Remarks by Steve Ballmer, Executive Vice President, Sales and Support, Worldwide Business Strategy Group
February 10, 1998, Seattle, WA
Steve Ballmer: Thanks everybody for that warm reception.It’s my pleasure to have a chance to kick things off here on the second day.I’m glad everybody is back up.Yesterday was a very long day.No matter where you traveled from, I can assure you, I’ve heard this enough, yesterday was nothing but long, and we will hopefully try to keep today moving with a lot of energy and enthusiasm, so that we can get you re-engaged here this morning.
What I’d like to do today is help with that transition between some of the issues that we discussed yesterday, in terms of the kinds of scenarios and issues that we see governments facing around the world, and to make the transition back into some of the technologies that we can offer, how those might be able to help you, and some of the customer examples that you’ll hear about this morning on how people have used technology to good effect.
I think the place to start has to be with the value of information technology.In some ways, what I’ll say will be very obvious.In some ways, I think it’s actually quite controversial.But I think it’s important to set a stage in terms of the way both businesses and governments think about information technology, and the ways, frankly, in which consumers have a natural interaction with technology in their business and home lives.
The first thing to remember is, information technology is a very large industry, probably important to many of you as government, but information technology spending is also large if you put yourself in the standpoint of any of the IT managers inside the government organizations represented here today.
The Economist estimates that about $1.3 trillion will be spent on information technology, hardware, software, people, labor, around the world this year.I’ve tried to estimate this number by going back to original economic sources.I’d agree it’s probably about $1.3-1.5 trillion.It may be more.IT is incredibly large.If you reduce that and take a look at what it might look like inside your own organization, I’m sure you will also decide it is a large number.The thousand largest companies in the world will spend about $300 billion.They will average about 3.1 percentage of revenue.
Sometimes I ask people who are not IT directors, especially, to ask,
“What’s the right number?How much money should we spend if our revenue is X, what should our IT budget be?If our departmental budget is Y, what should our IT budget be?”
I can’t say that any one answer is absolutely correct.What is right in one industry is completely wrong in another industry.What is right in one branch of government is wrong in another part of government.I can say, though, that we certainly see many excellent examples of people using IT to great value.
We also see many great examples around the world of industries and organizations that seem to be under-investing in IT.If I could pick one example that I think is particularly close to the hearts of many in government, it’s probably the health care industry.
The health care industry, whether it’s directly funded by government or through a set of health insurance plans, tends to be one of the most poorly funded industries with respect to the value that I think information technology can bring.You see that also in a variety of other parts of industry.
While IT spending is quite large around the world and while the IT spending here just in the United States government is about $75 billion, it’s still clear to me that there are many more places in which governments, health care institutions, educational institutions, and businesses can productively invest in information technology.
Information technology, I’m sure it’s no surprise to the people in this room, is one of the most rapidly growing industries in the world.And it is rapidly growing in a wide variety of ways.[Here are] just some statistics about the information technology industry in this country.
Recently, information technology became the third largest employer in the United States.Only electronics manufacturing and automotive manufacturing employ more people in this country than the information technology business, software, services, et cetera.There have been over 250,000 new companies formed in the information technology business alone in the United States in the last 10 years.
Some people step back and say that’s not really happening in my country.I guarantee you as I travel the world, as I do very much every year, it is true in each and every geography of the world.There’s not a country that I visit where there’s not an entrepreneurial base of people who are delivering IT services inside the market; where this number might be 250,000 or 300,000 in the United States, that number would still be 50,000 to 55,000 or more in the United Kingdom.That number would be 20,000 to 25,000 or more in Holland.And [the number of IT people is] similar in Latin America, in Southeast Asia, and other parts of the world.
That’s one point.The other key point, in terms of the investment in information technology is the impact and the importance it is taking to the other workers–the non-information technology workers–in our society.We did a study in conjunction with McKinsey & Company really trying to analyze IT spending, the value, the impact.And there were a lot of interesting findings that came out of that study, and those are now being published, and we will send you copies of those when they get published in the Harvard Business Review and the .
But one of the most interesting parts of that study was an analysis that McKinsey has done of the worker population in many economies around the world. The question they were trying to ask was,
“What percentage of workers today are really primarily knowledge workers, [defined as] the way in which they use and manage and access information is fundamental to their jobs as opposed to in some other way their direct output?”
Around the globe today, at least in -semi-developed economies, that number is about 47 percent of people are themselves directly knowledge workers.It’s clear that those numbers are higher in economies like the United States or Germany, while those numbers are lower in economies like India’s, which McKinsey profiled. But certainly there’s a shift in the workforce as economies develop where [for] more and more of the people, their fundamental job is working with information.
I don’t know if that really is a sign of progress and economic development, or a move to service economy, but there certainly is a very strong correlation in those two things.And it does imply then a workforce essentially which needs to fundamentally be equipped with the right computer tools, information technology tools, to properly do its job. Whether those workers are in government or in business or in education, they need those tools.
