Steve Ballmer at Nashville Technology Council

STEVE BALLMER: It’s a real honor to have a chance to be with you today. I hope we provoke just a little bit of thought. There’s always a way to kind of capture people’s imagination about what will be possible, and I think in general in the short run people probably over-estimate what’s going to happen, and in the long run people almost always underestimate the amount of creativity and vision and innovation and how that’s going to wind up changing the world quite dramatically.

Take a look at a video like the one I just showed you, and you’d say, hmm, what’s he trying to say? They could do good videos, that might be No. 1, which of course we all can with the right budget. No. 2, we’re really talking about something that’s coming tomorrow, or No. 3, we really are talking about something that is real and practical over the course of the next five, six, seven years. And really that’s the case, and I think people would still underestimate just how far we can go over a very short period of time.

It’s interesting, I look out in the room here, and I get a chance to do a digital assessment from the stage. And you might say, hey, look, this is the National Technology Council, we’re really digitally on the forefront, and I think that’s probably right. And yet I look at even the two Microsoft guys sitting here that I know in the front row, and they’ve got paper and pencil out in front of them. They don’t look like they’re living in the video that we just showed you.

And so we see the opportunity to really change the technology, to make the hardware, the software easy enough, flexible enough, light enough, valuable enough, that people can really move and embrace new things.

I want to thank the technology council here in Nashville for inviting me to give this talk. It’s a pleasure to have a chance to be here with you. I think it’s been basically since I was a young kid probably sometime in the ’60s that I was here. So it’s a pleasure for me to get a chance to come back and for some refresh acquaintances, as Todd was talking about, and a chance to get to hear what a lot of folks involved and using technology here in Nashville are really thinking about.

I want to start kind of with a fundamental view of kind of the basic things that are going to evolve and change in information technology over the next several years. And as Todd was saying, yes, Steve’s been at Microsoft 30 years. I wasn’t sure whether I was supposed to bring my cane up on stage with me or give you sort of the “long and winding road” history of information technology or some combination of both.

But probably the most important thing is to remind people that essentially, at least as long as we can look back, and probably as long as we can look forward in any reasonable way, we see in about a five, six, seven year, maybe eight year cycle, we see these massive generational shifts that happen in information technology; the kind of shifts that everybody, not just people in our industry, everybody wakes up and groks and understands and falls in love with.

Some of the things that get touted that way wind up being what we might call inside baseball, that only the information technologists get.

I remember trying to describe the XML wave at some point to my sister. It wasn’t very successful, and it wasn’t profound.

But certainly the move to personal computing was profound, the move from personal computer to graphical computing was profound and people could understand it, the move to the Internet was something that people could grok, the move to Web 2.0 or social computing people really got, sort of the onslaught of the phone as a computing device is something that has been huge.

And you see it about every five, six, seven years, and we are going through, we are early in stage on another one of those, which is really, you know, you could call it Web 3, the world doesn’t do that yet, but it’s the migration to the world of what we sometimes call at Microsoft “three screens and a cloud,” where the little screen, the phone, the big screen, call that the television , if you like, or the wall board like we saw in the video, and the personal computer all provide incredibly rich user interface to share data, to help you connect with people, to communicate, through the Internet, not just as a place to present data or occasionally interact with others, but as the fundamental back-end computing resources, not just for the consumer but also for every business.

And this transformation is another incredible opportunity. People will make large screen devices, people will make phones, people will make next-generation slates and personal computers. People will build new applications that can be designed to connect businesses and consumers in ways that are still kind of tough today or businesses to businesses. People will devise techniques to take dramatic cost out of the IT infrastructure that businesses run today. People will do a lot of things to innovate around this fundamental advance in the computing platform.

As more of the back-end kind of storage gets to move to the cloud, more of the front-end intelligence to let us do speech, natural language, gesture and vision recognition and touch, will move into these intelligent devices. And I hope by the time we’re done today I can give you a little bit of sense of how that really may come to the fore just over the course of the next few years.

So, another generational shift in kind of the computing infrastructure, which will enable software developers to build another wave of incredibly exciting and creative inventions, which will kind of delight, empower, intrigue the consumer, the business customer, et cetera; and I think this is as powerful as any of the generations, if you will, that have preceded it, in creativity, in productivity, in analysis.

