Remarks by Steve Ballmer, Executive Vice President, Sales and Support, Worldwide Business Strategy Group
World PC Forum ’97
September 24, 1997, Chiba, Japan
MR. Ballmer: It is my great pleasure to have a chance to be here with you today and to try to give a little bit of a sense of some of the things that we think we hear from our customers, some of the things that we see as possible with the technology going forward, and to give you a sense of how we’re going to try to help harness that, particularly through Windows, the underlying engine on which so much happens in the computer market. This year, there will be over 90 million new Windows systems shipped. There will be over one and a half million new Windows NT Servers shipped, and Windows has really come to form a foundation for the entire computing industry. Yet there are many things we need to enhance, fix, change and push forward in the Windows architecture to realize the original dream that Bill Gates articulated for our company and our industry: a computer on every desk and in every home. So I’m going to try to give you a sense of that.
I want to start with a discussion of the PCs in business. The PCs in the home is a very exciting arena. There’s a lot of upside and a lot of potential. In the United States only 40 percent of households have a PC. Here in Japan, perhaps 15 to 20 percent of households have a PC. The growth of the Internet is opening up many new opportunities for the PC. But still today we see the prime excitement and certainly the prime buying of personal computers happening in the business market. In the business market, we think there’s a tremendous opportunity to increase the value to our business customers. If you really ask most business owners today what does the PC do for their business, whether that’s a small business, a medium business or very large business, they will focus in on the personal productivity of the worker, they may focus on the PC as a replacement for some terminals they had in their environment, but very rarely do you have business owners saying that the PC infrastructure is really fundamental to the way our company makes decisions, the way our company reacts to competitive action, the way our company plans and reacts to customer feedback. We call that environment the digital nervous system.
The digital nervous system of a company is a little bit like the nervous system of the human body. You can ask how does a company react to planned events, how does it react to unplanned events, how does it respond to competitive stimulus? In the human body, we see, we listen, we learn, we think, we plan. How does a company see, think, analyze, plan and react? In most companies, the networks of computers that are in place are not a critical component, yet the PC is a wonderful tool for analysis, for communication and for training, and we view it as a primary objective for us as we think about how to push Windows forward, to be able to really have these networks of Windows PCs help companies think, learn, analyze, plan and take action, much as the human nervous system allows us to make those sets of actions. Perhaps the best example is just to focus in on competitive stimuli. When a competitor changes a price or takes an action in the marketplace, how does that information come back in from the sales force? How does it get spread to all the appropriate people inside a company? How do people analyze that information? How do they combine that information with other information? How do they make decisions? How do they communicate those decisions? How do they train their workers on the decisions that have been made? To get to the point where these PCs are a fundamental part of that process is very critical. That requires us not only to focus in on the PC as a wonderful tool for personal productivity, that causes us to focus in on how we can teach PCs to listen, to learn, to help be more adaptive to human beings. It will require our business customers to build on the infrastructures of PCs that they have installed.
Here in Japan, we think perhaps only 55 to 65 percent of all white-collar workers have regular access inside their jobs to a PC. How does that number grow? That is part of the key to the growth of the personal computer industry in Japan and around the world. How does that infrastructure of PCs really get networked together? Is there an electronic communications system, an electronic mail system, that allows those people to really communicate? Is everybody really connected up to the Internet or not, because so much of the information today and in the future that people will want to do their jobs doesn’t just come from within inside a company, but really comes from external sources–from the Internet, from business partners, from customers who you contact over the Internet. Just take the case of Microsoft. Our Web Site, www.microsoft.com, today receives roughly 1.2 million visitors per day, and each of those visitors we profile, we can understand their questions, what they’re having problems with, what they’re looking for, and that’s an incredibly valuable source of feedback to our digital nervous system. Of course, we need to tie in the things that people are doing today in their line of business applications to manage manufacturing, operations, customer service, order entry–because all of that information is vital if the people involved in the digital nervous system are really going to be able to take decisions and communicate about important things together.