A second point which was interesting was, as they analyzed the workforces around the globe, many of those workers are, in fact, mobile.They’re not just traditional desk workers.These are people like medical technicians and doctors, and retail salespeople, and stock clerks, who work with information, but don’t just sit at a desk.It has still become fundamental to their jobs to work, manage, manipulate and understand information.And what we find increasing, particularly with students coming out of university, et cetera, is the workforce is demanding the best tools to do their jobs, the best IT tools. And that’s actually a differentiater from how people think about and pick jobs and companies, and places to go work in careers.
From a government perspective, I think all of this talks to two key phenomenon, one which we’ve talked a lot about at this conference, this notion of helping to continue to enhance the computer literacy of the societies in which you have impact. But it also talks to you very directly as employers in terms of really thinking through the appropriate role of information technology for your own workers.
One of the most interesting meetings I had over the last couple of years I had with a member of the U.S. Joint Chiefs of Staff.They wanted to talk about how warfare will change.I’ve got to admit that’s a different kind of a problem for me to think about and talk about, and I think of soldiers and people on ships and airplanes.They said,
No, no, no, you have it all wrong.We educate; we’re all information workers, [and] the warrior of the 21st Century is a person with a computer, a cellular connection, and the ability to dial-up equipment.You can see, even in that part of government, people have really pushed this notion of letting information technology be far more the fundamental way in which people do their jobs.
So we see even in the United States Air Force, the United States Navy, the United States Army, they actually own far more PCs than they have soldiers these days as they invest in those information workers.
I think it’s important to have some of the statistics to understand how pervasive this has gotten.This year, around the globe, there will be about 82 million–or last year, 1997, there were about 82 million personal computers sold.Just to give you a sense of that, if you compare the personal computer market worldwide to the market for cars and trucks, there are actually more personal computers now sold every year than there are cars and trucks.In the United States, it’s almost twice as many personal computers as cars and trucks.If you go to other developed economies, you’d see similar ratios.
Many of those personal computers are mobile, supporting tax auditors who go and visit people and take their computers with them, supporting salesmen who travel around and see people, supporting utility and linemen, people who would use small hand-held devices for doing their jobs.Students, Liz had a chance to talk yesterday about some of the initiatives with laptop computers and students in school.
The other phenomenon we’re seeing is this Internet explosion really opening up the world of communications worldwide.There’s nigh an organization in the world today that doesn’t– [hardly] a large organization that doesn’t provide Internet access for its employees. And increasingly they are packaging up, in the context of the digital nervous systems that we talked about yesterday, the corporate information to be much more accessible to help employees make better decisions based upon the information available to them.
We can certainly see that in many aspects of government [such as] the way people think about delivering education, the way people analyze budgets and make sets of decisions about budgetary needs, and the way law enforcement works around the world.
There’s been a project that we have been involved in with several police departments around the globe who are essentially providing real-time information access to the best knowledge, the best databases about criminals, their records, and their whereabouts; [this] is actually a critical part to crime fighting inside those organizations.
Also, at the same time, consumers are changing.Here are a few statistics in some industries: automotive, travel, advertising, real estate, banking. These are all huge industries: 50 million vehicles a year in the automotive market, 700 billion in revenue.You could see some of the numbers in some of the other industries [on the slide].
I won’t say these things are going to flip overnight to be businesses which run primarily on the Internet, but they are certainly going through a metamorphosis. And I would fully expect that two, three, four years down the road, an increasing percentage of all of the transactions in shopping and information that is delivered gets delivered this way [on the Internet].Certainly governments should not be the last organizations to re-engineer their relationships with their consumers.
Yes. It’s fine to let the automotive industry, or the travel industry or banking get out front, but in fact, more of what happens in government, in terms of its interaction with consumers, could be automated using the Internet than almost any other aspect of life. Forms entry, claims filing, tax filing, all can move fairly rapidly to the Internet.
Some of the projects going on–I know I have some friends here from Italy who are involved with some of the processes to automate the electronic filing over the Internet of tax forms from small business.That’s an ideal application to move very rapidly to the Internet.The I-Forms project that you’ll hear about in the U.K. [United Kingdom] is another wonderful example of the kinds of things people are doing to re-engineer relationship between the government and the citizens using the Internet.
One of the things you could come back and say is,
“But too few citizens are connected to the Internet.”
And that’s true.That’s true in every country of the world.Here in the United States, a little less than half of all households have a PC, and a little bit more than a third of all households today would be connected to the Internet.The United States is in the top tier, along with countries like Switzerland, Sweden, Singapore is probably– [Singapore] defines a new level.But, those are all countries that have fairly broad PC penetration into households, and have fairly broad Internet access.You could say,
“If in our country Internet access is not that common yet, is now the time to make the investment?”
And each and every one of you will need to decide, based upon what you see going on in your country, what you’re trying to do.
I think there is certainly plenty of opportunity, not only to support citizens working out of their homes, but also plenty of opportunity to set up kiosks, whether those are in the bank, in the postal offices, or in other places, where you can let citizens have an opportunity to interact with the government in an electronic form.
Transactions, despite what you may hear and read sometimes, transactions–paying for things on the Internet–is now a reasonably secure process.People can move money, they can file private information, [and] we can guarantee a certain level of security with the right kind of infrastructure software from companies like ours and others, harnessed in the right way by the information technology professionals who work inside the government.
