Steve Ballmer: Executives’ Luncheon

STEVE BALLMER: Well, thank you very much. I appreciate your time today. I appreciate the warm welcome, despite the cold outside. (Applause.) And most of all, I appreciate the business that we do with all of the companies represented in the room; very, very important to us, and we have represented in the room today a number of our biggest and most important clients here in Korea. So, I just want to say thanks for all of that.

I also want to say for me it is fun to be a more and more regular visitor in Korea. The pace of the IT market, the broadband infrastructure, the leading work that Korean companies are doing in the technology industry on a global basis (audio difficulties) – sorry, technology problems. (Laughter.) Hardware, not software. (Laughter.)

For those of you who missed, we will try to catch up. How’s that? Still OK. All right, great.

A lot of leading edge work going on inside the Korean market, and it is fun for me to be regularly visiting in Korea, and having a chance to speak with you.

Today, I want to talk specifically from the standpoint of the IT industry and how IT is being used inside of large companies. Twelve days ago, we introduced our new Windows 7 product, and I’m excited about it, and it’s got lots of promise, and I know our moderator and host was talking about it. And I will talk a little bit about Windows 7, but I want to make sure to put it in a context of what I think are the pressures which I think as you said are great today on CIOs around the world.

The economy went through a set of changes on a global basis over the course of the last year, which are I think it’s fair to say once in a lifetime. Even though everybody here had a chance to live through the Asian economic crisis of a number of years ago, I think we will wind up feeling globally that this crisis is perhaps more of a long-term impact.

I was impressed with the speed of recovery from the Asian economic crisis here in Korea, but I think what we will see coming out of this economy – and I’m not an economist, I’m just a CEO who’s trying to run his own business – is that there will be a contraction in the amount of debt that society has, that that contraction in debt will lead to a reset of the economy to lower levels.

We know that IT now represents about 50 percent – 50 percent of capital expenditures in developed countries like the U.S. and Korea, and with capital more scarce we know IT budgets are more scarce, and so it’s important that we not say we just had a crisis and we’re going to have a recovery. Rather we think we’ve had a crisis, but since the debt is not going to just emerge again, we’re going to live in what we like to call the “new normal.” And the new normal will be a more scarce environment than we saw a year, two years, three years ago. And while we will see growth, we will not see recovery.

Certainly we’ve seen purchases in business of PCs and servers down about 15 percent globally, which affects us and affects you because it reflects the fact that CEOs have much more tightly constrained IT budgets.

We think if we now live in a new normal economically, there’s going to be pressure in businesses to drive for a new level of efficiency. Efficiency more than anything will be the codeword that gets applied as people consider business investments, and in a sense that will be nowhere more true than it is in information technology – nowhere will it be more true.

First of all, the CEOs and business leaders that you report to, they’re going to ask you, “Is our IT organization well run, are we cost-effective, are we running our IT operations as efficiently as we can?” And I know that that’s going to be a major question point for every CIO in the world.

At the same time, business leaders are not going to reduce the pressure on you to help them use IT to take costs out of other parts of the business. How do we reengineer our marketing to use the Internet more to reduce costs? How do we use IT to reengineer our supply chains and make them more efficient? How do we use IT to improve customer service in our branches? How do we use IT to move to e-government style operations? And so it doesn’t matter where you sit, the pressures will be to reduce IT spending but increase IT impact.

And so we need to have a strategy as a leading software vendor. We need strategies that help you, as we say, do more with less.

This was a marketing slogan for one of our earlier versions of Windows Server. Perhaps in this environment the first discussion you’re going to have with your leaders is how to with less do more, where the focus is first on cost, but helping you get more impact out of smaller IT expenses has to be No. 1 priority for us and every other vendor who’s going to do a good job for you.

Cost, productivity, and frankly there’s another area that I think will be of growing importance, and that’s using information technology to also enable innovation inside your own companies.

How do you let people collaborate in new product development? There’s new forms of scientific exploration: bioinformatic sciences, oil and gas science, energy and climate science. The only way those things will proceed at a much more rapid rate is if we can use information technology to actually improve the innovation processes.

You’re going to hear from Mr. Chae from Samsung. We talk a lot about green IT. And a lot of the focus today is on saving costs, but it’s really on designing next-generation technologies, which are fundamentally more efficient, and you’re going to have a chance to hear about some of that work here today.

So, as we bring Windows 7 to market, as other people in the industry bring new innovation to market, we think our mission has to be to help you do more with less. And I want to give, in that context, a bit of description, particularly of our new Windows 7 product, but also a few other important technologies that I think will permit this.

The No. 1 and most important innovation in Windows 7 is that it is simpler for the end user and faster and more responsive.