I’d just pick my favorite. I went to a conference last week in Washington, D.C., that was held at the White House, on modernizing government. That’s a good topic, I thought. And I said, OK, well, let me take one of the things I’ve tried to do in my job in the last year and see what it’s like. All I wanted to do was look at debt as a percentage of GDP over the last 50 years. I did this. I’m not an economist, but I said, hey, look, they tell us on TV the problem is we’ve got too much debt. How does this look historically? I’d like to be educated about that before I decide what kind of the total cost base of Microsoft should look like. This is not advanced macroeconomic blah, blah, blah, it’s just, come on, let’s go get some data.

So, of course, where do I start? My favorite trusty search engine, Bing. (Laughter.) In case you missed that, Bing. (Laughter.) So, I turned to Bing, and Bing gives me Web pages that have this source, that source. Boy, was it rich in data.

And then I, of course, tried the other guys. I got mostly the same Web pages. Just so you know, the story is sort of equal opportunity in its commentary.

And I could go wax and look all over the Internet. The thing I couldn’t do was the simple thing. I just wanted to populate a spreadsheet full of the information, and be able to play with it and look at it. That was really hard.

And you take a look at that and you say, hey, three screens and a cloud, citizens, government, data, analysis, productivity, creativity, whatever you want to do, vroom, that stuff has got to be available to you.

And, oh, by the way, I don’t know how to describe the data the same way government economists do. So, presumably I ought to be able to say in my language, natural language, what I want and get it back.

So, really smart devices front-ending a really smart cloud to enable a wave of invention and creativity from the folks in this room, the companies that you represent, the students I had a chance to meet with outside, and many, many others, I think powers and fuels the next wave of innovation in our business.

I want to give you just a few examples of how we’re trying to, at least at Microsoft, build in these directions, build. We launched our Windows 7 product this year. Windows 7 is a product on which we’ve gotten very, very positive feedback, because we really took our cues, in this case we took our cues from our customers, not just our end customers, but the people who build computers, the developers who write applications. And in a sense there was a desire to see us go beyond, facilitate new scenarios, and we’ve done that with things like touch and sensor support, some of the things that are modern that people want to use for innovation in the world I just described.

But people also just wanted their computers to be simpler, faster, more responsive, longer battery life, new form factors. You now have tiny, little, inexpensive PCs that you can literally put next to a TV and get many of the scenarios where you want access to the Web cam, the world, the information, the video, the video that’s coming off of Hulu, if you want it, right there on the big screen.

You’ve got new all-in-one devices with touch built in, the kitchen PC of choice, I would say; very tiny, small, inexpensive netbooks, very lightweight, somewhat more expensive and bigger screened notebook computers, on up to very high-end gaming or engineering workstation devices. And you need that range and diversity.

We live in a world where 300 million people will buy a personal computer this year alone, 300 million. And more and more of that, frankly a higher and higher percentage is coming from consumers buying on their own behalf. The business market still hasn’t quite come back with all the economic turmoil. And people want a range of choices, price points, features, capabilities that I think is unmatched from the world of Windows and Windows computers.

We have a new version of our Office product. Now, people say, OK, office productivity; it’s not really just for the office, of course. What is the group of users, No. 1 user group for our Office product by far? Students, exactly, students. We’ve got a lot of users in business, but there’s a lot more usage actually from students, students who want to start perhaps with some research project but then collect notes, put together a presentation, do some analysis, write a term paper, whatever the case, collaborate and share information with other students. Those scenarios of how you really let people communicate, analyze, create, create — we’ve built photo editing and movie editing now directly into our Office product to just generally facilitate people’s end-to-end productivity, their ability to work real time with others on the same document.

You’ll see the new version of Office, which comes out here in just a couple of months. It not only works on your PC but it will work through any Web browser and down onto the phone in new and rich ways.

And so we keep pushing some themes. One of the ones I’m excited about that comes with Office, comes with the new version of Outlook, and comes actually particularly to the business customer is really the notion of bringing social networking into the world of business and business productivity and business applications.