I think there is an important link between what consumers are doing on their own, the way government and business is trying to change their relationship with the consumer, and, frankly, the work that businesses are doing with their own IT spending.The first place you see that is in this area of online business, where people are now selling things on the Internet.Whether those are books, telephone companies who are providing directory services, you get more and more marketing going on, on the Internet.Today at Microsoft, we deliver more electronic mail to our customers around the world every day than we do paper mail: as we try to keep them informed of technology changes, as we try to keep them informed of seminars in which they can learn about new technology developments in their area, as the nature of electronic interaction is far richer.
If you just take Microsoft’s own Web site, www.microsoft.com, you’ll find that every user who visits us, we ask them to tell us what he wants to about himself, or herself, and we actually personalize the experience for you.If you tell us,
“I’m an IT director, I work in government, I live in the country of Belgium,”
you will get a different proposed experience than the person who says,
“I am an end user, I am living in Malaysia, I use my PC primarily at home.”
We will batch up and present to you different information, which is relevant, we think, most relevant to you and the experience that you face.
The other key point at which we see a crossover is this whole notion of people who are telecommuting.People who are in some way, shape, or form, either working from home who work with customers and therefore have no base office, or people who need to work far away from their home office.I’ll give you an example, very close to home here in Seattle.Even though Microsoft has done very well, Boeing is by far the dominant employer here in the Seattle area.They create a lot of traffic, people driving to work, and from work.We have these funny little bridges that run across these lakes out in front of us, and, as anybody who has been involved in government, and city planning might know, bridges get crowded with traffic.
It is actually a mission critical problem for Boeing, now for Microsoft, for the City of Seattle, for the county and for the state, to figure out, long-term, the traffic flow, and traffic patterns in this area.If Boeing wants to move production of an airplane from the North part of Seattle to the South part of Seattle, that would fundamentally change a lot of things.If Boeing wants to change an engineering project’s development from one side of the lake to the other side of the lake, what an issue for the city planners!
The whole notion of how computer technology can let people work in different places, in virtual teams, at different times and in different ways, is not only important to Boeing, the employer, but it’s fundamentally important to the State of Washington government, as it tries to think out and plan for economic growth and development and traffic here in the Greater Seattle area.I do admit it’s very close to home.It used to take me seven minutes to get to my house in the evening; it now takes me 37 [minutes]. I hope telecommuting very much helps with this problem.
Many people whose job is IT, as well as people who simply are effected by information technology, ask the question,
“Okay, I hear you. IT can bring value.We spend a lot on IT, maybe we could even spend more on IT.But, help me understand. How will I know that I’m really getting good value out of my information technology investment?When is the right time to put in that Web site, and how do I effectively put in that Web site to change the way I relate to the citizenry?When is it the right time to build the corporate Intranet?How do I get value out of the new tax collection applications, the new Customs applications, [and] the new law enforcement applications?How do I know whether I got a good value, where value is both benefit and cost?”
This is part of the topic that we researched with McKinsey.In a very high level way they came out with six principles, six fundamental things that companies and organizations do who derive good value from information technology.First, they make sure their information technology departments are very business driven.This is almost hard for me to admit, as a technology driven guy in a technology driven company, but the IT departments have to stay very focused in on the end business goals that the organization is trying to achieve.
They’ve got to focus on value.In many companies the focus, in many organizations, the focus on information technology is only on cost, or only on the wizardry and excitement of the new project.Companies that run IT well keep their IT infrastructure very simple and very flexible.Sometimes you hear IT directors say with pride,
“We have one of everything, from everybody. Aren’t we sophisticated?”
McKinsey would say,
“Don’t you bring a lot of extra cost into your environment.”
Many IT departments are not run with a focus on near term results.It’s important to get near term results and to get constant improvement.The other thing I think they would say is there needs to be a culture inside the organization in which the IT people are business smart, and the business people have to be smart about IT.If we don’t achieve anything else over these two days, I hope we show you enough examples of how other government organizations are effectively using IT to prompt your thinking, to give you more ideas, to make you a little bit more IT smart, as you go back and conduct your regular business.
I will say that the work we did with McKinsey led to one other thing, which I think is incredibly valued.They created a thing that we call the IT value diagnostic.This will be published in the McKinsey Quarterly here in the next couple of months.It’s essentially a checklist, which you can apply in conjunction with the IT people in your organization to essentially grade how well does your IT organization work.And it doesn’t ask what percentage of revenue you spend here or there; it’s a bunch of subjective questions, which are in language which both IT people, as well as business people can understand, that hopefully can help lend a little bit of assistance as you start to really think through,
“Are we spending enough; are we getting enough value for what we’re spending?Are we spending too much?How do we think about the way IT is serving this governmental organization?”
The ways in which IT gets used in government are very broad. We’ve touched on a number [of ways of using IT].I’m going to try to come back and ground that again, because I think we are excited about the way IT is used [in general].We’ll talk about, and you’ll hear from Nicholas Punais (sp), from Europol, later on today, about some of the ways in which information technology can be used in law enforcement to track criminals, to track cases, to track prisoners, to make sure that those people get fed and clothed and those sort of things, [and] to make sure that the best information is available to the judges, the police, the courts, as they try to go about their jobs.