And you’ll say, OK, but how do you quantify those benefits? I don’t think you will be able to quantify them easily, but I think as people start buying new computers at home with Windows 7, as they see, oh, immediately my computer turns on, oh, I can find the information I need quickly, it’s helping you with this notion of doing more with less. So, the end users, the businesspeople who you serve I think will absolutely say this makes us more efficient and more productive.

And yet at the same time, if we look at the primary costs in all of your companies in running an IT environment, it’s management and security of the desktop. And we’ve taken a lot of steps in Windows 7 to improve manageability and to improve security so that as you deploy Windows 7 inside your companies, you have an opportunity not only to help the users do more but to also reduce IT spending.

In studies that we’ve done with some of our early customers here in Korea and around the world we find that businesses are able to save between $50 and $100 per PC per year by using Windows 7, reducing power costs, reducing help desk costs, management costs, security costs, and it’s been a big focus for us in the Windows 7 wave of products.

There are two other important new technologies that I think will also drive this notion of doing more with less or the new efficiency, and those are so-called cloud computing and the underlying technology that permits cloud computing, which is virtualization. And you read a lot, you hear about, we talk a lot about cloud computing and virtualization, but they are also technologies that are appropriate for the new efficiency, for doing more with less.

In our own products, the Microsoft products, you see us taking all of our enterprise server products – Windows, Exchange, SQL, SharePoint – and we’re bringing them all to the world of cloud computing, a world in which we think you can save operating costs by relying on companies like ours and others to run the infrastructure more efficiently, and at the same time we think it can help improve the speed and agility with which you are able to deploy new IT solutions.

Those are the fundamental benefits we see in cloud computing. We need to maintain the reliability, the security, the availability, the control that you expect, but with improved cost and agility, and we certainly welcome the opportunity to discuss the cloud computing phenomenon with you.

Underpinning cloud computing is virtualization. Virtualization is the technology that lets us use hardware more efficiently. And, of course, you don’t need to move to the cloud to embrace virtualization. With technologies particularly like Hyper-V, which is our virtualization technology, and the tools that come in Windows Server – we have a new release that we made with the new release of Windows 7 – the ability for you to use virtualization to drive costs and complexity out of your datacenters we think is quite dramatic.

So, software for the new efficiency, lower cost, more agile, more productive, because you’re going to be under both of those pressures, and we’re trying to make sure that with products like these and many others we are in a position to really support you and drive this kind of new efficiency in your IT infrastructure.

You could see on the slide some of the costs type savings that I talked about: help desk, desktop management, the cost of deploying a new personal computer, power, which comes up again and again. Mr. Chae will talk more about that, very important to us. And if you’re willing to use virtualization technologies to the desktop, there’s also savings in application deployment using virtualization.

I’m going to have a chance to talk about a number of leading-edge customers that we’ve worked with here in Korea, but if you look globally, customers like Ford, BMW, Intel, Continental Airlines, many of the biggest companies in the world moving already.

Generally people say, let’s wait to embrace new technologies, Windows 7, whatever it is, but I think we’ve seen a lot of early adoption even in the largest enterprises.

It’s now my pleasure to have a chance to introduce one of our most important customers, business partners, and allies frankly in designing the future of the company industry, and that is Samsung, Mr. Chae, who’s vice president at Samsung, is going to have a chance to talk a little bit. They’ve been an early adopter of Windows 7, for which we’re very appreciative, but they’re also our ally in really defining the future of the computer, the phone, the big screen, and I welcome Mr. Chae to talk about some of the most important phenomenon going on. Thank you. (Applause.)

(Break for demonstration.)

STEVE BALLMER: (In progress) – little bit of a sense of some of the power and capabilities that we’re talking about, not just as we talk about Windows 7 but a whole new generation of technology.

I certainly congratulate and thanks Mr. Chae. This is really quite something. I’ve seen a lot of demonstrations of real-time display of information, but very impressive and very powerful, and I think it gives you a little bit of a sense of really what can be done with this new generation of technologies.

With Windows 7 we’ve been working not only with Samsung but also a number of other Korean companies, who you can see listed here. A number of you are in the room and we thank you for your early involvement with Windows 7.

But whether it’s Windows 7, we have other new products coming that our host mentioned in Office 2010, cloud computing, virtualization, business intelligence, touch computing, which was used very effectively I thought in the demonstration. The opportunities today, despite the new efficiency, despite the economy, information technology will be more important in helping all of the businesses that you work for do more with less, not just in IT but the general productivity, economic growth, effectiveness and efficiency of the businesses around the world, here in Korea and elsewhere is going to depend on all of us in the information technology industry. And I want (you) to know you can look forward to our continued support from our team here in Seoul and also the global Microsoft development and support teams.

Thanks again for the time. I’ll look forward to our discussion and question and answer session, but it’s been my pleasure to address you today. Thank you. (Applause.)

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