Kurt DelBene

As Microsoft's latest internal slogan is quick to point out, the software company is "all in" when it comes to the cloud.

But one of the products that points to such a statement being more of a half-truth is Office, which while in the process of being ported to the cloud and gaining an increasing number of Web interactions, is still a software program--and a very popular one at that.

In fact, Office is one of Microsoft's biggest and fastest selling software franchises next to Windows, as Microsoft's CEO Steve Ballmer pointed out at the top of the company's annual shareholders meeting this week. While Office may someday be an all-cloud affair, for the foreseeable future, it will continue to be offered as something you can install.

Heading up Microsoft's Office division is Kurt DelBene, who took up the reins just last month. Yesterday his group launched Lync, the successor to Microsoft Office Communicator, which mixes instant messaging, audio and video chat, and a VoIP service. It effectively completes the puzzle of apps that make up the Office suite. Lync, which goes on sale in two weeks, is beginning as a server product companies will be able to deploy on their own hardware, before moving to a hosted cloud service as part of Microsoft's Office365 suite early next year.

DelBene took time out of Lync's launch day to talk to CNET about a variety of topics, including the Lync platform, Microsoft's partnership with Facebook that is making MS Office attachments readable through the company's Office.com site, as well as how Office the software will coexist with Office the cloud service. Below is an edited transcript from that conversation.

Question: Congratulations on your promotion. DelBene: Thank you very much. I'm excited.

Can you talk about what, if any kind of collaboration the Lync team has with the Windows Live Messenger team Obviously the two are very different products with different markets, and this product came to replace Messenger as part of the Communicator product, but I'd imagine things that come to Lync might one day end up in Messenger one day and vice versa. DelBene: There's actually a very good collaboration across the two teams. And so, if you think about the focus of the Office team and the Lync team as around business users, and think about the Windows Live team, or the Messenger team being around a consumer audience, then neither product really replaces the other. And so the goal is really more around how do you get interoperability between the two products, which is what we demonstrated in the launch event. And so, that's how you can see Chris (Capossela) being onstage being on Messenger, and talking to Gurdeep (Singh Pall) who is on Lync.

The partnership goes beyond that, though, in that the underlying technology is shared across the teams. And so we have some deep experts in audio-video conferencing within the Lync team. And so they actually work with the Messenger team to integrate those capabilities into the messenger client. And so we can share that expertise as opposed to duplicating it.

Microsoft Chairman Bill Gates hops onto a video chat to help demo Microsoft&39's Lync product.

A lot of business is being done on phones now. Can you talk about some things that he was doing to make some part of the desktop experience carry over to mobile devices, especially with Lync I know one of the things you guys talked about this morning was transferring an active conversation from one device to another. DelBene: That's one piece of it, because people when they're on the go, they think about wanting to connect, having their desk phone follow them. And so we make it super-easy for you to forward your calls, figure out a schedule onto which you forward your calls. So, it really becomes fairly seamless to think about the mobile phone.

And then you can take that a step further and think about clients that are on the mobile phone themselves, where you're in the presence of various of the people on our buddy list, or anybody from the organization would be present on your phone and you can actually connect to them from the phone originally, as well. And so you can think about starting from the mobile phone and starting from somebody's presence and making a phone call to them directly from the phone. So, in the announcement, I think Gurdeep mentioned connectivity to Windows Phone 7 in 2011, and for the iPhone, as well. So, that would be for actually having a client on the phone.

Was there anything in particular piece of hardware from what Gurdeep referred to as "the wall of fame" during today's Lync presentation that's really been specialized for Lync Is there a big standout product that is maybe something competitors don't have DelBene: Well, the first thing I think they don't have is the breadth of products. And so, the key differentiator, I think for Lync, is the focus on open standards and that customers will want choice in terms of what hardware they provide, or that they purchase. And so, I think the wall of fame is most impressive because of the variety of functionality that's there.

I think the second thing is the variety in terms of devices and solutions for the PC as well. And so there are people who are going to embrace Lync by having a PC experience, and there are people who are going to embrace it with a more traditional IP/PBX or IP phone, and we think there should be great solutions across both of those.

