Microsoft Corporation (MSFT) Earnings Call Transcript & Summary

Okay. Great. Thanks, everybody, for joining us for day -- our day 2 keynote event. I'm Randall Stanicky, a Pharmaceuticals Analyst here at RBC Capital Markets and joined by my colleague Alex Zukin, who covers the software industry as well as Microsoft. And just to say, I mean, we're both really excited to have our next keynote speaker with us, Dr. Greg Moore. He's the Corporate Vice President of Microsoft Health, responsible for a host of initiatives, from product strategy to product development, research, including AI, machine learning technology for the life sciences. So a lot of responsibility there. He's also Microsoft's senior executive leading the dedicated R&D collaborations with the company's strategic partners. And that's going to be something that we talk about as well. And just to give a bit of a background here because it's actually quite important. When you look at his interdisciplinary background, I mean, I think it helps explain how complex and, really, the intersection that we're at with this. I mean he's an engineer with the PhD from MIT, a practicing neuroradiologist, neuroscientist, informaticist. He's got an extensive background in leadership roles across health care verticals and initiatives in big tech. And that's also not to mention he's formerly a tenured professor, still adjunct clinical professor of radiology at Stanford University School of Medicine. So really, really impressive background, Greg. I could keep going here, but we're really happy to have you with us today, especially on the heels of Microsoft's launch of Microsoft Cloud for Healthcare. So a lot there. And we also have Michael Spencer from Microsoft Investor Relations with us in case there's any questions.

But to step back, Greg, we want to, I guess, first start off by recognizing that we're in unprecedented times, right? We've got the COVID-19 pandemic. We had our former FDA commissioner, Dr. Scott Gottlieb on talking about his outlook there yesterday. So a lot of challenges that we're working through that, I think, health care and big tech can be a part of. But separately, you guys have a big announcement in the last few days. You announced Microsoft Cloud for Healthcare. And so Alex and I have a lot of questions that we want to jump into. But what I thought might make more sense is we hand it over to you for some opening commentary or maybe talk about the new announcements, and then we can go from there.

Yes. Thanks so much, Randall and Alex. I'm just delighted to be here with RBC and the team. So thanks for the opportunity and really looking forward to our conversation today. Just to touch on COVID-19 for a moment here, is I've really been inspired as a physician, as a scientist, as an executive of big tech just to see how truly, not everyone -- not only everyone at Microsoft has come together, but -- and truly how people -- organizations and people across the planet have joined together to have impacted in this pressing time of need. It's just been really inspiring to me and progress will be a small part of that response as a company. So yesterday at Build, Satya Nadella kicked off some really important announcements. One of the top ones was, what you alluded to, our Microsoft Cloud for Healthcare. And that really is Microsoft's first industry-specific cloud, and frankly, one we accelerated to provide tools for this unprecedented time that we're in at -- so Microsoft Cloud for Healthcare brings together Microsoft's 3 clouds: Azure, M365 and Dynamics. And then you have great tools like Power BI. So we have specific solutions built in that we've created with a number of partners and health care systems across the U.S. and across the globe to provide the solutions, increase efficient -- operational efficiencies, virtual meetings, like the one we are in today, but on Teams, which is fully rich of HIPAA-compliant and GDPR tools and things like health bots and health screen and triage, but really brings the power of Microsoft's 3 clouds together for this particular industry at this time but a first of many industry clients to come.

Greg. This is Alex. So just jumping in for a quick second. You mentioned the 3 clouds. I was joking with Mike that this was -- this is one of the first times you've actually marshaled all 3 of your requisite resources between Microsoft 365, Azure and Dynamics into one holistic solution. And we saw something similar when you guys talked about Coca-Cola a few weeks ago. Tell us, is that the main point of differentiation that you guys have between the other -- versus the other tech providers that you go all the way from IaaS to SaaS and kind of bring it all together, making it really easy to actually get the output of all these technologies?

You know, Alex, what we've done is paid very careful attention to our customers, to our partners in the ecosystem. Microsoft is a, if you'll ask, kind of about 170,000 health care and life sciences partners and customers across the globe and already embedded in one of these 3 clouds, if not 2 or 3 of them. And they have asked us to bring these together -- power these together for their needs, for their operational efficiencies in terms of health care for patient engagement, for -- we've seen this in the last 8 weeks, the world's gone virtual. How can we integrate a team's experience from our M365 platform into analytics and insights together and to bring the data together to allow providers to care for their patients as they need. So it's really -- we've listened closely to our partners to bring these together, and we couldn't be thrilled to accelerate the work that has been going on for some time to launch it into market at this point.

