Steve Ballmer Speech Transcript – Enterprise Solutions Conference

Remarks by Steve Ballmer
Enterprise Solutions Conference
Miami, Apr. 17, 2001

STEVE BALLMER: What Id like to do over about the next hour or so is try to set a context for things that we see happening in Latin America and across the world in our industry, and then have a chance to explain a little bit how were trying at Microsoft to help you take advantage of some of these key trends.

For me, having a chance to address a group of customers from Latin America is always particularly exciting. Ive been at Microsoft 20 years. Ive been regularly visiting Latin America for probably the last 12 of those years. And the one thing I have noticed continuously over that time is, in fact, the acceptance and open-mindedness to new technology of our customers in Latin America is higher than we find in almost any other part of the world.

I was speaking with a customer this morning about the French and how conservative some of the French customers are in their adoption of new technology. And Im not sure if its because of the fact theres a little less legacy in some of the Latin America countries, but weve seen a continuously fast ramp up in terms of the adoption of new technologies in Latin America. Whether its the growth in Internet users, whether its the rate of growth in IT spending, which is faster in Latin America than in any other part of the world, whether its the relatively high level of spending on e-commerce that weve already seen in the Latin America market or simply the expected growth rates in the Web Services businesses, I dont expect to see this change over the next several years.

Im going to have a chance to visit Brazil and a number of other countries this summer, and Im looking forward to hearing stories and seeing that same kind of rapid uptake of new technologies in Latin America that weve had a chance to really see over the last several years.

And Ill describe in a minute what I consider to be a new revolution coming in information technology, I expect to see a lot of the early adoption of these technologies to happen amongst the companies and organizations represented in the room today.

When we talk about what were trying to accomplish in our software or what our customers accomplish through the use of our software, our enterprise customers, we focus in our thinking on one principle: business agility. The word
“agility,”
Im not sure how well it always translates around the world, but it speaks to the ability of a company to move quickly, to move flexibly, to adapt rapidly to changing market conditions, to be agile, to be nimble, to be quick.

We think agility is actually the key hallmark of the successful business in the 21st century, and we also think its something the information technology approach that our software permits is particularly well suited to.

We have many discussions with people in this room — and Ill talk about it today — sometimes about what we call the technological ability: Are you scalable, are you reliable, are you manageable? Those are very important things, very important things.

But its also important to ask: Does my technology infrastructure let me respond quickly to whats going on in the market? Do I get data in front of the people who need it when they really need it to make a decision? Can I move quickly to implement a new product or service, or not? Can I quickly expose new services to my customers over the Internet or not? And this agility, this ability to be nimble, to be quick, to be flexible, thats something you also have to score the software and technology infrastructure that you use on. Not only will it work all the time, which is essential, but will it give you flexibility. And much of the infrastructure in the marketplace today simply does not do that.

Whats the big downside to the legacy of mainframes and mini computers? They have no agility associated with them. The mainframe runs all the time. Its impossible to implement new applications. Its impossible to get information out of the system. Its impossible to put the information right there where the user needs it to take advantage of. And we need to focus on systems that really permit this.

Certainly, building on the PC as a technology platform is a very important part of that. The PC is the most accessible, lowest cost of deployment computing platform in the world. Wherever you need to put intelligence — in a server, in a client — the PC is the thing that can be deployed.

Weve had great success as a company working with many institutions, including those in the room here today, on branch banking systems, for example. Why did branch banking systems move to Microsoft software quickly? Because the PC and our software was the most agile platform, the one that was easiest, most cost effective to deploy rapidly in that kind of environment.

As we as a company sit and approach your back end applications, your core applications, your enterprise applications, we assert that youre going to want the same kind of flexibility and agility in those systems. You build a Web site; you dont know what scale you might need. You want to be able to scale that quickly and flexibly. You dont want to over-invest. You dont want to under-invest. You need flexibility. You need agility. You want to put a solution in the market quickly, a server-based solution, a new Internet application. You want to do that quickly.

And we think theres three big things that people will think about, three big avenues. Youll think about how to put better information in front of your employees. An empowered workforce is perhaps the most important thing to an agile business. Do the people inside your company have the information they need to make smart decisions?

Ill talk a little later about a system that weve put in place in conjunction with Telmex to put information about whats going on with the provisioning of new telecommunications services right there in front of the managers who really need that information to make smart decisions on pricing, on capacity planning, et cetera.

Customer centricity: Do your systems really let you touch customers, not just automate the accounting and the back end, but do they really let you touch customers more effectively, whether thats via the Internet, via the call center, via your own employees, sales force automation, your Web site? These systems have to allow you to touch the customer much more effectively.

And last but certainly not least, you have to be able to touch your trading partners, your vendors, the other companies who add value with you to your product. Thats very, very important.

I actually think that the fastest growth that well see in the e-commerce world over the next several years will be in the connection of businesses to other businesses that they need to touch to go to market.

Were in discussions today about a project with General Motors to take their design infrastructure and extend it out to the people who provide parts and supplies, all the way down to the very small companies that design the tools that are used to machine the parts of the automobile.

And if youre a large manufacturer in any country in Latin America, your ability to reach out and touch those suppliers with design information, with financial information, with inventory information is incredibly important.

So we as think about our enterprise software, thats what we think about — agility. Thats got to have a flexible technology foundation. Its got to let you build and deploy applications rapidly. And those applications have to help empower employees, touch customers and touch trading partners. And thats really where well put our energy is trying to help that come alive for you today.

But all of this work needs to happen in the context of the greater technology revolution that we see unfolding in the marketplace today.

Ive been at Microsoft 20 years. Microsoft is 25 years old. And Ive already lived through three technological revolutions. The first technological revolution was the personal computer. And with or without Microsoft, the personal computer was destined to revolutionize the information technology horizon. We were a participant in that revolution with MS-DOS and we helped really galvanize that revolution to happen. But the revolution would have happened inevitably.

