Steve Ballmer Speech Transcript – Enterprise Solutions Conference For Latin America

Remarks by Steve Ballmer
Enterprise Solutions Conference For Latin America
Boca Raton, Florida
April 25, 2002

STEVE BALLMER: Well, thanks. It’s a real honor and privilege to have a chance to be here with you today. It’s sunny and beautiful outside. I’m not really sure why we’re in this dark room, it’s the most productive use of time humanly possible.

I was reminiscing as I came in from the airport this morning to the time from the ’80s. I joined Microsoft in 1980, just as the IBM Personal Computer was really starting off, and the headquarters of the IBM PC business in the first place was right here in Boca Raton, Florida. And I went through a period at one time in my life, where I made 16 trips in a row, every week for 16 weeks, from Seattle to Boca Raton. It’s a long flight, but it’s not nearly as long as the flight that most of you took to be here with us today, and I certainly say thanks incredibly for not only the time that you’re spending with us and our partners at this event, but thanks for all of the support that you’ve shown Microsoft over the years.

The title of my talk today is Realizing Potential in the Enterprise. And I want to spend just a minute and talk about this theme of Realizing Potential, and what it really means to us. We recently did a retreat for the top 100 executives at Microsoft Corporation. And we spent a lot of time really talking about the transformations that have gone on in our industry and in our company, and looking for those things which necessarily must be different, and those things which must necessarily be the same.

And I think the biggest takeaway I had from the retreat is, if you look at the value that has been delivered in the personal computer through products like Windows, in the Internet over the course of the 21-year history now of the PC, at the end of the day, the fundamental thing that’s been amazing about the last 20-plus years is the way in which technology has really become a tool to help people and businesses, and people inside businesses, extend their capabilities and really recognize their potential.

I will talk a lot today about scalability and security, and availability, very important issues, because you cannot depend on a set of tools to help your business realize its potential unless you can depend on those tools, and depend on the data that you get out of those tools seven days a week, 24 hours a day.

I may speak less today, but I’m no less passionate about the degree to which the transformation of our industry over the last 20 years has been to allow you as business and IT leaders not only to run data centers which are better and more efficient and more flexible and more agile, but the real advance in some senses has been to give you tools that let you put more power, more control, more insight, more knowledge, more data about your businesses in front of the users, either at your customers through the Internet, or inside your company, the users who need to know and need to understand the business.

I had just a short meeting earlier this morning with a customer from Mexico, CCM, who makes the beer Sol, and they were talking about their use of Pocket PC for the drivers and the sales people who go out and visit the various retailers and bars and restaurants who sell their beer.

But if you really think about it, think about it in context, it is really amazing how much information, how much more information you can put in front not just of the CEO of the company, but you can put the information right there, right there with the driver who goes out to drop off the beer, to pick up the beer bottles, to collect the money, so much more well-informed, so much better able to do their job today than at any other time in the past.

We, our company, our partners, and you, we have a responsibility to help your businesses, and the people within them as employees realize their potential. We talk about that in the context of business as a focus on agility. That’s what the business wants. Your businesses want to be more nimble, more flexible, more in touch with customers, better able to respond and adapt. That’s how we need to help, we think, with a set of tools to help you, help your businesses, get the kind of agility and the potential that that brings inside of them.

That focus is very paramount at Microsoft. We grew up as a company doing operating systems, we got into desktop applications. We’re going to talk today a lot about the enterprise and server applications. But it’s an end-to-end perspective that is very important. You’ve got to run the IT shop, then you’ve got to have the end user tools, like Windows and Office, and the amazing evolution we see happening in productivity software, communications software, data analysis software. You need to use those new tools, tools like Windows XP and Office XP, to bring the data in your organization alive for people.

And, in some senses, I’ll talk a lot about how we can help you achieve that, but the way I think about our mission every day, with every one of you is to be asking the question, how do we help you help the people in your companies realize their potential as employees, and give your businesses the kind of agility that they really want.

I’m particularly delighted to have this opportunity to speak here again at the Enterprise

Solutions Conference for Latin America. I was, last year, also at the conference, which was held in Miami, and it was simply one of the most exciting days, I would say, that I had last year. Why? It may not be as clear to you as it is to me, but the dynamic nature of the IT market in Latin America is truly phenomenal, and the openness that I see amongst our customers in Latin America to new technologies and to new approaches is really amazing.

