Steve Ballmer Speech Transcript – TIBCO Strategic Directions Conference

Remarks by Steve Ballmer

TIBCO Strategic Directions Conference

May 13, 1999, Palo Alto, Calif.

STEVE BALLMER:Well, let me say thanks first to Vivek, and thanks to all of you very much for your time this morning.It’s a great privilege and pleasure to have a chance to be here and speak in conjunction with Tibco, a very good partner of ours for a number of years.Vivek and I were reminiscing this morning.I think we first met almost seven years ago, and I didn’t have any hair, so it’s hard to age, and Vivek never ages.So we had instant recognition.

I though was a little surprised by your speech.I have to object on one key point I think Vivek made.When he said, “what is an e-corporation,” I wanted to jump out of my seat and say it’s any corporation who wants higher market capitalization.And at the end of the day, maybe there’s a little truth even to what I said about that.But I think the point that Vivek was making about the fundamental changes that will happen to all of our businesses, because of the broad presence of the Internet really is more amazing than we anticipate today.With all of the furor and commotion, I think, in some sense, expectations are overheated for what the Internet may mean for the next year or so, but I think if you take a long-term perspective, five years, ten years out, people still tend to underestimate what the Internet will mean – both internally in terms of customers and partner relationships – for all of us and with all of our customers.

So our enthusiasm for the e-corporation of the future is every bit as strong and powerful, and I want to talk about some of the things that I think happen with this.

I particularly want to focus on a notion which – I don’t know if it would be controversial or not, but certainly in the financial part of the world it could be somewhat controversial and interesting at this stage – and that’s the notion of what the Internet really means in terms of the nature of the way you interact with your customers.A lot has been made about the Internet as a tool or a vehicle on which people will do things for lower cost.

I was on a panel last year with George Fisher who runs Kodak, with Mickey Drexler who runs the Gap, and with a fellow named Walter Forbes who was running Cendant a year ago.But he was arguing vociferously that for e-commerce, what the Internet really meant was lower prices.It would be the best place to find the cheapest price to do everything, and very much sort of consistent I think with a lot of the ways we think about the Internet today.

I actually think the Internet will, over time, be a place where almost any sort of business concept can be sustained, so the guy who wants to be low priced and low service, hallelujah, that person will be able to use the Internet to best advantage. But for the business that wants to provide a higher priced, higher service kind of customer experience, I also think the Internet is a fundamental part of that.And that’s because the Internet is a place where you can give people the knowledge, the information, et cetera, to do whatever they want to do.You can conduct meetings.You can put people and customer service representatives together.You can do customer support in new ways.You can do customer education in new ways.You can give personalized advice and information.

And I think any notion that says the Internet is simply about low price, low service models is just misshapen.

Most of the people we do business with, whether we’re talking about end consumers or business partners, or businesses that buy from us, these are people who need a wide range of services, knowledge and information that comes from us, and essentially we, Tibco, and our industry has to make sure that the tools we provide enable all of these concepts.And I think in the short term there’s a lot of furor over the low price, low service alternative, which has sort of sprung up on the Internet, particularly in terms of the way consumers get served, but in the long run I couldn’t be more excited about the opportunities to provide higher service on the Internet.

I like to joke around with the case of the Gap, for example.I was sitting on this panel with Mickey Drexler, and I was telling him how much better I thought the service would be for me in the Gap in their online store.And most of the people in the audience had no idea why that would be the case, but Mickey instantaneously laughed.When I walk into a Gap store at my size, I am a customer service nightmare.I am not an in-stock kind of guy.In the average Gap store, they don’t carry my to-be-nameless waist size, and they don’t know what to do with me.

It also turns out that when I visit the Gap online, the Gap reminds me it’s my wife’s birthday coming up, do I want a reminder?Do I remember her size?Do I remember what I bought her the last time?When I walked into the Gap store at my local mall, I don’t have that kind of high-service experience.

And while I’m not trying to say that there’s not a role for human beings, the predictability, the repeatability, the personalization of the experience that you get on the Internet really can make an enormous difference.

Just take a look at presentation.If you take a look at the kinds of things we can all do on paper versus online, it is certainly the case today, and it will be more the case two years, three years, five years down the road that the presentation we can provide for any kind of information is actually richer online than it is in paper.

A technology we announced last year we call ClearType will actually make it so that text is as readable on the screen as it is on paper.And when you think about the dynamic presentation options, you think about the ability to model things, to quickly put in pictures and charts and a variety of other presentations, you can see the nature of the experience changing fairly dramatically.

We just launched a service in a joint venture with Citibank and First Data Corp.It’s called TransPoint.It’s a bill presentment, bill payment service on the Internet.We were initially fearful that the billers wouldn’t be excited, that they wouldn’t see the same opportunities to put on subsequent marketing messages and sell space in the bill and get stuffing done the right ways, that they can in the paper format.As we brought the first three, four, five billers online, they’re actually finding that they have better flexibility, that it is easier to provide exactly the right message, that they can provide more tailored direct marketing in the online world than they could in the physical world.And all this gets back to the nature of changing the richness of the customer service, the direct marketing, et cetera, that people do.

