Bill Gates: Windows Hardware Engineering Conference (WinHEC) 2007

BILL GATES: Well, good morning. This is a very important conference. The big advances in the Windows PC have all been planned and rallied around at the WinHEC Conference over the last 15 years. We’ve come a long way. PCs, when we first started WinHEC, it was almost impossible to connect up a new printer, to find the right font, and the range of things people did with a personal computer were far, far more limited than they are today. Year by year, the PC ecosystem has gotten larger and larger. And the impact of this tool, the most empowering tool ever, has just gotten stronger and stronger as we’ve connected up to the Internet, that’s become even further magnified with the great innovation going on with software and information throughout the world.

This last year was a great example of a very strong year for the PC, record volumes, lots of new innovation, new things that people are doing. The PC has really become a commonsense tool for every worker to get their job done, and every new application simply reinforces that. Here we’ve got a picture going back, and 1992 graphics interface was a very controversial thing. People thought, gee, this is too slow, too hard to develop the software, and, in a sense, they were right. The hardware actually wasn’t ready. Graphics interface was a case where we got out in front, and made sure that developers, and tools, and hardware came along. But by 1995, with Windows 95, the investments that we had all made in that graphics approach really started to pay off, and the breadth and richness of the applications that came out of that were far better than the character-mode applications, and that’s a foundation we’ve had to build on ever since that time. In fact, that’s the foundation that gave us the critical mass of machines for the Internet connectivity, and Web sites could really explode.

When we look at the breadth of things today, the PC itself, of course, has got many more form factors, many more applications, but we’re talking about connecting up to mobile phones, TVs, connecting up to intelligence in car electronics, it’s really pervasive use of these technologies where the PC would change the very central role in terms of the full-screen device, with a full set of applications that let you reach out and connect up to all of these other things.

And so WinHEC has had a central role in these developments, these things like USB have come a long, long way since that concept got first introduced. Going back to the beginning, it was about a few comm ports and how they would conflict, and was it a parallel port, or a serial port, things that we’ve gone way beyond.

This is an industry where the advances in the hardware lead to advances in the software, and the Web applications, and all of these things reinforce each other. And so we have this positive momentum cycle that really continues. Innovation helps spur on the entire industry. In the wireless area, we’re seeing innovation at many levels, expanding the Wi-Fi frequencies, bringing in ultra-wideband, more high speed data over wide area, and trying to make it simple for the user to get the drivers and connect up to those different wireless networks. That was a major area in the [Windows] Vista release.

These applications where instead of thinking of the Internet as just delivering presentations through HTML, we think about it as something where software can call other software, and so instead of duplicating software functionality, we simply call out through a Web service and that can be done inside a company or across the entire Internet. That’s an approach that’s allowing dramatic innovation. In fact, we’re getting intelligence everywhere in the networks now. On the client side, we talk about AJAX, where you have JavaScript. We’ve expanded that quite dramatically with the Silverlight that we brought out a few weeks ago, so that you can actually have compiled code, not just simple JavaScript interpreted code, but full richness of .NET code, but with the simplicity of that single click download, and the security model that makes people comfortable, getting that rich interaction just as part of their browsing experience.

The digitization of the economy, whether it’s work, meetings being recorded digitally, moving away from paper documents more and more so all forms are digital, that’s happening at full speed. In the home, it’s moving even TV onto the Internet. We can say to ourselves, what’s left that’s not on the Internet? Well, the phone network still has traditional PBX. That’s in the process of moving. TV, still largely broadcast and therefore limited to the number of channels, and the timing. That’s in the process of moving. And we’re finally getting all of our experiences with information into that digital realm.

The key to allow this to push forward is the advances in hardware and software, and the standards that allow those two to come together. The explosion of the Windows PC was partly because we allowed the innovation on the applications, the growth of the software industry that hadn’t existed before the Windows PC, and the innovation on the hardware to proceed in parallel. So the kind of standards and agreements that WinHEC helps drive allow for that high speed parallel innovation.

Of course, a huge milestone for the industry is when we come up with a major new version of Windows. That was true for Windows 95, Windows NT, Windows XP, and it’s perhaps most true of the breadth of things that we did in Windows Vista. Getting that out, launched the consumer version in January, was the most visible software introduction ever. We had over 3,000 broadcast and print stories. We had an ad campaign with the theme of “Wow.” It ran in over 20 countries. And so for us it was record-breaking in every way. We got into 39,000 stores in 700 countries for the launch, and a lot of you participated in that, and we want to thank you for all the work in making that a reality.

I thought it would be worth taking a quick look back, and remind ourselves how global this event was, and how with the PC, it’s such a mainstream tool nowadays, the way it got covered, and the way that’s generating the momentum that’s driving the industry today. So let’s take a look at that launch, and some of the key things that happened there.