If you just look on almost any dimension, annual growth in the number of people using the Internet, growth in IT spending, growth in users on our MSN portal, any of these dimensions, Latin America has been the, if you will, the highest growth geography in terms of acceptance of new information technology, not just last year and the year before, but really over the last six, seven, eight, perhaps as much as ten years. And every time I have a chance to sit down with customers in Latin America, I actually find more willingness, and more openness to new approaches, to new technologies, to new ways of doing things, than I find with customers in many other parts of the world who perhaps carry more legacy, I don’t know what the issue is with them, and we certainly find a very advanced, and literate, and sophisticated IT audience in Latin America.

So, for me, I had a great day. I came down last year to speak at this conference, and people had questions and thoughts and challenges, pushing, pushing, pushing, new ideas. Can you do this, can you improve that? I’m sure this conference will be no different. I look forward not only to having this opportunity to chat to you, but we’ll also have a discussion and Q & A session when I’m done, and I’ll have a chance to meet a number of you later on during the day.

I want to come back to this theme of business agility, because really at the end of the day, I’m sure that’s what really brings us all here. We all aspire to form a new kind of value chain of knowledge across the employees who work for us, whether they’re at their desks, or they’re stationed some place out of the office, consumers, and business partners that we do business with, and, in fact, even to the value chain of some of our customers and partners.

I have been involved with a project that we’ve been working on with General Motors. It is the assembly of a car is a very complicated operation. As some of you may know, car companies have suppliers who have suppliers, who have suppliers, who have suppliers, who have suppliers, who have suppliers, who have suppliers. I might have missed one supplier in that. But it’s a very complicated supply chain. But it’s even more than that, a very complicated design chain. General Motors designs a car, they design the door. The person who actually makes the tool that cuts the door that fits in your car is probably six layers removed from General Motors. They need a way not only to know inventory information, but they literally want to make sure that the tool that gets cut by a small company that might only have five or six employees actually cuts the door, the tool, in exactly the right way, otherwise they have a mission-critical problem at General Motors. And that problem is, the door on your car rattles. That’s a mission-critical problem for GM.

But they need tools up and down that chain, not just to pull information back and forth about how much of something is being built, but what’s the state of the tool. They need to be able to take information from that small toolmaker, and model it in their computer systems to make sure that door is going to fit in exactly the right way. Their engineers need to see that data, work with that design data. Their manufacturing systems need that design data. It’s not enough to just say this is a big batch process that exists someplace in the data center. It involves people’s brains, designs, manufacturing, and it involves people in GM and a whole slew of partners with whom they work.

When they say at GM they need to be more agile, quicker to put new products in the market, they’re really talking about this kind of involved scenario. And I know each and every one of you has a set of cases that are identical, where it’s a question of moving data around and letting people look at it, evidence it, make decisions on it, and move forward. And that’s the focus, I would say, of Microsoft, and I think needs to be the focus today of the technology industry.

The good news is, we live and we are part of an industry that does do revolutionary work. And each of the revolutions that I’ve had the privilege of living through has really brought huge advances on this notion of agility. The PC, a revolution that everybody accepts today. I do have to say when the PC first came out, nobody thought it was a revolution. Just a small footnote, the original sales forecast, lifetime, for the PC by IBM was 16,000 units. Today there are over 500 million personal computers that have been installed worldwide. Nobody knew the PC was a revolution. Most people didn’t know the PC was a revolution when it first came out. We all agree it is today.

The move from the old-style character user interface to the modern graphical user interface was a revolution. I remember when people used to say, why would anybody want to look at those silly menus on the screen? We need character-mode fast interfaces for data entry. And we had IT directors telling us that’s all that anybody ever needed. Certainly, if you ask today, would we have anywhere near the number of people involved, using the kind of data that you produce and distribute and manage for your organizations, the answer is no.

The Internet was another similar revolution. It took years. When Bill Gates and I were in college together, one of the first computers was installed at our school, and it was on the Internet. The Internet, that was 1974, the Internet didn’t take off really for another 20 years.

In each of those resolutions Microsoft has been fortunate to have done products that helped lead the revolution, and that DOS, Windows, Internet Explorer, in some cases we were ahead of the market with MS-DOS and Windows, in some cases we were behind the market, shame on us, with Internet Explorer. Although, I guess we caught up pretty well. There’s been a lawsuit about how well we caught up for the last several years.

We’re on the verge of the next big revolution. I will tell you today that I think this revolution is as big as the PC or graphics or Internet. And that’s the XML revolution. Some people say, I’ve studied XML, or I know something about XML, why would you say that it is a revolution at the same size as any of these other things? Because I think that XML will become essentially kind of a lingua franca, if you will, for the Internet, or for computing. I shouldn’t say the Internet, for computing. The standard way that systems talk to systems, and that people talk to people via computer systems in higher level intelligent ways will be XML. And just as people asked 20-plus years ago, Why will we need PCs? — five years from now, ten years from now, it will just be the accepted nature of how systems work.