One of the great transformations, that we agree with our partners at Tibco on, will be the move from the PC era to what I might call the “PC plus” era.Unlike a lot of people, we don’t see the PC disappearing.We see PC growth continuing.We see PCs as a very central device.But there will be millions, hundreds of millions of non-PC devices, which are also connected up to the Internet infrastructure.Whether that’s a wireless phone, whether that’s a wireless device that plugs into the automobile, it’s an area where there’s a lot of interest in the automotive manufacturing business; palm-sized devices that essentially have cellular, wireless capability built in; the television set, there is no doubt, and certainly our investment last week in AT & T has a lot to do with our passion about making the television set a more rich interactive device in the way it’s connected up to the Internet and integrates Internet and video broadcast information to provide a rich consumer experience.

For those of you in the financial services market, I’m sure you can only imagine what it will mean when people can literally be watching CNBC in the morning, getting the real-time experience, be connected for trading purposes, all while they’re, I don’t know, on their exercycle at home in the morning.

So the nature of the set of devices and the kinds of connectivity: wireless, broadband, video, the Internet will again broaden the set of applications and the ways in which we all get a chance to serve our customers.

With all that said, there will be some changes in the kinds of business models we all have to look at.I think there will be high service and low service business models on the Internet, but we’re all kind of feeling our way forward and there will be dislocations for many of us in the businesses that we face.

I take a few examples in our business, we offer today on the Internet, and this doesn’t have the same capabilities as our corporate e-mail products, but we offer a free Internet e-mail service — free meaning it’s entirely funded by advertising that we put into the electronic mail.It’s a very different business model for us than selling electronic mail seats into larger and medium-sized companies.It’s an incredible opportunity.And there’s an incredible opportunity for advertisers to very directly target exactly the right message to exactly the right person, but it is a very different business model.We currently have over 40 million Hotmail users, 40 million people who have used their e-mail account with us in the last 90 days.So it’s a stunning,in many ways, the number of people who have latched onto this way of doing business, but this is a case where we are going to have to learn and evolve our business model for the change in the Internet.

We see that in the online banking arena.You know, online banking at one time was an extra high-priced, for-fee service.That certainly has changed dramatically.

The PC industry is not quite sure what to do, but certainly as PC prices come down, one of the most important things that people do with low-cost PCs is connect into the Internet, we see people playing with business models, essentially where the PC and the ISP service are viewed as one integrated thing, and where you get your profit in the delivery of that device changes dramatically.

So while I believe that the Internet will support a variety of business models, it’s also the case that I think nobody can be a stick in the mud.We all have to be on alert, to understand where connections and expectations we had in the past could break down.And while our businesses may be every bit as profitable and we may be able to differentiate ourselves in various ways, the sources and nature of the revenue could change quite dramatically in the world of the Internet.

I do think that the software technologies that will support good customer service will change.Vivek had a chance to talk some about the kind of work that they’re doing with the information bus and really pulling things together for people.But we see this kind of change coming in a lot of places.Streaming audio and video.It turns out today that we would believe that even with the lower end of speed that you can achieve with a DSL line, you can get very good streaming video performance into a home.That holds great prospects for being able to think about that as a basic thing people do.

Click to Talk.I don’t think there will be many consumer Web sites in five years where you’re in the middle of a transaction or something that you want to do and you can’t figure it out, there won’t be a button where you just click and you immediately get a customer service person on the phone.That customer service person, of course, has your full record, your history in that session on the Web site, and then they’re speaking to you over some kind of IP connection.And I know you’ll have a chance to hear from Don Listwen and from Cisco and, you know, they’ve got a lot of exciting ideas in the way voice will be integrated in over this Internet infrastructure.

Online collaboration.Today that’s done in a limited way.I think we’ll give you some sense of how we see that done in a much richer way, as we can carry richer media types across the IP infrastructure.E-mail will become richer and richer.And, of course, the Web we’re talking about will be more and more secure and more and more of the most important applications you’ll feel confident about pushing to this Internet infrastructure.

So the software will continue to improve, and the software will give us more and more tools that allow you to support whatever business model makes the most sense for you.

Our role as a company is to try to provide some of the key software that really enables these scenarios, whether that’s electronic commerce services, core development platform, infrastructure and security services.Our goal is to provide a very rich infrastructure, stable, secure, enterprise ready, for supporting the kinds of applications you want to deploy on the Internet.

We’re not a vertically oriented software company, so we reach out broadly to partners, partners like Tibco and Cisco, but literally a very broad range of independent software vendors, I2 and Supply Chain Management, Siebel and Customer Resource Management, who provide solutions, or at least further building blocks for you to deliver the kind of service that you want to provide in this infrastructure.

We are in four core businesses: Windows, Office, our Back Office server software, and our MSN portal and access service.And those are kind of the building blocks, the platform foundation that we try to continue to extend.

Three years ago we didn’t have an application server.Today we do, and in Windows 2000 it’s included.Three years ago we didn’t have commerce services as part of our Back Office line.Today we do.We now have a range of services for small businesses, which are hosted to help them provide electronic commerce offerings as smaller entities, whether those are trading partners with you or people who are trying themselves to market to consumers.

