P ~81aintiff’s Exhibit~ NS-CC-Sun 00000007~040 HIGHLY CONFIDENTIAL Winning In Government Four Challenges and Four Solutions You Can Use Today MS-CC-Sun 000000071041 HIGHLY CONFIDENTIAL Agenda [] Selling Against Linux - Implementing on the Basics [] Piecing Together the Government Puzzle -What Make Governments Different? [] Competitive Response Roadmap for Government [] Action Items [] Discussion MS-CC-Sun 000000071042 HIGHLY CONFIDENTIAL Defending the Key Beachheads [] The core of the Windows value proposition is Business Value + Volume Research and academic ~ncludes HPC and Grid computing MS-CC-Sun 000000071043 HIGHLY CONFIDENTIAL The Windows Business Case Comparable server total cost of ownership; lower desktop TCO Delivers ~reater business advantage Easier to use & richer experience Much lar~er partner & ISV ecosystem Better accountability to customers MS-CC-Sun 000000071044 HIGHLY CONFIDENTIAL The Microsoft Innovation Case Need slide that calls out why our solution set is much more compellin~ and ultimately more interestin~ Slide should call ou~ need ~o have deep understandin~ of the customer requirement and subsequent development of a vision / scope documen~ to help the customer solve problems or take advantage of opportunities (see the Holland vision scope work) ~. ~ ,, MS-CC-Sun 000000071045 HIGHLY CONFIDENTIAL Field Competitive Strategy [] Focus on the business decision maker ¯ Avoid ’religious’ discussions at all costs [] Identify & upgrade Windows NT 4.0 servers [] Refuse to lose in the key beachheads ¯ File Servers: Samba > $1.2B in annual revenue > Windows NT Server 4.0 still 64% of installed base ¯ Desktop: Linux + StarOffice > 65% of MS revenue from Office + Windows [] Samba & StarOffice = entry points to the high volume, high business value segment! [] Escalate to CornpHot alias MS-CC-Sun 000000071046 HIGHLY CONFIDENTIAL Piecing Together the Government Puzzle Today the Four Troubling Things We Taken Together, Gov’t Wants AHear or See in Government: Company That Allows Them To: MS-CC-Sun 000000071047 HIGHLY CONFIDENTIAL Reasons Government Elites Support OSS and Linux (IGES Qualitative Results, n=670) Commercial So,ware Alternative Build Local IT Industry 5 5 Simple Ucense 4 4 4 ~’~, 6 5 ~;~ 5 7 6 7 5 Hi~h ~uaIi~ 4 5 4 4 ~,.f.~5 5 6 5 4 Stron~ Security 6 7 6 8 4 4 7 8 7 4 4 6 Be~er Standards 7 6 6 6 6 7 5 6 5 7 7 7 MSAIternative (vow) 8 8 8 7 8 8 8 ~ 4 ~8 4 " 7 MS-CC-Sun 000000071048 HIGHLY CONFIDENTIAL Piecing Together the Government Puzzle [] We have the technology products that government needs but this isn’t enough [] Government have different needsthan enterprise customers [] Government decisions are driven by technology as well as politics [] Winning will require a unique toolkit of programs and offerings MS-CC-Sun 000000071049 HIGHLY CONFIDENTIAL Competitive Response Roadmap FY03 H1 FY03 H2 Industry Growth Growth and Project Marshall Opportunity Suites + IT Skills Government. ~, ’ Community °~ LOcal A~i~isorY ’ " Leaders BoardS", Control Outreach ’ Govt. Engagemment Program (GEP) is more than this, ~t is about budding world class infrastructure .. Laying out right people INvotong nght people Broader engage for infrastructure MS-CC-Sun 000000071050 HIGHLY CONFIDENTIAL Owner: Kurman Fiscal Responsibility Global TCO Study [] Overview: IDC interviewed 100 customers, modeled data, and found that Windows and Linux have roughly comparable TCO: > Web serving: Windows is 6% higher’l’CO over 5 years > File serving: Windows 13% lower TCO over 5 years > Print serving: Print 19% lower TCO over 5 years > Networking: 11% lower TCO over 5 years > Security servers: 34% lower TCO over 5 years [] What it does: Removes myth of lower TCO as an argument to purchase Linux [] Where to learn more: http:!!linux, TCO [] Subsidiaryaction: learn to use TCO metrics credibly.. Then turn conversation to benefits of Win2K Server. I would recommend that TCO be presented in the following manner: 1. Teach rep not to lead with TCO but to use it to counter assertions that Linux is free, or at least cheaper than Microsoft. The best thing for a rep to say is that we have "roughly comparable TCO." Then to turn the conversation to the techological advantages of Windows over Linux, plus the organizational advantages. 