Greg, you mentioned your partners. I mean how do you think about -- you've announced a number of partnerships, and you've been very active and this is a big focus for you, particularly over the last several quarters. How do you think about the approach and strategy to those partnerships? Because I think a lot of people in health care, particularly executives and components of health care, are really watching what you're doing here. And you have taken a partnership approach, which has been very specific, I think. So how do you think about Microsoft's strategy there and where you're heading going forward?

Thanks for the question. This is indeed a partner-first approach. And this comes right from Satya Nadella. The -- we are here to empower every organization and every person on the planet to achieve more. And we do that by infusing our partners with core Microsoft technology. The -- in terms of health care and life sciences space, we desire to make a strong impact in here. In fact, a leading impact on this ecosystem that is now close to 20% of our GDP, I think 18% going forward, of the world GDP. And as a technology company, the only way we're going to have that impact we desire on that part of the ecosystem is with partners. We are not a health care life sciences company at Microsoft. We are a technology company with core competency in cloud, in AI, in compute, in insights and analytics. And so that -- to actually have the impact we desire will only be through deep partnerships with the likes of some of that we have announced, Walgreens Boots Alliance, Novartis, Humana, providers like Providence Healthcare System, deep partnerships there where we can actually launch products into that ecosystem and then expand it with our network across the planet.

Greg, on the topic of partnerships, another partnership that at least caught my attention and even some of the investors that we speak with was the partnership you announced with Nuance around the next-generation patient exam room. Now that one is particularly interesting because I think you guys historically had some of your own technology in this space, but I think you've chosen to partner more deeply with Nuance. So can you talk about the partnerships, what you're trying to -- that partnership specifically, what you're trying to achieve there? And then also in the press release, there was a comment about ambient technology and AI, but allay some people's fears about privacy, security, so that's not a big brother kind of approach.

So I couldn't be more excited about our partnership with Nuance. And it really does illustrate this partner approach that we talked about at the outset at the beginning of the call. So Microsoft has core expertise and competency in AI, specifically around NLP and language and speech. And indeed, some -- as I've -- and new to Microsoft over the last year, have seen, yes, this world-class technology there. And then how about a partner like Nuance who has this incredible approach to the market to really address the burnout. As a physician, one of the thing that my colleagues have always asked me for and since I've been into tech, but actually, I lived this for most of my career was how do I solve the problem of documentation in clinical care? So the burdens of documentation is necessitated by clinical care, by regulatory environment, by billing are tremendous, and many of these land on these, the providers, whether it's nursing or our physicians on the front lines. I mean, how can we make that more efficient for them? So this is something that Nuance has been working on a long time. We've been working on it a long time, and we saw this great opportunity to infuse a great partner like Nuance who always -- also have great technology in this area and to accelerate the delivery of a product to empower providers to deliver, care more effectively and more efficiently to their patients. And so the new product that was launched innovated by Nuance and Microsoft together that we announced, it's called Nuance DAX, and that's ambient clinical intelligence. How can they -- how can we take a computer screen that we're looking at right now out of the room and a keyboard and have a physician talk to their patient without having to look at a keyboard and type and capture that conversation with full consent of both the patient and the physician. So full consent there. And then we have the physician walk out of that exam room with their medical note, 95% complete with a few edits and corrections. So that's the vision and the goal of ambient clinical intelligence and one of the announcements we made. We actually were able to launch that. That is not a promise to come. That's actually a product in market. We launched a first specialty to orthopedics just a few weeks ago, and you'll see other specialties come forward. So we couldn't be more thrilled with this ability to take AI, infuse AI technology and infuse it into real-world workflow to really address that pressing need of physician burnout. Now privacy and trust are key for all of this in how we manage data. And it's -- it couldn't be more key -- it couldn't be more critical from my perspective as a physician and as a family member and caregiver in the area of health care. And so this business is as critical. And so that's why all of the products that we've designed are under the tightest of security frameworks at Microsoft, sort of just enterprise scale, great security there but also with all the privacy protections and trust built in with HIPAA in the U.S. and similar regulations around the world, GDPR in the U.K. All products engineered with those standards in place at the baseline to be delivered through that pipeline. And then importantly, data sits with our partners or health care systems' tenets. So it's in their tenet. It doesn't sit with Microsoft. So Microsoft, as core business is not a data aggregator, that data sits with our partners, with our customers, not with Microsoft. Encrypted -- encryption key sit there. So that's -- we take privacy and trust as -- with the utmost seriousness and bring our best efforts to their -- there to deliver them to our partners and customers. And so thanks for the question. It's really key to everything that we do.

Greg, can I ask a follow-up on that topic? You spoke at a conference in January, and you made a statement that -- I saw it virtually, but you made a statement that I thought was actually quite interesting. It's said something to the effect of big tech hasn't earned the trust of patients yet on the idea or the topic of patient privacy. What has to happen to change that perception? Or is this just a matter of letting health care house health care data and tech stepping back and providing the tools? How do you marry those 2 things up?