It is very hard today to connect systems. We hear that from all of you. Everybody has an enterprise application integration project going on. Everybody has some system that won’t talk to some other system. The issue is, we need a higher level architected way for that stuff to work, and it’s got to work across the Internet. It’s got to work over Internet protocol. It’s got to work through firewalls, but with security, in the appropriate way. It’s got to help consumers, not just enterprise application integration projects.

I don’t know how it is for many of you, but the mission critical application in the Ballmer family, not Microsoft now at Microsoft, I’m CEO and I can tell you about mission-critical applications. At home, I’m actually COO, and my wife is CEO. She said the mission critical application in our family is the calendar. I keep my calendar, not surprisingly, in Microsoft Outlook and Exchange at work, and my wife, perhaps also not surprisingly, keeps her calendar up on MSN in the MSN Calendar. Nice, convenient, fine. My wife thinks my getting home on time is a mission critical application. She would like to see me frequently merge those two calendars and make sure my calendar fits with her calendar. I can’t just drag her calendar and drop it on my calendar and do a comparison. I want to do that, but there’s no lingua franca for the way you would do that. There’s no user interface metaphor. You can drag and drop pictures of information, but I don’t want the picture, I want the real calendar. I want to be able to do enterprise application integration at the Ballmer family level.

And the case I mentioned is a little silly, but you can say it’s trivial compared to what we’re trying to do with our company, but it’s not. You need to do it at an enterprise level, but everybody who works for you has an equivalent set of things they would like to do with the information you publish to them. They would like to take some SAP data and compare it, perhaps, with some data they’ve pulled down off the Internet, or some data that they have in a project management system. And so, we need this kind of higher level construct for helping applications integrate.

Most of the great advances in IT have come because they let people better reuse the work of others. It’s not because we’ve made programming simpler. Why was Excel a breakthrough, or 1-2-3? Because it let everybody reuse and design their own view of the world, but around a common set of codes. Why was Windows great? Because a lot of applications could reuse it. Why is the Internet great? Because a lot of applications can reuse it in a consistent way. XML is really the next big advance on that.

Microsoft as a company has made a huge investment in retooling and redesigning our product line around XML. For some of you, this is not the mission critical problem of the day. For all of you, this is the mission critical opportunity of tomorrow. And we are working hard to lead the world into XML with our so-called .NET platform. People ask me, what is .NET? And my answer is really in a simple way, .NET is everything we need to do to enable you at the client, the server and the cloud, everything we need to do to enable you to build XML oriented applications that integrate in a higher way, and everything we need to do in Windows and Office to make sure that the end user can take data that you give them in XML format, and they can manipulate it, they can display it, they can compare it, they can do what Mrs. Ballmer would like me to do. So, .NET today has a specific kind of definition, it has a specific set of pieces. But we’re rebuilding Windows around .NET. We’re rebuilding our servers around .NET. We’re rebuilding Office around .NET. An we’ve introduced some new services for authentication, and others, that live out in the Internet cloud. Just as we bet our company on the Internet seven years ago, so today are we betting our company on XML. And this time, I think, as I’ll talk in a little bit, I think we’re well in front of competition on this.

You can get something of a sense of that just by looking at our enterprise server line, the so-called .NET Enterprise Servers, and the number of products that we are rebuilding and retooling around XML, Windows 2000, the Data Center Version, the Advanced Server Version, all of these products have taken the first step. We’ve built in the ability to handle and parse XML. We’ve worked on a set of standards with the industry, which are called the WSI standards for how XML information gets put across the TCP/IP link, and how it gets secured. We announced some new proposals in that area a couple of weeks ago in conjunction with IBM and some others. So, a lot of work at the systems level.

But then, if you take a look at our applications, server applications, the database needs to store XML, the content management system, the commerce system, all of these products need to accept information in XML form and be programmable through this kind of XML .NET infrastructure. And literally every one of these products either has been retooled, is getting added on toolkits to let you work with XML, and will be further retooled in the future. You’ll hear later on today from Lyle Curry, who works in our database group, really the focus on this next version of SQL Server is a lot of things, but one of it is to rebuild it from the ground up, not exactly from the ground up, but largely from the ground up to be an incredible XML storage point. The portal products, portals need to have a common way of bringing information together, the answer is, again, XML.