In the mid 80s there was a move to the graphical user interface. We happened to succeed in that revolution with Windows. And it was a revolution. PCs had really started to break through, but with the advent of graphical user interface and Windows, PC acceptance went to a whole new level. The way people built applications and deployed IT solutions shifted again, and that was a very important milestone. It actually took a lot longer for the graphical user interface revolution to happen than it did the personal computer revolution. There was more work to do, more reengineering of applications, more involvement by corporate IT people.

The third revolution to burst upon the scene in the last 20 years was the Internet itself, the World Wide Web. Some people actually though we missed this revolution at Microsoft, and for a while maybe we did. Certainly today nobody would argue that thats the case. In fact, theres an appeal of a lawsuit going on right now that is exactly about the topic of how deeply engaged we are in the Internet. But with Internet Explorer and our tools weve really been leaders in helping people take advantage of the new capabilities of the Internet.

Again, the way all of us in the room think about IT changes in the world of the Internet.

The question we might ask is, whats the next revolution? Is something going to change? We all want business agility, but the last thing we want to do is to build applications on an old technology platform, one that will be obsolete. And if you look at a world where predictably every five or six years some major change comes that affects our IT infrastructure, the kind of applications we build, how we build them technically, the question is whats that next revolution?

We claim the next revolution will be the move to so-called XML Web Services. Its not very catchy, not as easy to explain as the personal computer or graphical user interface or the World Wide Web, but it will be just as important, in our view — maybe more important, in fact, than any of those revolutions.

Now, some of you may even remember that some of these earlier phenomena werent that easy to explain. It wasnt really that easy to explain the World Wide Web when it first came out. Now we take it for granted. I remember in 1995 my mother and father asked me,
“What is the Internet and who owns it?”
I didnt have good answers to those questions.

Today its hard for us to describe to the lay person what XML Web Services are, but essentially we talk about a new style of application, a style of application that is much easier to integrate with other applications, a style of application or a style of Web sites, because a Web site and an application are exactly the same thing in the world of XML Web Services.

We talk about a type of application thats more extensible, thats more integratable, that can run on a server, can run on a client, can run peer-to-peer, can run client to server, can run in any of these forms of computing, and its designed exactly the same way no matter how its deployed. It can run on a PC. It can have intelligence that runs in a phone or a television set. Its a new style of application. And I actually think this revolution will perhaps be more important to most of the accounts in this room even than the Internet itself has been, because its a revolution that not only affects the way you communicate with the outside world, its also a revolution that will have incredible positive benefits for the way you put together and integrate and extend applications inside your own corporation.

So what do we mean when we talk about XML Web Services, and what is this .NET software that were introducing to try to help you be agile in this world?

XML is a message format. In some senses its an even simpler message format than HTML, which is the standard protocol on the Web today. We send HTML around. What were really sending around is pictures of a piece of information. You get a screen of HTML information; you have a picture of the information. But embedded in that is this representation of the data, and the XML message is the thing that actually carries the data.

Just take a small case today of a problem. Today, if a Web site sends a cell phone an HTML screen, the cell phone just doesnt know what to do with it, cant put all that information on that tiny little screen.

If instead of sending a picture of the screen, we could send a representation of the data and then let the cell phone or the PC figure out the best way to present that information for that screen, that would be a better world.

If when youre trying to put two applications together, instead of sending some arbitrary format protocol that nobody understands, it was well recognized that there was a standard format that was going to be laid on top of an XML message center, and that was going to be sent from application A to application B, youd have a basis for applications or Web sites talking to Web sites.

So we start the process of really abstracting basic information in a form that applications can use it broadly. Thats a revolution.

Let me give you an example of the kind of challenge that I think we can solve in the XML Web Services world.

I know this is not a time that people are starting new dot-coms a lot, but suppose you wanted to start a new company, MyVacation.com and MyVacation.com would be a Web site that would let somebody book a trip, it would put on the calendar of the person that youre visiting,
“Steve Ballmers going to be there,”
it would be it in the appropriate place on Mauricios calendar,
“Steve is coming to Miami for the ESC,”
put it on his calendar,
“Maurizio is planning to meet me at the airport;”
nice person that he is, but I would like it so that my vacation, or I should say my trip in this case — no vacation here in Miami — MyTrip.com, it should notify Mauricio if my plane is late. Mauricio should be able to say,
“Page me, call me, phone me, instant message me; I didnt really care that Steve was visiting anyway; ignore the message.”
Whatever rules he wants to create, he should be able to do that.

Since Im going out of town for a few days, I dont want my mail delivered perhaps to my house. I should be able to notify the postal service,
“Hold my mail.”

How would you create that application today? Well, today youd actually have to go write your own reservation system, your own calendaring system, your own notification system. Youd have to say,
“Oh, Mauricio, please, you have to use my calendaring system; dont use your calendaring system, so that we can all talk together.”
Theres no standards. Theres no formats. Theres no services that he doesnt have a calendar that I can write a program that talks to.

The kinds of problems that we think we can solve are exactly that.

The great advances, the great innovations in the computer world have always come when you let people build better on the work of others. So letting the calendar service be an open service that talks to other Web sites and helping Web sites generally be able to build off of and use the work of other Web sites and applications, thats a significant advance in the agility that you will see as businesses. And whether its applications talking to applications, whether its businesses talking to businesses, people talking to businesses or people talking to one another, we need that level of integration. Thats what this revolution is about.

Now, everybody in the industry is starting to say,
“Yeah, yeah, yeah, XML, XML, XML, XML, XML, XML.”
We were out front of this. Weve been working on XML stuff for five years now. Some of the founding people all work at Microsoft today of this XML revolution. And really if you were to ask my honest opinion, Im not sure anybody else in the industry, other than perhaps IBM, to be fair, is really embracing the fact that XML really will be the new what I might call
“lingua franca”
of the Internet. It is the way everything will talk to everything.