So we’re trying to build off this sort of four-prong foundation to work with partners and give you tool sets that lets you go after the opportunities that the Internet provides.

I’d now like to invite on stage with me Brian Hall from Microsoft, who will give you a demonstration of some of these concepts.We use an intranet setting to demo for you, but I want to show you a few of the kinds of things we’re doing in our infrastructure product to help bring alive some of the new things software will permit.We’re going to use SQL Server 7, the next generation of our database product, which we launched last year.We’ll use our Office 2000 software, which just launched.But we’re going to try to bring alive some of the ideas of how we might use the Internet in richer ways and present knowledge in a more comprehensive way to the user.

BRIAN HALL:Thanks, Steve.

So today I’m going to be talking about Office 2000, and how Office 2000 is going to make it easier for people to communicate and collaborate with colleagues and clients.In particular I’m going to be using the example of me as a broker, trying to communicate with my clients.

So where I’m starting out here is Outlook Today.When I come into the office every day, I go to this page and this describes all the information that I’m going to need to be able to get at during my day.On the left side you can see that I have a summary of an e-mail that I have in my box, I have my calendar, and I have tasks as well.

We’ve customized this some, so that up in the upper left-hand corner I have all the information available, and I can also go out to Web pages from the different links that I have here.And we’ve also made it so that within this box I can look at some of the key information that I go to.

STEVE BALLMER:So this is just a customization of the basic Outlook e-mail client that’s built-in to Microsoft Office.


STEVE BALLMER:But with a lot richer customization to, sort of, give me a view of the world.

BRIAN HALL:Exactly.So not only am I a broker who has clients that I think about, but I also think about how our business is doing.So here I have charts on how we’re doing week over week.I can look at year to date versus last year.And one of the interesting new things that we now have as an Office 2000 family member is a product called MapPoint 2000.MapPoint 2000 allows me to take Excel data and map it out on a worldwide, a country-wide, or even all the way down to ZIP code level.I can look at common metrics like revenue per capita, revenue per certain demographics.You can see in the second one we have household penetration, particularly looking at in household incomes over $150,000.Rather than looking at a spreadsheet I can look at this in a very easily understandable way, and seeing that least penetration is darker I can tell that in California our brokerage isn’t doing particularly well.

So I’m going to go back up to the bar along the top.One of the things that people particularly ask about Outlook, Outlook has a lot of different features in it.One of them is the Contacts section.Many people, particularly financial services companies, want to be able to have a richer contact management. I have ACT in here that I’m using, but obviously any of them will work from with the Outlook Today environment.You can have it launching within a window within Outlook or it can be coming separate as a standalone application.

STEVE BALLMER:Or the customer information management system that any of you might deploy in whatever line of business you’re in.

BRIAN HALL:So I’m going to go back to my home page, and I can see that today I have a software and outdoor equipment industries broadcast.Every week I do a broadcast out to all of my clients where I talk about subjects that they’re interested in, and told me that they wanted me to discuss.So I have to do a little research for that.So I’m going to go over here to a Web page that we have, and I’m going to search our database for information on small California software companies that have Russell 2,000 membership.

You’ll notice that this isn’t a standard database query that I’ve done.I’ve typed it out all in English and it’s going out and what it does, you can see from the example that I have here, what it was asked, is that it restates it into a format that SQL will understand.So, which software companies that are in California have Russell 2,000 membership – that alone would have been very hard for me to remember.But this is the real SQL statement that’s being sent.So in order for me to query the database in a rich way like that, in real life if I didn’t have English Query installed, which is what I have here, I would have had to have typed all of that out, which is incredibly complicated, I’m not even going to try and read it.English query is a good example of one of the technologies that’s come over from our Microsoft Research Division and moved into the product.

STEVE BALLMER:I particularly think this holds great promise for the kinds of things people want to do on their public Web sites, to make it much more navigable to the information that you provide, particularly the large data stores.I think English Language Query against not only text data, but data in databases will be tremendously important.

BRIAN HALL:And one of the other interesting things about SQL Server 7 is I’m running it here on my laptop.SQL Server 7 has great scalability, all the way from laptop up to the data center.

So here I just press on a button, it imported the information into a cell.Now I can use it in a more comfortable environment, I can make changes, I can do calculations, all with the data from the SQL database.

So I’m going to go to a little more interesting Excel spreadsheet.This is a pivot table that I’ve charted, so you can see I can go through here, I can make changes within the database or within the pivot table.It will graph them out for me immediately.Chances are many of you know Excel better than I do.We’ll give it a try here.So there we have this new chart, and I want to publish it out.During the presentation I’m going to give links out to my clients and to my colleagues, so that they can go out and see this information on the Web.So I’m going to go
“File,” “Save As Web Page.”
In the past if I took an Excel document and saved it out, it would have put it as straight HTML, so that rather than being able to interact with it, as I did, it would have just been static.They could look at the page as I had it and that was it.Now with Excel 2000 I’m going to add that interactivity, and hit

What this is doing is it’s actually saving all the information that was behind this chart inside the pivot table, out to the Web page so that people can interact with it in very similar ways.So we’ll switch over to this one.