The legislature and the judiciary–much of what happens in the legislature is about creating ideas, authoring, publishing, and expressing ideas. Personal computers are the best tool, I think, for people to express their ideas, to capture those ideas, to collaborate and to put together the best ideas of a wide range of people, and finally, to author, to create a document that represents the law of the land.
You had a chance to hear from Liz King yesterday, about some of the things going on in education.In civil services, the way directories, permitting gets done, licensing, I think this is , as I said earlier, one of the best applications to move to the Internet.Same thing [goes] for environmental impact studies, environmental impact analysis, the kinds of things that need to happen before buildings are built, and people are moved.All of these things involve a lot of knowledge work, a lot of analysis of big banks of information, a lot of permitting, a lot of review, [and] a lot of tracking.The computer is the fundamental tool; the PC is the fundamental tool for handling that kind of analysis.
At the same time, even while you are doing the business of running a government, you also are a business yourself.You buy things, you pay people, you do budgets, you collect money–a lot of money in some cases, in our own states here–but collect taxes from people.You do business development, as you try to bring more business to your communities to generate more tax dollars.And the business of running the businesses, I think are still not well automated.
As we study some of the experiences that the U.S. government, for example, has had in the Social Security Administration, in the Internal Revenue Service, the opportunity to do an even better job, with information technology couldn’t be more clear.This sort of underlying activity in all of these things comes down to a few core things.You communicate with one another.That is very important, in all of the scenarios I talked about.It’s important in permitting, it’s important in drafting legislation, it’s important amongst law enforcement officials, it’s important inside the tax auditing systems, et cetera: communication.
You author and publish information; that is a big job of government.Giving you tools to do that, in a general purpose way, are important.You do transactions. Whether that’s the actual collection of money, or disbursement of money, you do transactions.Increasingly, those transactions will happen electronically.You manage knowledge.It is very important, not only to communicate, author, and publish, but to really understand what’s going on, before somebody makes a new tax proposal, before somebody makes a new legislative proposal.I think it is important to people that there be good bodies of knowledge available inside government, which can be analyzed and looked at, in many, many different ways, to make sure the best possible decisions are being made.
Bob Herbold talked yesterday about Microsoft sales, the great tool we have that lets us look at our sales information very flexibly, in many, many different ways.What is the equivalent analogy for somebody in the budget office or the tax office of a government to try to assess the impact of a new tax?Are the tools really there, and are they there in a way that the average decision-maker can use them?Are they only tools the most sophisticated economist can use?This is some of the challenge that we can help work on together.
Microsoft as a company is focusing on those general scenarios, but we’re also, as evidenced by this conference, very focused in on the specific applications inside governments.You heard a lot of talk yesterday about the digital nervous system.The digital nervous system is about those things.It’s about communication.It’s about authoring.It’s about line-of-business applications, knowledge management, commerce, tracking, analysis.
We’ve thought a lot about those scenarios can work in government.Our company which, in our last financial year, did $11.3 billion in revenue, our company did about 10 percent of that [business] with governments around the world–about 10 percent, could be as high as 12 percent.There are some parts of the world in which even our sales database doesn’t help us really get to the final determination.We’re a company that did about $1 billion worth of revenue with the governments of the world in the last year.And so, we’re very focused on bringing these initiatives to life, and making them meaningful in your environment.
We’ve had good fortune as a company.We’ve had great revenue growth.I’ve been at Microsoft since we were $1 million in sales–I’m sorry, $2-1/2 million in sales, and 30 people, back in 1980, and with the incredible progress that the chip industry has made, the personal computer industry has made, we’ve had good fortune.Our products are well received.Windows is popular.Our Internet Explorer now has almost 50 percent market share worldwide.Our Office product is almost a default standard in terms of the way people communicate.Our NT Server
product essentially had no presence in the market four or five years ago, and today we have about 65 percent market share around the world.Two years ago, we didn’t have an electronic mail offering.Today, our Exchange product rivals Lotus Notes products from IBM as the most popular way in which people communicate.The biggest electronic mail systems in the world at places like Boeing and General Electric, and the U.S. military all run on top of Microsoft Exchange.
We’ve had good fortune, for which we are thankful and appreciative. I want to make sure that you understand that we’re appreciative of the support that you’ve given us.But we’re also very diligent about the fact that we need to continue to reinvest in the business, and there are three areas where we think we need to invest to continue to improve the value that you, and the value of the citizens in your countries derive from PCs and IT.
The first is R & D [Research and Development].We’ll spend–Bill talked about it yesterday–$2.6 billion in R & D.I think we are now the number four U.S. company spending on R & D, and if there’s one thing every year that we wish we could increase more, it’s our R & D budget.We’re trying to create more good ideas to facilitate more things that make your jobs easier, so you can get better value of out IT.
Most of that R & D budget goes into three products: Microsoft Windows, Microsoft Office, and Microsoft BackOffice.We’re going to take $2 billion of new ideas, new thinking, new work, every year, and give it to you at the same low price that you had the year before.We think that adds value to your IT’s world.We know we need to do an even better job of supporting you.If you’re really going to take advantage of IT technology, you want to be able to have our people there with you, serving you, helping you architect and figure out how to really take advantage of what’s available.We now have over 2,000 consultants, 5,000 technical support people around the world, where literally in every country in which we do business, we have a presence, people who can do technical support and help you derive value from these products.