I will also say I continue to be excited about the roundtable solution, which is a great innovation of both hardware and software working together, and that's the panorama view that Gurdeep showed of everybody in the meeting. I think that the beauty of great software innovation coupled with great hardware design, that product is a great example of that and shows the kinds of things that you can do when you have hardware partners working with software partners on innovative solutions.

Speaking of which, the Kinect integration you guys showed off this morning is obviously a killer demo, but I'm wondering do you envision people getting home from work and maybe starting to play a game, and they get a call from their boss Or is this more of an extra solution on top of what Kinect already does DelBene: I think both. There are a couple of angles there. I think I am excited about that as an endpoint for users, and so the person who is playing a game with their children doesn't have to jump out of context, although their kids might be a little disappointed if they have to pause the game for a second. I'm also excited about the hardware and software innovation that it represents for Microsoft overall. I think that we've gotten some really good feedback from both the press and from customers of how game-changing Kinect is. It's not just about emulating what somebody else does, it's about phenomenal innovation for Microsoft.

And I think if you think of the body of knowledge that is represented in Kinect, and the ability to think about some of those scenarios for information workers as well, you can kind of let your mind wander and think about some really cool breakthrough scenarios that are possible when we take that body of knowledge and think about it in the context of information workers. So, I'm just as excited about the future that it represents as I am about the functionality we're delivering to customers now.

Microsoft&39's Gurdeep Singh Pall (left) talks with Office senior VP Chris Capossela through Lync working on the Xbox 360&39's Kinect video chat.

Let's talk about Office for a second. Yesterday, Steve Ballmer called it out during the shareholder meeting as being the fastest selling version of Office ever. So from where you sit, what features in Office 2010 are resonating the most with customers What's leading them to upgrade DelBene: I think it's a broad set of capabilities. I think there is functionality in terms of really pushing forward 'what does it mean to author documents' and things like the ability to do rich editing of photos directly in place in Word, and PowerPoint. Just taking the kinds of documents that people create and making them richer, I think, is one pillar.

Another pillar is around making it easy to author documents with others and share your ideas with others--the whole idea of like the PowerPoint broadcast feature, where you can invite people to view a broadcast online without a lot of infrastructure. You can, just from within the client, post the slides up to a share and everybody can view the PowerPoint presentation with you. I think that's generally around the area of working better together and a set of features around there have resonated very well.

And then I think the whole vision around PC, phone, and browser has been a big piece. So, having an experience in the browser with the Office Web Applications, so that if I'm away from my desk, or I have somebody who just wants to go view a document or do some light editing, you can do that in a way that is collaborative, or is complementary, rather, with how you use the full desktop client.

And similarly, delivering the rich experience in phones, you know, we did an Office hub in Windows Phone 7, but are also working with partners like Nokia to have a rich experience on mobile devices, as well. So, I think those are kind of the areas of investment that have resonated with people. I think bringing the new user interface with the ribbon to all of the applications, I think the completion of that has been a key element.

So, now IT can think about a consistent user experience across all the applications. And then the last thing I would really say is, the refresh cycle for PCs in general has been hampered a bit by the economic situation. And I think we're starting to see a turn in that. And so we're seeing a bunch of people purchase PCs, and the whole notion of purchasing Windows 7, and purchasing Office 2010 as two products that work well together are fresh, are highly performant, and represent a great desktop is another thing that we're seeing as driving that demand.

One thing you mentioned earlier was Office on the Web. Do you want to talk for a little bit about the new Facebook messaging service which came out this week It has deep ties with Office.com. Can you talk about how that integration happened, and some of the things Microsoft is doing to capitalize on users who might be coming to Office.com for the first time because of that feature DelBene: Yes, so the collaboration happens because we've had a relationship with Facebook for some time. And actually Ray Ozzie started the discussions with them around an incubation project called Docs.com, which basically took the Web applications and made them available on a third-party site that was run by Microsoft, and put those into, or had a user experience inside of Facebook for the Web applications. And so that was kind of a prototype experience and we followed that up with the Facebook team to figure out what we can do together on a production basis.

And so what we have announced, and what they're shipping is the ability from within Facebook e-mail to when you have an Office document to actually be able to view that document using the Web applications. And from there you can bring them into Office.com, and Windows Live, and actually do all the things you can do with the Web applications. So, you can edit them online using the Web applications, or download them to the rich client and do all the things that you naturally would think about doing with the rich client, as well.