Now look, the health care systems providing care in their communities for over a century or more. And they earn that trust through relationships with their patients every day on the front lines. Big tech as a whole is a new player in health care, and depending on what parts of the ecosystem are taking different approaches to health care. And in tech overall, and I've been fortunate enough to be at a few -- as is learning in health care. And if my approach -- and at Microsoft, we're taking a very humble approach here, learning from those who have earned that trust every day in the health care system. And that's why it's so important to have a partnering approach. I actually don't like the phrase let's bring technology to disrupt health care. What I want -- what our view at Microsoft is actually to empower health care and to move innovation forward at a faster pace, but to do so with a sense of humility. Again, its core competency of -- at Microsoft is -- as a technology company to take things like cloud, compute, AI, advanced analytics and insight and then apply them to a specific domain. And I'm thrilled to have a team of engineers and the physicians and nurses at Microsoft now that understands this domain, but then that they can come with humility and in a partnering approach to actually solve the problems and take advantage of the opportunities that our customers and partners see, with patients, with your providers and with customers, and I think a humble approach by big tech is really important here as we do that over a period of time.

And Greg, I want to -- I'm going to also follow-up here. So there was something in your answer that particularly piqued my interest, which is Microsoft is not a data aggregator. And then you touched on the concept of humility, not disruption. And there's another call I participated in where the concept of empathy is core -- as a structural differentiator for Microsoft in the way that you'd partner with your customers sticks out. So the comment about not being a data aggregator, the comment about customer empathy, you do have a unique vantage point to talk about the difference of how Microsoft is approaching health care versus big -- maybe outside of -- not outside of -- but versus big tech or other big-tech companies. Talk about that differentiated approach and why you're particularly enthusiastic about it at Microsoft because this is also not Microsoft's first foray into health care. You did it in 2012 with GE. You did it -- you announced the vertical strategy with health care being a vertical in 2017. So I realize this is a multipart question. That's what we analysts like to do. But talk about why now that the time is -- why now it's different, both from a timing perspective and from other big tech companies, how you're different?

Sure. The -- there's been a lot of great ideas in tech in health care. Microsoft has had some of these as well prior. And some of these ideas have been even before their time. So the -- I mean let's think about that time line. So let's think 15 years ago, maybe even 20 years ago now. We did not have digital health records, right? Your health record was on paper. And flash forward, even 10 years from that or even now, 98% -- over 98% of health care records now are digital. And it's a different time at this point. So if you look back at that time line, how could a tech company wrap its arms around something on paper when these are digital technologies? So I think there's -- so why now? Or finally, and it's been a huge step for the health care industry have now -- have the vast majority of records over 98% in digital form. So what is -- so where are we at now? Unfortunately, as we've gone digital, in broad health care digital, we have -- that data has ended up in silos. So whether that's your clinical records, whether that's your X-rays or MRIs in a separate silo in what's called radiology PET systems or maybe it's your laboratory reports in your -- in a laboratory information system, scheduling it in another system. Daily information is in silos, and often it's dark silos, it's dark data. So in the era of the cloud and cloud compute, what Microsoft has done and differentiates, we've been the leading advocate for open and something called fast health care interoperability, FHIR resources. F-H-I-R, is an international standard for data. And we've been advocates for this at the federal and global level going forward. We think it's the right thing to do for patients and their providers that need to take care of them and need that information and take care of them because that data is in silos. So cloud, if you will, and the Microsoft Cloud that Azure that allows this opportunity to ingest data from these various silos, and normalize that and then to bring that into advanced analytics pipelines, whether that's for BI or into our AI pipelines in Azure. This is this combined offering that we talked about upfront, massively differentiating. And by being an open cloud -- we opened -- an advocate of open standards, this also really engages this -- the hundreds of thousands of developers in the developer community here. It's Build this week, and it's second day of Build today and this is aimed at developers. So taking that open approach for data liquidity while overlaying the deep trust and security standards to that data is something I'm really excited about at Microsoft. And we talked about this deep partnering approach and the ecosystem to engage the trust of our partners and customers every single day to develop these really core offerings at the infrastructure and platform level where many of our customers build their top end of that stack, those specific custom solutions going forward. And the last thing that I would say on that differentiating piece, and just to come back to it, we've really seen the world, as I mentioned, go digital and virtual, like we are -- normally, I'd be sitting on stage with you, Nathan (sic) [ Randall ] and Alex today. And we saw just in the past few weeks over 34 million health care interactions on Teams. And so to have a platform like that connected to our other clouds is just pretty amazing going forward. So that's a long answer to say we do think the time is right to bring this together and offer these differentiated solutions.

That was awesome.

