Speech Transcript: Bob Herbold a the Commerce Solutions Briefing

Commerce Solutions Briefing
March 4, 1999

Commerce Solutions Briefing

March 4, 1999

MR. HERBOLD:Well, thank you very much.It’s a pleasure to be here under unusual circumstances, in terms of Version 3.0 of Ballmer. You know, Steve tends to talk about 105 decibels, and then when he really gets going, it gets up to about 130.So, when Steve has a child, the first thing he does, he has the doctor check the vocal chords just to make sure that this child really has Ballmer-like capacity in terms of the voice.

So, anyway, let’s go on.We have a key issue here that is very important, not only to this industry but to virtually every sector of the economy.One of the things that’s so exciting for Microsoft these days is a concept that we call the digital nervous system.It’s really got three components to it.One of them is dealing with knowledge workers, one dealing with operations, and a third dealing with commerce.And that’s the focus today in regard to what this subject truly can mean to millions and millions of companies.

I’ve got three components that I want to focus on for a moment.First and foremost, if you take anything away from this conference, it is the fact that literally every business, every organization, should be able to benefit from e-commerce, be it providing information to employees, providing information to suppliers, or setting up traditional transaction-like systems that look like a shop online, which is usually what we think of when we think of e-commerce.

Secondly, we really do have a complete solution at Microsoft, not only the products and the context of Windows NT and Site Server and SQL Server, but also with regard to the thousands of partners that we have, and the total network represented by those partners.We can really serve customers in a very thorough manner in putting together their e-commerce solutions.

Third, we’re going to introduce BizTalk.So, what’s BizTalk?BizTalk is a way for applications to talk with one another, to share information for applications, to interact much more easily than in the past.It’s really a framework for applications talking with one another.

If you think back to the days of EDI and how hard it has been over the years to get standard EDI applications going in terms of the interfaces and systems internal and external that you had to do.BizTalk is really going after that very same problem in the context of getting those interfaces easier.Ideally, it’s the Lego-block idea for electronic commerce.

Okay.Let’s talk about Microsoft a bit.What’s our goal?Our goal is to enable e-commerce in over a million new businesses.We really think we have that kind of breadth in terms of products, capabilities, services such as MSN.com with terrific reach, with thousands of suppliers and the like, support service organizations, solution providers, that we really can have this kind of an impact.This is the way we’re thinking about this opportunity, it is gigantic.

The reason why it’s big is because it truly can enable organizations to operate more effectively.And that’s the name of the game, be it small, medium, or large, to be able to get information to your employees easier and more effectively, everybody wants to do that.To be able to get those links with suppliers that you use every day far more automated, so you can put aside the fax machines, so you can put aside all the phone calls, recording devices, and put all that stuff on automatic, that’s what people want to do.This is a gigantic opportunity, not just for the Web site, but for selling things. But oftentimes we overlook the obvious in terms of what these capabilities can do for organizations.

There are really five components of why we think e-commerce is for everybody.And what we’re going to do in this presentation is go through each of these one by one and talk about their impact.Web sites deliver results.These are transaction-oriented Web sites.They’re becoming more and more robust.They’re becoming incredibly impactful in terms of revenue that’s pumped through these sites.

We’ll hear from Michael Dell on tape in regard to Dell.com.I know in regard to Microsoft, we have a way for our distributors to order product where we’re pumping about $3-1/2 billion worth of our revenue through this system that we have, which is nothing but an extranet with our key distributors.It’s an incredibly powerful system.

Employee self-service is what I referred to before, enabling your people to get key information and fill out key forms without having to go through the pain of the past of phone calls, fax machines, recording devices, interaction with tons of paper being sent here, there, and everywhere.

The third point, in regard to value chain is a subject that the logistics folks in the audience know just how difficult this challenge is.But fantastic progress has been made over the decade, and these technologies today enable us to do an even better job.And we’ll talk in detail about some examples of that.

Effective sites for small business. Small business can really be revolutionized with these technologies in terms of being able to vastly improve their reach while still remaining small from the standpoint of what it takes in terms of human resources to do what they want to do.

And, lastly, better online shopping. Making it easier to get the payment stuff sorted out.Make it easier in terms of getting the catalogue squared away, and the like.These technologies will vastly help.

So, what we want to do, basically, is talk about the following framework.There are three components to it architecturally.First is the build component.The basis of this from a Microsoft standpoint is very sound.We’ve got Windows NT Server.If you look at Commerce

Server revenue today, as measured by Gartner, Microsoft has a 63 percent share compared to 23 percent for IBM, who is second.So, we’re already in a very strong position with NT in terms of helping people build their sites.

Secondly, SQL Server, a powerful database tool, is clearly the fastest growing database tool in the industry.Site Server Commerce Edition continues to gain strength in its ability to help people get these kind of sites up and running quickly.And, naturally, all of this is wrapped by partner solutions which are absolutely critical.We’ve said it many times, but Microsoft is so dependent on those great relationships we have with literally thousands of solution providers.They’re the core that enables customers to use these technologies easily in order to get their commerce sites up and running.

As far as integrating, that’s a key term here, and it’s a very big challenge.It has been for decades, and we think we’ve got some great ideas to make this integration easier and easier.We’ve done some work at Microsoft with a value chain initiative over the course of the last year-and-a-half, where we set up a lot of protocols with over 100 ISVs that have software dealing with the logistics business.That helped a lot in terms of these interfaces, but we think we can go a lot further with BizTalk, and we’ll talk about that in a moment.

