:52Is it break even on an annual basis including advertisements as far as our research could determine? Yeah, I don't follow that space super closely so a lot of a lot of cogs in that business I suppose this true both on the technology and on the content and talent side All right listeners Now is a great time to thank our longtime friend of the show ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part. Yeah, the hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like the risks are real.

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39:51So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com slash acquired and tell them that Ben and David sent you. Let's move on to we're going to do two other categories that we like to do on the show or segments. First is Ben and I both and Kurt, you're welcome to join in too. We assign a category to each acquisition we're looking at and the 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

40:50that old Outlook web access and start 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 seat. 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 a company were popping up and, you know, useless for a lot of my mail. So, I remember even just as an exchange user at Madonna, it was...

41:16It was really frustrating because all my friends who were working at startups were using mailbox or the Gmail app and they were great. And look, it came not a moment too soon. I think that for me, a company I was using it before 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 You know what it was gonna turn into what the timelines were gonna look like and what the people were gonna look like you can kind of like It you always figure all that I'll take like six months or so within two months it shipped as Outlook for iPhone and like all the new stories were kind of funny that oh They're just slept a new label on it. Maybe they did but who cares it was great. That's a really good point at some at some point you don't want to mess with success And instead of legal things you got to do to make it a Microsoft product, but that's and that's probably what took the time but you know

42:11Keep giving people what they love. Yeah, so I'll go next and I'm curious Ben and particularly Kurt may maybe beat me up for this one, but I'm going to go out of the box on this one. I'm going to call it another. And I wrote down combo meal because not only because it was multiple acquisitions, if you include sunrise and wonderlist.

42:38But I actually think there are elements of this that, as there are in every acquisition, but here that they 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.

43:07future on in a mobile first cloud first world and you know part of that is technology and part of that big part of that is people as we've talked about and product as well. 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 had in mind something very specific we wanted to acquire but there's clearly synergies with the other parts of the office business. And so in office products, so think about the fact when you download a piece of email that 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 said you need to establish a footprint on mobile devices. And the first workload, if you will, that people use

44:05or the first three, I would say, are the three that we acquired in these three acquisitions. And so in that sense as well, it wasn't re-energizing the businesses also. So I guess I would, I think there's something to that. It's maybe it's a combo meal that has at its heart a product deal. Maybe we call that a happy meal.

44:31That is interesting. You talk about the key scenarios on mobile there. 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 a curve of workloads. What's your mobile workload? 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 there's scenarios like I mentioned if you're reading a document in Word, and there's a set of comments that

45:28or 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 really 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.

45:56Let's move on to, I want to make sure we have enough time for my favorite part of the show, which is our technology themes segment. And Kurt, so what we do here is, each of us talks about, and again, please join in, we'd 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 start up.

46:26been on this, but I'm curious on your take, having been a big tech company for so long, having done a stamp with us in the venture world, what themes there. So maybe Ben and I will go first, give you a little time to think about it. But 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 think Kurt, I think you said it. You know, innovation is distributed. It's global today. You know, Accompli is in San Francisco, Sunrise was in New York City, Wonderlist is in Berlin. We haven't talked about it yet, but and it's not in the same group, but Microsoft also recently acquired Swift.

47:16another part of your strategy to take over my iPhone. But they're in London. And again, don't know about Swiftkey, but the plan 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 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 what's important isn't isn't so much the the location. It's about the quality of the products And I think about when we talked with Ed free is about bungee and how important it was keep the bungee culture But they had to move them down the street to redmond. You know today they would have stayed in Chicago the one for me is

48:14you 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 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 a 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.

48:42to 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 know, you choose Office 365 or Dropbox or, you know, a variety of different mail services or like 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, the reason why I think that this was so important is if there are three best in class applications that people are going to choose to consume their services,

49:36It'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 two and Nobody won like the the the points of interest and Dynamicism in computing and technology or technology meeting consumers and products these days. It's not 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. Now I think there's something to do with what all of you said and I think those are

50:34Those are all correct things. For me, it's hard for me in this one. The thing that if there's a theme for me, it's that good products rise to the top inevitably. And you look at one of these products like a company like Sunrise, like Wonderlist, and you just look at them and you say, wow, this is a great product. And you know, it's that excitement that we all have when we do.