Greg, one of the questions, so going back to the partnering. And you've been clear, this is not a, I'll phrase it, Microsoft at the health care gates, right, to use our variants of the gates analogy. This is a -- kind of the partner, and we want to become part of the ecosystem from the outside and help make things more efficient. One of the questions I've gotten pretty regularly or at least a couple in the last day, how does Microsoft think about these partnerships over time? Some of them are with very large companies, some of them are with smaller companies. Does Microsoft want to remain partners? Or is there an opportunity over time with some of these companies to bring in some of this technology or, I mean, to be very -- is much more direct to bring in-house some of these partnerships?

The -- is across what we and other in various lines of businesses across 3 different horizons. So it is -- when we -- with our -- the largest of our partnerships there, we're at all 3 horizons: horizon 1, horizon 2 and horizon 3 framework. Horizon 1 there tends to be the some of the core assets at Microsoft and some of our core competencies. So moving -- helping to move a company's data estate from an on-prem legacy solution into the cloud. Those moves, how do we do modern workplace communications there? So really core to Microsoft's business is those horizon 1s, and often the relationships will start there. And horizon 2 is about digital transformation. And so, for instance, how to take a legacy retailer and maybe a legacy retail health care retailer or a retail pharma and use all the tools -- the digital tools in -- that we've now developed in retail and then pull forward into a digital transformation for a retail health care or a retail pharma. So it's all about digital transformation of their businesses. Then this horizon 3 is what could be a future business for our partners, our customers in the next 3 to 7 years. What could -- what -- where do we -- where is the putt going and what do we need to build with to actually transform an entire ecosystem, whether that's the health care provider system or in drug discovery and having the new way -- our new ways to address that? So future focus is -- which is why that it's one of the areas where I sit with research and product strategy and development that's exciting to actually envision the art of the possible, what could it look like as we bring together the latest research and AI and machine learning and analytics to develop new products going forward. So that partnership approach is -- tends to be with our largest across all 3 of those horizons at Microsoft. And I love interacting with my folks in corporate development when there are M&A activities, or going forward, there's certainly a lot of idea flow in this ecosystem. And many times, and probably the most common ways for us is actually coming in and infuse, whether it's a start-up or a mature start-up or large public companies is to infuse our technology to accelerate them as a partner. We -- cloud growth is just amazing. As a techy doc who's come into this industry and learned it, the growth that I'm seeing in this transformation is just incredible and the speed of it going forward, that speaks to the value and the return on investment that those we're getting and continue to get. But Microsoft is, I think, has been disciplined in its approach to M&A, and it's just amazing to see how that works, and I'm really thrilled to engage in those conversations going forward. So I think there's no change in that strategy, that disciplined approach that I've just learned at Microsoft over the last year or so. And -- but I'm thrilled to now to be a part of those conversations.

Greg, when we think about all the announcements and the partnerships -- you've been in Microsoft now for about a year or a little bit more. When you think about which ones -- I know that it's hard to -- you love all your children equally, but when you think about your enthusiasm or your passion for any of the specific use cases that you've seen Microsoft actually deploy either in market or in trial, which one do you think -- which one is most exciting to you, 1 or 2? And which one do you think we should be most excited about?

Yes. Something that I've learned first as a doc and now in tech is that health care is not a -- an individual sport. It's actually a team. It's a team sport. And as you look across the ecosystem of what is health care and life sciences, I frame it into -- I frame it along a series of Ps, if you will, and there's a lot of other ones you could frame it. But it starts with the patient. And for us, how could I not be more excited about something with patients as a doc, but to have someone like Walgreens Boots Alliance as a retail health care provider, not only their footprint in the U.S., then across Europe and Asia. So just an amazing company to do that. And then I look at another one of those Ps, Novartis, right? So a large pharma that's making medicines, and we're infusing our AI technologies for anything from to accelerate drug discovery, to supply chain going forward. And how can I not be excited about that? And then you look at a large payer like Humana there. And you know what? As you connect the dots on these ecosystems, that's what I'm more excited about. We are providing that core connective tissue through our Microsoft Cloud for Healthcare to connect the ecosystem of those because, you know what, the -- Walgreens Boots Alliance really loves to be able to talk to a Novartis or a Humana because they have a common interest, and it is around that patient. And then you bring in the policymakers here. So they're working interoperability, and FHIR and data movement is another piece of that ecosystem. You bring in platform providers like a Nuance to actually connect that into the provider ecosystem like a Providence Healthcare System. Then you take some of these biotechs like Adaptive Biotechnologies, small biotech firm and sort of the techie researcher scientists. I mean, I just love these small companies like Adaptive that we can take and infuse our best AI and ML as they try to decode the human immune system and overlay our machine learning technology with them and to really power actually new business lines going forward. So for me, it is about the connected tissue in this ecosystem. And I'm adding to those 6 Ps that I just gave you. I'm adding a seventh one now in terms of public health because at this time of COVID, to see how we've expanded our reach and actually accelerated and applied our tools, the importance of public health entities, not only in the U.S., like entities like the CDC, but across the globe, whether that's with NHS in the U.K. or WHO, just to see how we can expand and scale for public health agencies is incredible. And really, it's a corporate responsibility that we have to take our technology and to accelerate it to have the impact that we're all hoping to have and need to have, particularly at this time.