In terms of having products though that really take advantage of this XML transition, thats where I feel were really distancing ourselves from competition. WE announced our .NET platform about a year ago. And .NET is the software for Microsoft that implements and helps you implement applications that participate in this XML world. Its a set of programming tools. Its a set of servers. The new version of Windows, Windows XP, will contain a set of back-end services. There are interoperability services that dont run just on the client or on the server, but you actually want to run out in the Internet itself. Ill talk about those in a minute. But .NET is our platform to do that.

Weve already started making some releases. The XML support in Windows 2000 and in SQL Server 2000 is very, very strong. Our BizTalk Server product helps you put together XML flows of information so that you can flow data between applications and Web sites very easily with the BizTalk Server product and connect up your legacy applications.

The new version of Windows that well ship later this year, Windows XP, creates a set of advance services.

We recently announced something that we referred to as Hailstorm, which Ill describe in a minute, but thats a set of services that actually run out in the Internet itself. So if you want to have a calendar, that calendar could be hosted on Microsoft Exchange in the corporation, but it also can talk to and have a representation that lives outside the firewall, perhaps in the Internet itself.

So .NET is a platform. Its a platform that competes with J2EE. Its a platform that competes with Websphere. Its a platform that really is designed from scratch to be an XML platform. Unlike J2EE and Websphere, which really grew up around a Java approach, and the Java programming language — we dont dislike Java; in fact, we are doing an implementation of Java that talks to .NET — but the platform itself, the .NET platform is designed from the ground up to build on the XML revolution, which I claim will happen inevitably, with or without Microsoft, with or without IBM. Its a revolution that will happen. But I think were way out front in terms of helping you take advantage of the incredible power it brings.

This year well have our development tool suite, which makes it trivial — trivial, as well show you in a minute, to write an XML application, Visual Studio.NET, and the framework and object supports that let you do that.

We have a new application server that we will ship that conforms to this XML Web Services model that well ship later this year.

In addition to that, SQL Server, the BizTalk Server, we have run time support to help you create these agile applications.

And all of this lives in a standard space world, the world of XML, the world of the so-called SOAP protocol, which we developed in conjunction with IBM, which has now been accepted as the standard; the UDDI protocol, which we developed and now has been accepted as a standard by the IETF.

XML is the next generation platform. The decision youll have a chance to make is whose — and I think XML is the key to business agility — but whose XML platform will you pick. I think were out front and I actually think we embrace this fundamentally, unlike some of our competitors, who really have embraced the Java programming language.

I want to just give a brief description of this Hailstorm work, which we announced a couple of weeks ago. Hailstorm is essentially a set of services that will run in the Internet cloud, and we will provide servers that you can run and operate inside your own corporation that have a standard approach to whats a calendar entry, whats a notification, whats an address, whats a contact, whats a location. We need to have standard XML representations of everything in the world.

Were going to work on some of these. These are services you expect from us — calendaring, contacts, inbox, but in every industry represented in the room here today there will be a standard set of XML representations of the important things in your business. Whats the standard representation for a citizen? Thats a government responsibility. Whats the standard representation for a flow of oil and gas? That will be a piece of XML standardization work that happens in the petroleum industry. Whats the standard representation of a purchase order? That will be something that comes out of people who are in the ERP business.

So this kind of XML schema standardization will be incredibly important for deriving the benefit of this XML revolution.

Id like to invite Ken Mallitt on stage now to join me. Kens going to do a little bit of a demonstration of how you might use your BizTalk Server and this XML platform to put together and integrate the next generation applications in a very agile way. Ken?

KEN MALLITT: Thanks, Steve. Steve, the first problem we want to address today is how the big enterprise organizations need to integrate their back-end systems.

STEVE BALLMER: And youre saying this whole XML revolution, even though it comes from the Internet, will really help corporations internally with this integration?

KEN MALLITT: Right, internally, as well as externally when you talk about the building blocks, since were going to show you how that XML ties all that together within your organization as well as provide the agility to your customers to access that information.

So what you see here is a company called Gold Cycles. Theyre a big supplier of bicycle parts and so forth. And what they have is a lot of these back-end legacy systems. They have an ERP, MRP system, which theyre currently running JD Edwards One World. They have a warehouse management system here. They have a warehouse application down there for the warehouse workers. And theyre all disparate systems and they all talk different languages and different formats and so forth.

The key here is how BizTalk Server is going to transform that using XML and be able to integrate all these different systems together, without having to touch and replace any of these systems in the back end.

STEVE BALLMER: So some of these companies like JD Edwards and (McCue ?), they agree with our vision about the XML Web Services world?

KEN MALLITT: Absolutely, yes.

So thats the first part; well show how BizTalk Server can integrate that together.

The other thing when we start talking about the building blocks is how can we enable the customers to provide them more agility to get them quickly information directly out of that back-end supplier? This is where.NET, Visual Studio.NET and Web Services come into play.

So the first thing I want to show is, just bring up Visual Studio here, and this is how people build applications today. And the key is that they can take their existing components, written in Visual Basic, C++, whatever language that they have —

STEVE BALLMER: Java?

KEN MALLITT: Java — and just by putting this one little keyword here, right,
“Web Method”
it automatically basically exposes this particular component or application out onto the Internet.

STEVE BALLMER: So you take an application that you already have built and then all youre trying to do is export some of its capabilities to be extended and called by other applications or Web sites, and thats a pretty easy change, as you just showed.

KEN MALLITT: Absolutely, just one little keyword, and what happens is when you compile it, it actually generates what we call this Web Service SDL, which is basically a System Description Language that basically publishes out the information about every Web Service that you have.

STEVE BALLMER: And our tools automatically handle all of the packaging up and structuring of the XML data coming out of the app.

KEN MALLITT: Absolutely, and were going to show you how we actually submit an order now. We have two Web Services we generated onto this back-end application. One is a
“get status,”
which were now allowing our customer when they place an order to a back-end supplier to look real time into their order processing and manufacturing process just by this one single Web Service.

STEVE BALLMER: Its a simple wrapping of what we already have in there.

KEN MALLITT: Absolutely, just using XML via SOAP and sending that message directly over to the supplier side.