How do you take some of the concepts that we think about with social networking today and say, look, I want to have colleagues and colleagues of colleagues, I want to know who the experts are. It’s kind of like a fan group, if you will, in social networking. How do you let people build applications, business applications that build on that and say, hey, look, I’m going to send a mail to all of the people who are interested in what’s going on at the HCA account in Microsoft. How do we group those people? How do we find them? How do we do that in the same kinds of ad hoc ways that people can do in a social networking environment, and what does that mean to Outlook, to note-taking, to e-mail? How does all of that stuff come together, and yet in a way where if business wants to secure the information and control it and manage it, that can all happen?

And when you combine what we’re doing in our Office products for students and businesses alike, you put that together with what we’re doing in some of our back-end infrastructure, particularly for business, a product we have called SharePoint, SharePoint is actually our most rapidly growing product of all time, because businesses are finding that the No. 1 point of advantage comes in providing their people with the right information and letting them share it in the right way. And SharePoint is kind of the back-end collaboration, social networking platform, has been a huge innovation, and we take incredible strides forward, particularly on making the kinds of analysis scenarios and social networking scenarios possible that people really want to drive. So, it’s another round of innovation, Office and SharePoint, coming this year.

Bing. Bing is kind of firing, firing, firing. You know, we’re the — I don’t know how many folks have either read to their children or been read to, a book called the Little Engine that Could. It’s about a little blue engine that’s just chugging up this hill. It’s a huge hill and it’s a little engine, and vroom, it just keeps coming and coming and coming, and finally I think I can, I think I can, vroom, it’s on the top of this hill.

If you haven’t read it, it’s really a dramatic book — (laughter) — to read to about a four year old, but anyway.

Bing. Bing is the search engine that thinks it can, and every day we have folks working, what’s the newest innovation, how do we change, how do we let people do things in search they can’t do today. It may not be the No. 1 thing everybody wants to do, but how do you take a unique point of view, because there are so many unmet needs and opportunities in search, there really are.

Fifty percent of searches still don’t lead to an answer today. How do you help people navigate more quickly to what they’re looking for? How do you help people accomplish tasks and make decisions?

It turns out that if you want a streamlined, pure, here’s the best 10 links, and all you’re trying to do is get to 10 Web sites, we’re battling it out, but we’re trying to take a point of view. We’re telling you, hey, look, you said you were interested in this topic, here’s five related topics that we think made a lot of sense. Here’s a structure that we’ve put on top of that that makes a lot of sense. Here’s the way to integrate this stuff into the map experience. We’ve really gone beyond in the visualization of maps in Bing.

My favorite new Bing app actually is in partnership with something called the Newseum out of Washington, D.C. You bring up the map and this application, and you can click on any one of several hundreds of cities around the world, and you see the front page of the newspaper in that town. And then you can go ahead if you want to and click through. But it’s just a front page. You just go Bing applications, Newseum, vroom. But it’s only possible if you take a view that says we’re going to let third parties add value, we’re going to innovate in new ways, we’re going to be presumptive about trying to help people really do things they want to do as opposed to just react to the queries that they pose.

And that’s why the Little Engine that Could has grown I’ll say 50 percent almost its market share. That means from about 7 to about 10, so let’s also just be numerically correct, it’s three points of market share. But it means a wave of innovation, and new ways of thinking about things that have been super healthy for us, for our customers, and I think generally for the level of innovation that you see in the search marketplace. So, we’re excited about the kinds of innovations that we’ve been able to bring to market.

Project Natal is one we’ve talked about, sneaky peeked a few times, but when I talk about natural user interface, the notion that the computer can understand you, see you, listen to you, recognize you, I’m really not talking about something that’s way out in the future. This year, this is a technology that sits with your Xbox. It does recognize your voice, your face. It is in some senses the most natural way to control anything, particularly for the couch potato. And I’m going to roll a little video here, but I think you’ll quickly decide it’s an easier way not only to play video games, but to actually control your television set, whether you want to browse the Internet, watch traditional TV, have kind of a Web call with grandma. It’s kind of the right way to go. So, maybe I’ll just show you a little bit of some of the kinds of things you can do.

(Video segment.)

(Applause.)

STEVE BALLMER: Coming this year.

The important part of that is just to remind you where innovation can go. I mean, I think that’s one that’s easy for people to resonate with, because we all interact, we all do things socially in front of the television with friends, with family, with kids, whatever the case is going to be, and it reminds you just how far this stuff can be pushed.