Just to pick a couple of examples of this, I’ll talk just about these as examples, our new Commerce Server 2002 product, this is a server product that helps you build an online presence through which you want to do commercial interactions, selling, buying, et cetera, with your customers and trading partners. We’ve just brought out a new release, the new release integrates tightly with Visual Studio.net. It is able to be used to export and to present itself as a set of XML information. Say you have a customer, eBay is a reasonable example although they don’t use this product, some of your customers actually want to come to your web page and type in their order, no problem. It’s well-known how to do that. But suppose you have some customers who actually want to talk to your computer programmatically. Some of you will say, well, I can do a specialized link, I can do something in EDI, ba-dump ba-dump ba-dump. What you really want to do is create your commercial presence in XML, and then if somebody wants to see the information, they can see it in a browser. But if they want to take a price list, for example, from you, take it down on their computers, have some more analysis and study done on it, you actually want your commerce presence to speak XML, and the kinds of technologies that we’ve built into Commerce Server 2002 really facilitate your building that kind of XML presence on the Internet.

Another good example of this XML and .NET embrace is some work that we’ve just issued that works in conjunction with our Exchange product. We want to make it possible to access all Exchange information using our .NET toolset and through XML. The calendar example I went through is a very good one, how do I get the calendar information in XML format? Well, with the XML Web Services Toolkit that we’ve launched for Exchange, we take the first step down the road of letting it speak the lingua franca of the Internet.

Just for a perspective before I invite Lyle to come back up on stage, maybe a little bit of perspective on the Exchange product, because really it’s been one of our fastest-growing businesses over the last several years. We’ve been, for many years, the number one competitor for corporate email, scheduling, groupware has been Lotus Notes. Just in the last year, we now have gone over 100 million, 100 million customers using Microsoft Exchange, and we think we now have over twice as many users as Lotus does for their Notes system. And you’ll find Exchange in use in over 65 percent of all of the large companies in the United States which build their basic backbone infrastructure around Exchange.

I now want to invite up on stage with me Lyle Curry, who works in our database group, where he’s a product planner. He’s going to do a little bit of a demonstration for you of some of the kinds of things that you can do with these .NET Enterprise Services and XML.

Lyle.

(Applause.)

LYLE CURRY: Thank you. Good morning, everyone. What I’d like to talk to you about today is the America’s Cup. For those of you that don’t know, the America’s Cup us the world’s premier yachting race, and ten teams that are from countries all over the world will vie for the right to challenge New Zealand, who is the defending champ this fall for the America’s Cup. These people spend about $80 million a piece for this effort, and technology actually ends up making a difference between winning and losing in this very competitive environment.

So there’s a new challenger this year, and it’s the One World Team from the Seattle Yacht Club. Now, One World is actually using Microsoft technology in the form of SQL Server 2000 to help do analysis on the massive amounts of data that they collect when they’re doing testing.

And what I’ve got here today is a vision for how XML Web services in concert with the .NET Enterprise Server product can help the One World Team be more effective in their interactions with their partners, and also increase the value of their fan base which is globally disperse. So let’s get started, I’m going to come in first to a secure portion of the portal that’s for partners. So I’m going to log in via Passport. Okay. And I’m going to sing in. And so all of the team members that are part of the core team, as well as our extended team, which includes the engineering teams that work on the components, that are usually based in the United States, as well as suppliers that actually manufacture these components have access to this portal, and we can collaborate in the process of designing better boats.

So the first thing I’m going to do is show you some of the information we can pull up, this is one of the parts that I worked on here, is the winch, and I have the ability to load in the 3D models, which are the drawings of the actual parts. So for the purposes of this demo to start with here, I’m going to play the role of an engineer who is working as one of the partner firms in the United States on these various parts.

The first thing I want to do is, I’m working on a specific part currently for the team, which is a fin, it’s a rudder fin, and let me pull that one up. There we go. And of course, I still have the ability to pull up the drawing. But, as an engineer one of the things that’s really important for me is to pull up the test data to make design changes, I need to know how my current design is running in the real world, and to make changes I have to understand how it performs. So I want to look at the test data. Now, this has been very difficult for me in the past, because I’m in the United States, the team is running down and off in New Zealand, and it’s hard for me to get real time data. So using XML Web services we’re able to expose this information that’s in SQL Server down in Offland, for the engineering team, and they can look at tests, and these tests are specific to this part. I can come in here and chart out some performance information on this test. What I’m actually looking at is location information for the boat during this test. This is about a one-hour test run in the Harrach Gulf, and I could do some things.