So thats the front-end piece. Now what I want to show you is how weve actually integrated in all the back end, and here we have BizTalk Server, what we call orchestration. And this is where your businessperson actually designs out the business process on how they want to integrate their back end system.

STEVE BALLMER: So theres no programming actually going on here; theres just a description of how you want information to flow amongst the systems, and this looks like Microsoft Visio.

KEN MALLITT: Yes, it actually uses Visio 2000 as the front-end design tool. And on the left-hand side here is where the businessperson draws out the business process flow.

So like from the Gold Cycles, right, were going to receive a purchase order from somewhere from that Web Service and then were going to send it off to the ERP system. Well, this is our integration into JD Edwards. A lot of our ISVs, third parties like JD Edwards, McCue, are building these adaptors that plug directly into BizTalk Server to make it very easy for customers to integrate these. They dont have to do any coding. They do a thing called mapping, mapping one document specification into another format to go directly into that back-end system. So they dont have to change their back-end system.

So once we send this off to the ERP and we get an acknowledgment, were going to basically send an e-mail back. And this is where we tie into the building blocks, right, of notification. My notification is one of them. So we can basically let that user decide do they want e-mail, do they want to get a call back on their voice, you know, on their cell phone and so forth? They can designate how they want to get notified on anything that they get.

STEVE BALLMER: So as in the MyVacation.com application if something changes youre going to trigger automatically one of these notifications and it can be delivered through the corporate system or through the notification service running out in the Internet.

KEN MALLITT: Absolutely. So here we actually have built into our business process that we can send an e-mail back, we can send a voice call back to their cell phone. It all depends on how these apply within their profile.

Once weve done that, we pass it off to the manufacturing system, and then once its manufactured, then we actually pass it off to the warehouse management system.

STEVE BALLMER: Now this just isnt a picture. This is really the actual — you drive the actual workflows directly from the design tool.

KEN MALLITT: When this actually compiles, this workload generates a schedule, which is all in XML that our scheduler kicks off whenever a transaction comes in.

So let me show you how really easy it is to extend this. So we have an e-mail acknowledgment, we have a voice notification. What were going to do is down here once the order is shipped were also going to send him another e-mail. So let me show you how easy it is for a businessperson to add additional functionality into this business process.

They would select an action item on the left hand side, drag it into the diagram here, and let me just slide in here. And were going to call this
“Send IM ASN”
for an instant message. Were directly tying to one of the new things of Hailstorm and the building blocks of sending an instant message. So whether that person is online or whatever, they will get notified that their order has been shipped.

So were going to add this in here. We need to add it into the business process. So we select this, drag it down into here, and then were going to connect that down at the bottom.

Now, on the right hand side weve already talked to — we have a Web Service, which is part of one of the building blocks, and we drive that over to the right hand side and this is where we integrate into our back-end system. And lets just call this the same thing
“Send IM ASN.”

And now what were going to do is normally when UDDI comes more prevalent out there, youll basically be able to go out there and find all these services out there on the Internet. I actually have these located here, so were just going to scroll down here and I have a thing called
“orchestration IM”
that allows me to get notification either from an acknowledgement or from an shipping notice.

So lets go ahead and select
“advance ship notice.”
And so now on the left hand side we have the action item. On the right hand side we have the actual service. Lets connect the two together and were finished there.

The last piece then is to map it. This is where we tie in the XML. We have the original document thats coming in via XML that has the customer number, the order number, their phone number, their e-mail address and everything, and now we need to map that over to the Web Service. So here is our ASN that has all the XML strings and everything in there, and all we need to do is drag that over there, connect the two and now when I go up under
“file”
here and so this
“make XLANG,”
which is a form of XML, and save this, were now going to rewrite the existing schedule and weve now added in that business function into that business process.

STEVE BALLMER: You literally have integrated two applications, the instant messaging application and the manufacturing process application, that simply?

KEN MALLITT: Yes, that simply.

So lets go ahead now and switch rules and lets kick off a transaction from a customer and follow the entire business process integration on the back end.

Lets just minimize this here, and were going to bring up a customer of Gold Cycles, called Cycle Central. And this is a form built with Visual Studio.NET on the front end and what were going to do is were going to go ahead and do a special promotion and create some water bottles for all our customers here, and were going to go ahead and add this item, and then just for this demonstration I have a little button here to generate XML so you can see the raw XML thats going to be sent via SOAP directly over to that back-end supplier here.

And some of the things you can see in here is my e-mail. This is now Im going to be notified via instant messenger. I have my phone number in there, if I want to be called via my cell phone and so forth. So I have all that information in my profile.

Lets go ahead and click
“send”
here, and now whats happening is were actually packaging up that XML, sending it off via SOAP over to the back-end supplier, kicking off that entire business process now and starting to integrate in. The first step was to integrate into the ERP system.

We have another monitor here, which is a Web Service — remember, we had two Web Services there. Every five seconds we just have this refreshing, getting the real time status out of that back end supplier.

So in a second here we should come back and we should see that the order has been placed, which is really the acknowledgement back from JD Edwards. And there you see here our order has been placed.

So now what were going to do is lets switch to the back end and follow each one of those steps within that business process, right? So the first one was to go off to JD Edwards. So our new order number is 51282. Well, here is JD Edwards One World — [cell phone ringing] — and there it is, right, we had that in there. Lets go ahead and push talk and then push 1.

COMPUTER VOICE: To review an existing order, press 1. This is a message from GoldCycles.com to inform you that order 51282 has been completed and will be shipped within three working days.

KEN MALLITT: Okay. So thats one of the notification services that we automatically provide as part of that.

So lets put in 51282 and we can look at that order now into JD Edwards. And there you see our Cycle Central for the water bottles for 550 for todays date, right? So weve automatically very easily integrated in the back-end system. Weve been notified of that. Whats happening is the next thing is to pass that off to the manufacturing system.

Here is a real application that runs down on the shop floor, a company called Iconics that builds these human machine interfaces that talk directly to —

STEVE BALLMER: So these are real apps?