STEVE BALLMER:So there’s essentially a set of XML semantics so the presentation remains HTML, but we can round trip back and so can the customers.I’ve always rued the fact that when I visit a lot of Web sites, the data I pick up is simple HTML text, and how can I return that information to somebody in a form where it’s more manipulatable for them from the start.Certainly if they’re using Excel, which is a broadly used package at this stage, you now get some flexibility to publish data out, which people can view with a browser, but could also download and then manipulate themselves in the spreadsheet.

BRIAN HALL:You bet.So here we are on a Web page now.This is Internet Explorer.We have very similar looking charts.And here’s the data that we’re using.So I can go down here.I can say,
“I no longer want to see sleep gear.”
We’ll change the chart.I can drag.It will create the new chart, and this is all within HTML.So if I actually — I could send this to Steve or my other clients, and within the e-mail, if I have HTML set as my default mail format, within the e-mail they’d be able to do these exact same things. They can also open this up in Excel, if they have rights to the page, and actually do things in Excel rather than the Web page.This is a real powerful way that we think you’ll be communicating information with clients in the future.

So now that I’ve done all this research and I’ve found the right companies I want to talk about, I’m actually going to broadcast my presentation onto the Internet.PowerPoint 2000, one of the features it has is this online broadcast.I can set it so that it will broadcast up to ten different people without me having to have a NetShow server or anything particular.If I do have the NetShow server I can broadcast to as many people as I’d like.

This is the lobby page that PowerPoint automatically generates.See, it tells when the broadcast is going to start, has a link so they can send me e-mail and also a description that I put in, weekly broadcast on stock opportunities and recommendations.

We’ll go over to PowerPoint.What I did in order to do this was I created my PowerPoint stack, and I have up on top here a USB camera, so we’re going to be able to broadcast video out.Once I hit start the online broadcast, it went through and it took all of my slides, converted it into HTML, so people will be able to see them on the Web page.It checked the microphone, it checked the camera, and it told me,
“Okay, we’re ready to go.”

So I’m going to hit start here.Let’s start anyway.So now what it’s going to do is it’s going to start encoding the information that’s coming through the camera and encoding the PowerPoint slide so that it can stream them out.

One of the lucky things is, is it takes about 15 seconds.It takes about 15 seconds for the encoding to happen, so what we’re seeing here, they’ll see on the page in about 15 seconds.I’ll go real quickly, and then we’ll go over to that page and see how it happens.So there are my slides.It can even do animations.They’ll see the same things. And these are actually hot links.So now we’ll end the broadcast and switch over to the Web page.

So now you can see that it’s changed from that lobby page to having the video coming in right there, and my slides.So there I am talking.Normally I’d probably have the camera positioned a little better for the presentation.I’m taking you through each of the slides.I can go up here; I can click e-mail feedback.This will allow me to send mail to the presenter during their presentation.That way they can make any changes.You can set up a chat on this page.And what I think is particularly powerful, which is actually more powerful than a physical presentation, is that I can go up and look at the other slides that the presenter is going to be doing.So if I’m confused, I can move back.If while he’s presenting I want to be able to go out on the Web site, and look up more information on what he’s talking about, I can do that.So maybe Steve’s next presentation will be done this way.This one in particular you can see is the one that we are at.It’s the Web page that we saved out there with all the Excel interactivity.

So we’re pretty excited about Office 2000.We think it will do a great job for allowing people to collaborate more online, and I hope you guys enjoy it as much as I do.

Thanks, Steve.

STEVE BALLMER:Thanks, Brian.


STEVE BALLMER:The real point I want to make sure comes out clearly to you is the nature of what the basic software tools that companies like ours and others provide you will facilitate a wide range of different interactions with people over the Internet.Will an analyst at Goldman’s start doing their own PowerPoint broadcast, say, after we ship?Oh, I suspect not.There may be somebody who tries, but I suspect that won’t really happen.But we’re trying to provide more simplicity in the tool set, so we can have more people being involved in authoring, communicating and interacting over the Internet.It’s only that way that we’ll really sort of open up a new range of ways to facilitate real communication with real end users across the Internet.

I want to transition a little bit and talk about Windows NT.I suspect that if I was to take an audience poll, I’d have more interest, questions, maybe even about NT than, quote,
“a view of where the industry is going”
, because this is a product that has come from nowhere five or six years ago to be very important to a number of you, and of increasing importance to the rest of you.

The Windows NT product has achieved a lot of popularity.This year about 35 percent of all new business PCs will ship with Windows NT as the desktop.The Windows NT server volumes have increased to over 2 million units a year, two million server units a year, making it by far the most popular server platform.

People ask me, is that all file and print servers and in small business?And the answer to that is certainly it is not.Windows NT is powering larger mission critical applications, branch environment applications, manufacturing, shop floor applications, telecommunications applications.In a wide variety of industries we’ve seen incredible uptakes.

There’s still some applications sets where we haven’t seen customers embrace NT.We know we still have a lot of work to do on reliability, on availability, on scalability, but we just keep our heads down, we keep working and driving forward fairly aggressively.