Can you expand on that a little bit? Because that's been a focus for people. The pandemic is obviously a challenge. It's unprecedented. There's billions and billions of dollars being thrown at this from multiple introductions, and it's absolutely incredible. But there's also this view that this is an entry point or an accelerator for big tech from a host of different perspectives, but also a solution that big tech can actually provide. So from a Microsoft perspective, how do you look at the pandemic, for example, and say, these are the ways that we can help? But also coming out of the pandemic, how do you see Microsoft positioned differently, if at all?

The start of this pandemic in Wuhan where we have Microsoft research offices in China in Beijing and in Shanghai, and really, we began thinking about this early and how could we really have impact and help going forward. And then, if fast forward a couple of months later, it's on our doorstep here in Puget Sound, in Redmond and with our -- just a fantastic partner in Providence Healthcare System to build to deploying our Healthcare Bot technology there to -- initially there at Providence and working together with them to triage patients and do symptoms reading, doing AI-infused bot experience and our Healthcare Bot to take what was regional there in the Northwestern Providence and to just see how when you've built, we've had the discipline to put security, compliance, privacy tools are on base technology and then to see that scale over just a couple of weeks, to over 1,600 health care systems in 23 countries around the globe, and then be at the forefront with the CDC designing their screening technology in triage as a public health entity to provide direction, all happening in literally days at most places and in deployments to get that kind of scale. That scale is something that I -- as a doc who came to a tech company to try to implement in terms of how could we impact lives with technology for better health and health care, but to see that accelerated by the need and to see engineers coming together with health care organizations to build but was needed and deploy it at that scale. It was just amazing to see. So I think, and when I touched on the virtual health piece before, the world's gotten virtual, including our teams platform in health care. These are -- have accelerated regulatory changes, for instance, in telehealth across the U.S., things that we thought were going to take years, but barriers have come down overnight. So we see virtual care, virtual health as a changed world. These things are going to persist. In fact, we're hearing from our -- both our partners from health care systems, physicians, nurses and patients that they love the experience and make it more convenient. So we think this is a lasting change, not a temporary change. And then as we see the effectiveness of bot technology, this question, would this be accepted? Would it be effective? And we have the answer in front of us just overnight again, call volumes going down for screening and triage to providers, 40% to 50% with these bot experiences to be able to affect, particularly, triage and do warm handoffs directly whether into a telehealth or into a provider experience. It's pretty amazing to see. So all of that has accelerated. Sometimes we wondered pre-COVID would -- how long would it take to keep the traction? Would they ever have critical medicine traction? And what's accelerated is not only the development of the maturation of these tools, but actually, the affirmation of the market that these are things that are capable of delivering on the promise. And our view is that they'll be here to come for the future that this isn't just a small piece. So the barriers has been broken down in many cases. And so virtual care is a thing. Health care bots are a thing, and we think they'll persist.

Greg, Randall, so I'm thinking I'm going to -- I love the way this is going. I'm going to ask maybe one more question and then we'll round -- if it makes sense. Maybe we'll take a few from the audience, make it interesting and interactive. So Greg, we've talked a lot right now about how Microsoft could be changing health care. You talk about virtual health, digital health. How is this changing Microsoft? So -- and maybe I know Mike is on the line -- but how important is this? I know it's very important to Satya. He talked about it at Build on some of these initiatives. But how is this vertical, again, now different than before? Why is it? Is it a lot more important? Stack rank it in terms of importance for Microsoft. And how you think, as investors, why should we -- or why should our clients really be perking up at all of these announcements in a meaningful way and how that kind of influences the growth trajectory and growth curve of the company?

Yes. I can start, and I don't know if Mike wants to chime in. So health care's baseline is $3.5 trillion spend in the U.S., $7 trillion globally, 18% of GDP roughly. This is -- and you know what, this industry is already infused with technology and is making this, like other industries, a significant move to the cloud going forward. And it's still early days here before. So like other industries, certainly, that's not a part of the economy that -- and business that you ignore. And we feel that we have core competencies in this area to deliver. And I think we've showed that even in this COVID-19 time. So the -- our partnering approach is really significant here as our trust that we've earned with our partners, and we'll continue to earn. And I think our approach in -- to the ecosystem, particularly in health care life sciences is resonating with customers and partnerships with the momentum and traction that we have. So the investment in health care as a vertical and life science as a vertical, I don't think it should be -- it's not surprising to me. Of course, I'm biased as a techie doc. But from those who do business full time, as a living rather than advocating for research, product strategy and development in the area of health care and life sciences, I don't think there's any surprise that this is an important part of any investments here in the economy that's really a horizontal player as well in terms of the tech company. Mike, I don't know if you wanted to say anything along those lines.