KEN MALLITT: These are real apps.

STEVE BALLMER: We use XML to integrate JD Edwards, Iconics, the warehousing system well see in a minute, et cetera?

KEN MALLITT: Absolutely.

So Im just going to start this up here, and when I do a
“get next job,”
we see our 51282 and we start seeing our water bottles being manufactured, talking directly to the robot, right?

Lets go ahead and speed this up a little bit, so we can get through the demo. But at any time I can go back to that monitor screen, right? And look here, we have now our real time status is in production and we can see every five seconds how many are actually being produced. So were giving the agility to our customer to really find out exactly when that information is going on in that back end.

STEVE BALLMER: So because were using Internet protocols, I can take all of my manufacturing data and pretty easily expose the right set of it out to any of my customers down the road?

KEN MALLITT: Right. So instead of the customer having to come to your Web site and log on and do everything like that, through Web Services they can directly have their own applications now access that information.

STEVE BALLMER: So another big advantage of XML, instead of me having to look only at custom Web sites or Web site produced for me, I can take the data essentially out of a Web site and repackage it and represent it in exactly the way Ken is showing.

KEN MALLITT: So lets go back to the manufacturing and lets just jump this ahead here and mark
“job complete”
there. And when we go back to our monitor now we see in a second here our status has now been updated to built and weve produced a total of 550.

The next step on our business process was to send that off to the warehouse. So here is a real live warehouse management system from a company called McCue, and lets put in our order number 51282. And we see the order from Cycle Central there.

Well, heres where we get a little more interesting here is we work with another partner called McCue that builds Win CE type applications and BizTalk enabled applications. Well, what does that mean? That means XML back and forth between our warehouse management system and a Pocket PC, completely wireless now so were sending an XML picking ticket and then acknowledgement back to the warehouse.

So Im going to ask you to be our little warehouse picker today, and what Im going to do is resize this here. And when I click
“allocate order”
out of the warehouse, its generating the XML picking ticket through BizTalk Server and Microsoft Message Queue down to that Pocket PC.

So go ahead and click
“pick”
for me.

STEVE BALLMER: Ive picked it.

KEN MALLITT: Then click
“done.”

STEVE BALLMER: Im all done.

KEN MALLITT: And then click
“okay”
to confirm that youve picked those items off the shelf.

STEVE BALLMER: So Ive just sent an XML message to this application to let it participate in the process?

KEN MALLITT: Right. But its not just a Web site, its an actual application thats running now on the Pocket PC.

So lets go ahead now that weve sent that acknowledgement back, we go back here and do a refresh in the warehouse management system and we see our status has been updated to shipped.

The last step in the business process is go ahead and ship that order, and now we have all the information. Keep your eyes on the right-hand side of that screen, the bottom right-hand side, and we should get our instant message saying that our order has been shipped here in a second. And it should pop up here, and here it is right here:
“Your order 51282 has been shipped from Gold Cycles.”
And if I click on that, we have the link that brings up that real time monitor.

STEVE BALLMER: You notice that is part of the instant messaging infrastructure that will be built into Windows XP, but it doesnt just let you talk to somebody else the way todays instant messengers do. It lets an application send you a message. And when you click, it knows who you are, et cetera, and can return you programmatically to someplace that you need to be. So its a whole new next generation of notification and instant messaging, which will be delivered as part of Windows XP.

KEN MALLITT: Okay, so just to finish this all up, Steve, lets just real quickly recap. Right, weve placed that order for the 550 water bottles. It kicked off, went off the supplier side and kicked off the BizTalk orchestration that integrated back into JD Edwards. So it took that XML document and reformatted it into the format that JD Edwards needed.

JD Edwards then processed that, sent the acknowledgement back through BizTalk Server and then thats when we got the phone call back saying the acknowledgement there. And then what it also did is attached the work order, billing material, all the routing information and passed it off to its MRP system. Thats when we jumped over to the Iconics end and started manufacturing that, which goes up and pulls that information down from the MRP system, then starts talking to the robots there to start building our little water bottles. And once thats done, then we sent that complete message back for the manufacturing and go back to JD Edwards. And then finally it then generates an XML shipping request down to the warehouse management system.

We then go ahead and allocate the order that generates the XML picking ticket through BizTalk Server and Microsoft Message Queue down to the Pocket PC.

And finally we go ahead and pick that, we generate the XML picking acknowledgement back to the warehouse management system, and then finally we go ahead and ship it. It generates the XML ship notice, updates at JD Edwards, and then notifies us back with the information.

The key here, Steve, is this was built in two weeks with two people, because all we had to do was a lot of it was in the BizTalk messaging and orchestration. Very few components had to be written here because we didnt have to modify anything on the back end system.

STEVE BALLMER: Super. Thanks, Ken.

(Applause.)

STEVE BALLMER: If youre with me at this stage, the thing I hope you get is the incredible power. And were so early in this XML revolution, and yet the kind of flexibility and quickness and agility that it will give us is already amazing. Its amazing. It is the next big revolution, and I think we have tools that can help you get out in front of it.

To have this agile business though requires more than just this view of what we can do today. It does require a good solid foundation, a nimble data center, a data center that is reliable, thats scalable, thats manageable, that lets you work with enterprise data in a very convenient way.

We think weve made enormous strides as a company in providing the tools for you to implement the kind of data centers that you want to put in place. Whether its scalability, reliability, manageability, Windows 200 and SQL Server 2000 really have taken order of magnitude steps forward.

Here is some data in terms of scalability of SQL Server and Windows 2000 systems. Youve got some IBM DB2 systems on here as well. We show absolute TPC-C results, as well as the dollars per transaction along the bottom. You can see that the number one, two, three, four, five systems are all Windows based. It turns to number 28 before you get a system thats based, for example, on Sun Solaris. And here were talking about absolute performance. Were not just talking about price performance, where as always Windows systems dramatically outperform what you would find on a Sun system or an IBM AIX system, but absolute performance of 688,000 TPC-Cs is absolutely a world record.