[Video segment]

And now we can go back and talk about some of the success that was driven by the launch, talk about the Vista First 100 Days. We’ve really been amazed at the customer response. I mean, we knew that [Windows] Vista would become the standard version of Windows. We knew that the industry was stepping up to take advantage of those capabilities, but what’s happened in the last 100 days has been beyond our expectations. As of last week, we’ve had nearly 40 million copies sold, and so that’s twice as fast as the adoption of Windows XP, the last major release that we’ve had.

If you think about that, that says that in our first five weeks we’ve matched the entire installed base of any other provider of similar software. So just in five weeks we’ve gotten out to those levels. And the reaction has been very strong. We’ve got people who are talking about the ease of upgrade, the excitement around DreamScenes. We’ve got families who are using photo tagging, and organizing their information in new ways. We’ve had a good experience with the support issues, because of the way that we connect up the Web, and get the latest drivers, and the first 90 days ease of set up has actually been better than any version that we’ve got.

The way we’re connected to the Web, and seeing what devices people are installing, and seeing whenever they’re having a challenge with their system, that helps us to do continuous improvement. There’s a lot more built-in to Windows where it goes up and looks for the improvements, the new things that are up there. And many of you are participating in making sure the drivers and other things just get better and better as part of that. The fact that we have all that telemetry, that built-in information, allows us as an industry to be far more responsive and to make sure people are having great experiences. But, what we had in mind with [Windows] Vista is that it would open up platform opportunities, open up new kinds of applications, and a new level of ambition, that’s definitely happening.

One space, and probably the fastest growing part of the whole Windows PC area, is mobile devices. Mobile devices are richer, and richer, and becoming a very standard pool. So let’s take a look at a video showing some of the mobile innovation that’s been spurred around Windows Vista.

[Video segment]

I actually have some of these new mobile devices right here. We’re really pushing the limits, both in terms of getting down to very small size, with screens that are quite small, and then on desktops, of course, people are now getting absolutely gigantic screens, including multi-monitor. So the scaling, making sure the interface works from three inches up to three 30-inch displays, that’s one of the things we’ve put a lot of energy into with Vista.

Here we’ve got this Samsung device, a really beautiful device in the ultra mobile PC category. This is the Fujitsu, with the screen that you can flip over and use in a tablet-type model. And one from HTC, that’s also quite beautiful, the screen actually has three different configurations. It’s interesting, the HTC is best known for doing mobile phones, and actually as the PC is moving down and phones moving up, we’re actually having some of the innovation in both spaces come together. The richness of the radio stack and some of the design capabilities of phones will be very important in these lower-end models.

Here we’ve got a machine from Acer that they did together with BMW, its a very light device, but using this ceramic packaging on a Dolby partnership with the surround sound capabilities, really taking portables into new spaces. People like Zeus, Intel, here’s a concept machine that Intel has been working on that actually has Sideshow here on display that doesn’t use any power, and then a super thin tablet device in the portfolio there. So we’re seeing a lot of innovation, things like the Sideshow capability, the touch capability, were enabled only with Windows Vista, but already we’re seeing hardware that takes that software platform and does very interesting things with it.

There’s still a lot of work to do, still more devices. If we look at the coverage we’ve got in Windows Vista, it’s up over 95 percent, but we’re still getting those device ID numbers, reaching out to you to get those updates. We have four times the number of drivers we had with XP, but we want to get all the way up to 100 percent. Over the rest of the year, I know we’ll get extremely close to that, because of the involvement that you’ve all had.

The range of devices is getting to be bigger, and bigger, moving cameras, still cameras, any phone that’s got a Wi-Fi built in you ought to be able to connect it up and just do drag and drop between that device and your PC. You can think of it as a microphone, a remote control, it ties into the PC experience. Setting up Wi-Fi networks, we’ve all read about people who set those networks up without security, and so making so that it’s almost as simple to set up a secure network as a standard insecure network, that’s been a very key thing, as well.

So the ecosystem is a key here. Of course, one element that we bring to that is this Certified for Windows Vista logo. It’s very important that we set a bar for the devices that are really using the new simple installation, the new security features, and that’s what that’s for. IDC just did a study showing there will be over $120 billion of economic impact because of the innovation that come around the Windows Vista platform. And that’s pretty exciting to see that taking place, and then to see what users do, and go on with that. So our logo program is stronger than ever, and a key thing for users to see which peripherals they should buy for their [Windows] Vista machine.

Connecting all these things together, historically it was just cables out the back of the PC, then we got to USB, now more and more we’re connecting over Wi-Fi. Home networking is really exploding. As videos become so mainstream on the PC, this idea of getting the video around your house, getting it onto your TV screen, getting it onto the various PCs, that puts a lot of bandwidth challenges on the network set up that you have, and how can we make that very, very straightforward. We have over 40 million homes worldwide with multiple PCs, and obviously they want to connect together in a simple way.

A year ago at WinHEC, we introduced the idea of Windows Rally, the technology where the discovery, driver download, all these elements of letting people set things up, really came together. So things that were Windows Rally-compliant, [Windows] Vista had built into it the ability to make a very simple experience for those things. I’m really thrilled how this has come together.