No. I mean I think that was well said, Greg. The only thing I would add is that in addition to being a big opportunity from a public cloud standpoint and from a technology standpoint, it also aligns to our core cultural values as being a good corporate citizen. And so when we can achieve both, both grow our business as well as get back to the broader community at large, it's a win-win situation for all involved.

Yes. And maybe I can just follow up on that, if I can, Randall and Alex. The -- yes, there's 4 billion people on the planet without meaningful access to health care. So it's a big number, and it's over half the population of our planet. And technology has a role to play in creating access to that -- to care, right? It's going to have a critical piece of that. But it's always going to be with people, and that's going to be within partnerships. And so you'll see things from Microsoft, like our AI for health initiative to create access. You'll see more from us as a company as our core responsibility going forward. But also they do this in a sustainable way, right? So how can we bring innovation and the pace of innovation to health care to the planet at a pace that -- and with a sense of urgency that these 4 billion people on the planet need? And so you see our partnerships and our efforts across the globe in this particular area. And I think it is an area of great opportunity for us as well to have that impact we all desire.

Greg, there's a question from the line that fits into your answer there. And as a follow-up, just something you said before, but what's your view? Because as you think about delivering care to billions of people that aren't necessarily structurally set up to receive care, but also the -- with the pandemic and some of the changes we're seeing, what is your view on the quality of telehealth technology that exists today? And where do you see this transforming to enhance adoption going forward?

I think the telehealth couldn't be more important as a component of providing access to care, both -- so if you'd ask me what are the 2 largest opportunities for us to improve in health care, it's access to care and its communication among providers and providers with our patients. You have virtual care through Teams and through messaging platforms like we have on Microsoft are going to be a key component for that -- of that infrastructure. It's important that we've spent years developing the full trust and compliance standards built into that platform. Those platforms globally, again, table stakes fills going forward. So that speaks -- that's quality there and ensuring security, trust and privacy at that level is key to any telehealth or access platform going forward. I'm delighted to -- about the investments that Microsoft has made there and continues to invest at the core. Then the other end, I have -- coming out of the next organization that I'm a part of with Peter Lee, investments remain several years ago in how you could route -- effectively route these virtual encounters using a machine learning approach to maintain quality on these platforms. And you know what? It's been amazing to see how that -- how those just scale dramatically, and we don't reveal the number of the scale, but it's this incredible scale that happened overnight, that -- to see the quality of the signals, the transmission, the interactions that's maintained even with this tremendous growth. I think working with partners and providers, building in additional features specific to health care is certainly on our road map going together. And we released some of those and are talking about some of those either yesterday or today. And I only hesitate because I'm not sure when the announcements are going out. We made a number of announcements there today, but please turn in -- tune into the health forum and Build today to see some of those features. And they're all there on video for you as well, the -- to come back to later. But amazing features there, not only delivered specific for health care, but then more to come in the pipeline. So I'm an optimist in this area and it is amazing what we've already delivered and we will deliver. So important in this ecosystem.

Greg, I'm going to try to throw a slight curve ball at you here. So we think about -- we talk about why the time is now. We talk about COVID, fortunately or unfortunately, as an accelerant for digital transformation of health care. What does success look like? When you think about the impact you will have made on Microsoft as a evangelist of digital health, what does success look like to you? Take us to the future. What lasting impact do you want to have on both this company and this industry?

Yes. The -- I wake up every morning, Alex, thinking about the sense of urgency that we need to develop and innovate for those 4 billion people on the planet. So success for me is that Microsoft is a key part of the ecosystem with partners delivering the core technology to provide to further health and health care for those individuals across the planet. And so success for me is billions of lives touched through a technology solution, coupled with a partner on an ecosystem or a person in an ecosystem. So that can look like a, empowering a oncologist as they care for their patient, deliver the next-generation molecular therapy or treatment that was diagnosed with, decoding the human immune system with a company like Adaptive Biotechnologies. So not only diagnosing disease, but to -- but helping with the treatment there across that, sort of that -- the high -- the highest touch of precision medicine empowered by machine learning and AI there. That's going to be a part of our future. I'm convinced as a scientist that's going to happen, and we're seeing some early signs there going forward. Two, having a community health worker in a village, in India or Africa. I have spent time in small villages in Honduras, empowered with a piece of technology and a device that helps her triage that patient going forward, but infused with connectivity and technology there, again, AI and ML solutions, and have that all happen. Data has to flow and with liquidity. So I see a liquid data environment with the highest privacy and security embedded in an interoperable data platform. So whether you're seeing a -- I'll give you an example of -- a family member is visiting from the East Coast, comes to the West Coast and has a health issue. I don't want a fax of a medical record. I want a digital transfer in 10 years of all of that for that provider taking care of my family member, my mother or father, to have instant access to that history so they can provide the best care and best treatment for a patient. And it's really about meeting the ecosystem where it's at, and where you think getting real fax is, you'll see 5 or 10 years. It took us 15, 20 years to digitize the health care ecosystem. Another factor is 85% of health care encounters or transactions are still adjudicated by a fax that sometime -- somewhere across the pipeline. As a medical school professor, there's actually a teaching session to teach medical students how to use a fax machine because they haven't...