Certainly we see Windows, Office, Exchange, NT Server and SQL Server as critical building blocks in combination with many products that will come from a variety of third-party software vendors. We certainly think that the digital nervous system of a small company looks somewhat different than the digital nervous system in a large company. Sometimes as I’ve talked to people about this concept, they say, “Oh I see. That’s for those terribly big companies that have a hard time communicating.” But even in small companies–five, six, seven people, say in an architecture firm–the need to communicate plans with builders, with clients, with customers, to communicate costs, you simply have to view the digital nervous system as extending beyond company boundaries in a very strong way. The starting point for our work, whether it’s digital nervous system or information at your fingertips or making PCs simpler and more approachable, the starting point of our work is always Windows. Windows is our cornerstone product. It carries with it in some senses the architecture, whether that’s to permit more easy operations by the IT staff, whether that’s to allow end users to approach PCs in a more easy way, or whether that’s to enable these digital nervous systems, Windows has to carry the core building blocks and the core architectures on which our customers, on which ISVs, on which our hardware partners all build.
We started on a strategy about 12 years ago to so-called put Windows everywhere, to really let Windows extend down from very small, very lightweight devices on up to very big devices. When I first talked about this concept, in 1986, 1987, Windows wasn’t everywhere. Windows was really just on desktop PCs. It’s moved to portable machines. Here we see people introducing new NetPCs, PCs that are designed to run on PC 98, which is the hardware architecture of the future. The new NetPCs, the new NEX series from NEC all carry this important, new, simple hardware architecture that we call PC 98. We’ve recently announced technology which we’ll bring to market next year that will allow you to connect a dumb terminal, what we call a Windows terminal, a very low-end device, no intelligence, it’s simply a dumb terminal that you can connect to a Windows NT Server. That opens up new possibilities in terms of very low-cost devices, very easy to manage. With our Windows CE technology introduced last year, many people today are carrying handheld devices that run subsets of the Windows application pool.
Our work with Web TV, a company we recently acquired, will allow us to do Windows-based televisions that can be connected to the Internet. On the other side of the spectrum, on the high-end, we see Windows NT Workstations rapidly replacing UNIX workstations in finance, design and manufacturing and in the automotive industry. And of course, Windows NT Server keeps pushing to more and more scaleable design points. With the release later this year of our Enterprise Edition of Windows NT Server, we’ll push again and add clustering and give support for more microprocessors. We certainly believe, as I’ll make clear later that the most scalable device, the most high-performance device that you will be able to buy within three or four years will be essentially a PC server. It may have sixty-four processors. It may have a clustered shared-nothing design point, but what Intel is doing, what people like Fujitsu and NEC and Compaq and HP and others are doing, is pushing Intel systems to the high end. They’re guaranteeing that Intel systems will have higher performance and better economics than anything running power PC chips or Sparc chips or even IBM mainframes over this period of time. And it is important for us to let Windows scale out. Because if we do, you really can think about structuring these digital nervous systems around Windows. If Windows is restricted, just to the desk top or just to personal productivity applications, it’s not possible. We need to show a very broad set of deployment options for these Windows devices and these Windows applications. So really, people can engineer the entire digital nervous system around Windows.
This is an important year for the Windows family of products. We have some critical new releases coming. We will bring, this year, the second beta of Windows 98 to the market. And this week we are doing our first developers conference on Windows NT version 5.0, and the beta releases for that are now available. We are also bringing to market today in Japan and the United States, version 4.0 of our Internet Explorer which is an important component of Windows 98 and of Windows NT version 5.0. By the second quarter of next year we will ship Windows 98 and by the middle of next year we will ship Windows NT version 5.0. Both of those products are very important, but in different ways. Windows 98 is a product that really helps take advantage of new hardware–that really takes cost and complexity out of the systems by targeting this new PC 98 architecture, and by including the Internet Explorer version 4.0, which we are going to show you here later today. Windows NT 5.0 is perhaps an even more important product strategically. Windows NT 5.0 really lays the foundation for a new set of infrastructure, not only for the scalability of the Windows family, but for the cost of management and the complexity of management. There are a lot of important technologies–the new directory, the new installation facilities, the new IntelliMirror technology which I will talk about in a minute, our zero administration technology — are all very important, both from an IT perspective and from the perspective of a business manager trying to deploy a digital nervous system. Today, when we talk to customers and we ask what are your top concerns, issues, frustrations–where do you feel like we need to make the most progress for you to more successfully deploy Windows inside your organizations? Or when we talk to home users. It always comes back, essentially to the same point: you’ve got to make Windows systems simpler and cheaper to manage and own. We’ve taken that very much to heart.And in both Windows 98 and Windows NT version 5.0, we are pursuing something that we call our zero administration initiative.And it’s goal is to reduce total cost of ownership (TCO.) There’s a lot of work to be done. We have to help reduce hardware costs, and we focused in on that by allowing people to literally put a four hundred dollar dumb terminal in and let it run Windows applications.We focused in on that by also allowing people to extend the life of existing Windows PCs by giving them the chance to run terminal emulation sessions to these new multi-user NT servers.