Thirdly, in terms of promotion, once that site is built, it’s properly integrated into your finance systems, or whatever other systems you need to integrate it into, a key task is, how do I get awareness?How do I make these offerings real out in the marketplace?This is especially true for small business.Microsoft.com or MSN.com, I should say, is emerging as a tower of strength in terms of reach.And so it’s a great source of eyeballs, so to speak, in terms of getting awareness of a particular offering, also Link Exchange is a terrific tool in order to get the word out about your offerings.

So, we’re doing a better and better job of providing tools today that enable people to build the site, integrate it into what they need to focus on in terms of basics of their company, and then properly promote it to get that awareness up and get the business moving.

BizTalk is key here. Once again, what is it?It’s a framework for allowing applications to integrate well together based on open standards, based on XML, and we think it’s going to be a powerful new tool in terms of making it much easier to integrate these kinds of capabilities than ever before.Piecing this stuff together has not been simple.That’s why we’re in a strong position here in terms of having all the components, and now putting this kind of focus against it in terms of a simplifying tool such as BizTalk.And that’s why we’re so fired up about that subject.

Okay.Let’s take these individual items and go through them in a bit more detail as far as what we’re actually doing, and what some of these new capabilities will mean to us.

We look at Web sites that really do drive results, drive transactions and the like.One that I’d like to use as an example is Gigabuys.I don’t know if you saw the announcement yesterday by Dell, but it’s very creative.It goes past Dell.com, and becomes basically a computer oriented shop.You’ve got all kinds of computer related products and services, it’s integrated tightly with Dell.com, it’s built on Windows SQL Server, Site Server Commerce Edition, just like Dell.com was, and it was deployed in less than two months.

That’s something we should dwell on for a moment.If you go back in this industry 5, 10, 15 years, and if you were in the IT business you know well how long applications used to take to develop.To be able to put these kinds of capabilities together in months as opposed to years, and in reasonable amounts of money, as opposed to huge amounts of money, it’s a real treat to be in this industry these days.Naturally, you want to integrate these things with your existing system, so in the case of Gigabuys, I have a reference down here to the mainframe and Oracle, where it’s plugged in.With that, I’d like to have Michael Dell say a few words, via our videotape here, and comment on the new service that they are providing.Let’s look at this tape.

(Video shown.)

MR. DELL (From video): Dell is the world’s leading direct computer systems company with annual revenues that exceeded $18 billion last year.We’ve invested heavily in e-commerce and broadened our array of services to consumers and business customers of all sizes.Dell.com transacts about $14 million a day, or approximately 25 percent of Dell’s global revenues.We provide our customers a wide array of services, including paperless purchase orders, instant order status, a virtual help desk, a spare parts ordering system, and a natural language search capability.We’ve also developed more than 15,000 custom Web sites we call premier pages, for our corporate customers.While we continue to invest in Dell.com, yesterday we announced we’re extending our Internet leadership with the grand opening of Gigabuys.com, a new online store that is now open for business.

We intend to evolve Gigabuys into the number one online destination for computer related products.Gigabuys will offer customers selection, convenience, and an easy to navigate site, and customize information based on their personal needs.One key factor in our successful development of both Dell.com and Gigabuys.com is the aggressive adoption of the latest technology.We evaluated several vendors and chose Microsoft solutions.Microsoft’s Windows NT, SQL Server, and Site Server Commerce Edition are the building blocks of both Dell.com and Gigabuys.com.These technologies have provided our web teams with a comprehensive scalable platform that allows for the rapid development and tight integration with our existing order management system.While we’ve made significant progress, we still have much to do.Our goals for both sites include more tightly integrated personalization capabilities, improved content management, and segmented customer solutions.These will allow us to both more tightly integrate with, and better meet the needs of our customers large and small.

MR. HERBOLD: Well, we greatly appreciate Michael Dell taking the time to put that together.And that’s the kind of excitement that exists in virtually all industries today, as they look at these technologies and ask the question, okay, what does it mean to us, in terms of how we can do our work differently, more effectively, more efficiently, so that the consumer wins, and we get the efficiencies.So what are the challenges in these areas, site creation, product promotion, customer self-service, making it as easy as possible, getting the proper kind of promotion available to people, so they’re meeting up with the concept, they’re seeing great advertising that can convince them to visit these sites.

Now, in the context of the unique aspects that Microsoft brings here, Site Server Commerce Edition is certainly of paramount importance.The Dell site that you have seen here, as well as the previous Dell.com that was referenced are all built on Site Server Commerce Edition, and we could go through just a long, long list of major sites that are also built on that set of tools.Built-in app-server integration is absolutely critical.The quick deployment here is so important, and so valuable, in terms of being able to get up and running fast.And the availability of thousands of solution providers that I mentioned before, make it very easy to get up and running, and get the kind of experience that each and every organization should be getting.

So what are the challenges? Catalogue management is not easy, real time marketing is still a challenge, business analysis tools are relatively weak, and business process integration continues to be a challenge.So we at Microsoft are looking at these challenges and asking the question, where do we go from here, relative to Site Server Commerce Edition?And the answer is as clear as a bell, it’s going to be called Commerce Server.It will integrate a lot of the capabilities that I just referenced.With big improvements in terms of catalogue support, a lot more ability to target and personalize than ever before.People want to use those capabilities, but we don’t make it easy today, and we must make it easy.Data mining and analysis, we’ve all dreamed about this for years.But, actually making it happen has been very difficult.And we want to make it one heck of a lot easier.