I need to sign up for that.

Yes. So a major accomplishment will be to have data liquidity in digital format. So we cannot have paper copies coming out of fax machines or giving a CD of your X-ray or MRI scan going forward. So these are the things that technology -- that big tech, Microsoft is good at, and I would like to see the barriers broken through and innovation accelerated to actually, not only impact that hospital on the West Coast or the East Coast, but actually into a village somewhere in India with a device going forward to impact those lives across that spectrum with access, with liquidity of data and communications, which is key on these platforms. So that's my future vision. Virtual liquid data environment providing better health and health care for X billions of lives infused by technology.

Greg, can I follow up on that? One of the things that we haven't talked a lot about, but it is a huge opportunity. Talk about your role or Microsoft's role in drug discovery and how important is it to get recognition in some of the scientific journals and put forth data. Is that something that is a big focus of you or Microsoft?

So the organization that I lead in Microsoft Health NExT, it actually has its roots in -- so NExT is new experiences in technology. It actually grew and has its roots in Microsoft Research. So over 2,500 scientists across the globe, I think the number is actually more than that. And so research laboratories from Cambridge, U.K. to Beijing to, of course, in Redmond, to Boston, and I think I'm leaving some in India, where I was just at recently, and I know I'm leaving others out. But this is amazing group of some of the world's leading engineers, leading scientists and researchers that go all the way from neuroscience to communications technology. Microsoft has really put some of the leading work out there over the last decade in open source in the AI and machine learning community and is an active publisher in this space but also in deep scientific areas like synthetic biology and is partnering with the best universities in the world, Cambridge and Oxford. The amount of work that we've been doing across universities in the U.S., Berkeley, Stanford, Harvard, MIT, and [indiscernible], I'm there. So -- and I can only offend someone by leaving out some of the amazing work that's going, those leading technology institutions in India, the leading work in -- that's happening across Asia and in China and in Singapore. Just -- So this is a part of our DNA, Randall, and it's one that we're proud of and one we'll continue to move forward with. Now I'm really proud of the work coming out of Microsoft Research and our -- and even our tendency as I develop product in NExT is we actually published this, not only in the open scientific peer-reviewed literature, but when I develop a product, our tendency for most things is actually to open source it, to do a first open source release to embrace that developer community going forward, and then develop for those large customers an enterprise solution going forward on Azure. So that's really a -- rose up from our research routes, but it's also -- we found to be a great business strategy to embrace that open source community, releases open source first, and then for those large enterprise partners and customers that really need the enterprise horsepower, we develop those enterprise solutions within cloud that will be getting our full security and compliance around that. But it is that developer community first then our enterprise customers.

Greg, I'm going to ask a question from the forum now. A follow-up question on the DAX product that you talked about earlier with respect to the work Microsoft and Nuance are doing together. Obviously, this is a foggy time and maybe tough to get a real read early market update. But they're interested in how you'd characterize the demand and reception out there for something like DAX, in particular, and alongside the comments you made around telemedicine, as they think about the potential to integrate DAX clinical documentation into a telemedicine environment, which they believe that Microsoft and Nuance are doing, is that something that could serve to accelerate the adoption and value proposition of a solution like this? Any thoughts would be really helpful.

Sure. So I'll give you my first anecdotal piece of this. So when I told my colleagues that we were -- this actually was coming out of development and actually it's going to be released to product, the first 2 colleagues that I told about this, tears in their eyes. Thank you. Thank you. This has been something that provider -- my provider colleagues have been asking for years to do this and really gives them back time to care there. So there's no question in my mind. And I think those who have expertise in marketing will back this up. The demand is there, and it's a pent-up demand, and bringing the solution to address what is really a crisis of provider burnout and, unfortunately, even suicide among physicians as they deal with the burdens that they have during this time. So I think an incredible opportunity ahead, and this is, in my own experience, really hitting the mark for what's needed going forward. And we do see telemedicine, this world going virtual overnight. The demand, now can we accelerate that in a virtual interaction rather than the face-to-face interaction in the room. And fortunately, these are digital technologies and they actually are very amenable. In fact, there's even some advantages to a digital environment in these interactions. So we see a tremendous opportunity to accelerate adoption and actually fill a gap going forward. So we're working hard on that with our great partner in Nuance.