It’s been several years that this was talked about, it’s really a necessary thing to enable a broad set of scenarios. And it’s going to drive innovation in peripherals, picture frames that sit on the refrigerator, some that are AC-powered, some with touch, connecting up to the phone, to the music devices, to let you get your music in any room. All of these things are greatly simplified with this technology. Even things like security or cameras, or home control, which have just been very niche oriented, now with this ease of set up we see many of those things coming into the mainstream.

So we focus on the underlying infrastructure, and so partners can take new Rally devices that are very differentiated, and so just the same way that USB came in and was such a fundamental building block, we see now Rally as important as that, and driving a whole new set of devices.

This simplicity of set up, of course, is something is best seen in action. So let me ask Glenn Ward and Jim Barber, our senior program managers, to come up and show you how this Windows Rally capability has really come together.

GLENN WARD: Today, Jim and I would like to show you how the Rally technologies in Windows Vista make home-network setup easy, and enable rich experiences for you, our partners, building connected devices.

Now, we’ve got a lot of demos to show, so I’m going to ask Jim to get started, and in the span of the next five minutes you’ll see us set up a network from scratch, add a number of devices to the network and use them, and lastly we’re going to finish with something fun; we’re going to use our network to stream some high-definition video wirelessly in a way that you haven’t seen before.

So, with that, let’s start.

JIM BARBER: Thanks, Glenn.

So, the first thing I want to do is set up really the foundation of my home network, and that’s going to be my wireless home router that’s been certified by the Windows Vista logo program.

Now, the great thing about Windows Vista is we have a network explorer that automatically discovers all of the devices that are on my network, and once they’ve been discovered, I can do all kinds of interesting things with those devices like set up my wireless network, so I’ll do that now.

GLENN WARD: Now, I’d like to underscore what Jim is doing. He’s taking a raw, unconfigured router, and setting it up securely using only the native functionality of the Vista operating system. This is part of what makes device setup such a breeze with Rally. Looks like we’re almost done, and we’re done.

JIM BARBER: Yeah, so there it is. We’ve just set up our wireless router and our wireless home network.

So, the next thing I want to do is go out and purchase a network attached storage device, because I really am going to have a lot of digital memories that I want to store and share on my home network.

So, I’ve purchased that device, and all I’m going to do is plug it in and power it on. And I’ll wait for the network explorer in [Windows] Vista to discover this device.

GLENN WARD: You know, Jim, I’m thinking why stop there; why not add — oh, I don’t know — a Wi-Fi enabled point and shoot camera?

JIM BARBER: I think that sounds like a great idea. We have one here, and I’m going to count on the fact that Windows Rally technologies are going to make it very easy for me to transfer the wireless settings from my PC over to this device.

GLENN WARD: Now, this is a good opportunity to dig a little more deeply into Rally. Think of Rally as the standard way for IP-connected devices to interact with Windows. Jim is showing the transfer of wireless settings to the camera. Once he’s done, he never has to use the cable again. But there’s also layer two and layer three discovery, quality of service, programmatic control, and extensibility, which is an important point for you, our partners, since that is what lets you launch your applications after the device has been set up.

Now, another important point is that the way that we message these great experiences to users is via the Windows Vista logo program, like Jim mentioned. Look for the logo as our message to say, hey, that device at retail that bears the Vista logo is your assurance you’re going to have a great experience when you take that device home and you set it up and use it.

It looks like Jim is ready to take a picture. I’ll get a better backdrop here.

JIM BARBER: Perfect. That looks like a keeper.

So, I definitely want to take this picture and I want to paste this into an area that’s important to me, so that I can share it with my family and with my friends.

GLENN WARD: Now, I love this example because in my mind it’s about building confidence. The fact that Jim had such a great setup experience means that he’s more confident to go out and buy another consumer electronics device and use it with his camera or with his PC or with his home network.

This is a great segue, too. Now that we’ve got a camera on the network that’s Wi-Fi enabled, it would be great if we could show off these pictures around the house with, say, a digital picture frame.

JIM BARBER: I like it. So, let’s count on this one right here. And again I’m just going to follow a pretty easy setup process here. I’m just going to plug it in, turn it on, and again wait for Network Explorer to discover this device.

Now, here’s the cool thing. My network attached storage device has already shown up for me. So, I’m going to follow a really simple procedure. You’re going to see this a number of times today of right-clicking and installing this particular device.

Now, the great thing about this device is that when I right-click and install, not only do I have a great plug & play experience, but I also get the advantage of taking advantage of a gadget, a Sidebar gadget that’s specific to this particular device.

GLENN WARD: One thing you’ll notice too is that Jim is following a common process every time. He’s not typing in an IP address. He doesn’t have to figure out WEP keys, or WPA keys or even his network name. He just looks for the icon to appear in Vista, and from there it’s right-click and install, right-click and install. Is that right, Jim?

JIM BARBER: Right-click and install, that’s it.

So, I’m going to initiate local synchronization here, and watch this gadget will change status for me and alert me when the device is actually in the middle of doing its local synchronization.