You’re going to see a lot of those kinds of capabilities in Commerce Server.Enhanced transaction support, to make it easier and easier to handle the administrative aspects of these sites is just absolutely critical.Commerce Server should ship shortly after Windows 2000.We’re very bullish about Commerce Server, great capabilities, this is what customers are asking for, and so consequently this, we believe, will be a giant step forward, relative to the overall impact of e-commerce.

Okay.Let’s go to the second component, in terms of employee self-service.All of us know what tremendous gains in productivity you can get from intranets.It’s happening galore.Also, procurement is probably one of the premier areas, because of the huge savings that can be achieved. Los Angeles County is the biggest local government in the United States of America.They have 10,000 desktops, and they had a procurement system which was pretty much in disarray, as is the case with most organizations, with time, because humans tend to do this activity in a pretty sloppy manner.So what did they do?They took their $650 million of annual purchases, and they put it on a web based system, that they developed in a period of four months, a tremendous result.

What they’ve been able to do is get incredibly fast payback, and enable small business participation.So they can hook into their procurement system, not just the one or two big vendors, but also some key small vendors to make it much easier for people to get at some of the products that aren’t in high end demand, but there are significant needs for those products within Los Angeles County.This system turned up $20 million of inventory savings in year one, and is saving them $6 million a year.With, once again, a four month development time, it’s absolutely impressive.Procurement systems like this, that automate a lot of those steps and eliminate the sloppiness are easy pickings, and there’s a lot of organizations that are doing it.It’s a terrific example of the use of e-commerce.

So what are the challenges, relative to employee self-service today?Corporate purchasing, just because it is such a huge opportunity, corporate services, and I use that term naturally very broadly, but it can be all kinds of things in terms of providing information to your employees, relative to all aspects of how the place operates, be it financial information, information on how things are defined from an accounting perspective, you can get all kinds of details.But, having those kinds of menus available to people just cuts down a heck of a lot of phone calls, paper and the like.Naturally, employee benefit systems are very popular, as well, because the old methods involved a lot of people, a lot of paper, a lot of phone calls, and a lot of wasted time.

So if you look at the unique aspects that Microsoft provides here, one of the things that is startling is that of the five top ISVs, relative to procurement, they’re all built on our technologies, 64 percent of corporate purchase deployments are built on Windows NT, and AXI, American Express, which is a travel platform, so to speak, is one that is also built on NT.So there are some unique characteristics here that we have provided, in terms of the overall thrust on employee self-service.But, there are tons of challenges in this area, as well.

People need broader access.Workflow integration is not easy to implement, and supplier adoption can sometimes be a bit difficult.So that’s the feedback we get from our customers.So what we’re trying to do here, with the relationship that we are announcing today, between Clarus, MasterCard, and Microsoft is make it a heck of a lot easier to implement these kind of procurement procedures for small and medium sized companies, as well as large companies.It broadens the access to corporate purchasing and payment services.

What MasterCard brings, naturally, are state of the art payment and reporting services from 15 million merchants and suppliers worldwide.What Clarus brings is a very slick system called E-Procurement, which portrays products that people will want to purchase, has great visualization of those products and gives people the choice menu that they want to put together to offer to their employees, or members of their organization.And it’s all built on the Microsoft Commerce platform, as you would guess.From the standpoint of when this will occur, it will roll out to customers later this quarter.This is a great relationship.We think it will make it easier and easier for people to use these technologies in some of these areas which are obvious in terms of their impact.So we’re very bullish about this particular partnership, and think that the impact will be quite significant.

There’s another example, this one from PeopleSoft, dealing with self-service for employees.In this case an organization takes a standard ERP, a set of tools, and puts on top of them some tremendous interfaces that enable people to use these tools better than ever.So with that, I would like to introduce Dave Duffield and Tom Lathanos, from PeopleSoft, and have them do some demonstrating for us.

Dave, Tom, nice to see you.

MR. DUFFIELD: Thanks, Bob.And it’s absolutely great to be here, and I’m excited about today’s announcement.And I’m looking forward to looking closely with you and Microsoft to deliver our customers the awesome power of the Internet.

At PeopleSoft, we believe the Internet provides us and our customers with a tremendous opportunity to radically change the way people get their jobs done within an enterprise.Dramatically increase the productivity, effectiveness, and satisfaction of every employee with universal access to information and resources, you know, to help people work smarter, to make better decisions.And the result will be a stronger, more competitive organization, in closer working relationship with key suppliers and business partners.

Our vision of the future revolves around the concept of what we’re calling the PeopleSoft Business Network, or PSBN.PSBN is a new class of solutions we believe will emerge as the next big category in enterprise computing.I think back to late 1988, when PeopleSoft introduced our first client server solution.I believe we were four years ahead of our competition at the time.With PSBN, I feel we’re in that same position today.PSBN will leverage the Internet to combine enterprise applications with internal and external content, including products and services from key business partners and suppliers.We call these new solutions community applications.And PSBN will provide relevant access, and I want to emphasize relevant, to all of this content through an enterprise portal, which will provide businesspeople with a productive and compelling user experience.

You’ll see this portal and our community applications in a few minutes when Tom Lathanos demonstrates our prototype.Think of the enterprise portal as the convergence of transactional, analytic, knowledge and collaborative data as everyone works together for a common business solution.And this relevance and operations are all based on the roles that people play within their organization on a daily basis.In keeping with the theme of this conference, PSBN is making e-commerce easier for everyone.