Greg, we've talked a lot about the U.S. A lot of folks on the webcast are probably a little more -- or some at least, U.S.-centric. You're thinking global. I mean you just presented in India in January as the pandemic is rolling out. We saw you virtually online, a very global health care opportunity. How does Microsoft think about that? A lot of what we've discussed is U.S., but there's a massive global opportunity. How do you think about connecting the geographies and putting it all together?

Yes. Health care is -- health and health care is a global need. And so I do spend a large amount of my time in thinking about how we can address that global need and opportunity going forward. And a bit intentional actually about building product and engineering teams, and our engineering centers and embedding even the research at our centers across the globe. So we understand those markets in-depth and understand the opportunities there because they can be different in other places, in different areas, and we need a deep understanding and -- going forward. The new demand for health care is from those 4 billion coming online in addition to the new opportunities to empower tech in precision medicine. So this is truly a global opportunity. I'm thinking about it. Microsoft is thinking about health care and life sciences globally. We have global partners already in the ecosystem that are using other Microsoft products, including ours. So we feel we have a view of that ecosystem, and we have the ability to hear directly from our customers in part, in what their needs are in their ecosystem. So this as an engineer, it's been amazing and having spent a lot of my time, even personal time in under-resourced areas, even providing care. It's amazing how sometimes when you can design new product and technology from under-resourced environment, the impact that, that can have in a more resourced environment. So we actually see this exchange going both ways and why we're intentional there. Asia. The whole Asia region is really a growth opportunity in health care going forward. And so certainly, a lot of attention over what's happening in that part of the world. And frankly, we're on embedding a lot of resources.

Greg, maybe another one from -- another interesting question from the forum. You mentioned access to care with communication being the key issues that need to be addressed. As part of access, cost is an increasingly -- cost increasingly an issue in the U.S. and obviously, the rest of the world. How is Microsoft planning on using this technology to reduce costs beyond data aggregation and analytics whereas Microsoft's main contribution on data efficiency and improved diagnosis through better data?

Yes. Certainly, improved efficiency in operations is key to the solutions that many of the solutions that we offer. But we often see as technology scales, the costs come down as well. Much of the costs in health care is you have those -- these precious human resources, and how do you scale them and transport them. And just much like we're doing here today, if you can deliver that resource efficiently to a remote area that uses everyone's time, invaluable time and lets you scale those precious resources that are expensive resources to areas that you won't be able to. The costs and disparities in care are -- and opportunities for care are key here. And we do think technology is a solution to actually lower cost while delivering higher-quality care and a better experience while also providing a better provider experience. So we call that the quadruple aim: lower cost of care; better outcomes; better patient experience; and better provider experience, and we think the technology is key to doing that. Cost is a key issue. So thanks for the question.

One more, Greg, from the line. What are the most significant business challenges that you think Microsoft is faced launching into health care technology? And what will Microsoft do differently in this ecosystem? And maybe to add on to that, what are the biggest learnings that Microsoft has gone through as you've made this move into health care?

Yes. We've learned so much from our provider, the provider ecosystem, from the pharma ecosystem, we have from biotech, from those who are on the front lines every day in the ecosystem. So I think the #1 learning is humility. You approach health care and life sciences with a sense of humility. Know your core competencies going forward. And while I spent so much time on that partnering approach, it is our DNA at Microsoft, too. And some of what I think we've learned over time as a company to really empower our partners but also learn from them. And this is a 2-way exchange, right? So we can bring our core competency of -- in technology, in AI, in cloud just this amazing technology that are moving forward in innovative base. But to meet an -- so -- but not to do that independently of those partners. And as I had said to Alex earlier, it was really to meet our partners' ecosystem where they're at. And so to be -- to carefully listen to them, to -- and earn their trust every single day. So humility we've learned, I think, and we've learned that sometimes the hard way. We're going to cut -- I think, and -- but it's been really good for us to do that and embedding actually that core clinical competence now within our engineering teams. This is great people going forward to do that. So why do you find a techie doc leading Microsoft Health? This is a core learning and then building with our partners for the ecosystem to deliver that vision that we've all thought about for so many years.

Well. Greg, I think that's -- I wanted to personally thank you again for joining us, for Microsoft's participation in our Healthcare Conference. From myself and Randall, obviously as well as everybody else at RBC, we thank you. We obviously hope that you have the greatest success in making that impact, both at Microsoft and on those billions of people, and ushering us into a brave, new, better world post-COVID of truly transformed digital health.

Thank you so much, Alex and Randall. Just delightful to have a conversation. Highlight of my day where we can talk about some of this stuff. So thanks for the opportunity.

Really appreciate it.