2. For sales rep to be able to describe our TCO metrics effectively, here’s a short summary. To delve into the true story behind so called "free software," Microsoft commissioned market research vendor IDC to conduct a TCO analysis to quantify the hidden costs of using Linux in the ’real-world ’ The TCO analysis focused on major server workloads where Linux has made inroads in market share: ¯ Web * File-print ¯ Networking-WlNS/DHCP/DNS, RAS, Directory, Cache, Other (router/hub/switch) ¯ Security- Proxy/FirewallNPN, AuthenticationlAccesslDRMICertificates Where did IDC get the data? IDC interviewed 100 customers over the phone who consider themselves late adopters (i.e. MS-CC-Sun 000000071051 HIGHLY CONFIDENTIAL Owner: Orlffrnier Fiscal NesponsibJlity Education & Government Incentive Program (EDGI) [] Overview: Revenue adjustment program for new OEM PCs [] What it does: Allows us to compete with naked PCs and Linux PCs on cost ¯ Can offset cost of Windows through services, training and/or direct rebates ¯ Use only with approval and for select largeeducation and government deals [] Where to learn more: email: ~ Add best practice example of where similar approach worked What EDGI Is. A tool that supports the MS strategy for w~nnlng against low-cost/no-cost competitors inthe government and government-driven education space EDGI ~s a framework for responding to largedeals revolving a designated regional team to support the subsidiary using a consistent process Th~s effort will be =ntegrated rote the overall sales process and ut=lEe the same tools and processes EDGI ~sfocused on the sale of OEM PC’s Geographically, EDGI ~s ~ntended for developed and developing substhrough there will be a special emphas~s on developing subs. EDGI ~s not a tool to help win commercial deals It =s only a p=ece of our cornpet=hve strategy and ~s not apphcable for small opportunities EDGI funding ~s hm~ted With EDGI we w~ll ~ncrease our w~n percentage against the competition, especially ~n developingeconomies. We’ll protect our product pnce pointsby removing discounts below empowerment gu~dehnes EDGI allows us to pursue incentives =n a predictable and controllable way to ensure maximum use ofresources We’ll track the use of resources centrally to we understand the tradeoffs we’re making EDGI Background In light of recent pressures from Linux and the open source movement in education in MalaysJa, Ta~wan, Brazil and many others, the Educatzon Soluttens Group [EdSG] and wtndows client group have beendeveloping a plan to give you an additional tool to ensure that we can always match and thereby neverlose to Linux in thts space. The Educatlon and Government Incentives [EDGI] plan will provide fundtngin the form of revenue adjustment so that we can Invest in deals that involve customers purchasing OEMPC’s This will enable us to compete wfth naked PC’s/IJnux PC’s by meeting competition and matching prices ff necessary. While thisprocess is being developed and tmplemented, we need to ensure that wedon’t hold-up or lose deals whtle waittng for thls to become available You are empowered to makecommitments to return a maximum of the cost of Windows on GEM PC’s to the customer in the form of services, training, and/or direct rebates if necessary to match a lower competing price ~n order to wln a large educatton and government deal when necessary. Unttl we get th~s formahzed, account teamsshould emafl edgihq and their GM to ensure visibility to any deals that you tntend to use this program for The team in Redmond (Dawd Driftmier and Pat Fox) will ensure you get the support you need toexecute on this. As soon as we get the detatls finalized we w~ll update you w#h all the specifics. MS-CC-Sun 000000071052 HIGHLY CONFIDENTIAL Owner: Charania Fiscal Responsibility Proactive REJ Studies [] Overview: Localized Rapid Economic Justification studies for 40 subsidiaries in FY03 [] What it does: Allows us to go into a govt agency before there is a Linux TCO study ¯ MS shapes cost/value definition ¯ Proactively identifies where we are notcompetitive ¯ Regional teams of experts conduct the studies [] Status: In progress - approval pending [] Subsidiary action: GM input requested Add best practice example of where this worked Best practice: Belgian Ministry of Finance - see attachment mailed to David for details. What it does. Allows us to