That is a cool gadget. I love it. Local-synch status, I wish I had that gadget at home for my NAS.

GLENN WARD: Hey, Jim, this is a Web services-enabled device, right?

JIM BARBER: Absolutely. It’s a Web services-enabled device, super useful, super easy for our customers to understand.

GLENN WARD: Now, the thing that I see here, too, is it looks like your picture frame is ready for you also.

JIM BARBER: Absolutely. The picture frame has shown up, and it’s already showing us pictures, which is a great thing. But now I’m going to extend its functionality again using Rally technologies to install the Sideshow driver for this device. So, I’m going to follow that same mantra. I’m going to right-click and install the driver for Sideshow.

So, what’s really great now is that once this driver is installed, again same familiar plug & play experience, it’s ready to use. I can go into Windows Sideshow, I can select my device, and I can add these great gadgets that come with Windows Vista and are being developed by people like you.

Now, as this picture frame cycles through its pictures, you’ll see those gadgets appear in the bottom part of the frame.

So, there it is. We’ve just set up a wireless network, we’ve configured a bunch of devices, we backed up some stuff, and we’ve done it all in about the time it takes to pop a bag of popcorn and then sit down to watch a movie, which is a scenario we haven’t talked about yet.

GLENN WARD: That’s right. Great segue. So, watching movies, especially high-definition movies and high-definition television, that’s what the Media Center features in Vista are all about. Now, a Media Center Extender is our platform to give us Media Center functionality throughout the house, so in a television or in a set-top box.

The thing is consumers still have to bridge that last 30 feet between their home PC and the PC that sits in the living room or the den and their high-definition television. We’ve got a great solution for that. I’m going to show you how fast the setup experience is, and then I’ll describe it afterwards.

All I do is I take these, a pair of high-definition media bridges. I’m going to give one to Jim.

JIM BARBER: Great.

GLENN WARD: I’ll take the other one over to my TV. We plug them in, power them on, and that is all we have to do. From here I just fire up Media Center Extender. That’s it, I’m done.

JIM BARBER: So, that’s it. I just plugged it in, I powered it on, and we’re done.

GLENN WARD: Exactly. I’ll explain this in a little more detail. Here’s what the consumer does. They go to a retail store, they buy a Media Center Extender like an Xbox 360, and they also buy these. These are the high-definition media bridges. They crack the shrink-wrap, unbox the devices, they plug one in to the network that Jim set up a moment ago, they plug the other in to their Xbox 360, power them on, and that’s all they have to do.

JIM BARBER: I think it would be great for our audience to hear a little bit more about the magic that makes that user experience happen.

GLENN WARD: You’ve got it. Let me make sure the magic is working, and I’m going to try and stream a video wirelessly between the two bridges now.

Make sure that they connected, fingers crossed. All right, that’s awesome.

So, here’s the magic, Jim. Three things enable this functionality: The first is Rally technologies let the devices auto-configure. They sense a few things about their environment, going to the correct infrastructure mode, and they implement quality of service using the QA APIs to make sure that they stream intelligently.

Secondly, they operate at 5 gigahertz. So they’re immune to the interference that’s present in legacy neighbor networks operating at the 2.4 gigahertz band like 802.11g.

The third is, hey, these devices are connecting using 802.11n, so it turns out we’ve actually got bandwidth to spare. We could add at least one more, oftentimes two more, for a total of three Media Center Extenders and stream throughout the house.

JIM BARBER: That’s awesome.

Now, one of the things that I really love about this demo is there’s no rip and replace of the original Wi-Fi network that I set up, isn’t that right, Glenn?

GLENN WARD: That’s exactly right, and that’s an important point. We set up a second network that operates side by side with the network that Jim set up at the very beginning. Again, we’re streaming media at 5 gigahertz, which is a perfect way to do it. The network that Jim set up is operating at 2.4 gigahertz, great for data.

So, there it is. We’ve demonstrated how Rally technologies empower you, our partners, to establish awesome experiences for our mutual customers, experiences that show rich application support, great setup experiences, and the kind of rich high-definition media streaming that you’re seeing right now.

JIM BARBER: Exactly. Remember, this is a demo that we’ve done from scratch in about five minutes. We’re showing the tip of the iceberg in terms of what Rally can do. We look forward to working with you on your Rally enabled devices. Thanks very much.

GLENN WARD: Thank you. (Applause.)

BILL GATES: Rally is going to lead to a lot of new innovations. One of the things I think will be very important is this ability to remote media experience and user interface, the underlying technology we call “Pika” that we’ve got there in the Xbox 360. We’re going to make sure that that’s easy to put into all sorts of consumer electronics devices, so when you go out and get an HDTV set, that will be built-in. We’ll enable PCs themselves to be”Pika” display terminals so you can do the extensions that way. And that remoting capability people will just come to see that as something they ought to have for every screen in their house, both getting at the media and getting at the full power of the PC that they’re connecting up to.