Today, we are very pleased to announce that we have chosen Microsoft to supply the underlying technologies and tools we use to build PSBN, the portal and the community applications.We chose Microsoft because our two companies share a common vision of the future.We have a great track record of mutual success.And we share a strong commitment to our customers.Together, we’ll help our customers create the network enterprise of the future.

We anticipate that PSBN will become the primary place where people go to get their jobs done.We are very excited about it, and are delighted to share this vision and help make it a reality with our friends from Microsoft.And now, I’d like to introduce Tom Lathanos, president of PSBN.Tom will give us a demonstration of the enterprise portal as well as the community applications.


MR. LATHANOS: Thank you, Dave.

Good morning.I’m delighted to be here.I’d like to give you a demonstration of how a claims manager at Duluth Insurance might use the PeopleSoft Business Network

to get his job done.

Now, imagine that you are Joe Sparks starting work this morning at Duluth Insurance.You’ve had your coffee.You’re sitting at your desk.You’ve got a ton of work to do.The question is, where do you start?

Well, how about logging in to the PeopleSoft Business Network and entering a personalized portal that looks just like this.Think of this as Joe’s world or, better yet, your world.It’s a place that organizes all the tools and information you need to get your job done.It lets you track important To Do list items, view company and department news, perform common activities, and even track things graphically like department performance relative to plan.

Now, Joe’s world is roles based, and that means all of this information can be filtered according to the role or roles that Joe performance as part of his job.For example, Joe may start his day in the role of a manager, in which it has filtered his To Do list items, and his performance metrics according to that particular role.He may end the day in his role as an individual employee within the company.Here his performance gauges show him things like the number of vacation days that he’s used relative to those that have been accrued.For most of the day, he’s going to use his role as a claims analyst.

Now, PSBN can help Joe with every day tasks.Let’s see how he might go ahead and purchase some new digital cameras for use by the claims organization.To do that, he’s going to go to his favorite activity, and click under search catalogue, which brings him to the community application for procurement.And you can think about this as an e-commerce site within the enterprise that brings together all of the internal and external information necessary to completely and efficiently streamline this task.

So, he knows what he’s looking for.We’re going to look for cameras, digital cameras.We’re going to go ahead and submit that.And it brings in here the information that’s brought right out of the Duluth product catalogue.This is up-to-date product information, price and availability, all of which is kept current via Internet links to the supplier.Notice here, there’s a variety of other information that helps him make his purchase decision.There’s pictures of the cameras themselves.He can look over here on the left and see where he stands in terms of his department budget relative to plan.And under community forum, notice he has access to the opinions and the thoughts that other employees have had who have purchased cameras, and can even link to product reviews available from Photo Magazine out on the Internet.

Now, we’re going to go ahead and order 10 of these cameras.So, I’m going to type in 10.

MR. HERBOLD: So this is hooked right into your procurement module in SAP

or at PeopleSoft.


MR. DUFFIELD: Both.We could do both.

MR. LATHANOS: Actually, we could do both.


MR. LATHANOS:What we have here is the order has been placed.Now, what happens now is that a purchase requisition is being routed to Joe’s manager, where it shows up on his To Do list items as part of his portal.Once it’s been approved by the manager, it’s entered into the financial accounting system at Duluth, the PeopleSoft accounting system, and then the purchase order is transmitted to the supplier over the Internet.So, you can see what this has done, this has accomplished a complete end-to-end task associated with the process of procurement linking the external suppliers with the internal systems, all delivered through the power of the portal.

Now, let’s finish up by just giving you a very quick idea of some other things that Joe can do with the portal.For instance, his top To Do list item here is to review a 401(k) quarterly statement.So, the example here, is you could come in and look at the portfolio that he maintains with his 401(k) provider.

Other things he could do is to purchase travel for his next trip, or to go to check the status of an expense report that he may have put online.

And, finally, one of the things he could do is, he could drill down on the performance metric here, and using the analytic systems within the enterprise, understand what’s really behind some of the recent cost overruns.

So, there you have it.As you can see, Joe can be quite productive using the PeopleSoft Business Network and the PeopleSoft enterprise portal.We think it helps him work smarter.It streamlines how companies work both internal and external suppliers and customers.And it helps the company work more effectively as a team.The vision you’re seeing here will be based in part on the Microsoft product and BizTalk standards that are being featured here as part of the event today.And on behalf of PeopleSoft, I’d like to thank Microsoft for this opportunity, and how we’ll work together to help companies compete in the Internet economy.

MR. HERBOLD: Tom, thank you very much.

MR. LATHANOS: Thank you very much.

MR. HERBOLD: A first class demo. David, thank you.

MR. DUFFIELD: Thank you, Bob.


MR. HERBOLD: We’ll also have Hazo Platner from PeopleSoft joining us later.

The third point that I want to elaborate on for a moment is the value chain initiatives that are going on, and they’re very impressive because, as I mentioned before, the challenge of logistics is so significant in terms of the number of dollars that flow through people’s operating expenses and cost of goods sold and the like that relate to all aspects of trade and movement of materials and money and the like.

An example here is Proctor and Gamble.Over the years, they’ve been very effective in using EDI, and they’ve had a lot of difficulties, as has everyone, in terms of those interfaces between people’s systems.So, it’s easy to implement the communications aspect of EDI, the standards in regard to getting the systems to work together is the real challenge.

We hope to make a significant step forward by providing a lot of shared information in the future that people will be able to use very progressively.For example, Proctor and Gamble and Sainsbury are very interested in making sure they understand what’s actually going out of the door of individual stores.This enables them to improve forecasting of field promotions in a far more effective way so that they have the right amount of products in the right place at the right time.And get customer feedback as early as is possible in regard to the success of promotions.