We focused in on the hardware, not only in the NetPC, which is a stripped down PC, but perhaps more importantly, through our new PC 98 hardware architecture which really is the first major revamp of PC hardware architecture since the beginning of the PC industry, where we and Intel and our hardware partners really took a look and said, how do we simplify hardware design in a way that is going to make it easier for our customers not to have headaches as they can figure and deploy these systems. From a software perspective of course, both Windows 98 and NT 5.0 are 32-bit systems.That is very important in terms of the complexity of managing these things. We have put a lot of work into our zero administration initiative and into our Systems Management Server. The key breakthrough that occurs really in Windows NT 5.0 and components of this technology will also be available in Windows 98, is what we call our IntelliMirror technology. This is a technology that essentially lets you keep all of the master copies of configuration information, data and programs on a server, and have those be automatically mirrored or replicated out to a client. Today, if you talk to somebody who has either 5 PCs or five-hundred or fifty-thousand PCs, they all raise the same question. Anytime I want to do something new in my company, I have to go reconfigure a bunch of different computers. Why don’t you let me centralize Microsoft and all of these changes, and make them one time in one place on a server, and have those changes automatically replicate themselves out. You can think about this in a variety of ways–in the call center of a bank you have people say that when a PC breaks, I want to just plug a new PC in and have it work. I don’t want to be doing set-up and configuration for half an hour. I want the information to just become cached from the server to the client. Essentially we do away with the general notion of installation and configuration and have that done only in one place on the server.And then we let information be mirrored on the desktop over the network. We also have a strategy that lets you unplug those machines as lap tops and take them with you, with the appropriate information cached on the notebook which can then be updated when you are ready .
It is terribly important that we create a new architecture for IT professionals, for software developers, for people doing server applications that we think will fundamentally change the cost and complexity of PC ownership and that in turn lets people focus more on the benefits of the digital nervous system instead of the simple cost of management. Along with Windows NT 5.0, and the Windows architecture, I want to then build to the pieces that live on top of that, starting at the server with our family of BackOffice products. Windows NT gives us an architecture, but it is an architecture which increasingly at the server level lets people run the backbone of their business.
You will notice that Windows NT 5.0 includes not only traditional operating system features, but it includes message queuing, transactions services, sophisticated Internet services, so that people can really build mission-critical server applications on the platform. We have extended the family of products that live on top of the BackOffice family–the SQL database, our Exchange product, the SNA connectivity product, Proxy Server, Site Server for the management and creation of advanced Web Sites, including Web Sites that are engaged in commerce, either business to business or business to consumer commerce. And we think it is very important that we provide a core set of building blocks to run the digital nervous system.But NT is the foundation. NT has to be as rich a platform to build server applications as AS/400 or anything that ever happened on IBM mainframes, and we are very invested in doing the R & D work to really make that happen. We also recognize that there are different needs at the server–for a department in a large company, for the backbone servers that run the large company, and down into small businesses. Their needs are very similar, but the complexity is somewhat different.I talked a little bit about all the work that we are putting into those high-end servers–higher performance, more processors, better clustering, better data center management tools, hierarchical storage management, better disaster recovery. These are very important for an enterprise data center.