Well, there’s another demonstration we want to show you, and that’s about this new category we call the Windows Home Server. We kicked off the idea earlier this year. We had the product out in beta, have been getting really strong response to this. And this will come out in the fall. It’s for backing up, it’s for accessing in a very simple way, and it’s about being not only simple but unbelievably reliable because of the way the underlying technology has been done.

We’ve got a lot of new partners who are helping us with this. You can see their logos on the screen there. We’ll also have a version of this Home Server SKU available to system builders, so people who put together custom systems even in quite limited volume, this software capability is something that they’ll be able to load onto it.

It’s important to note that this is a platform. Because you’ve got Windows capability, we’re already seeing these partners and software companies build on to the functionality that’s there in the Home Server. What we’ve done is make sure that the built-in functionality is strong enough that a multi-PC household is going to find this the simplest and the best way to manage their information.

And so to give you a quick look at how this has come together, let me ask Steven Leonard, senior product manager of Home Server, to come up and give us a look.

STEVEN LEONARD: Thanks, Bill.

BILL GATES: Welcome.

STEVEN LEONARD: OK, I’m going to start out my demonstration today with a bit of a quiz. It’s a yes/no quiz. Keep track of your answers.

Number one: I back up all my home PCs every day.

Number two: I can monitor the health of my network from one place.

And number three: I’m able to remotely access my important files from any Web browser.

So, if you answered yes to those questions, you’re probably one of the 60,000 people that are participating in the Windows Home Server beta program. If you answered no, then don’t despair, because help is on the way.

Windows Home Server was designed to help families with multiple PCs connect their digital experiences. It provides a familiar way for them to centralize all that content, to be able to access and share it with other people and other devices, and also automatically protect all that stuff, your cherished memories.

So, Bill just announced some of our hardware partners. I am very pleased today to be demoing on the HP Media Smart Server.

So, the first thing you’ll notice is this is small. Can you believe the size of this? My mom said that good things come in small packages, and that’s definitely the case with this Windows Home Server.

You’ll also notice that there’s not a monitor hooked up to it or a keyboard or a mouse. It’s very simple to set up. When I come home, I do three things. I plug in my power cord, I plug in an Ethernet cable. Then I take a connector CD, and I go to each one of my home PCs. That’s going to set up a couple things automatically for me. What it does is it will put a link on my desktop so that I can come in, and I can access my favorite photos.

Now, the interesting thing is everyone that has had the connector CD can now see these photos. This was loaded by my wife, and now I can go in and watch it. The other cool thing is I can go into my living room, I can sit in the comfort of my couch and see this on my Xbox 360.

OK, the next thing I’m going to do is I’m going to come in here and I’m going to show you what’s called the Windows Home Server console. The Windows Home Server console is where I configure and I manage my system. You can see on my particular network here I have three PCs: my PC, the kid’s PC, and mom’s PC. One of the great features of Windows Home Server is this: It’s the ability to monitor the network. And it looks like I have a problem. There is a red icon and it’s saying critical firewall. Well, I think I know what happened in this case. My son was loading a new game, and I think he turned off the firewall. So, I’m going to correct that. Turning off the firewall in our house is a big no-no. When I was a child, my parents would probably have sent me to my room and grounded me, but in the digital age that’s not going to work. So, what I’m going to do here is come in, and I’m going to deny Ben access to his music, but just for a little while.

All right. I already came through this, and I want to talk a little bit more about backup. You can see here that there’s a very powerful backup engine in Windows Home Server. Now, the real innovation comes in multi-PC backup. All of my PCs, the three that I’ve described here, are backing up automatically every day.

We have a joke within the Windows Home Server team, and that is if you lose a cherished photo, say your wedding photos, that could be a divorceable offense. Now, luckily, with my Windows Home Server I can go in here, I can see a bunch of previous backups. I could actually restore a single file here. My wedding photos would come back to my PC, as well as my marital bliss.

Here’s another scenario for you. Have you ever had your hard drive start to whine and sound a bit like a jet engine? Well, that’s usually not a good sign. So, what I can do is go to the store, buy a new hard drive, put it into my home PC, and I boot up my home PC with this restore wizard.

Now, the amazing thing is my PC is going to be returned to exactly how it was the night before — I mean, everything, operating system, applications, settings, and, of course, all my files.

I think I hear a clap in the back there. I mean, that’s a life saver. (Applause.)

Windows Home Server also has the ability to grow with me. What I can do is buy some internal or external drives. In the case of this HP Media Smart Server there are some trays here. I open it up, I put my disk drive in there, and close it up. It’s automatically going to be added to my storage pool down here.

The other cool thing is I can take those USB hard drives that I purchased in the past, dust them off, plug them into the back; they will also be added to my storage pool.

We have traveled great distances to be here. In this case I’m going to travel about two steps, but it could signify 2,000 miles. And I’m on a new PC now. You’ve seen how I can centralize all my content when I’m at home. Well, with Windows Home Server I can also access all that same stuff when I’m on the road. I get a free domain name from Windows Live when I buy a Windows Home Server. That’s right, I said a free domain name. That will allow me to come in and access all the same stuff that I would have as if I was sitting at my own desk.