And sometimes I spend a lot of time out talking to our business customers, and in a business environment you get a little bit more, well, is it going to be perfect in its voice recognition, is it going to — and those are all good questions, and we’re going to be awfully darn good and plenty good certainly for the average skateboarder who wants to go out and have the kind of experience that we showed in the video.

Microsoft as a company has a broad portfolio of things into which we are investing. We’re investing into the PC as a rich device with Windows. We’re investing into mobile phones with our Windows Mobile software. We’re investing into the server and the cloud, into communications and productivity scenarios, into search and advertising, into enterprise infrastructure and to TV and the entertainment that goes with it, in addition to ERP, some health care solutions, and many others.

That is a broad portfolio, but we are so convinced that the opportunities for innovation are so high, the question we kind of ask ourselves is, how can we not make that level of investment?

So, we’ll spend this year about US$9.5 billion on R&D. That’s a big number. We don’t actually… with that, we’re not able to outspend every competitor in every area; we’re just in a broader set of areas, because we actually do think this notion that there is synergy amongst the innovation, three screens and a cloud is real, bringing this stuff together for our customers is actually a benefit, in addition to building them all individually.

And that’s why we invest. Our R&D budget I think now is larger than any other company in any other industry in the world, and it just speaks to the range of opportunities not just for us but the range of opportunities for everybody in the information technology field over the next several years.

I have had a chance to speak to groups like this from time to time, and people ask about various things, what’s most important, and certainly having the right idea to bet on is awfully darn important to having a technology business. Getting the right people to really make it happen is very important to any technology business.

The one thing I think people sometimes forget or skip, is patience, also very important. You’re not going to necessarily exactly hit it out of the park with the first version of everything you build. So, a little bit of tenacity, in addition to inspiration, in addition to great people, I think are absolutely a requirement. And if you take a look at the great businesses, whether the business is headquartered here in Nashville in tech, out of tech, whatever it is, I’m sure you’ll find that at the backbone. And certainly that’s how we’d characterize our core formula: great ideas with a real commitment behind them, and the best people in the world that you can attach to them, and that ought to let us and you and others really invent this incredibly exciting future.

You know, I was getting all briefed for my, as I said, first trip to Nashville in about 40-plus years, and I was struck by how much is going on in this area in industries, not just information technology itself, but in industries that information technology are really going to be able to help transform: health, energy, education, other forms of science. These are all businesses that not only will help drive information technology, but information technology will help drive.

Modern science and medical research will be accelerated by the ability to model the human body virtually. That’s for sure.

We talk about climate science and energy science and keys to that. We’ll be able to model the physical world in the virtual world in order to speed up the rate of experimentation that helps drive the scientific inventions that are a breakthrough.

In our own search team they talk about one of our core capabilities is how quickly can we experiment and iterate on new algorithms that really do a better job of guessing what you were looking for based upon what you typed in. Well, that’s really kind of the game in all science processes: How do you speed up the time of experimentation, how do you speed up the process of iteration? And in medical science and in energy science those will be important things.

As we talk about health care delivery, there is no more information-based business than the business of health care and health care delivery. What’s the best treatment, what is the best practices, what is the collection of data on other patients who have been treated in this facility, in this operating room? How do we package and put that data in front of people?

I’m not saying information technology is going to sort of solve all the problems of health care or energy or education, but if you think about the improvements that can get driven, and so as you sit here in the Nashville Technology Council, whether your business is, in fact, IT or your business is one of the other industries that I mentioned, I think the role that the innovations in information technology are going to play will be key enablers of the kind of innovative work that’s being done here in the Nashville area in a variety of different industries.

We’re certainly very pleased to have the opportunity to work with many of your companies. We’ve got a great team that Chris, who’s sitting here in the front row, runs here in the Nashville area. What’s your e-mail address? I forgot to ask you. [email protected]. Feel free to shoot him an e-mail and follow up, or SteveB, that’s me, @microsoft.com. We’d love to hear from you. There’s a lot to do, there’s a lot to drive, there’s a lot of opportunity, and certainly we look forward to as partners, as customers, as information technology industry participants, we look forward to embracing it together.

Thank you all very much. (Applause.)

Thank you to the Nashville Technology Council. I’m going to love this. I have three teenage sons. We’ll see what my wife thinks. Thank you. (Applause.)

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