The flip side to that is our investment in partners.We know we can’t do it all in terms of helping you.One of the most important things that we invest in, over $400 million this year, is in making sure that we have partners who are educated, trained and doing their best work in conjunction with our product line.Companies that develop software applications, companies that know how to install networks, companies that know how to deliver other IT services.That’s really a worldwide investment.
Every time we start up a new subsidiary in a new country, the first question the new manager asks me is,
“Okay, what’s my number one goal: is it to sell this product, to sell that product, or sell the other product?”
I have to stop and say,
“No, it’s not about selling this product or that product or the other product; the most important thing you will do in this market is make sure that we do technical knowledge transfer to local partners.”
That we have companies in this country who know, who understand the latest and greatest technologies from Microsoft, who can add value on top of those technologies, who can deliver services, who can build the applications that will help really deliver value inside this country.Because if that happens, frankly, we will get business.While it’s always important to sell, the most important thing we need to do is make sure we get good knowledge transfer to the companies in your country who can actually help you capture IT value and to help the other businesses inside your country capture this IT value.
One of the areas in which we are investing heavily, and so far frankly we haven’t figured out the formula of making money, has been in this area of having a presence on the Internet.We have a variety of different services we offer.We let you learn about Microsoft and our technologies on the Internet through our Web site, microsoft.com.We have–for customers in the United States–tools that help you learn about local arts and entertainment.We’ve got tools that we’re building to help you pay your bills and receive your bills on the Internet, tools to help you buy cars, read news, a variety of other things.
Where will these ventures go, what role will they play, how will we take these outside the United States is a very open question.Right now, what we’re trying to do is make the R & D investment to really learn about what it takes to provide a satisfying commercial experience on the Internet, and then look for the right partners in every country around the globe to make sure these same kind of services are available in a variety of countries.
While we build these services here in the United States, we also look to build platforms which we can license and work in partnership with people in all of the countries represented here in the room.
At the end of the day, people often ask, what are the real problems that you’re working on, Microsoft, how do you hope that the technologies that you build can really add value inside our government? I usually come back to three things.
First, the digital nervous system we talked about so much yesterday.The backbone tools running on the PC to let you run your organizations, understand your organizations, communicate and make decisions.
Number two is technologies to support what we call a Web lifestyle.These consumers that I was talking about who want to live on the Web, who want to do business on the Web, who want to be entertained on the Web, who want to do business with their government on the Web.We need to make sure we are providing the tools and products that help consumers and the businesses that serve them live a so-called Web lifestyle.
And last, but not least, I started this discussion with a talk about IT value, and mostly what I talked about is the benefits that information technology can bring.The other side of that is making sure that we’re doing everything in our power as a company to reduce the cost and complexity of computing.We have an incredible focus on the scalability of the PC architecture running Microsoft Windows, it’s ability to talk to other computer systems that you may own.It’s manageability to try to make it cheaper and cheaper for the IT people inside your organization to keep their costs down as you deploy new information technology solutions.So, [we have] a huge focus on benefit, but also a huge focus on making sure our products let you achieve the benefits of information technology at the lowest possible cost.
When you hear from Jonathan Murray from Microsoft later on today, he’ll talk a little bit about both of these, and I think he’ll help you understand some of the initiatives at Microsoft that try technically to make life simpler and keep costs down inside your information technology department.
We are very excited about the future of information technology.We think that its application is so much broader than we’ve achieved today.We think that the acceptance by consumers will continue to skyrocket, whether that’s through PCs, or devices like the WebTV and others that Craig Mundy had a chance to show you yesterday. We think we can help you remake successfully the way government does business internally, and particularly as you think more and more about reaching out and changing the interaction between the government and the citizens, there’s a great role to play.
Our objective for this conference is really to spark your interest and to let you know that we’re here; we’d love to help.We’d like to figure out how to really put our best people in place working with you to do the knowledge transfer and help you build the solutions that let you achieve maximum IT value inside your organization.
Thank you very much for your time this morning, and we really appreciate your support.Thank you.
MR. BALLMER: The fact that the clock here says 12:09, and it’s ticking down, tells me I probably have a few minutes for questions.So, I’d love a chance to take people’s questions, thoughts and comments.And if we could have the lights up a little bit, that would be helpful.And we have people with microphones as we did yesterday.So, please just raise your hand and we’ll get you a microphone.
Questions can be on anything I said, or anything else you have on your mind.This gentleman right here with a question.I was beginning to worry
the microphone is coming
I was beginning to worry that I hadn’t woken you up.
— I was wondering on the 9th, which was yesterday, you talked about a global
— I was wondering if you send me
help us to create, let’s say, the government net.I could link with other government
— to disseminate information
— would Microsoft take the initiative of putting them together in the form of Internet value-added net, hyperlink with other initiatives?After I get the application inside the government for the next three
few months, so that it would be
–to know what is happening.What about the Web site which has been mentioned here?Thank you.