go into a govt agency before there is a Linux TCO study MS shapes cost/value definition Proactively identifies where we are not competitive Regional teams of experts conduct the studies MS-CC-Sun 000000071053 HIGHLY CONFIDENTIAL Owner: Neault/Coburn National Security Government Security Program [] Overview: New government offering includes: ¯ Windows source access via secure website for sponsoring agency and contractors ¯ Redmond residency program to audit build process ¯ MCS/PSS efforts to support projects [] What it does: Increases trust and transparency, removes significant OSS differentiator [] Where to learn more: email Davidco [] Action: ID technical & business owners for your sub The government security team ~n June v~s~ted government customers in Korea, PRC, Singapore, Russia, France, andBraml Met w~th deputy-mm=ster level people from Defense, Intelhgenca, and E-Government agencies as wellas their key Academ=c adwsors and contractors Add best practice example of where th~s worked (Saudl)? OVERVIEW: Government Security Program consisting of the fcllow~ng elements Source Code access, sponsoring other government agencies and contractors Access through MSDN Code Center Premium Sponsoring agency manages a smart card b=llet system for maximum 25 Specific proJects w~th 3rd party contractors or consultants mutually agreed and author~ed by M~crosoff Redmond ws=t to audit budd process and d~scuss their critical projects 10 day ws=t ~ncludes ~nteraction w~th product group, ws~t to build lab, build own CD project, pursuit and support of specific objectives outlined ~n their proposal and product group and sen=or management de-brief to share ideas and capture customer feedback Separate build lab ~nfrastructure and support prowded (building 25?) Government submits proposal outhning specific goals and objectives m coming to Redmond pnor to arnval MCS/PSS support where required to support their projects Create forcing funct=on In agreement that leads governments and subs to allocate necessaryresources In order to be successful w~th related projects Feedback on security-related issues and development k~(s Provide clear process for Iogg~ng and following up on security bugs reported as a result of sourcecode review Create process to capture feedback to be used to ~dant~fy development k~t ~mprovements Additmnal securdy-related documentation as below Improve PAG, planning and operations guides, document security-related deltas from version to version releases Communicate technical reasons for the th~ngs we de Answer why we do the things we do from a b=gger picture policy and architectural perspecbve Develop a bus~nees pohcy for how we engage foreign governments ~n security related techmcal d~scuss~ons and collaboration Agencies ¥1slted want to engage technically; ~fwe do so we can get mmdshare & funding that ~s or wdl be applied to L~nux Staff 2 hub-spokes systems (Redmond - subsidiary/region) for government-centr~c secunty efforts (0business approach & engagement/market development, (,) technology/product design & collaboration Est ~15 heads worldwide (includ=ng MCS) some staff already =n subs=d~anes Must doefforts include MS-CC-Sun 000000071054 HIGHLY CONFIDENTIAL Owner: Matt Tomlinson National Security Government Security Program Training [] What: ¯ Policy, strategy, tactics, technology, tools [] When: ¯ Sept 9-:1.0, Bldg 33/Baker, Redmond [] Who: ¯ Govt BizDev exec (or LCA) from subsidiary ¯ MCS/TS/TAM with infrastructure security knowledge/responsibility from sub or region [] How: ¯ mailto:rebstern (Becky Sternberg) to register MS-CC-Sun 000000071055 HIGHLY CONFIDENTIAL Owner: Matt Tomlinson National Security Plug~able Cryptographic Modules [] Overview: Technolol~y solution that allows substitution of MS standard crypto module with module built by I~overnment or other third party entity. [] What it does: Increases trust and transparency. Removes significant OSS differentiator. [] Status: in progress - approval pending [] Subsidiary action: ? MS-CC-Sun 000000071056 HIGHLY CONFIDENTIAL Owner: Kaefer Industry Growth + IT Skills Growth & Opportunity Suite [] Overview: Suite of information including: ¯ IDC study looking at IT economies in 29 countries ¯ Overview of Microsoft partner model ¯ Government best practices for building local industry [] What