So, to summarize it really comes from the long relationship we've had with Facebook, thinking about the opportunities that exist between Office.com and Windows Live, and Facebook, to deliver a great information worker experience.

What fraction of customers would you say for Office in general, are interested in Office 365, and are cloud services showing up on requests for proposals Is Microsoft pitching that ecosystem at buyers now when someone is looking for software DelBene: Yes, I think the demand we've seen has been very strong, and so I tell people that we've moved from a point where people we're saying were having discussions with us about whether they wanted to move to the cloud to when they want to move to the cloud. And so if you look at our business customers, we're having discussions with almost all of them, saying this is what the cloud offers. You can now consume software from Microsoft in two fashions. One, we are going to continue to deliver the best on-premises software, but we'll also deliver an alternative to you, in providing the online version of that product, as well.

So, I would say we're having very broad discussions with customers about Office 365. As it goes into beta, we expect a lot of those customers to trial it with a subset of their users and then decide the timeframe that they'd want to move. There's always going to be a set of customers that will move more slowly, have different concerns around security. I think we feel very, very good about the security that we offer, but you're always going to interpret it based on your own history of the company and how you view the world. But, we think the momentum is very, very strong.

We also think that momentum isn't just among large customers. It goes down into the features that are interesting for large customers, and SharePoint, Exchange, and Lync are just as interesting for small companies, too. The difference is before they weren't able to actually deploy, or they had a difficult time deploying all the servers that would be required to provide us that functionality to users. So, we like to say that Office 365 can make a small company feel large in terms of its set of capabilities.

As a follow up to that, with software now shifting from this giant packet of bits every two to three years--like Office, smaller improvements start coming more quickly with some of these other software applications. Will Office get on that bandwagon and is Office 365 largely going to be held against that same kind of release cycle DelBene: I think it's a balancing act for us. And I think we're starting to show that with the Office Web Applications. If you look at the set of features that we shipped in the Office Web Applications when we shipped Office to the set of features that were available when Windows Live published them, or made them available to customers, there is actually some incremental features between the two that we did the first turn of responding to customer demands, and figuring out what are the key gaps that we had to fill, and to actually deliver those.

So, I think we will get on a rhythm of updating the service more frequently, while at the same time having a set of the team working on the big innovations that take longer to do. And so, you'll have kind of a quick turn of responding to customer needs, and then you'll have the more traditional pace, which we like to say is, as you say, about every two-and-a-half years. And the question will be, what's the right balance there

But, we basically have always been very, very responsive and adaptive to what the needs of the customers are, and this is a place where we'll adapt as well.

So, on competition, I'm curious about Microsoft's plans for the Mac App Store. Office for Mac 2011 is already available for sale as a suite and as a download from Microsoft's Store. Are you planning an offer in Apple's upcoming store as well, and would you ever break it up into individual apps like you did on the PC side DelBene: I don't have anything to talk to you about now, but it is a topic of discussion that we have with the Apple team. And so we continue to be responsive to how our customers buy our products, and there are always intricacies when you go to a new distribution system that we would have to work out there.

I will say that the response at retail to the new version of Mac Office has been phenomenal. And part of it is due to the strength of the release across the board. Part of it is due to new applications that are being delivered. I think Outlook in particular is a shining star for the new version of Mac Office. And so we are seeing very good results. And we are having a very good partnership with Apple in terms of making the product visible, and available in Mac stores.

So, we feel like things are going pretty well.

I was especially curious because for the Mac App Store, Apple appears to be breaking up iWork, which is traditionally a suite. DelBene: I think we do view the value of Mac Office as being partially about the individual applications and partially about the suite. And so that's obviously a point of discussion with Apple. And they've been very receptive to the discussion. We actually have a very good partnership with Apple.

Even though you're now at the top spot of the Office division, you have a long track record as a product guy. How often do you find yourself using early versions of a product before it's finished Is that something you still enjoy DelBene: I absolutely love it. And just to give you a sense of that, we had our first build of the Office 15 come out, and it's already on my machine. It's one of the funnest things about my job.

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Josh Lowensohn joined CNET in 2006 and now covers Microsoft. Before that, Josh wrote about everything from new Web start-ups, to remote-controlled robots that watch your house.