We have a video here with Ralph Drayer from Proctor and Gamble, where Ralph talks in detail about some of the challenges in that business, and what some of these new technologies are enabling them to do in terms of dreaming dreams that they’ve not been able to dream before.

Let’s take a look at the Proctor and Gamble tape.

(Video shown.)

MR. DRAYER (From video): Proctor and Gamble is a recognized leader in the consumer package industry for our work in using technology to streamline business processes, and we’ve invested many years in working with our industry partners and standards bodies, like the Uniform Code Council and VICS, to develop industry best practices.P & G’s vision is for an end-to-end supply chain that drives business processes and systems from consumer purchase all the way back through our raw material purchasing.

Now, to make this a reality, we need more real-time demand data, collaboration, and integration with all of our supply chain partners.P & G is already gaining some real world experience with Microsoft that demonstrates that the vision is right.We’ve been an active participant in a pilot at Sainsbury in the United Kingdom.

MR. (From video): Sainsbury is the second largest food retailer in the UK.Maintaining availability of promotions is quite a logistical challenge.The first thing we did is get a number of suppliers together talking about the processes, cleaning up the processes.

MR. (From video): When it comes to collaborating in the supply chain, you need to do that in the most effective way.You need to bring together bits of information from different applications, and give it to the knowledge workers.And the Microsoft product platform spanned that whole range.

MR. (From video): We recently ran a promotion with Sainsbury.Now this promotion was coming in much greater than our forecast.And across the week, the availability on the shelf went from 99 percent on the Monday to about 93 percent on the Friday.But now we’ve got this real-time information, we could react a lot faster with our supply chain, and we got the availability back up to 99 percent by the beginning of the following week.

MR. (From video): In terms of the promotions that are running, we’re finding a 20 percent reduction in out of stock.The fact we’ve got 20 percent after sort of six months or so


— to move forward from here, we have to treat the supply chain as one chain right from the shelf, right way back to the raw materials.This software product is beginning to make that happen.

MR. DRAYER (From video): Microsoft’s vision of the digital marketplace and in particular their value chain initiative aligned very well with our own supply chain vision and the industry needs.We’re excited about the new age of electronic commerce, and the opportunity it provides to build on the industry standards work and today’s more collaborative business practices between supply chain partners to create virtual integration and begin managing the entire supply chain as one for the benefit of our customers, consumers and shareholders.

MR. HERBOLD: It’s a great story.Those kind of opportunities represent significant efficiencies for those industries retailing consumer products that can truly make the difference between a great year and an ordinary year.And that’s why they pursue logistics with such a vengeance.

So, what are the challenges?Collaborative planning, getting an organization like Sainsbury and Proctor and Gamble doing that planning as up-to-date as is possible is absolutely key.Execution in terms of getting people out of the way so information can get to the right place at the right time is also vitally important.And then, real-time integration of the new information and key decisions that need to get made.

Naturally, from a Microsoft standpoint, we provide some unique characteristics today.In terms of commerce interchange pipeline, the value chain initiative that I referred to before that involves over 100 software companies dealing with primarily the retailing and consumer products industry has had a big impact in terms of raising people’s awareness on the need to make these systems that you get from various vendors dealing with materials management, raw material inventory management, finished product inventory management, having all those systems work together well is just vitally important.

So, we’ve been involved with the leading ISVs, and been focusing on the industry standards in terms of integrating these various software tools via Windows NT.But there certainly are tons of challenges out there.Integrating diverse systems, real-time data transmission is always a challenge, and analyzing massive amounts of data that you get whenever you deal with logistics problems.

At Microsoft one of the things we’re doing in launching BizTalk, which is an incredibly exciting new tool that really should enable systems to fit together more easily, so you can get up and running much more easily and have that big impact on key challenges such as the value chain.

So it will enable software to speak the language of business, it’s a framework to exchange data, and integrate applications, a purchase orders, product information, pricing, forecasting information, and the like.It’s a set of schemas, basically, that enables companies to cite how it is they talk about particular aspects of commerce, and to be able to match those up with how someone else does, in an easy way, based on industry standards, and XML, as I mentioned before, and it’s a platform and language neutral approach.

A collaborative effort to define schemas is an absolute necessity.This must be done with partners from various industries, and that’s what we’ve been attempting to do.So as you see here, you can have two purchase orders, with different numbering systems, and BizTalk is the great simplifier that enables these systems to operate with one another, so that it really does lead us to the world that’s closer and closer to the Lego blocks of systems, as far as putting together value chain initiatives.So BizTalk at Microsoft extends the Windows DNA architecture.

There will be a Microsoft BizTalk server, it will provide BizTalk tools and services, it will ship shortly after Windows 2000.And have native support in the product features of MSN, Office, BackOffice, and Windows.So this will be a major impact initiative for Microsoft, in terms of simplifying e-commerce, making it truly a possibility for millions and millions of organizations to take advantage of e-commerce.We said it in the beginning, we’re confident it will happen, because we’re making it easier.

Okay.Now, let’s talk about SAP.Naturally, this organization gets involved with a lot of value chain kinds of subjects, given the tools that they provide.They’ve got some great ideas, in terms of how to incorporate some of the things that we’re announcing today.And it’s a great pleasure for me to introduce Hazo Platner, the co-chairman and CEO of SAP.

Hazo, nice to see you.

MR. PLATNER: Thank you very much.

I don’t know, Dave, how many share options you gave me, but I think we can work together nicely.And actually, in this new context, we have to work together, because all these networks will, in one way or the other, have to tie into one another.