We’re very proud of some of the work that people have done on top of Windows NT.I had a chance to have a breakfast discussion with Tony Pieze, from Merrill Lynch, who’s in the audience, and the work that they’ve done with their Trusted Global Advisor software, mission critical to the financial consultant that Merrill Lynch deployed literally to their branches throughout the United States.Tony mentioned this morning is they actually did the upgrades from Windows NT 3.51 to 4.0 at the same time that they were rolling out the new branches.And they did all of that with an untended operation, they have no local technical support in those branches.

So mission critical applications, broad environments, more and more scalable application, more and more requirement for high availability running on NT.

As I said, we’re not everywhere we think we need to go, and where we think you think we need to go, but every day we make some progress with each new release, with each new service pack, with each new hardware enhancement that comes from our partners.

I’d like now to invite on stage to chat with you a minute Gregor Byler.Gregor is with NASDAQ.NASDAQ’s been doing some very exciting things with Windows NT.And as CIO at NASDAQ I invite him up here to come on up and chat with us a little bit.Gregor.


GREGOR BYLER:Thanks, Steve.Obviously to those of you that know the NASDAQ, we are certainly riddled with mission critical applications.And for those of you who know my background at Citi, I am also one who’s definitely been watching NT from a mission critical perspective for a long time.

For us what we are looking at with NT right now and, in fact, have got a process underway to implement is something that is called the market surveillance system, where — the Surveillance Delivery in Real-time is the actual system name, SDR.Let’s go the next slide.This system is a sister system to the market itself.It monitors in real time every transaction that happens in the NASDAQ stock market, which means that it, in fact, runs at the exact speed of the NASDAQ stock market, and, in fact, faster.It runs a set of pattern analyses on those trades that occur, looking for suspect behavior, as well as kind of bonehead errors, somebody buying Microsoft at ten, so to speak.

STEVE BALLMER:Sounds profitable.

GREGOR BYLER:Sounds profitable.Depending on which side of the trade you’re on.But what we needed to do was to prove to me, quite frankly, in this process that NT could do what we needed it to do, so we ran through a series of tests with a number of specific vendors involved in the bid, a number of benchmarks, and the benchmarks really focused on the basket of capabilities that you need to run the system as opposed to how fast can it go.It did perform remarkably well at speed.Eight hundred messages per second is what we were targeting, a 4 billion share day.I will say with some confidence that we’re quite a bit above the 800 messages per second right now, and plan to be implementing it this year.

At the same time, though, the operability of an environment like this is really critical.And the systems that are both provided by Microsoft and those that come from third parties in this process made us comfortable that we could run a clustered environment in a non-stop transactional mission critical application at speed with the NASDAQ, and we plan to be very successful in that process.

So it can happen.It does take an investment of the company and Microsoft to make these things work, and I’ve been very happy with Microsoft’s effort in this area.

STEVE BALLMER:Great.Thanks, Greg.



STEVE BALLMER:It is a core question, what will happen as we move forward with this new world of the Internet, what will be the platforms on which all of us will build the applications that provide these services.Our goal with Windows NT is to not only drive that software platform, but also the PC commodity hardware server platform as far as it can go, on scalability, availability, et cetera.The kind of application that Gregor talked about is, I think, one that many in this room might be surprised is running today, successfully, on NT.There are more and more examples of that kind of application, and of people having great success.And I want people to understand that it’s clearly within the sweet spot that we target to attack those very mission critical, high availability applications.

From a scalability perspective, it is my belief that there’s really not much in the way of short-term limitations on NT in the PC server platform.Here are some TPCC data comparing Compaq’s Reliant line versus running NT, versus the Sun Enterprise Server line, and what you can see today is that for smaller systems, the Compaq systems are consistently out-delivering the Sun systems.For the very largest applications, they’re still more topside, more up sides in the Sun product line than there would be in the Compaq or the HP PC line.But over time, as we add software support, and as our partners continue to push up and up, and you’ll see some of that in Windows 2000, I think it’s increasingly clear that the bottleneck in adoption of Windows NT won’t be scalability.It certainly also won’t be cost.If you look at dollars per transaction, there’s no doubt that the best performer on that will certainly be the PC platform.

So really the key is to make sure that the operating system software that we provide, Windows NT today, Windows 2000 tomorrow, provides the kind of rich services for manageability, for availability, for reliability that are required to support mission critical applications.

Windows 2000 – which remains on target to be shipped by the end of this year, we make no explicit commitments, because we think the most important thing is to make sure the product is rock solid, but every indication still is the product will be available by the end of the year – it’s really focused in on three key areas.First is improved scalability and reliability.We support more processors.We improve, to some degree, the clustering.We’ll support large memory.We’ll support job objects and other high availability features.We build the directory in, an activity in which we’ve worked in great partnership with Cisco, that becomes part of the management infrastructure that 2000 delivers.A range of new security alternatives, particularly important for corporate extranet environments, which many of you are putting in.Remote management is a key high availability feature.We know it is important that there be absolutely lights out management.We don’t make that as easy as it should be today.Windows 2000 takes another set of big steps forward.

And Windows 2000 is the first release of Windows NT that actually includes in the basic offering our application server: the queuing services, the transaction services, the object services, the database connectivity services, which are bundled to that application server middleware, and that will be entirely integrated in, integrated in with the security and the directory system, and ship as part of Windows 2000.