MR. BALLMER: That’s a very good suggestion to provide better navigation of some of the available information, and things which will become available, and I’ll look to Deborah Willingham to make a note.We’ll see if we can’t follow-up in a productive form.That’s a great suggestion.Thank you.
In the back here, there’s a question.The lady in the red, and we’ll get you a mike.There’s three people running, and one of them will get there.
QUESTION:You pointed very clearly that the society of the future, or at least of the future 50 years is a society of knowledge workers.This was very well pointed out by Peter Drucker (sp) in a review article of Harvard Business Review, where he points out that knowledge makes itself continuously obsolete.Today’s advance knowledge is tomorrow’s ignorance.
And my question is the following, with all these technologies available, one very key issue for governments or large enterprises is to continuously update the knowledge of their knowledge workers.They have to do this in an economical way.They cannot do it by sending people in classes during a week, you know, losing a week of their work, like we have been training people today.And we must have tools to train end users.And I think this is a very important challenge in the future that Microsoft has started working with NetShow, NetMeeting, and I’d like to know more about what are the future plans in this area, because I think that this is a key issue for the advanced nature of knowledge workers.
MR. BALLMER: I think you’re absolutely spot on.One of the great
and I’ll go through sort of three different cases.The first case, and I think the one you were directly addressing is this notion of how even for computer things, do we keep knowledge workers current on what’s possible, what’s available, et cetera.And certainly one of our objectives, primary objectives, has got to make
and is to make our software essentially, how shall I say, more discoverable.The software has to watch what you’re doing, has to understand what you’re trying to do, has to let you express what you want to do in your own language.And then the computer needs to figure that out and go do it.
Otherwise, the time that gets consumed with people just continuously being retrained, even on the computer systems themselves is crazy.It makes no sense in the context of value to the organization.That’s why we have a lot of work in our research area going on in certain areas of artificial intelligence.We’ve got a lot of work going on in our Office development team in terms of really thinking through how we would change the basic user interface to the PC so that, in some senses, instead of having to express yourself the way the computer thinks, you can express yourself the way you think about problems, making those tools available broadly so that all software can work that way.
There’s a separate set of problems, which is, in general how do you keep knowledge workers educated and up to speed to do their jobs, not just the computer usage of their jobs, but the usage of their job generally.And certainly one of the great challenges there, where we have a lot of work underway is, what kinds of tools can we provide that really makes it easy to author what we call knowledge bases.
And I’ll give you the classic example, it’s just inside our own company.We take over the phone about 25,000 phone calls a day from customers who can’t make something work with their personal computer.It’s very tricky.You sit there on the end of the phone.You don’t know anything about the customer, you’ve never seen them before, you don’t know what’s on their computer, and you must help them in the next 20 minutes, or 15 minutes, or 10 minutes
too often it’s 20 minutes, but you’re just sitting there.And we need to have an incredible base of knowledge that is authored and available for those service technicians to use.
But you have the same problem inside government.A citizen calls with a question.I heard yesterday you were asking about citizens emailing in requests, how do you quickly, reliably, have enough knowledge captured to let the people who are doing that job respond to that kind of inquiry, whether it’s electronic or by telephones.And there’s a lot of effort here on tools that essentially let you put together bases of knowledge, so that the workers don’t need to sit and be trained, rather they can access knowledge from their computer, expressing themselves the way they do naturally, and getting access to the information they need to do their jobs.
QUESTION:You mentioned that the last year, there was created 250,000 new companies, which of course create new employers and good jobs.On the other hand, technology is destroying employees worldwide.Do you have any statistics or your comments, which is the balance worldwide, not only in the United States, but worldwide, which is the balance at the end?It’s creating the technology new jobs, or it’s destroying new jobs.
MR. BALLMER: Well, I think you can probably get as many economists, because we’ve tried on both sides
— you can get as many economists to say jobs have been created as you can get economists to say jobs have been destroyed.I think it’s almost not the right question to ask.It is inevitable.The good news is, technology does create jobs.They are technology jobs.I think there was a fear, at one time, oh my goodness, the computers are coming, the people are gone.What we’re really finding isn’t the computers are coming, the people are gone, but we’re finding the computers are coming, some jobs are gone, some new jobs are created, and what’s probably more significant is, everybody else, not somebody who got a new job, or whose job went away, but everybody else has better tools now to do their job.
And so you really have to look at the three pieces.If we were to ask net/net, I think it is probably fair to say that jobs have been created.But, as I say, you can find economists who will say both, they will say both in the United States.They’ll say both in some other economies.So I don’t know that that’s definitive.But, certainly, there has far, far, far more job creation in information technology than I think the fearful thought would happen when the sort of first round of, oh my gosh, computers will replace people came about.And I do think that’s important to highlight, particularly in markets where the computer markets are now just starting to boom.It’s important for people to really understandthe job creation and productivity that comes with that.
QUESTION:This is a question on behalf of Mr. Lavaris (sp), from Dominican Republican.Given the huge increase in the use of the Internet and the congestion in the lines, or the limitations in the communication infrastructure, the question is, what is Microsoft’s perspective on, and what’s Microsoft doing to increase the bandwidth of the Internet?