it does: Basis for beginning discussion with government about building strong local IT industry [] Where to learn r~ore: email davidkae or go to http:!!Icaweb/WSG!CLO/Tools/O pportu nities [] Subsidiary action: Identify sub champion for this subject and engage with government leaders MS-CC-Sun 000000071057 HIGHLY CONFIDENTIAL Owner: Kaefer Industry Growth + IT Skills Project Marshall [] Overview: Negotiate and implement MOU with government, academia and local industry outlining MS local commitment ¯ IT Economy Blueprint (McKenzie Study + Working Group) ¯ IT Sector Opportunities (hardware, software & service commitments, co-marketing, source access, tech co-development, VC funding) ¯ IT Skills (teacher training, free certification, curriculum development) ¯ Academic & Research Cooperation (source access, IVlSR partnerships, research outsourcing) [] What it does: Convinces government academic and industry elite that Microsoft is investing locally and committed to country’s success [] Status: in progress - approval pending [] Subsidiary action: Provide feedback to initiative working group on feasibility, benefit, resource needs ~ Introduce by us=ng China as best prachce example MOU Is something each subsidiary should work towards creating. The MOU Is a structured process thatallows us to develop a mean ngfu local partnership w~th ~ndustry, government and academia Theprocess of negotlat=ng and leveragmg the MOU ~s as important as the substance. MOU can contain Budding and ~mplementing an IT economy bluepnnt ¯ McKenzle style economic study ¯ Formation of MS, =ndustry and government working group Educahon and training Target both developer and knowledge worker environment Money and resources for curnculum development Money and resources for teacher training Subsidized cerhficat=on on MS products ¯ Academic and research cooperation Source code access and community Product Iocahzahon ¯ Commitment to expand opportunities for local firms ¯ Hardware manufacturing outsourcing Software outsourclng Service partnerships Financial commitment for VC opportun~hes Co-marketing financial commitment Source access for local industry Technology co-development MS-CC-Sun 000000071058 HIGHLY CONFIDENTIAL Owner: Kaefer Government Control Community Leaders Outreach [] Overview: Government targeted image buildin{~ initiative ¯ Key theme is realizing potential. Corp delivers tools around digital decade, responsible leader and trustworthy computing ¯ Infrastructure encourages GM involvement ¯ Coalition focus on Initiative for Software Choice (www.softwarechoice.org) [] What it does: Allows Microsoft to engage proactively in public policy discussions about IT and its impact on local society and industry. [] Where to learn more: http://Icaweb/w_sg/clo [] Subsidiary action: Form CLO team and follow RVP budgeting guidelines. Send CLO team to regional workshops in late fall. Support Initiative for Software Choice. 2O MS-CC-Sun 000000071059 HIGHLY CONFIDENTIAL Owner: Kaefer Government Control Local Advisory Boards [] Overview: Group of current or former government officials that provide advice and guidance that is used as feedback loop for product design and business decisions ¯ Boards include senior Microsoft executives at regional level and from Redmond ¯ Five largest subsidiaries have country advisory boards ¯ Three+ regional advisory boards [] What it does: Demonstrates Microsoft’s commitment to listen to government input and use that input to shape product and business decisions. [] Status: in progress - approval pending [] Subsidiary action: GM feedback requested on the likelyvalue of the idea and guidance on possible roadblocks MS-CC-Sun 000000071060 HIGHLY CONFIDENTIAL Crisis Management Escalation Programs [] Overview: There are three main escalation paths in Redmond ¯ Product: comphot alias ¯ Legislative & Regulatory: Davidkae [] Crisis tools: ¯ Peter -anything to point to on http://linux? ¯ Q&A With GM’s faced with legislative challenges [] Subsidiary Action: Ensure one person on teamis member of ’gosdft’ and ’ ’ aliases MS-CC-Sun 000000071061 HIGHLY CONFIDENTIAL Summary of Recommended Actions [] X [] X [] X [] X [] X [] X MS-CC-Sun 000000071062 HIGHLY CONFIDENTIAL Discussion Time MS-CC-Sun 000000071063 HIGHLY CONFIDENTIAL 25 MS-CC-Sun 000000071064 HIGHLY CONFIDENTIAL