People ask me what’s our application server strategy.The answer really is Windows itself, with the rich middleware infrastructure that we’re building in.

Tibco certainly made a big investment in understanding and having developers who can build around that middleware infrastructure and that’s been an important part of our partnership is doing the right job, listening to the folks at Tibco and providing the right kind of technical support for them to move forward.

We refer to our entire application development architecture, the database connectivity, the application server and the presentation approach using Internet Explorer, ActiveX controls and the browser, as the Windows DNA development platform.It is a three-tier application direction.We have a lot of advantage the way we’ve designed the application server that allows it to either run up at the server, to be remoted and run down on the client.That flexibility exists for the kinds of configuration options that you may seek to support Internet applications, intranet applications, wireless, mobile workers in your work force, et cetera.

And making sure that there’s a rich set of services, that it hosts rich partner services like the Rendezvous technologies and others from Tibco is very important to us.We want to make sure that it is an infrastructure that will support the easy development of the broadest set of applications for the new world of the Internet and e-corporations, and at the same time provide relatively good facilities for application deployment and management.

We’ve done some very specific work around this three-tier architecture in a number of industries, to try to work with industry participants, software vendors and customers on a set of common protocols for applications communication for applications specific to that industry.In the financial services and securities world, there is a Windows DNA for Financial Services set of protocols that helps define the set of standard interfaces, so that it is easy to take an application, for example, that was designed for call centers and make it also work on the Web, make it work on a kiosk, whatever the distribution vehicle may be.

In the manufacturing space is another place where we’ve had an opportunity to do some work with Tibco.We have a platform that we and our partners have designed that we call Windows DNA for Manufacturing, that’s designed to provide the set of facilities so that in a standard way what goes on the shop floor, from the PLCs on up, things can communicate, applications can communicate with one another and have people get a rich sort of view of information.

There’s a valuable set of additional services that you get when you combine the Windows DNA infrastructure with the standard protocols and the kind of publish and subscribe technologies that you see from Tibco.

In the commerce area we’re trying to extend the set of services that we provide with our commerce server product, and significantly with promotion services that are delivered via MSN, whether that’s traditional advertising, direct mail services and the like.And we’ve had a lot of experience.Some of the initial work we did with NASDAQ was on their Web site.And now a number of the largest commerce Web sites in the world run on top of Windows NT: the Gap, Dell, Dixon’s — the largest electronics retailer in the UK, Mirrorcell, one of our large distributors; all of their Web sites, their e-commerce Web sites were built on top of this Windows NT based infrastructure.

I think for us and for you to realize the full opportunity in the Internet, in becoming e-corporations, in realizing the change and benefit in the way we serve our customers, our work and your work alone is not enough.That’s why we make a big effort to reach out with the partners, hardware partners who build very large systems: Compaq, HP, a number of the Japanese computer makers to name a few; to the big systems integrators who are getting more and more experience and can work with you more closely on enterprise applications, built around the NT infrastructure; and, of course, the independent software vendors who build the ERP systems, the manufacturing systems, the financial trading systems, the plumbing.You know, they told me I shouldn’t go too far; apparently Steve Jobs got himself in a lot of trouble talking about plumbing, but we’re plumbers at Microsoft, and we work with other companies that also build software that provides the fundamental plumbing that allows these systems to work the way we all want them to work.

Our relationship with Tibco goes back seven years ago to when Vivek and I first met.And it was an interesting first meeting.Our guys said,
“These guys are tough, tough cookies.They’re doing a lot of good work on UNIX.They’ve got a very strong technical team.They’re not going to accept any song and dance out of you, Steve.We’re going to have to really deliver.We’re going to really have to provide the right kind of products, and they’re going to be demanding on us.”
And demanding they have been, and for that I say both thanks and I’m glad now that we’re in the marketplace together and doing things together.We can sort of be demanding together.We just keep seeing more opportunities in partnership with Tibco.We have more and more customers that are in common.The work that we’ve been doing in financial services and manufacturing, Tibco’s been an important partner in shaping the kinds of directions we’re taking with our middleware infrastructure, our COM object infrastructure, the queuing stuff that we’re doing.There’s been a lot of input and incredibly valuable feedback that we’ve received from Tibco.

And I know that in a number of the customers represented here today, there’s a lot of important work that we and Tibco have done together.

Vivek and I were talking this morning about the next steps we need to take.More and more of their development goes on, on the NT platform.They’ll continue to support UNIX and other platforms, I’m sure, but we just see a lot of opportunities and we see a lot of customers who really want to deploy the highest performance, highest availability applications in their environment using Windows NT and the Tibco infrastructure.

I think there’s an incredible opportunity in this concept that Vivek referred to as the e-corporation, and at the end of the day the e-corporation should be something that’s good for all of us.It’s almost a bit of a craze, but as I think if you return to the roots and ask, how do I serve my customer better, with whatever model I choose, how do I change my supply chain, how do I change the way I touch my partners and customers?And if you really focus in on that, and if companies like ours and Tibco really do the right job of enriching everything from the operating system, the Office software, the development tools, the information buses, we really will have an infrastructure that lets you do amazing, amazing things, from a customer service perspective across the Internet over the next four or five years.