This is not a dynamic environment, so I can choose to look at a denser view of the data. Now, this software that I’m using to do this charter is actually from one of our really good partners that’s actually here in Boca Raton, they’re a local company, that’s Software FX, and this is their Chart FX .NET application that I’m running. So because it was written for .NET this is really easy for us to integrate with our application.

Let’s do a little more work with this. I can click on at any point, and I can look down here, and I can see the telemetry data for point. I can also go up and look at another point, and just highlight a section of the test. So here is about seven minutes out of the test that I want to take a closer look at. And as an engineer I want to understand the dynamics of what was going on here, so I’m going to look at different views, for instance, the keel of the boat, which is the angle that it was keeled over at each data point, or since we’re working on the rudder, let’s look at the rudder position.

The point is here, as an engineer, I have access to all the critical information I need to make the design changes, and so for the purposes of the demo I’m now going to change roles, and I’ll play the role of a team designer down in Offland, who has actually received notification that the guy has got a new design for me, I want to get it on to the boat, and see if we can use it in the next competition. So next what I’m going to do is go over and look and see what vendor we have working on this particular part.

We’ve got a single vendor for this part, and in the America’s Cup, it’s interesting because there’s only a few places that can actually manufacture this kind of high tech part. So actually a lot of the teams use the same vendors to make the parts. So it’s kind of a mini-competition to get time with the vendor. So, again, this is where XML Web services is really going to help out the One World Team. We’re going to go over to the schedule information, and I’m going to be able to pull up the schedule for the production line for this vendor, and also overlay it with the team schedule. So I’m taking information from SQL Server that talks about the production line vendor, and overlaying it with calendar information from Exchange Server for the team. And I have a nice view of it here, and as I look at my month of May I can see I’ve got a race at the end of the month, so I’m going to need to request this part to be made by, let’s say, the 22nd, if I’m going to have any chance of using it in that race.

STEVE BALLMER: So you’ve integrated all this data using XML, the Exchange XML toolkit, et cetera?

LYLE CURRY: That’s right. In fact, we use the SQL Server Web services toolkit, and the Exchange Web services toolkit to make this work. So it’s really a great thing for us. I’m going to go ahead and place this order. Of course, it’s not just scheduling information that we’ve integrated, but we can actually integrate the ordering process as well, using XML, and what will happen is, on the vendor then they can take our request, process it, you can see that they can meet our date of the 22nd, but they’ve also offered an earlier date, as well, and it’s a 25 percent premium for the quicker turnaround, but time is money. So I’m going to take that quicker order so I can do more testing.

So I’ll request that order, and via Web services I’m able to send them the full information for the order, as well as things like the engineering, the 3D model in XML that they need to manufacture the part. And if I go look at my order history I should see a new order, and there it is, our order for today has been accepted. So if I go back to the schedule view and take a look, hopefully what we’ll see

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yes, the manufacturing line has been reserved for us for three days early in the month, and they’ve also inserted a delivery for the part on the 14th, I know that’s kind of hard to read. So that’s actually in our Exchange calendar. So if I go over to Outlook and take a look, flip over to the month of May, take a month view, you can see it’s actually been inserted into our calendar automatically.

Now, I’m going to go ahead and schedule a test, it will be the last thing that I need to do, so that the team knows that the part is coming in, and I want to get it tested. All our testing takes place down in Offland. I’ll just label it as a performance test, and I’ll make it an all day event, and then we’ll just save it to the calendar. So there is it, in the calendar, but as you would probably expect, if I go back to the schedule view and refresh it here, there is it, it appears. So this is really a great thing for communicating with our extended team.

Okay. I also said that we’re going to do some stuff for the fans, so let’s go into the other parts of our portal. We have some interesting things for the fans, like different models of the boats that they can look at, we’ve got race standings, racing takes place in New Zealand, not everyone is in that time zone, so it’s good to come in here, and see how things are going. But, one of the great things we were able to do to make the site a little more interactive was actually add notifications, so the fans could be notified for events, race standings, or news, or whatever they were interested in. We used notification services for SQL Server, which is in beta right now, it will be released within a couple of months, to quickly put this into the application.

We’ve implemented a rich email notification, or a mobile SMS notification, you can have any kind you want, we have multilingual support. So I’ll stick with English, which is my language, and I’ll go ahead and you can pick the frequency, and you can just sign up. Then the next thing I want to do is add a mobile SMS notification, so it’s the same information, but if I happen to have my phone, then I get a different form factor for that information. So if I go into Outlook, since I’ve signed up, I should have an event come in, my introductory event, and there it is. I can open it up, it’s a rich e-mail, it’s got links back to my site, which helps me drive traffic back to my site. When the fans get back to the site, they have some more to look at. And they can watch a virtual replay of the race.