MR. BALLMER: That’s a good question.The bandwidth of the Internet is in everyone’s control, and no one’s.If you really ask, end to end, who can help make more bandwidth on the Internet, well, there are some things technologically, of course, that will allow us to get more through put, better compression technologies, et cetera.And Microsoft is making an investment there.So that if you want to move audio data, or if you want to move video across the Internet, we want to use less of the available capacity, and we are making an investment in that way.
But, if you actually are talking about the big electronic pipes, what are we doing to make there more pipes, there is very little we can do, other than be a stimulus to interest in the topic.I’ll give you an example, though, of how every user of the Internet can solve this problem.We used to have bad performance of our Web site, www.microsoft.com, because there wasn’t enough Internet capacity coming into the Pacific Northwest part of the United States.How did we solve the problem?We spent money.We wrote checks, to GTE, and Sprint, and MCI, and all of a sudden there was enough capacity.And like every other user of the Internet, if you fear there is not enough capacity, you too can spend money to solve the problem.
People laugh, it sounds, oh my God, what a terrible answer.But, as an enthusiast about Capitalism, I really kind of like it.Problem, money, solution, the Internet works.We’ll at the same time try to make sure that the things we do cause less demand for big pipes, but I think the Internet is just going to continue to mature and people are going to buy the kind of performance they want.
There is one other key issue that’s being worked on by companies like Microsoft, and Cisco, and others, that’s this notion of is the technology in place that would allow a user to guarantee, over the Internet, a certain quality of service.And today the technology is not there.It will be there within the next couple of years, then you’ll actually be able to go to one of the Internet access providers in your country and say, I don’t just want Internet access, I want Internet access with a certain guarantee of service.
For that to happen there does need to be some technology work, which is underway with a variety of companies and a variety of standards bodies.
QUESTION:In the beginning you mentioned $1.3 trillion are spent on the technology.Microsoft is $11 billion, so who has the major share of this technology?
MR. BALLMER: That’s a very good question.Most of the money that gets spent on information technology actually gets spent on people.The employees of your organization, the employees of these start up companies that I was talking about, that do information technology services in country.It gets spent on hardware, it gets spent on some of the data-telecommunications that moves information, whether that’s via the Internet or other ways.But, you are correct in observing that Microsoft is perhaps, perhaps one percent or less of the total.
Now, because we’re a very prominent company, people often conclude Microsoft must be a high percentage of the information technology industry.We’re a small
— we’re happy, thank you.We’re happy with our success, but we’re really a very small part of this fantastic industry, which has just mushroomed, which has grown incredibly over the last several years.But, primarily, it’s people in jobs that have been created as a result of the computer.That’s the biggest part of that 1.3 trillion in expense.
You know, in the United States
— let me give you a worldwide number.Around the world today, there is probably about, rough numbers, about 13 million people employed in information technology directly, 13 million people who have direct employment, might be a little bit more, might be a little bit less, but that’s really quite an incredible number.And that’s the biggest part of that $1.3 trillion in expense.
Yes, right here.
QUESTION:Steve, I work at an organization that works closely with government, providing information and working with the government agencies to ensure we get it in an efficient form.And we’re a great believer in the Microsoft products, in helping that process.But, our frustration still is that, as much work as your fellows have done in putting that information together in a consistent form, we still find that
— as an example, yesterday the suggestion that you can put your name in once, and address and it filters across the whole collection of final data positions, even within your own product set we find there is a lot of frustration in
— for example, six months ago, there was about seven different address books across your product set.Now, for an organization such as ours, which is trying so hard to work closely with your people to get the thing right for ourselves, it really puts us a little bit off, and even things as basic as the icon sets that aren’t exactly the same.Now, I know that you folks have pushed hard on this.What’s the prospect, for example, with Office 98?
MR. BALLMER: Well, the question, essentially
— I’ll rephrase just a little bit, maybe a little less technically, is there are places in which our product line is not as consistent with itself, or as integrated as maybe would be in this gentleman’s best interest and his organization’s best interest.And what are the prospects for that to get better?We certainly are making a big investment, every year, in trying to make our product line not only work with other people’s products, but to work better with our own products, to share more code, to share more technology, because we think, as you point out, if we do that, that’s going to reduce cost and complexity for our users.And one of the key principles for us is to make sure that Windows and Office and BackOffice both work very well together, and that they continue to grow in the functionality that they provide.
You’re right, we’ve got seven address books today.I would have thought five, but I’m sure there are seven if you say there are seven.Once we integrate the so-called “directory service” into our Windows product, we will have one place in which everybody, or all Microsoft products, and we will encourage the rest of the industry, to store that kind of name and address information. We think we can back to the world of one address book.But, it does depend on us really having the focus on integration, and on consistency.
And we think those are important, important principles, probably shouldn’t mentioned it, but one of the key principles, of course, that we are discussing with the U.S. Department of Justice is, should we be allowed to do this kind of strong integration, and because of the kind of feedbacks that we get from users like you, of course, we believe in it, because we think it’s a fundamental source for the kind of value our products can deliver.
I’ll take a couple or three more.