And actually what I can do here is also remote into my home PCs. I can give my parents a username and a secure password. They can log in and see the latest photos and videos of their grandchild from a link in their Web browser.

I’ve just had time to scratch the surface of the capabilities of the Windows Home Server today. There is a tremendous opportunity for hardware and software vendors. Bill has already made some announcements, and we’re hoping that as a result of this we’ll see some more coming soon. It’s a tremendous platform. We have this set up in our booth in the expo hall, so please go out, try it for yourself. And, of course, our development team is here to talk about some technical sessions later in the week. So, I encourage you to attend those if you can.

Enjoy the rest of the event. Thank you. (Applause.)

BILL GATES: Well, Windows Home Server, as I said, the software extensions are part of the thing I think that’s going to really bring that to life as a strong new category.

We have one more demo, last but not least, and this really comes from the fact that when we get the client platform out, we often soon after that have a server release. It benefits from all the work that was done on the client, but then, of course, there’s special work that we do up on the server.

Windows Server, of course, has been phenomenally successful. It’s the primary server used throughout the world for all the key tasks: file sharing, Web hosting, mail hosting, database hosting. This is a product that has driven incredible growth and success for both Microsoft and the industry. We still use the “Longhorn” codename to talk about this. It’s really a very major product.

It will certainly be in terms of reliability a big step up every time we do a server release. We’re very proud of the steps we take forward there.

In the area of security things like the Network Access Protection are very big deals. The Web hosting capability, what we call IIS 7.0, allows more extensibility, higher scale for people who do hosting, better performance, better debugging capabilities.

We just put out the beta for this, so-called beta 3, and we’ve had more than 100,000 downloads of this, so it’s a major, major product for us.

We expect to release this product to manufacturing by the end of the year. Of course, all our releases are driven by making sure that the quality feedback we get really makes it clear that this is ready to go into the mainstream as a high volume product.

Also when we make the release, at the same time we’ll have a beta of our new hypervisor technology, which we call “Viridian.” That’s on a somewhat later schedule, but a lot of the features will be there, so that will be in beta form when the server code itself goes to be final.

The name for this product, we’ve been working hard thinking about it. Microsoft has a lot of different names for things. We played around with a couple different ideas, but what we’re going to go with is pretty straightforward, I think you’d say. This will simply be called Windows Server 2008. So, you can see now the packaging there. (Applause.) I know it’s a surprise for us to pick something so straightforward, but we thought that would be the best choice.

Now let me ask Ian Hameroff to come up and give us a quick glimpse — this is a very broad product, but a quick glimpse of some of the highlight features in Windows Server 2008.

IAN HAMEROFF: Great.

BILL GATES: Welcome.

IAN HAMEROFF: Thanks, Bill.

And good morning. Well, let me say it’s great to be one of the first people to be demoing Windows Server with its new name. In fact, I’ll be demoing a number of security and policy enforcement features in Windows Server 2008 that will help address many common customer challenges, like, for example, preventing unhealthy laptops from connecting to the network, safeguarding sensitive information, and managing device installation.

Up on the screen is a simplified diagram that illustrates our network here of Contoso Corporation. You’ll note that Contoso is using key infrastructure and resource servers running on Windows Server 2008 like, for example, our Contoso sales portal. Contoso has also implemented HP ProCurve 3500 series network switches to provide 802.1x network authentication.

Now, Windows Server 2008 delivers powerful new management tools and security enhancements that will help simplify many administrative tasks. To demonstrate that, let’s switch over to my Windows Server 2008 machine and take a look at how easy it is to configure Network Access Protection policies.

Now, Network Access Protection is a built-in policy enforcement platform that helps ensure laptops and computers connecting to the Contoso network are in compliance with Contoso’s IT security standards. Using the Windows Server 2008 Server Manager I’ve configured a policy that requires that a desktop firewall and an anti-malware solution are both installed and fully enabled. If any of these policy conditions are not met, Network Access Protection will automatically limit network access until the host is brought into compliance. In this case we’re using 802.1x as the enforcement mechanism to make this network restriction happen.

Now, this is just one of over 4,000 centrally configurable policies I can mange with Windows Server 2008. It’s also worth noting that nearly a thousand of these policies are new since Windows Server 2003.

OK, so let’s switch to the user experience. In this scenario I’m a mobile sales employee who has stopped by one of Contoso’s branch offices to download the latest price list. I took my trusty laptop. I physically plugged into the network and I logged on.

Now, while I log in it’s worth noting that Contoso is utilizing the new fine-grained password policy feature of Windows Server 2008. New to beta 3, this enables IT administrators to define different password policies for different groups of users within their network. This removes the need to have different domain controllers to have different password policies, say for a remote worker like myself versus a research and design worker at the corporate headquarters.