What I want to talk about is SAP’s view on this, and why do we team up with Microsoft and try to work together as much as possible.The title is User-Centric Solutions, we were talking about user-centric solutions for 25 years, and thanks to the Internet, we got the end users now, we’ve got basically everybody on a computer in the world, and that means we have to change our systems dramatically.User-centric applications, that means we have to build the systems exactly to the needs, or as close as possible to the needs of individuals, and not bring the individuals to the computer systems, and train them as hard as possible, and as long as necessary to make them, or to enable them to use the systems.

In the e-commerce area, we have no time to train anybody, it has to be as appealing and easy to use a system.So the young kids are sitting for hours and hours in front of their PC and use the Internet to communicate, to find something, to buy something, and we have to do this, and introduce this in the business world, in our business apps, as well.

We have worked very successfully together with Microsoft for many years.We announced three years ago a cooperation we call business APIs, we open up the SAP system that other software companies can reuse our system, and we have about 900 software companies now using the interfaces of the SAP system, but now we have to go one step forward.These applications can not only be in-house applications using workstations, PC-type machines, but they have to be Internet applications to a large extent.And that means, we have to find some common understanding about semantics of application interaction.And it’s not only that they can physically talk to each other, it’s not only that we standardize the messages to be passed from one application to the other.In one way or the other, we have to synchronize the semantics of those systems.And that means we have to understand what common business objects are, and we have to understand what the prerequisite for programs are that they can work.

And this is much more than just a message. I don’t want to go into the details, but it’s hard work for all of us.And it takes more than one or two or three companies, we all have to work together here, and some companies have to provide leadership.And therefore, we are very pleased that we can work together with Microsoft, and push this thing ahead.

An abstract chart of what is going on, we combined the companies with all the partners.Partners can be consumers, can be dealers, can be other corporations, can be end consumers, and in the old days we had separate systems and people in between.Now, we have people sitting on top of networks and talking to the other partners, so the people are using normal communication, like telephone, like fax, like e-mail, or television.But, they ought to use the computer based communication, digitalized communication, and we combine this now in a way which is in some areas like QVC, selling over the television, in other areas like selling Amazon.com, selling over the Internet, and sooner or later we will have this combination of computerized communication, and human interaction simultaneously, basically in every single application.

Three major applications which are of the heavy reconstruction, that’s supply chain management, that’s sales management, and that’s procurement.We heard all these areas touched already in the presentations, and I don’t want to go into the details.It’s clear to everybody that these areas are the areas where we have to put our energy in.What I want to mention is, with this empowerment of the people, that they are making the decisions based on the facts they have and the opportunity to talk to other people live, we have to accompany this empowerment of people with knowledge transfer.We have to improve dramatically the knowledge transfer within the company.

If I take our own company, it is by far too slow, how we roll out the information to our sales people, to our service people.So we have to get an umbrella around all these systems, and inform them, basically online and this is an Internet system.We have to provide them with information which is representing the overall performance of the company, not the specific information they need for their deal, for their transaction.We call this information warehouse, business information warehouse is another application we are currently introducing in the market.And the third, we heard several references to that, employee self-service.Obviously it is necessary that empowered people do not work in the old fashioned way, with service departments by forms anymore.They do their jobs themselves.

We have quite a few initiatives within this context, and they all come together nicely.And they have one common feature, they use Microsoft technology to a large extent.And that’s not because I’m here to promote Microsoft, it’s just a fact that Microsoft is a natural partner, one of the few partners we have with whom we can really work together.

DVDExpress.com, one of the Internet retail stores selling DVDs, based in San Diego is running an SAP system, using Microsoft Site Server for the shop front, and the Three System, or a specific Three System set up by Pendesic for the whole supply chain management.The system is totally contained into Internet, or by Internet front ends, so the people in DVD Express don’t see the classic transactions of our Three System, the system is scaled toward their business needs, which are totally different than in a classic company.They only sell over the Internet.So we discarded all the other functionality, which is not necessary in this type of business set-up anymore.And actually, the interesting thing is they run at twice as high per capita revenues than Amazon.com.

We heard about employee self-service.Employee self-service within the SAP system is a major product now.We have between 2 and 3 million users already, the actual number should be 2.4, 2.5 million users.We nearly have as many self-service users than we have professional users in our SAP community.And on the right side you see a huge list of functions, then we can easily extend this by the applications they’ve introduced here, and sooner or later we’ll share a lot of information.We might dial into the other systems, whether it’s AOL, Yahoo, another one, all the other portals, we dial into them, and make the information available, which is necessary to conduct business in a convenient fashion.That you don’t have to leave your workplace and waste time, that’s the most important thing.Make it easy is the overall theme, let the people enjoy their jobs.And this is just the start up transaction here, for some of these self-service applications.

But, we also have transactions, or interactions with the computer which can’t be represented over the Internet.And we have to keep this in mind, when too many people talk about web enabling applications, that everything is now Internet.There are many applications, and more to come, which rely on heavy interaction between the user and the computer system.These are design systems, creative systems, PowerPoint is one, Excel is another one, when you use the spreadsheet actively.Our supply chain planning module here is one where we use heavily the workstation concept, relatively large computers for fast interaction.

But, on the other hand, we have small windows of this information here, which we present over the Internet, for example, for the availability to a promise transaction, which every single sales rep, or somebody who is involved in the sales cycle has to have access to.So we have both, we have workstation applications, and we have the Internet application, or Internet technology based applications.What is very important is that the same person, or one person has access to all these different applications, and they look alike.And that makes the Windows platform so appealing to SAP that the next release, the 4.6 release of Three, at least for the first three months will only run on Windows, because that’s the only way we could pull together all these different transactions, or the interfaces we have for web-based users, or workstation based users, that they look alike.