QUESTION:This question is on behalf of Cumre VanCera (sp) from Venezuela.As you said, the usage of PCs and the Internet has taken the concept of telecommuting to a new level, unprecedented levels.Have you heard about any
— or measured any impact on the number of hours people work on the people, telecommuting work?Their availability, for the companies and also, have you heard of any examples of governments trying to regulate this new environment for the work force.
MR. BALLMER: I’ve seen no statistics about people’s work hours, based upon their being able to telecommute.I can tell stories, I do think that, you know, having a computer with which you can work from home does give you the possibility, if you’re not careful, to work anytime, anywhere.I’ve done a lot of that myself, I will say.But, it is regulable.I don’t think governments
— I would certainly not like to see government regulation of that area.But, I think, you know, human beings are well able to regulate themselves.I have not found businesses insisting on more work hours from their employees.If their employees are enthused and excited and motivated, sure, they’ll spend time.But, I haven’t seen where companies are saying, now that you can have a PC connection from home, we insist on you working 60 hours a week.I don’t see that at all.
Okay.I’ll take one here, and one in the back.So this gentleman here, and then I’ll come to the back.Okay.
QUESTION:This is not directly related to your speech.But, I’d really appreciate your input.The Year 2000 bug, how much of it is really hype?I’ve just been reading some stuff out of the New Zealand newspapers this morning.The Gartner Group are warning that government may need to increase taxes to cover costs of big losses within systems in the Year 2000.And there’s something from a key surgeon out of the health care industry that says, you know, people could die because of the
— can you tell us what you think?Is it a lot of hype?And what do you think organizations like governments and institutions within the government structure really should be trying to do, other than the normal auditing and trying to make people sort of comply?
MR. BALLMER: Well, the Year 2000 issue is a very real issue, there’s no doubt about that.And there is a lot at stake for the proper functioning of a number of organizations if the Year 2000 issues are not addressed.I’d be surprised, I’m not going to argue with the surgeon general of New Zealand, but I’d be surprised if most hospitals weren’t careful enough that the Year 2000 problem is not life-threatening.On the other hand, there’s possibility for very real and very serious business interruption.
The thing that I think has been to some extent overstated, is the amount of money that it will take to solve the Year 2000 problem.The thing that I think has been understated potentially is the amount of time it will take to solve the Year 2000 problem.In some senses, it gets crazier, and crazier, and crazier for people to be panicked about the Year
2000 the closer we get.I guarantee you by December of 1999, if somebody hasn’t solved their Year 2000 problem, they’re not going to solve their Year 2000 problem.They’re going to replace it with a new set of problems.
These are issues that require thoughtful and careful work over a period of time.You’ll find that many organizations, you actually have to solve the Year 2000 problems early, by early in ’99.The airlines need to solve it by 1998, because they start taking reservations more than a year in the future, for example.
So, I think a lot of the cost may be behind us, and there’s probably a few disasters
— there will be at least one or two high profile disasters in front of us.But the notion that you could significantly increase taxes in a way that would actually solve the Year 2000 problem, I dispute that, unless you raise those taxes a few years ago.I think those problems need to be worked on now.
QUESTION:You certainly made a very compelling argument in favor of this development the Internet will be taking over the next few years, and I’m also quite convinced that smart people will get smarter, and people who work fast will work faster.Now, could you just give us some information how you think about the other ones?There are 50 percent of people
— of homes which have computers in the United States, and my country as well, but that means that 50 percent don’t have them; 33 percent are linked to the Net, 66 percent of them are not linked to the Net.And how is your thinking about the role Microsoft has been playing with the governments in order to not to add a second illiteracy to a first illiteracy?
MR. BALLMER: In every place we are involved where we do business, we try to bring
and certainly we’d love to have a chance to spend more time talking about things that we could do together to stimulate computer understanding and computer literacy.There is no way for the government, nor is there for Microsoft to say, we’ll write a check to make sure every house has a computer.I don’t think that’s practical.On the other hand, I think it is practical to look at the investment of computers and software that are Internet connected in libraries and in other public places to promote not only computer literacy, but computer use.I think if you take a look including in the United States and every other country around the world, and you ask, are the schools investing enough in computers, the answer is, in my view, clearly not, not if you want to promote computer literacy.
I think the good work of the PC hardware world, the good work of clever people like the WebTV people to try to make sure there are devices at more and more affordable prices that people can have access to is an important part of the issue.But we’d certainly love to have a chance to sit down in different parts of the world.We’ve been involved in different programs that promote computer literacy.
Unfortunately, it’s not a problem that has one easy solution.As we were talking earlier, it’s a $1.3 trillion industry around the world.If you really want to get to every house, et cetera, it’s a much bigger industry, and there’s no way to just write checks or raise money.It really has to be a sort of a stimulus to people, and a chance to make some of these things available to them in public places, school systems, et cetera, that I think will carry the day.
With that, let me say thanks again very much for your time this morning.I think the next part of our session should be fascinating.We have four customers who are using IT in leading edge ways from around the globe who will come talk with you about their experiences.And to introduce that, I’ll turn things back to Deborah Willingham.
Thank you very much.
(Applause and end of presentation.)