Now, this is interesting, because this is actually using that GPS information we had from the engineers and re-purposing it for the fans. A portion of it is used to plot the race out for them, and they can watch a virtual replay at their convenience. So the fans really

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this has been a real popular feature for them.

Okay. The last thing we did was we put a team store in, because the fans got really into the racing, so they wanted to buy logoed merchandise. We used Commerce Server 2002 to implement this team store, and as you’ve mentioned, we’ve got tight integration with Visual Studio .NET, and so in order to create this store it was able to come into the design tool here, select a new project, I’ve got commerce server projects I can select, and it actually creates a wizard environment to start the project.

So literally I ran through the Wizard and it created a basic, fully functioning retail site, and then I was able to use the tool to create an XML based catalogue for my site, and the result is what you have here. So I’ll take you through a basic shopping experience, we have accessories for the team, clothing, and I think, Steve, you could use a One World patch, so let’s buy you one of those. And because I signed in with Passport earlier, that authentication has stayed with me all the way through, so it knows who I am, and I can go ahead and just check out, all I need to do is pick the credit card, which is also a card in my profile, complete the purchase, and I’m done.

So what you’ve seen here today is how XML Web services, working with our .NET enterprise Server product, has helped the One World team be more effective with their partners, and have a better relationship with their fans. And in the America’s Cup, as well as any business situation I can think of, that could mean the difference between victory or defeat.

STEVE BALLMER: Great. Thanks, Lyle.

(Applause.)

STEVE BALLMER: I hope you get something of a feel there for the lingua franca, XML and information moving back and forth was the key to doing the kind of work that we’re engaged in right now with the Americas Cup Team. Americas Cup is kind of fun. It’s a small business, but it’s one that most people can kind of relate to.

I want to talk a little bit about the back end of this agility, tools like Windows and Office, the new things that you can do with technologies like XML and .NET are great. But when we talk to a group of CIOs, there’s really four things you say to us. I believe in all of these notions, but if we’re going to bet on your stuff to help our business achieve agility, it’s got to be secure, it’s got to be reliable, scalable, it’s got to be manageable, and it’s got to fit in the context of our existing infrastructure. And really Microsoft, what are you thinking, what are you doing about that?

I want to start with security. Security has been an issue that has incredibly consumed us, because we know we must do better for you on the security front. Last summer, our customers got hit by two viruses in particular that really shook us, really made us understand we need to do more. And those were Nimda and Code Red. And if you really take a look at it, security is more than just is the software secure. It is, do we have the tools, the techniques, and the technologies to help you keep this stuff up to date, keep it running. A denial of service attack is a different security problem than a virus, which is a different security problem altogether than a data corruption problem. We said, we must commit ourselves as a company to the highest levels of what we call trustworthy computing. You have to be able to depend on this stuff, seven days a week, 24 hours a day, you have to be able to make sure that those systems stay up, that they don’t get compromised, that the data is good, et cetera.

So, we literally told all of our development team, this is job one. We’re not forgetting XML, we’re not going to not do this, that, or the other thing, but stop whatever you’re doing, and let’s focus in on this problem. Some of our teams came back and said, we need to give our customers better tools for deploying fixes and patches, because, in fact, we had fixes available for Nimda and Code Red before they were available. Later this year, we’ll bring an incredible tool to you that we’ll call Microsoft Update, which in some senses lets you run a service in your companies a lot like our Windows Update service, that lets you real-time publish and automatically distribute patches, fixes and new drivers.

We said we also have to go back to look at the basic code, and make sure that we don’t have security holes in the software that we shouldn’t have. What we have found was there were some coding practices that don’t show up as bugs, but can be exploited as security vulnerabilities. So, our research team wrote tools, and we used them to literally go over every source code for every product at Microsoft, and look for potential additional security vulnerabilities. Literally, the Windows team did nothing for two months except go back through, and now they’re packaging up their work as a set of service packs and quick fixes for your use.

And in terms of our own Web site that you interact with, we’ve gone back and done a thorough, again, audit and analysis of the privacy of your data on our site. I commit to you the highest level of priority on these issues. That’s not going to stop there from being continued security issues, or continued viruses, whether it’s our stuff, or Sun Solaris, or Linux, all of these systems have had security vulnerabilities. We all need to do better. We know our products are the most popular, so we need to do the most better. But even as good as we’ll get, security is never 100 percent. We have to give you the tools that can help you operationally not only get secure, but stay secure.