It’s been my privilege again to have a chance to speak to you and I thank you very, very much for your time.


STEVE BALLMER:The little clock up here still says ten minutes, and it’s still going down, so that means I think I can take a few questions, which we wanted to have an opportunity to do.So I think there are some mikes in the aisles.If you have a question, please go to a mike, and I’d be happy to take it.The questions can be about something I talked about today or anything else frankly that’s on your mind.So let’s go wherever you’d care to.

Q (Off mike.)

STEVE BALLMER:Well, certainly I think everybody sees that in the opportunities of tomorrow, the line between what’s software, what’s computing, what’s telecommunications, that line is blurring.We see that.I know our partners at Cisco see that.That doesn’t mean that there’s not distinct value for everybody to provide, but the kind of partnership that people have will need to be even more intimate.You’ve seen us make the investment in AT & T and in Nextel.I’d say those are all part of an important recognition of the need for the software and computing industry and the telecommunications industry to have even sort of a tighter linkage, if you will.

Q Good morning, Mr. Ballmer.Could you please comment on Linux and the development model, and how it affects Microsoft strategy?

STEVE BALLMER:Well, the Linux development model is interesting.I think we all got a chance to learn and study.Today, you know, as we assess Linux we see a reasonable amount of interest, more interest than I guess I would wish.I mean, we’re competitive guys.(Laughter.)More interest than I’d wish, but what it’s caused us to do is really focus in and ask what is it about the Linux model that really rivets people.Initially some people thought it was the price, and I frankly don’t think that’s the case.In almost every application that we talk to people about, people want to have a good price, but the most important thing is that you get a platform that does the job, that is reliable, that does what is needed to get done.

Some people think it’s the development model.Does the development model let Linux run more quickly, because you have a bunch of people throwing code at the thing?And that’s been a little bit overstated, but only slightly.

I think there are some things that you get with that development model.You certainly get more people trying to add value at one time.That may mean some good work happens.But because of the openness of the Windows system, there are plenty of opportunities for people to addto the Windows operating system today through their own dynamic link libraries and device drivers, et cetera.

The place where I think we have something we must learn from Linux and must respond to is in the area of, excuse the word, open source, because it means different things to different people, but certainly the notion that there are parts of our source code that if we published, on some basis, whether we put it up on our Web site or licensed it to the kinds of customers in this room, would help you be more effective in your job, it would help you get applications built more quickly, it might help you support the deployment and management of applications that have been deployed in your environment.We see that fairly clearly as a requirement being expressed essentially out of people’s interest in Linux.

And we’re trying to figure out exactly what it means, and exactly what kind of licensing or no licensing, and which pieces of the source code.I don’t think everybody really wants to sort of dig through the code that puts up menus, but there are parts of the system where if you had the source code I think people would feel they could be more effective.I’ll pick on the database connectivity pieces for a second, because I think a lot of people who work in that area have found them complicated to understand.And so we do have the team off thinking through what kind of a strategy is appropriate to make our source code or parts of our source code more available to customers so they can be more effective at what they do.

I won’t call that a full embrace of the open source model.On the other hand, we’re trying to understand what it is that really brings the benefits.There are a lot of downsides with the open source model as well.There’s a bit of chaos.You have four standards distribution.Things can seem like they’re moving fast, but they don’t necessarily respond to any given customer needs.People who bring it in almost all wind up having to have system hackers who want to go hack the systems.Many of you would prefer to have your people more productively deployed on the business needs.There’s no way to guarantee response on fixes.

So there are some downsides to the Linux model, as well.We’re trying to learn from the things that represent, I think, clear upsides and where change in our approach will benefit you.

Q Steve, good morning.I’m Craig Foreman, the VP of Interactive at CNN Financial News.This is asking you to answer a business question as opposed to a journalism question.You talked about the evolving business models of the Internet, and Microsoft deserves a lot of credit for experimentation.You’ve experimented with, I guess, every business model that’s there on the Internet, some with some success and some without.I would like to ask you, if you could, to give us your best sense this morning of which business models are the ones that are going to be valuable for your corporation going forward.Subscriptions and a Slate-like model may not be the most effective, but some of the other ones that you’re experimenting with may be.Can you give us kind of your gut read on what’s going to work for you in terms of business models on the Internet?

STEVE BALLMER:Well, I think it depends a lot on the business.And we will have businesses that are clearly transaction model based, which is the way, for example, our HomeAdvisor home-buying service works.We essentially get a piece of the mortgage brokerage commission as part of what we initiate on the Internet.And I think there will be people, our travel service has the same — the same basic concept.

I think the subscription model will work for somebody.It works well for the guy who people expect to receive a monthly bill.So it works well for AOL.It works well for the two million customers we bill monthly for access.It’s not clear to me that a lot of the other things, if you want them to be broad reach, it’s not clear that you’ll be able to get away with subscription.And that’s why, I think, it’s partly this business model question that brings the software and computing industry closer to the telecommunications industry.

I mean, PCs today, low-end PCs, get sold essentially at cost, and all of the profit comes from the bounty of signing somebody up to the Internet.So there’s a shift there.