51:02download a new app and it just it changes how you it changes how you work it changes how you work with others etc 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 they went out and they you know they get that opportunity to to be in, you know, 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...

51:58execute 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.

52:26And consistent with that is 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.

52:54Microsoft is a company that has 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 Office, it's to have the best possible integrated experience across all platforms.

53:24How 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 are 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.

54:17It has to be championed by the CEO as well. And Sacha has to look at the acquisition and say, you know, I like this acquisition. And Terry Myerson, I understand this doesn't specifically help you. I think it indirectly helps you by making our services strong and making windows an outlook for windows, a great experience that also works on mobile devices. And this is relevant. Terry, you've heard a list. There's this head of windows, right? Yeah. Terry, Terry leads windows.

54:47But there's always a balancing that happens and you go into it not thinking that there's a 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 they're we're not the only one of the size There's always going to be this balancing of priorities that comes out the thing that you have to that we are constantly pushing towards is Don't let that balancing the priorities mean that your mediocre and 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.

55:44Should we wrap up? Yeah, yeah, render our grades. Yeah. But before I do that, I have a question for Kurt. This acquisition is typically too early for the ones we usually do on this show. Usually we like to see a little bit of proof in the pudding that you can look at some spreadsheets and see, hey, they bought the company for this much and it turns out 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 acquired or post acquisition.

56:22Great clean math nice to justify, you know, 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 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 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 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?

57:19Among users in using our products and this one the metrics around these products are all in that ladder category It's all about how many people are using and loving the product and you can't even draw the indirect You know mathematical connection to greater office sales and we don't even try so we set goals that are for these products that are around how many month-way 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 memorable 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.

58:17and the users of the mobile applications as well or do they use one drive 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 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 tend to do these conjoined analyses of you know if the connections of the different products today and what that implies about the the strength of that particular user as a customer. Fascinating. That is very cool. It's great to, I think this is one of the reasons why we started this show, is to talk about stuff like this. It's so opaque. What acquires, are looking for, and what happens to companies post-acquisition. It's just, yeah, it's, thank you for that. It's great to get that insight into how, you know,

59:16We talk about categories of acquisition, and we're thinking more from the theoretical perspective. But yeah, what really is the measurement that you guys are using for different kinds of acquisition? Definitely different, 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.

59:44in 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 an A or a B. I'm going to go, you know, I've been thinking about this for the whole episode. I'm going to give this an A.

1:00:08And I'm going to say that because I'm thinking about this in contrast to we did an episode on Siri and Ben and I were both we were both quite quite harsh in our judgment of of that. And I and I one of the reasons is clearly virtual assistance and voice based computing is a major paradigm that is important for technology companies going forward.

1:00:37Amazon, but Apple's really not done so great on that. And I think about, in contrast, office and Microsoft having been the leader in productivity. And when these acquisitions were made really, I think Microsoft was under a lot of threat from a lot of different areas, from Google Docs, to startups like Evernote, to the other male and calendar clients and task lists out there, of which there were several.

1:01:07And here we are several years later and I am a hundred percent 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 yeah You know, I've joked about it several times but Microsoft basically owns my productivity on my iPhone I use Wonderlist every single day all day. I use Outlook for iOS every single day all day and the calendaring features are the real differentiator for it. I use Swift key. Oh my god send availability in Outlook is like the best feature. Yeah and I contrast that with 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.

1:01:57All right, well, I'll take those. I think I'll take those and go grab a beer or to celebrate. But I hope you'll, I'll help you ask me back and Ben, we can celebrate you changing your grade to an A. All right. All right. Thank you, Kurt. All right. It's been a pleasure. See you guys. All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig. Yes. There is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale. Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what

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