Business to business procurement, we heard this already.Perhaps this is the most interesting application for all of us, if we can save money, and a significant amount of money.I don’t know what the impact will be on the manufacturing companies, because the comparison between different offerings in a split second over the Internet is quite dramatic, and actually we could save significant costs in SAP when we started to look at how we can increase our inventory in computers, and we used Internet offerings.So for the first time we slashed cost substantially, not dealing directly with our partners, but using information which is public domain on the Internet.

And what you see here is a pre-announcement actually of how our transaction will look, we will leave the gray and gray, slightly old fashioned Windows type look, we will redesign, or have redesigned, all of our screens, and all applications in the SAP system, and they will all get the same look and feel, and will come out mid this year, with the so-called Enjoy Three release.And this is another type of the personalized employee workplace, where we have different transactions of different type.We did not try to put everything into one shell, and then drive it out of the shell.We do this for specific jobs, we do this for the service employees, service clerks, we do this for our sales clerks, we don’t do this for every single user in a company.We think to drive it out of the menu, and then go into the various applications under the assumption that the applications all look alike and have the same navigation scheme is the right way to go.A slight variation of what Dave Duffield talked about, but the actual reason why we do this is the same, and we want to provide the variety of all transactions, of all interactions with computer systems, whether they are in-house computer systems, or network based computer systems, directly.

Going into a detail, this is not a job one’s company can fulfill.To many components are necessary, and if we concentrate on building applications only inside out, then we miss applications Microsoft is concentrating on.If we build only applications from outside in, we build little bits of great applications, and tie into the major ERP systems, we tried this for a while, at least in the lab.Then we miss big time.We have to build systems together in the future.And even competing, we have to sit together and try to work out how we can semantically integrate our systems, and that means we have to use other people’s tools, we cannot redevelop everything just to make the integration happen.

We have been masters of integration for 25 years, and some American analysts thought that we were cuckoo to be so much integration focused when we first came to America, more than 10 years ago.Now everybody is shooting for integration here.What this chart should indicate is that many systems have to talk to each other, and it’s absolutely necessary that we develop together something like BizTalk, that we have something through which we communicate to systems which were not developed in the same lab.

And running through the history of the SAP relationships, just to mention a few milestones, just a year ago we announced a business application interfaces together with Microsoft, with the help of Microsoft, at the Hanover Fair show.We delivered e-commerce solutions pretty soon after that announcement based on the by-piece, and some of them are still up and running.We developed SAP’s business objects, this is the way we present our objects to the outer world, and we used COM.In 1997, we built the DCOM connector, and many, many software companies are using the DCOM connector to tie into SAP applications.We delivered an interface


— just to understand better how to work with these interfaces, because we have to support the community of our 900 software partners.In 1998, we made business objects in the by-piece available in the Visual Studio.So that’s what we did and this is only a few things which became visible to the community.It is absolutely necessary that we share in an open fashion without being frightened by potential competition, that we share how we can exchange objects, how we can exchanges messages between objects across our systems, without

— or across the boundaries of different development labs.

Pendesic, the hosting company for Internet shops, will continue to build the front end on Microsoft tools, and SAP and Microsoft develop together XML specifications, which can be used within the SAP business framework, and the Microsoft BizTalk framework, so that we can offer this to the whole community, and make our applications and other applications more accessible.

And this refers both to the selling side, and the buying side.Because they come together business to business anyway, and we have to make sure when we use the procurement applications that the selling side on the other side can understand when we talk to them, and that we can transfer all the information automatically, so that we can drive our business transactions through the Internet interaction automatically.I call this do business only once, so don’t do the business in both systems twice, do it only once.And SAP and Microsoft want to accelerate our corporations to develop this semantic interoperability between systems, and that’s an initiative which is totally open, everybody is invited and nobody should be scared, especially the folks at IBM.

Thank you very much.

MR. HERBOLD: Hazo, thank you very much.Terrific, appreciate it.

Looking at the fourth area that we mentioned before, in terms of sites for small business, clearly these kinds of tools are very exciting for small operations, in terms of launching initiatives that people would have never dreamed of before.There’s a guy named Lance Cleveland up in Maine who decided that he had had a lot of fun helping people put small commerce sites together on the web, so he wanted to do one himself.

So now he’s in the Lobster business, and you can go to Lobster Net, out on the web, and have shipped to you, within a couple of days, a live lobster, with seaweed all over this creature, and plenty of ice to keep it alive.And that’s the business that they’ve built and the sales are booming, plus 40 percent per month.One of the intricacies of this system is just getting awareness, as we were talking before.Quite often it’s very difficult to promote small sites like this.

What they had in place was a system where they would convince Web sites to launch their banners, and they would keep track of customers who eventually came to their site, and actually ordered lobster.And they made a deal with these sites that they get a piece of the lobster, so to speak.And what was very difficult was keeping the books, in regard to how much they owed all of these various different sites, what the traffic was, what the transactions were, et cetera, a mess.

They found click-through, in terms of a click trade, which is a feature of Link Exchange, which really made an impact on simplifying their business.And today, in terms of their ability to actually implement the complicated aspects of promoting their product are a heck of a lot easier.It’s a great story in terms of the kinds of exciting things that are being launched on the web, and the emergence of key tools to make it hopefully simpler and simpler.