On the other hand, we will bring to market later this year in Japan a product I am just as excited about, that we call the small business server, targeted at companies that have twenty-five or less PCs. And in this case we tried to take the complexity out of the server. The small business server includes Windows NT, and Exchange, and SQL and the Internet, but it makes it very easy to do modem sharing, fax sharing–to connect up to the Internet, to get e-mail, to submit things to your web hosting partner so that you as a small business can have your own Web Site. We have put in a lot of work to re-engineer the administration of all of these products, to make them much more simple. And so we have a core technology which we need to extend to the digital nervous system needs of the very largest and of the very smallest organizations. We have been fortunate to get excellent customer response to our BackOffice line of products. I mentioned the 1.5 million Windows NT Servers that will be sold this year. That is roughly three times as many servers as there will be UNIX servers sold. But we have also had good progress with our SQL database. That is a very competitive market.At least Oracle is doing a very good job.
But we continue to offer better price performance, building off the strength of Intel servers and Windows NT. We have a major release of SQL Server planned with Windows NT 5.0 during the middle part of next year that will take the next set of steps in terms of scalability in the high-end and in terms of having a desktop version of SQL, at the low-end for lap top use, etc. Our Exchange electronic mail and groupware system–we now have many customers who have deployed over fifty thousand seats, people like General Electric and Boeing and British Telecom, who are literally communicating the mission-critical information of those businesses across the digital nervous system. Companies like IHI, here in Japan, who I will talk about more later, and Nissan Motors and others are very important to us in this area.Most of the biggest commerce-based Web Sites in the world are now based upon our sight server product.When Dow says they do many millions of dollars a day of business over the World Wide Web, they are doing business to a Windows NT Server running our site server.
We have had phenomenal uptake amongst our partners here in Japan who are doing electronic commerce with the site server product.And so we are pushing along across the family to make sure we have a set of building blocks to equip people to deploy the digital nervous system.Internet Explorer version 4, which will be part of both Windows NT 5.0 and Windows 98, is a key component of the digital nervous system.There are many great breakthroughs that came from the Internet.People will talk about TCP/IP and lowered communication costs and the magic of the Internet, because it is really magical. I can sit there from my desk in Seattle and I can browse Web Sites literally in any part of the world, at no marginal cost. It is a phenomenal thing.But the other phenomenal thing that came with the Internet was a new way of navigating and finding information.Webs and pages of information that people really responded positively to–and so when we think about either the world wide web or the corporate internet, people will navigate and find information through this page-based metaphor.
Essentially the Internet is also helping to revolutionize the way in which information generally is browsed.And so you’ll see as we do the demonstration a little bit of Internet Explorer 4.0 , how we have integrated web browsing and file system browsing.And so you have one Internet style, user interface to information, whether it is in a word document, it’s on your hard disk, it’s on your LAN, it’s on the Internet, it’s in HTML, one unified user interface metaphor.You will see that Internet Explorer 4.0 includes an electronic mail client we call Outlook Express that is compatible with the Outlook product, which is in our full Office product. It includes FrontPage Express, a subset of the FrontPage product which is part of our Office family that lets you design simple Web Sites. It includes capabilities to let you look at interactive media across the world wide web, and to share information with people real time through our so-called NetMeeting technologies.
We have been very focused on driving both the technology and market place success of IE over the course of the last couple of years. We shipped over ten million copies of IE in our financial year, which ended in June. We are simultaneously releasing this new version in Japan and the U.S. We think that we are going to be able to blanket the world with IE and you’ll see in our demonstration that we’ve really gone out and got some of the very finest developers of electronic content here in Japan to sign up very close partners in providing Active Channels of information to users through Internet Explorer. We are pushing. We are pushing. We are pushing. We are pushing the technology and we are pushing our partnerships with our customers and with content providers to really drive forward. If I might, just a small show of hands , if people don’t mind. I’m curious, how many people in the audience today are users of Internet Explorer? Netscape Navigator? Fifty-fifty. Ah, the world has become clear.
There are two basic choices and that is why it is so important to us to continue to put very strong R & D effort and partnership effort into Internet Explorer. Here are some of the content partners that we have lined up to do Active Channels which we are going to demonstrate to you here in Japan–Nikkei, Mainichi, Recruit, Disney, Elle, TV Guide, Weather, Pointcast, of course the Microsoft Network. And to give you just a sense of both how Internet Explorer works and gives you this new page based way of navigating information, and to share with you a little bit some of the work that our content partners are doing here in Japan, I want to ask Forest Linton to come on up and join me and do a little bit of a demonstration of Internet Explorer 4.0 for us.