Well, now that I’ve logged in, I can see that my computer does not meet the requirements fort his network, and by clicking on this alert notification I also notice that my network access has been restricted.

To help demonstrate how this network access restriction is being enforced using 802.1x, I’m going to try to connect to the Contoso sales portal. Well, thanks to Network Access Protection I cannot connect to this critical business server. This also helps reduce risk to the overall network while my laptop is not completely healthy.

Well, let’s take a look and see why I am not in compliance. By opening up the Network Access Protection notification, I can see that my anti-virus solution, Forefront Client Security, is not enabled.

So, I will quickly open up the settings for Forefront Client Security, and re-enable the real time protection. Now, this will trigger another evaluation by Network Access Protection to determine if my laptop is now in compliance.

Now, of course, the Contoso IT administrators could have automatically remediated this unhealthy laptop, but since it would have happened so quickly I decided to do it manually here for this demo.

Well, with my laptop now in compliance, I also see that my network access has been fully restored, so now I can connect to the Contoso sales portal to download that latest price list.

This sales portal was built using Microsoft Office SharePoint Server 2007 running on Windows Server 2008, with the Active Directory rights management services role installed.

Now, thanks to the integration of rights management services with SharePoint Server, the Contoso sales management team can easily apply persistent information protection policies to these sensitive corporate documents.

For example, at Contoso Corporation the corporate policies require that sensitive documents like a price list should only be available to fulltime employees and trusted partners. To help enable compliance with this policy, the option to print the price list — in this case thanks to the information rights restrictions applied — is not available.

Now, this is just an example of how Windows Server 2008 provides a platform for comprehensive information protection, and which we can all build our businesses on.

Well, since I can’t print the price list, I’m going to take this USB thumb drive and connect it so I can copy the price list to it for use on my home PC later. Like many organizations, Contoso has struggled with trying to prevent sensitive information from being transferred to unauthorized devices. At Contoso Corporation they have a specific policy that states USB and removable media need to have additional security mechanisms, like, for example, biometrics or cryptographic functionality.

Well, as you can see, thanks to the new device installation restriction features of Windows Server 2008, the Contoso IT administrators were able to restrict the usage of this unauthorized device.

Let’s switch back to the Windows Server 2008 server manager to take a look at this new group policy.

Now, as you can see here, we are not blocking all USB devices, but instead IT administrators will have a full range of options available to them to define which devices are allowed and which are prohibited. This helps reduce the risk of sensitive information from being transferred to unauthorized devices, and it also removes the need to glue shut all the USB ports on our laptops.

To help demonstrate this policy, let’s switch back to my sales laptop. I will remove this unauthorized USB device, but plug in my USB wireless mouse. Being an authorized device, the mouse installs and works immediately.

So, to summarize, I’ve shown you a number of different Windows Server 2008 security features that will help provide IT administrators the ability to advance protection and improve compliance in their organization. By helping address common customer challenges, and thanks to the ecosystem of our partners who help extend these features and technologies, Windows Server 2008 administrators will be able to spend less time on day-to-day tasks and more time adding value to their businesses.

Thank you. (Applause.)

BILL GATES: One of the opportunities you’ll all get is to have a copy of this latest beta. So, we’ve got DVDs coming down. They’ll be here at noon, so just go by the spot labeled material pickup, and you’ll have the latest Windows Server 2008 beta.

Well, let’s look ahead a little bit. Where is the PC going? What are some of the new things that we all need to be aware of and investing in? And I’ve got four different areas that I think are going to have some significant impact.

One thing that is important to note is that we are in the middle of an address space transition, but this one has been handled extremely well. The new capability that lets us have 64-bits, instead of being a separate incompatible set of processors that are very expensive and you need to recode applications to run on, those have been brought onto our standard high volume processors. In fact, most of what’s being sold today in the server space and over the next couple of years even in the client space will actually have that 64-bit capability just sitting, waiting, and available, so really no premium in cost whatsoever. You can see we’re expecting very, very rapid adoption getting up to that 100 percent level even in the mobile space over the next couple of years.

What does this mean for the industry? Well, 64-bit allows us to have lots of memory. And as we have lots of memory, very advanced scenarios around visual information, business intelligence information, they all come in to reach. In fact, many things that we used to think about as being disk-based now are being moved in and being memory based. And so Microsoft and others are doing a lot of innovation in what we call in-memory database technology, making navigation very, very quick. Every tier of the storage hierarchy is getting far, far bigger, and that means a very big level of ambition for things that wouldn’t have been possible in the past.

For the industry it does mean a change in drivers. We can’t have a 32-bit driver with 32-bit pointers able to put information anywhere into a 64-bit address space. And so although it’s not a dramatic change to create a 64-bit driver, there’s still work to be done. The industry I’d say is about halfway through getting all those pieces in place. So, we’re certainly pushing that, and trying to make that very straightforward for all of you.