Build site, promote the business, sell the product, those are the key challenges related to small businesses.Where can Microsoft help?Tools like FrontPage, when Microsoft bought FrontPage, the tool that you use to build Web sites, to build the pages themselves, to keep track of the links and the like, they had only sold 264 copies of that software.Today, it is an incredibly popular product, with millions of copies out there.Naturally, from a Microsoft standpoint, I’ll again mention the fact that we have unmatched partner support, to allow small businesses to get assistance in launching their sites.Link Exchange, as I mentioned before, a valuable tool for getting the kind of promotion that a small business needs, without having to go through the heavy administrative burden of getting all those ads placed.Sidewalk for local business is a great tool, to get awareness of your site in particular locals, but more is needed.Getting started, customer reach, payment processing can be very difficult, and a total end to end solution is always the key request.

What we’re launching is small business commerce services, an easy, integrated solution to get small businesses online fast.Browser-based e-commerce site creation, Link Exchange is the site promotion service tool, and a shopping cart and payment services built right into the capabilities.It’s availability is in the second half of 1999, and in the future we should have very easy integration into MSN Shopping Directory, and the various other features of MSN.com.The goal, naturally, is to simplify the emergence of these small businesses on the web.We think these kind of features are certainly what customers are telling us they want, and we think this will really help us launch some major initiatives here, that will be very popular, which once again will lead to literally millions of people launching these kinds of e-commerce applications.

Better online shopping.From the standpoint of just how messy it is today, we did an experiment back at Microsoft, and took the notion of a stroller, given Steve B.’s new needs, and said, okay, just how easy is it to find on the web where a stroller would be marketed?So if you go to some of the search engines, you’ll find you get some curious things.First of all, we ended up at a site that the language was Portuguese, so we couldn’t even tell where we were and why we ended up there.We also ended up with a golf cart site, we were pointed to Stroller Furs, which is a style of fur.And we were pointed to a site that basically had a heading that said a hilarious look at goofy inventions.How we ever got to these things none of us knew.

Find is a major issue on the web.Choose is an issue.Is that everything?When you find a site, you look at the offerings, you say to yourself, is this it?Where else can I go in order to do some comparative shopping, how do I compare?Today we’re announcing in a moment I’ll cite our solution to this issue of compare shopping, comparison shopping.Another challenge, though, is to pick passwords, continuously as you weave your way through this, enter personal information, how are they going to use my information?So the whole buying experience has a lot of basic questions in it.

In terms of the challenges, then, is find, choose, and buy.Finding the site is particularly troublesome.So what are we trying to do?With MSN.com, we’re trying to aggregate things that we know people will be interested in.And our intent is to broaden that, and broaden it, so that it covers the large majority of things people will be interested in.In a great user experience, sellers provide more content.Now, much more is needed in this area.Aggregating products and offers, better search and compare, integrating merchants easily, ensuring privacy, buying quickly and the like.MSN open marketplace strategy is really focused on being the largest shopping directory.We want sellers to easily promote through MSN, we want to enhance the search and compare to avoid the kind of problems that I just cited in regard to a stroller.Build in data exchange with Microsoft Commerce Platform, with BizTalk being a key technology for linking a lot of these components together.

That comparison shopping that I cited before we’re announcing today the acquisition of Compare Net, which is the leading comparison shopping service.So that you can have that confidence, hey, I’ve got this item, what else is offered, and how does it compare to what I’m considering purchasing.A powerful set of tools that we think users will greatly appreciate.Naturally, Compare Net provides a framework for a lot of other comparison shopping approaches in the various aspects of MSN.com, BizTalk will connect all of these things together, and we think it’s going to be a powerful story.

Microsoft Passport is a tool that will provide single-click shopping for everyone.It enables universal sign-in, registration and wallet.As I mentioned before, there’s nothing more frustrating than going to site after site and having to start from scratch, in regard to filling in a lot of personal information, having passwords and the like.It simply is a problem that must be solved.Passport helps us do exactly that.Consumers will control their personal information, there will be strict privacy policies and certification, and it will be based on Microsoft services, and used with Microsoft services.Open to all partners who meet strong privacy policies.It’s consistent with TrustE, it’s consistent with BBB Online, and you can see there are some other organizations that are working with BBB Online, as well as Trustee.

You will hear more about this in the future, it’s a very significant initiative.Privacy is really on the minds of people.We think this will put us in a strong leadership position, in terms of what people want, and what people want is the ability to know what information you have, and whether or not they’re comfortable with that, and the ability to change it if, in fact, they’re not.

So, overall, architecturally, let’s go back to the key slides.What does it look like?It’s built on Windows NT Server, SQL Server, with a lot of new components that will have a major impact.BizTalk Server, Small Business Commerce Server, and Commerce Server all with the partners assisting us in implementation.

Looking over toward partners systems, internal systems, external systems, over on the right, in terms of MSN and other tools to enable people to promote their capabilities and services, BizTalk will be an incredibly important link in terms of putting these kinds of capabilities together quickly.

So, the summary of the announcement, first and foremost, you look at Commerce Server, BizTalk Server, and Small Business Commerce Server, and those are just incredibly important in terms of that basic build function.

In terms of promote, MSN open marketplace strategy comparing that acquisition will be a gigantic step forward for the user in terms of useful information coming off the web, and Microsoft passport to solve those privacy concerns.

Last, but not least, in fact most importantly, BizTalk, to be able to integrate all of this together much more easily than ever before.This is what people want, and we are dedicated to delivering it.

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