Sometimes people ask,
“Okay, this is for scale out; thats when Im able to partition the database amongst multiple systems, but what about scale up where I want to have the database all reside on a single system?”
And through the work weve done with our partners at Unisys on scale up systems, I can say today we have systems that are about one-third the price — one-third the price for comparable hardware and comparable performance, based upon Windows 2000 running on the Unisys ES7000 box versus that, which youd find from Sun or IBM or any other vendor.

For scale up we dont hold the absolute performance record, but we can do as much as almost any business in the world would ever need to do in scale up configurations as well.

From a reliability perspective, I want to highlight the improvements that weve made in the systems. Its been a point of real focus for us.

We have some customers who want five 9s of availability, and we have customers like MortgageRamp, which is an affiliate of General Motors Acceptance Corporation, Starbucks, FreeMarkets.com, which is an important B2B Web site, all operating at five 9s. Five 9s has greater cost in hardware, in software, in process than some lower levels of reliability, and we have plenty of customers who are running at very low cost today at three 9s level of reliability and better, people like NASDAQ.com, Barnes and Noble, the second largest bookseller on the Internet today, InfoSpace.com, Commerce One, a leading provider of B2B applications.

So theres plenty of data today that supports this notion of Windows 2000 having the kind of scalability and the kind of reliability that lets you breathe easily and be flexible in deploying these new XML-based applications.

We did a lot of work to get these kinds of reliability numbers. Before Windows 2000 we did a very detailed analysis of the places in which we forced you to take downtime, system extensions that required you to take the system down, to reboot the system.

We took a look at every crash reported on Windows NT 4, every driver reconfiguration, and made sure that in Windows 2000 we addressed those issues.

We invested in clustering technologies for better fail-over.

We documented a lot of the best practices from an operational perspective of our customers.

And last but certainly not least we brought the Datacenter Server edition of Windows 2000 to market, and its got a whole service and hardware support strategy behind it to guarantee the highest levels of reliability and quality.

The other thing that weve done in the foundation is really focus in on this notion of speed to develop, speed to deploy. Ken talked about the way this application only took a couple of weeks to build, and thats because the tools, whether its Visual Studio.NET, which he showed you, which focuses on making it easy to build an application that exposes itself as a Web Service, as an XML Web Services, whether its the BizTalk product, which makes it easy to integrate XML information between applications, weve put a lot of effort in the tools and a lot of effort into the run time systems so that you get a pretty complete suite of products from us that let you build this style of application, deploy it and then manage it comfortably in your data center.

Were not done. Weve got a lot of new things coming. I talked about the new Application Server product, which we will ship later this year. Weve got new management operations tools that we will ship later on this year. Visual Studio.NET is only in beta and it will have full support for our new programming language, C#, in addition to C++, C, Visual Basic, Java, Cobol and about 30 other languages that you can use for this style of development.

We dont think a world that forces you to one programming language is a sensible world. There are tools that make sense for different jobs. If you want to use Java, thats great, but if you have people who know Visual Basic and are comfortable with its flexibility and speed of development, you can use that. And we actually think in our C# work weve taken systems programming really to the whole next level of productivity and rapid development.

So theres a lot of work here thats build around providing a suite of tools that let you target XML based applications and do that very rapidly. Whos the competition? The competition, of course, is J2EE based solutions. They havent fully embraced this XML world yet. Theyre starting to. Theyre very expensive. They by and large deploy most commonly on higher priced systems. We will build the core XML infrastructure directly into the Windows clients and the Windows server. And theres nothing in the vision that IBM has expressed or Sun has expressed for J2EE that starts at the problem of how do you connect the users to these applications.

We showed you instant messaging tied in to the user interface. Thats part of the vision. Part of the vision of an agile organization is an organization thats able to get that information to its users. So not only do we give you the tools to build XML applications, we give the users the tools and the facilities to access that information very comfortably. And thats something that we will do uniquely versus what youll see from Oracle or Sun or IBM.

The key though isnt the technology. The technology, the XML revolution, its all there to enable new business scenarios, empowered employees, connection with partners and suppliers and vendors and customer centricity. We have a lot of partners that we work with in each and every one of these areas, and we think theres just enormous progress being made.

In terms of empowering employees, were on the verge of introducing our Office XP system. Were going to show you a little bit of that in a demonstration how it integrates into this XML world.

Weve just shipped our new knowledge portal server, the SharePoint Portal Server. We have new collaboration capabilities based on this XML infrastructure that shipped in the Exchange product and in Office 2000.

And all of this is being designed to extend to handheld devices, whether its the Pocket PC or a variety of work that were doing with cellular telephone manufacturers around the world to make sure that this information is easily accessible via WAP phones, phones with smart browsers, et cetera. Weve got to get the information to the people.

Windows XP, which will be the end of this year, is another big step forward. It builds in a common notion of how you authenticate to an XML Web Service, how you notify from an XML Web Service. It builds that into the basic Windows system, which ships at the end of the year.

In terms of this notion of businesses without boundaries and supplier and partner integration, as I said earlier, I think this is one of the big, big, big areas in which businesses will need to move. How much e-commerce will be done with consumers remains to be seen. What you can do with your own value chain does not remain to be seen. Using the kinds of XML technologies that we demonstrated for you earlier, theres just huge wins out there. And whether thats automating a supply chain, a design chain, theres so much that can be done.

We thought wed give you a little sneak preview of some work we launched a couple of months ago in Mexico and which we will be carrying forward later this year to Argentina, to Brazil, to a number of countries in Latin America with our bCentral Small Business Services.

Now some of you may say,
“Why do I want to know about small business services? Im an enterprise customer. Thats why I come to the Enterprise Solutions Conference.”
Because I think one of the great challenges of the enterprise customer is — how do I connect electronically with the smaller vendors that I do business with, with the smaller customers I do business with? And with the bCentral services that were putting in the market in Latin America, were going to put in the small businesses hands the tools that will allow you to connect to them in this XML world.