And the advertising business model will work as well as it works in anything else.I think it can be overdone.There are only so many advertising dollars in the world, and there’s far more inventory, as you’re well aware.If you count up all the places that you can put advertising on the Internet, there’s far more inventory than there are people who are really desirous of paying for that, that inventory.And that’s why you see such a high percentage of unsold inventory on virtually every property on the Internet.

Q (Name and affiliation inaudible.)Is RV going to be embedded as an NT 5 service?

STEVE BALLMER:Is what going to be, sorry?

Q Rendezvous.

STEVE BALLMER:Is Rendezvous going to be embedded as an NT 5 server?

Q And if it is, where does that leave COM+ as a transport?And finally, what’s the story between Tibco and Microsoft in delivering Active Directory on the Tib?

STEVE BALLMER:Is Rendezvous going to be integrated with NT 5?No.I mean, packaged with, no.Why not?Two reasons.Number one, we’ve got a big set of things we’re trying to do.Number two, Tibco’s got a business and we’ve got a business and if they went together, it’s not clear either business would be — some business model wouldn’t work, either Tibco’s or ours wouldn’t work.We believe in selling things at very low prices and very high volume.When you start talking about $50 a desktop, $60 a desktop, that’s a model that only works if you’re literally counting your customers in the tens of millions.And I think if you ask Vivek if he had tens of millions of customers right now using the Tib, you might well have a very different pricing model.But, you know, I think of the Tibco software or the Rendezvous software as more targeted at very high value applications and it’s, you know, appropriately priced.So, no, I don’t see the two coming together for sort of a variety of reasons, including the fact we have separate businesses, and that’s fine.

You know, COM+ will continue to evolve.We have sort of a next generation set of things that we’re trying to do.I don’t see us, you know, sort of overlapping with Tibco highly over the course of the next several years.We’ve got a set of things that we need to do.Some customers, including customers in this room will tell us there are some basic services that maybe are in Rendezvous, that we ought to do, but as Vivek and I talked about this morning, I think the way you said it, and I would agree, is we don’t see much more than a sliver of competition between our two firms over the next — over the next several years.And you go out five years, ten years and it’s too long for anybody to tell.We see ourselves as good partners.

I think your last question had to do with Active Directory in the Tib?

Q Yes.

STEVE BALLMER:I may defer that and let the Tibco guys be able to address it most directly, because I think that’s the appropriate thing for me to do.

Q Thanks.

STEVE BALLMER:Vivek has a question, based on what I just said.Yeah?

Q A lot of people in Silicon Valley lose a lot of sleep wondering what you guys in Redmond are going to be doing next, so two questions, really.The first question is other than the US government, do you lose sleep over anything?(Laughter.)And the second question is who should be losing sleep in Silicon Valley right now?(Laughter, applause.)

STEVE BALLMER:Good questions, both.I’m a good sleeper.I don’t know if I deserve to be a good sleeper, but other than our nine-week old baby, I’ve never found anything to interrupt my sleep.We have plenty of good competition though.I mean, if you take away every bit and say,
“Well, there’s no competition for the day after tomorrow,”
there are plenty of environments where people won’t throw Windows out the day after tomorrow.But if you look some combination of Linux and Java and browsers and the way in which that may take energy and focus away from our poor platform, if I was a guy who didn’t sleep well, I sure wouldn’t be sleeping well about that.

We have a very good position today with Hotmail and MSN on the Internet, but we’re not really known.Despite the fact that we have, you know, number three reach on the Internet, we’re not even really known as a portal, yet MSN is the number three portal on the Internet.I’d lose sleep about that, and our ability to really establish ourselves clearly as a leader in that business.We’re very focused in on that.

So there are plenty of things I find to lose a lot of sleep over.I lose sleep over whether or not we’ll continue to be what I would consider the greatest place in the world to do software, at least at, you know, the kind of size.There are smaller companies where people can have great experiences, but really Microsoft’s an amazing place.And are we going to keep the environment a place where people can do great software in a variety of ways.

So, those are the things I would say I lose sleep over, if I lost sleep.

Who should be losing sleep in Silicon Valley?That’s an easy answer.Sun.(Laughter.)And Oracle.I hope we’re enough competition to make them lose just a little bit of sleep.If Scott McNealy and Larry Ellison have a problem sleeping, I hope we get at least a few cycles in there, because if you look and say who are our big competitors, our big competitors are IBM, Novell, Sun, Oracle.I mean, that’s kind of the core set.AOL is clearly also, I would say, at that level, but it’s an unusual competition, since we’re trying to be a little bit more of a portal with an access play.They’re trying to be an access company with a portal play.

But those are the guys we wake up and think about all the time. There may be other guys that we somehow bump into, but we try not to.What we’re trying to do is forge partnerships with other people, because we know we have sort of five core competitors to really think about and challenge us and keep us on our toes.

I’d list Linux on the list of core competitors, but I don’t have a company really to point to and say that’s Linux, but I’d certainly otherwise put it on the list.

With that, I think I’m out of time.Let me say thanks, everybody, very much.And particularly thanks to the Tibco folks for having us.


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