Scalability and reliability, there are two kinds of scaling that most people talk about, scaling up and scaling out. Scaling out is the notion of adding a bunch of small systems to cooperate to do a big job. Scaling up is the notion of having one big system that does a lot of processing. Some applications and some scenarios naturally people want to scale up, and some out. There’s a big wave of server consolidation that many of you are engaged in for mail, for database applications, for back end. Many of you want to scale up because the applications are too hard to partition. For Web applications and Web front ends, many of you want to put them on redundant small machines which are easy to add as you get additional volume onto your Web site, and the presentation logic in a Web application does scale out nicely. We’re working on a set of operating system features, database features, and management tools to allow you to scale up or scale out depending upon the nature of the application.

We think we’re doing pretty well with this. If you take a look at the top application benchmarks from a scale out perspective, the top eight are all on Windows 2000 Advanced Server or Data Center Server. This is not price/performance, this is absolute performance. The top scale out benchmarks are all on the Windows platform, and all but one are actually on Microsoft SQL Server. You can see the numbers here, 709,000 transactions per minute on the TPCC benchmark with a $15 TPCC cost, really quite amazing numbers. And these have all been done on the Windows platform with SQL Server.

If you take a look at the scaling up case, that is the big machine which many of you want because the application doesn’t partition, because the management approaches are better, in this case, we’ve made progress. We’re certainly in the game. We’re not yet at the top of the list. The highest scale up performance on any system are still on the proprietary UNIX systems, HP, IBM, Sun, Digital, almost always with Oracle or with

‑‑ Fujitsu has a database that’s quite high-powered. But if you take a look, number seven now is the Windows Data Center Server

running SQL Server, running on the Unisys ES-7000 machine. We can do 165,000 transactions per minute on a single machine. There’s still some headway versus some of the other systems available, but you’ll notice the kind of excellent price performance that we deliver, and you’ll notice that the price for the system is far lower than the prices on any of these others, $3.5 million for the system that delivers this compared to $12 million, $8 million, $10 million, these are all very high end systems. Frankly, much higher than most companies in the world will ever need on any application.

If you take a look at this from a different perspective, the perspective of applications as opposed to the perspective of the TPCC benchmark, we also have a good performance. We took some of the popular benchmarks for Onyx, for PeopleSoft, for SAP, for JD Edwards, and we asked, which platform has the best overall performance, and if you look at the SAP R-3 sales and distribution benchmark, 24,000 concurrent users on Windows and SQL Server, and that is better than you get on any other platform, Unix, Oracle, any other. And you can see some of the other numbers. In every case, the highest performing benchmarks of this type in these applications are on our platform.

We’ve worked with a number of companies in Latin America on these kinds of solutions. I mentioned earlier this morning CCM from Mexico, the brewers of Sol Beer. I had a chance to talk a little bit about the Pocket PC application, but we’re in process of a full deployment of their SAP system running on top of Windows 2000 Data Center Edition, the SQL Server Enterprise product, and this is the mission critical project, and the mission critical application for CCM. You’ll hear later in the conference from the CIO there. I had a chance to meet with him this morning, but huge benefits, very good performance, and as the CIO said, I’m not religious against or for Microsoft, this is just the solution that works.

We understand that what we’re really talking about here is not only using Windows for agility at the end user level, but really driving and delivering mainframe class reliability with Windows servers. The Unisys ES-7000 as compared to Sun’s E-10000 is perhaps a good comparison. And in this case, we have some benchmark data that was done by DH Brown, an independent research company, you can see the graph shows the percentage of machines that stopped and the number of stops, and we track production systems, 48 productions, Unisys ES-7000, and took a look at the data, compared it, and what you can certainly see is incredible results in terms of the percentage of these systems that have ever, ever, ever had a work stoppage. Incredible performance. We know we can still do better. We know you expect five nines of availability and reliability out of these systems, and we and our partners, Unisys, Compaq, HP, we are committed to delivering that kind of result.

This is not just a question of the hardware and the software, it’s also a question of the operational processes that you put in place. We have a documented set of processes that we call the Microsoft Operations Framework, which we encourage you to relook at and use if you want to deliver mainframe class reliability on these very much less expensive, but very high quality machines.

The third area I talked about was ability to leverage and build upon existing infrastructure, the problem we attacked with one of our customers in Chile, a company called Marinetti that makes packaging materials, is how they would take a set of data that lives in legacy systems, invoice data, and get those better distributed to partners, to customers, as well as to their own people. With them, we built the solution based around our BizTalk Server, which is really a product designed to provide enterprise application integration and workflow using XML, and we helped them take a business process that literally had times to resolution of 120 days and shorten that down to about eight hours in terms of invoice rejection coming in from their customers. They didn’t change the invoicing application, we simply built an add-on using BizTalk connectors and speaking XML to their existing invoice system to extend this thing out.