So Id like to invite our staff that is working in this area to come on stage and share a little bit of that work with you, and Im going to turn the stage over to Thomas.

(Applause.)

THOMAS: So Im very happy to see all of what weve presented with integration with large and medium to large-size businesses, and this real time integration.

The real question here is how do we take this to the masses? How do we take this to what is maybe 95 percent or plus of the commercial entities in our region? These are very small businesses. How do we take .NET to these businesses? And this is what bCentral is all about.

We have to take into account how the actual small businesses are — whats their condition in Latin America, what theyre being required by their large customers to connect. Some of them are asking them to connect via EDI or via specialized extranets. So they have to understand all of these different interfaces. Its quite complicated for them.

They also have to connect with government, banks and suppliers. They rely very much on a lot of outsourcing for telecommunications. They have low infrastructure for computing. They use mainly our channel as their IT consultant. And they have the same overload of administration as the large business but they dont have all the elements to face it.

So taking all of this into account we feel successfully over .NET. What were going to see right now is a live experience. Its much more than a demo. Were going to see its going to be actually happening, and its actually working today in Mexico.

So Id like to invite Marco Calderon, whos going to be representing our large customer that wants to integrate with a small supplier.

MARCO CALDERON: Great. Thank you, Thomas.

I represent a large company in the retail industry. Our name is Costco. We need to send different kind of commercial documents to our small and medium suppliers. For this we are using also business orchestration services, all designed to take one of those documents from our ERP applications and then take the decision where that document is going to be delivered. In this case that document is going to be delivered into the bCentral site.

Im going to show you one of these examples and Im going to send a real purchase order. This is one of those. We are running out of a stock some Mexican candies. This is one of the purchase orders. And Im going to send it through this stock orchestration.

Okay, the transaction has been sent and it tells me that actually the transaction is in bCentral now.

STEVE BALLMER: That was an EDI document that you sent across, but you sent it in XML format?

MARCO CALDERON: Exactly. BCentral transformed this transaction in a very simple way in XML so that transaction is going to be sent with the supplier.

STEVE BALLMER: So minimal changes to the EDI systems that Costco already has in place?

MARCO CALDERON: Thats right.

THOMAS: Thats great. Now we have part of the demo where its the same infrastructure for .NET that you use to connect to large or medium sized businesses, now youre going to connect to small businesses through bCentral. This was the point of view of the large business now. Wed like to invite Julio, who is the proud owner of a small business in Mexico, to show us what his experience using bCentral is every day.

JULIO: Hi, Thomas. Hi, Steve. Thank you all for inviting me, and just in time because Ive been notified by bCentral to my pager that I have a new purchase order from one of my customers. So what Im going to show you is what Im doing with bCentral, which has really enabled me to keep on top of my business today.

As you can see right here, what we have is Outlook XP based out of Office XP. I have a couple of tasks that I have to do today. I have my contacts. And one of the things that this is very cool is that I can really use my very small telephone infrastructure. As you know, I only have one telephone line in my office, so as you were using the phone, if you can hang up, then I can connect to the Internet and synchronize all of my items.

So what Im going to do here is Im going to send and receive and Im going to synchronize my Outlook. Im going to connect to the Internet, connect to bCentral and download the information that I need.

STEVE BALLMER: So youre saying the bCentral service in Latin America will process these XML messages that come from larger businesses and then package them up and essentially just e-mail them to you?

JULIO: And its great because it actually advises me that the document is waiting for me, because Im not online all the time. Its very expensive for me in Latin America. So it tells me that theres something waiting for me there. And now I can go out and see who is my customer thats sending me out a purchase order. Oh, and its Costco, which is actually one of my largest customers, so Im really happy that theyre still buying from us. And I have all the information out of the purchase order right here.

So one of the really interesting things is that bCentral has provided me with the ability to have this data in a standard format using Excel XP. And with Excel XP I can really use information and introduce that information into other of my normal accounting package systems that I have running in my office. And you know Excel XP one of the cool things that it has is this Smart Tags. Of course, you know very well what that is. So it recognizes that this is —

STEVE BALLMER: This is a new feature of Office XP that allows any Office product to recognize — we say Smart Tags — but it lets you recognize essentially XML information inside any of the Office applications whenever you see that little
“I”
sign or information sign that Julios going to click on now.

JULIO: Yeah, Im going to click on this. And one of the things that happened is my Microsoft reseller who installed bCentral in my office configured this in a way that its already connected to my accounting package. So with Smart Tags its extremely easy and its just, you know, two clicks on the mouse and youre actually going to do all my accounting for me.

So what happens right here is that it has sent the data from this purchase order to my accounting system and its going to do several things for me. Its going to check inventories to see if I have all the information that I require for this product. Its going to create an invoice for the customer. And its also going to create an accounts receivable for me, so that way I have done all of that paperwork automatically.

STEVE BALLMER: So bCentral took the XML document, let you view it in Excel, and then ships the XML document to the accounting package, which comes from — whats the name of the firm in Mexico?

JULIO: Its Costco, which is my largest customer actually.

So I can go back and then go on and do the rest of my things as I work through today.

THOMAS: I have one question. Is Steve now your accountant?

JULIO: No, it has changed a little bit because actually all of the data that I do, the input of the data into my accounting system is done automatically. And my accountant now really provides me value add because he ensures that I do everything according to the general accounting practices, and he provides me financial information so that I can make better decisions for my business.

THOMAS: Okay, so now we saw how you automated your accounting process, not only integrating through your accounting package, but also sending some information to your accountant that hes going to present later.

What else can you do with bCentral?

JULIO: Well, one of the really interesting things is that as a small business I have to do a lot of government paperwork. And part of what I do is theres a lot of changes in my payroll very frequently, so I need to keep the social security updated in regards to that. And again the Microsoft reseller that installed bCentral connected this to my payroll system, which is a normal commercial package that I use in my office.