[Demonstration of Microsoft
technology in Internet Explorer 4.0. This is technology that allows a content provider, whether that is a public Web Site or corporate intranet, stream information directly to the user’s desk, instead of making the user search for it. It’s designed to work like television channels so the user can choose to see the information. It can download information so that the user can read it offline. IE 4.0 can be configured to provide only the information desired by the company.]
I want to talk a little bit about the second piece of these systems that the end-user typically sees and interacts with, and that’s the Microsoft Office application. The Office applications today are the primary point of interaction with PCs for most users. The PC really grew up as a tool for personal productivity with the Office product, with our Office Professional product, and what we think is very important for us to do in this environment of the digital nervous system is let the office product really grow from being a tool, not only for me to express myself and do my personal analysis, but really to grow and be a tool generally for participation in and automating the digital nervous system of the company. Do I get, for example, sales data delivered to me in Microsoft Excel format, where I can then further analyze it and dissect it and understand what it means? Do I get customer feedback to me in that form? Do we manage the names and addresses of our customers through the Outlook Contact Manager to make it very easy to send them a fax, send them a piece of e-mail or otherwise communicate with them or schedule a meeting with them? It’s very important that this thing grow from being a tool for personal productivity to a tool for productivity to business.
Certainly one of the key characteristics of Office that makes that possible is the built-in automation technologies that comes to our so-called, VBA or “Visual Basic for Applications” technology. Office becomes a generally programmable tool, which the IT manager can use to customize Office for the digital nervous system. Just as we recognize the need for our BackOffice product to have an appropriate set of versions, to span the needs and interests of smaller and larger organizations, the same is true for our Office products. Our Office and Office professional products are very well-tailored today towards small, medium and large businesses. But there is really a market that’s called “SOHO” or very Small Office and Home Office market, where we don’t necessarily think our Office products is 100% well-tailored.
So we are doing a variation of that product that we call “Office Personal Business Edition,” which will be available next month here in Japan to really target the needs of the one-or two-person company or people who are working and trying to be productive in their homes. For very much more personal or family use, we are doing a version of Office that we call “The Family Package,” and “The Family Package” is a start to target the different kinds of productivity needs that you find in a family. Families don’t do a lot of presentations, they don’t do a lot of big sophisticated analysis, but they do want to manage their money, plan their trips, and they do need some level of functionality that’s like spreadsheets and databases, but they need a package very much in the context of hobbies and interests and schoolwork and etc., that is so important in the family. So that’s the direction we’ll take.
“The Family Package” and “The Personal Edition” we’re targeting at very small business. We will continue to enhance Office and Office Professional for the very higher-end business needs, small, medium and large. The Office product will continue to get enhanced both to be more usable. We’ll continue to improve its ability to adapt to the customer, to really watch customer behavior and whether that’s through technologies like our “IntelliSense” technology, whether that’s through some of the things we are doing with our new help in Wizard technologies, whether that is taking some of the work we have in our labs in voice recognition in natural language to allow this product to interact with you more naturally through spoken language and natural language.
We’ll continue to make the PC more approachable by leveraging new technologies through the Office product and eventually back into Windows themselves. Many of these technologies are very much market-specific. They need to be sensitive to language, voice recognition, natural language, typing, input, information that people need in home environment. The same technology and approaches here don’t work in the United States, in Germany, in Japan. And so we’ve taken great pain and great care to really make sure we’ve got an R & D effort that’s focused-in on the specific needs of the Japanese consumer. We have hundreds of people here in our Tokyo R & D Center. We have a usability lab here in Japan, very much focused in on refining these user interfaces. And this content is set to make sense here in the Japanese environment. We’re very proud, I’m not somebody who can type Japanese but I’ll tell you, the feedback we’ve gotten from customers on our investment, in our IME technology, the work we’ve done in Encarta, not only to provide Japanese user interface, but really deep Japanese content has been fantastic.