We do see the form factors continuing to change. In fact, we had a contest where we asked students who go to design schools to give us a sense of what they thought some future form factors would be like. And you have here just some pictures that give you a sense that it was quite a variety of things and quite nontraditional in terms of what they suggested, from little screens on the refrigerator called the Yummy kitchen connect to something that looks almost like a light bulb that’s just there connecting up, to something that’s got almost an animal, little robot-type look, called the Pussy Cat, so many form factors that the advances in miniaturization are going to make possible.

One of the most interesting, in fact the one that won the top award, called MADE in China there in the upper left, and it’s kind of a Tablet form factor, very thin and sleek, and they even let you use a pen type thing or even a chopstick type way of getting input into the machine, so quite different. And those are all in the exposition hall. I think you’ll enjoy taking a look at those.

As we get the software to be richer, one of the big advances that we’re investing literally billions of dollars in is the idea of natural interface. This is something that has been talked about for a long time, and more and more is finally getting the kind of quality at the hardware and software level to move into the mainstream.

Recently, Microsoft bought a company called Tellme, a very big acquisition for us, and just shows our confidence that voice input will be a major way that we’re interacting with all these devices. Whether it’s from the mobile phone to the PC, the idea of being able to give commands we think is quite important.

As you scale down the size, the idea of having touch, the pen, voice, things that complement these keyboard type inputs become increasingly important. And really getting the quality of that recognition up is something we’re very proud of the progress we’ve made, whether it’s recognizing English text or other languages, and a particular breakthrough that we’ve had in terms of how we recognize Chinese and Japanese characters, where the traditional keyboard actually isn’t that convenient, the breakthrough we’ve had there I think will make ink input particularly important in those areas. And so with the new input it frees us up to think about different form factors and ways of interacting.

Communications will have a big influence on the designs we do. We don’t see the desk phone existing as a separate device in the future. Between what’s going on with mobile phones and PC peripherals, and the richness of telephony being on the Internet and connecting up not just voice but also screen sharing, video, software driven richness in those communications interactions, the phone is going to be the PC, the PC is going to be the phone, and it’s actually a lot easier when you’ve got a screen to navigate through, pick people to add to the conference call, see who called you in the past. And so this is going to have a very significant effect on the design work that goes in here. We have a lot of partners connecting up to the unified communications software that we’re doing, and so that emerges as a very key scenario as well.

Last but not least, we have what we call the Live era. And this is the term Microsoft users for the idea that you’ll have many computing services coming from over the Internet; that is, they won’t have to be local in your machine. So, for example, if I’m somebody who uses multiple PCs, the ability to synchronize the data, either peer-to-peer or by using cheap storage up in the Internet, which we often call the cloud, that will be quite a mainstream thing.

You see with applications like maps that show 3-D buildings and traffic and even let you eventually point at that building and go in and see what the store is like, see what’s going on, that relies on a master database that we’ve got up on the Web that makes that mapping interaction great.

Now, we’ll cache the data locally, so if you’re not connected or if you’re navigating around at high speed, we use the full richness of the Windows client and its local storage capability, but in terms of getting the updates and being able to navigate the entire world, that’s something where it’s out there on the Internet.

Information about people, your devices that you use regularly all get stored that way. So, even if you borrow somebody’s device, their phone, their PC, if you can authenticate and connect to your Live services, we understand your buddies and your documents and your policies and it’s all very straightforward.

And so this is a big change. It’s leading to some datacenters that are so large, they’re almost in a class of their own, mega datacenters. Microsoft and many of its partners will build those. Some of the redundancy and modeling techniques that come out of that will actually have an effect on how we think of datacenters broadly. All of the ways that you match hardware and software together will be far more model-driven and less manually driven. So if a piece of hardware goes down, not only does the system immediately take that function to another system but you don’t even have to come in and change it immediately; you just eventually come and service it, and so there’s no urgent capability, the hardware layer has an incredible redundancy capability that makes servicing lower and lower cost.

And so this is going to change the applications. It’s still going to require richness on the devices, the speech recognition, the speed, avoiding the latency. All these things mean that it’s intelligent definitely at both ends.

And so some interesting evolution, getting out in front, getting the tools, thinking through the new applications, and even at the hardware level this is going to change what the devices look like. We’ve got a record level of R&D and it’s partly because the optimism we have of what this can provide.

Now, Microsoft is lucky enough with the success and the R&D budget to be able to apply a lot of that to things that are pretty far out in our research group. In many ways the most fun part of Microsoft, they’re working on the toughest problems, and those are increasingly important to deal with security and modeling and reducing the complexity of software environments. The things that will keep fueling this industry are going to come out of research labs, either ours or the universities or the other companies that take this long term point of view.

My colleague Craig Mundie may have one of the most fun jobs at Microsoft because not only does he drive a lot of our strategy, he gets to manage these research activities and make sure that they’re tackling the new frontiers.

And so he’s next up with a keynote, and he’s going to talk to you and even look a little further out and talk about this big change in the processor technology to having multi-core, and some very interesting opportunities that come out of that.

So, with that I’m done, and let me ask Craig Mundie to come on out, and thanks for your attention. (Applause.)