So what Im going to do is Im going to check what are the changes that I have made during these last couple of weeks, and its very easy. What Im going to do is say I want to check biweekly the movement that Im going to do. Lets take everything, new changes in wages, new employees or any changes that I have made, and lets select a period that goes from the 15th of March to the 15th of April.

So what it actually does, the way that they have configured this is that this goes to my payroll system, takes all of the information out and pre-fills an Excel spreadsheet, an Excel XP spreadsheet with all of the information that social security requires from me by law to be able to submit.

And the only thing that I need to do is just press a button. The information is prepared and it is automatically send to bCentral and bCentral will take care of this information so that it arrives to the social security.

STEVE BALLMER: So youre essentially packaging up an XML document out of Nomipac, I guess is the name of the software product. Youre looking at it in Excel. Youre shipping the XML document to bCentral. And then it will distribute it to the Mexican social security.

JULIO: Thats correct. And whenever the social security processes the information, it will send me a confirmation that everything was done accordingly and securely so that Im safe and I have done all the movements that are required.

STEVE BALLMER: And Costco, the Mexican social security, theyre already signed up and supporting bCentral?

JULIO: Actually Im receiving purchase orders from several of my largest customers. I do social security. I do all their stuff. I do banking transactions, like electronic funds transfer and several other stuff through bCentral.

STEVE BALLMER: Super.

THOMAS: Okay, so we see now on application to the government. You have mentioned that you can interconnect to banks. And whats most important is this is done from a single interface at his office that you already know how to use. Its Excel. Its Outlook. And it also integrates to your accounting package that you already have.

Now to be a good .NET citizen, we have to give this power any time, any place and on any device.

JULIO: Yeah, and actually thats one of the things that I love, because it really has allowed myself and my sales people to travel more and to look for new clients, which is key for the survival of my business. So my sales people, not all of them have portable laptops, so some of them when they travel they go into an Internet caf
é
or the business center of a hotel, they log onto the Internet and with their password they can see their documents securely.

But whats really cool is that we are now synchronizing with our portable Pocket PCs so the same Excel spreadsheet that we saw on the Outlook XP experience I now have this with my Pocket PC. I just click here and I have exactly the same information, which is all of the information of this Excel spreadsheet right in my hand so that I can work on it on the plane or wherever I go.

THOMAS: This is bCentral bringing .NET power to small businesses and large businesses can leverage this effort from Microsoft to enable their e-commerce strategy and reach all sized businesses.

STEVE BALLMER: Super. Thanks, all.

THOMAS: Thanks a lot, Steve.

(Applause.)

STEVE BALLMER: I hope you get a sense of the power of this whole XML phenomenon. I mean, its really amazing. I actually had never seen a demonstration of the bCentral Latin America stuff until I arrived here yesterday. Weve been working hard on it now for about a year. But using the power of XML and with the work with the partners, it really is a chance to see businesses connect to the important small businesses that they do business with.

I want to move to conclude with just a couple of case studies, people who are using our technologies, using the XML infrastructure to get business agility today. The first one Id actually like to show you a video from BMNF, a large bank in Brazil that is using Windows and XML BizTalk based systems as part of their foreign exchange clearing system. Theyre one of the largest clearers actually in the world of this kind of transaction and theyve built fairly sophisticated systems on this platform.

So if we could roll the video please?

(Video presentation.)

STEVE BALLMER: Its really an important application. And when you think about the key issues in managing risk and foreign exchange, this is an application that was built in eight months and its been set up to process over $5 billion daily of transactions, its really quite amazing.

Mr. Vicara from BNMF is with us today. I had a chance to chat with him a little bit this morning about the application. Theres a lot more we can do, a lot of challenges, lot of issues. As all our customers do, hes pushing hard to see us move capability, reliability, everything forward, but I think its been a real success for us and is an example of the kind of amazing customer-touching applications. This is an application that touches the brokers, that touches the banks, which is a fundamental customer for BMNF with their foreign exchange system.

The other case Id like to go through just a little bit is some work that weve had a chance to do with Telmex in Mexico. And this is the work I mentioned earlier where were really trying to put information in from of decision-makers. They need to make real time decisions about how to provision, how to deploy, how to staff for information coming from a variety of different systems. They have long distance services. Theyve got local services. Theyve got data services. And how do they consolidate the operational information out of all those systems conveniently so that executive management can pull together, take a look at real time information and then make the tough decisions they need to make to operate Telmex properly.

Its been a really successful system with us, one that fundamentally affects not only the workers but the executive management of Telmex in the kinds of decisions that they need to make every day.

Microsoft as a company has made a huge investment in the technologies and in our own support and in our own ability to provide consulting and architectural guidance to you around these agile business solutions. We think this XML wave is amazing, but we know that it will require more than our work and more than your work; it will require the work of independent software vendors and other consulting and system implementation partners around the world to really make this work.

And so weve put a lot of our effort and energy in putting and bringing up to speed partners who can work with us and work with you to get things moving and build these kinds of solutions.

The whole XML world is about helping people leverage the work of other people. Its born to facilitate the kind of systems integration that our partners do.

Our lead partners for this event were Accenture, Compaq, KPMG and Unisys, people who are doing hardware as well as services to help people really take advantage of the XML revolution. But they join a broad variety of partners, global partners, regional partners as well as local partners who we have around the globe helping in this kind of work. Youll have a chance to hear during the course of the ESC from a number of these people, and particularly from Accenture and Compaq, KPMG and Unisys, but the value add of these third parties who can come in and help build these applications is absolutely essential.

Theres a big opportunity here. Youre going to be under constant pressure as leaders of businesses and IT organizations to move more quickly, to face the customer and the partner more effectively. And the opportunity to work with us, to take advantage of the XML revolution, to build out standard XML infrastructure in your businesses, to connect to small and medium companies through services like bCentral are really amazing.

We look forward to having the opportunity to work with you on leading-edge projects. As I said at the beginning, Latin American businesses have been amongst the fastest adopters of new technology. I suspect at the ESC a year from now well be talking about Latin American leadership and taking advantage of the XML revolution.

Thank you for your time.

(Applause.)

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