We’re going to show you our new Office Product-“Personal Business Edition” here in a minute. I think they’ve done some very clever work in really anticipating and thinking through the needs of the very small customer here in Japan, which frankly are needs which are unique, which we wouldn’t see in other parts of, at least not in the United States and some other parts of the world. We’re bringing a product to market, the product we call “Hagaki Studio,” which focuses in again, on some of the unique opportunities and some of the unique things that people do in Japan that they don’t do elsewhere in the world. So we are very committed to making sure that we embrace the productivity needs and the digital nervous system needs of users here in the Japanese market.
One of the ways in which we measure how good a job really are we doing in embracing the needs of our Japanese customers is by looking at the acceptance of Microsoft Word, our word-processing product. Word is a product that very deeply needs to understand language and apply appropriate user interface. It gets very married to the work that goes on inside the IME. So we’ve built market share with Word. We think that’s a great testimony to the fact that we’re very focused in on providing the best technology for the Japanese customer. We’re just going to keep pushing and pushing and pushing. I was in an important meeting last night with out internal development and marketing team. We were talking about the next generation of Microsoft Word. And the next generation of our IME and we think we’ve got some very innovative ideas to take a big step forward in making it easier to input and edit Japanese documents. So we are very enthused with the possibility and potential to keep making our products much more tailored for the Japanese market.
[Demonstration of Office Personal Business Edition and FrontPage 98 for Japan.]
These pages of information need to be easy for people to put together the information you are trying to find, whether it’s with FrontPage or particularly the integration that we’ve just showed between the web and Office documents like Word and Excel. We have to be able to take the databases that people work with, whether that’s their customers, their contacts and very easily let them get at that information and act upon it, whether it’s the nice rich integration with mapping or whatever.
We do have some large-account customers here in Japan, with whom we’ve done some particularly leading-edge digital nervous system style projects. We are working with Bridgestone, who is migrating their multi-vendor host systems over the Windows and NT, and using that as an opportunity not only to take cost out but change the way they package and present information-sales, order processing, accounting, a wide variety of functions. At Yamanouchi Pharmaceuticals, we’d been working on a big project with them that uses Exchange and a host of other products to try to really change the way their sales force works: how do they get information about the latest and greatest drug products, how do they get the latest information that is relevant to a sales call that they may make on a given hospital or doctors office, etc. With IHI, we’ve done a major project to try to help them automate and change they way they communicate. I’ve had the chance to visit and take a look at the very clever things that they’ve done there, building primarily around Microsoft Exchange. They already have 10,000 users on Exchange; they’ll have over 30,000 Exchange users when they’re done. At Nomura Securities, we’d been working on a variety of projects over a number of years. At first, primarily to replace the kinds of terminal systems that they had inside the different brokerage offices, but those projects have now changed to metamorphose and grown to the point where we’re not doing just something they used to do with old terminal-based systems, but try to change and automate the way information is supplied to and made more effective, the work of the Nomura broker and trader around the world. There’s much that has to go into letting the full power of the PC be realized, whether that is in the home or in the business market.
I chose to focus today on the benefits that can come through the digital nervous systems and on the technologies, the enhancements to hardware: PC 98, the enhancements to Windows, the basic platform, the enhancements to the user interface in its migration to be more web-enabled, the enhancements to products like Office, which are the basis for interaction, and the enhancements to the server components so that really PC servers both in terms of functionality and in terms of scalability can be the backbone for the way businesses gain productivity, whether that’s in a very small-, medium- or large-sized organization.
The potential is enormous. At Microsoft, we still believe as Intel said a few years back, that “the PC is it.” We don’t see the world reverting to a world of centralized computing and network computers. We don’t see the world diverting. We know that if we do the right job, continuing to improve the value and continuing to help eliminate costs at the desktop level and at the server level, from these computing infrastructures, and let people see and analyze and think better through their computer digital nervous systems. There’s an exciting future ahead for the personal computer industry. We are glad to have a chance to play a critical role with the Windows product and I hope that everybody who’s had the chance to attend today sees new and greater opportunities to add value around or to let Windows face systems add value inside your own organizations. I say thanks very much for your time and attention this morning and your support and patronage of Microsoft products.