I want to now have a chance to show you a brief video about another project we’re doing in this area, not even of enterprise application integration, but I guess I could say industry application integration. That’s a set of work that we’re doing with a company that has been formed amongst the Brazilian banks called Tech Bond, and perhaps we’ll show you the video, and then I’ll get a chance to comment a little bit about it.

Please roll the video.

(Video shown.)

STEVE BALLMER: I hope that gives you a little bit of a feel. I had a chance to be in Brazil about eight months ago in August, and sat down with a number of folks from the largest financial services institution in Brazil. And the Brazilian Central Bank had ordered essentially a redesign of the payment clearing process in Brazil. And we had already a number of customers who wanted to work with us on this type of XML-BizTalk server based solution, but there was a very tight time frame, I think the systems all had to be live this week, last week, something like that. You’ll notice we don’t have many customers here from Brazilian financial services institutions, it’s a kind of a wild time.

But, what we did, in fact, do was move forward aggressively, not only with tech bonds, but with the bank themselves, 80 percent of the banks wound up building solutions around .NET, including Banco Itau, HSDC, ABM Amro, BM & F, and a number of the important Brazilian financial services institutions. Scalable, completely mission critical application, 90 percent of the GDP of Brazil will move through the payment clearing system, and I hope provide the next reference on the kind of scalability and reliability and integration with existing infrastructure, because the basic back end systems of these banks certainly haven’t changed.

The last issue that I want to talk about is management. There’s a lot of great news in the world from a hardware perspective, hardware gets more powerful, and cheaper every year, and that will continue, at least from our perspective, for at least another 10 or 15 years. People do not get more inexpensive every year, and the cost of management is largely tied to the efficacy of software, and letting you minimize the number of people it takes to manage hardware and software. So we think it is very important that we focus not only on better and better software, but more serviceable software as we move forward.

One of the important produce that we’ve introduced, and will grow in importance over time is a product we call the Microsoft Operations Manager. Microsoft Operations Manager is a management product based upon some technology which we licensed from one of our partners, Net IQ, and it’s really complementary to the other management offers that we have in the market. It lets you take a look at Windows Servers Active Directory, Exchange, and SQL Server, and really monitor, and filter, and manage mission critical events and performance data. It integrates nicely with not only Net IQ products, but also products from Computer Associates and Tivoli. When we look at, for example, a typical Exchange installation, they all need this kind of event management infrastructure as part of the solution. We take serviceability, event management performance management, configuration management, as important issues, and we’re making an investment now in technologies, ourselves directly, in our products and around the products to give you better manageability.

An example where we’ve had some success with a customer in Latin America around management is the Central Bank of Costa Rica. Again, an automated payment system, check clearing, funds transfer system. We built an application using XML Web services, SQL, Windows 2000, and they do use the MOM, as we call it, the Microsoft Operations Management, to manage that system, 99 percent of Costa Rican financial services institutions are connected, transferring an average of $350 million a day. They need to make sure that system is well managed, and that they anticipate and take care of any issues that might come up, in terms of performance, availability, et cetera.

We think we’ve really made a lot of progress, and we’ve seen third parties start to really agree with us, both in terms of XML Web services, where I think most of the industry would agree we’re out front, we’re a leader. American banker, one of the leading financial services institutional magazines says, Microsoft is really moving toward its goal of becoming a major supplier of enterprise servers to financial services companies. The Wall Street Journal late last year, Microsoft has two things going for it in the corporate computing market, new products, and newly cost obsessed companies. Microsoft is gaining market share in the enterprise.

I think you are not alone. If you make the bet with us today on new applications, using new technologies like XML for mission critical applications. The perhaps sharpest of critics are the analyst firms, Gartner, Meta, et cetera. Gartner has their famous four quadrant chart, how complete is your vision, or something, and how good is your ability to execute. And in the case of XML, and XML Web services, Gartner says we have the most complete vision, and the best ability to execute. And you can kind of see how they think about and stack rank some of the other guys. A few quotes, everyone should build not eh XML-SOAP foundation. Gartner believes Microsoft is now providing more vision and influence regarding this shift than any other vendor.

This is not a lonely path to take. We want to help your business realize their potential. We want to help you be more agile and flexible in what you do, and the knowledge you provide people. We want to help you empower your workers, and we think it is now for you a safe bet to move with us, not only on the infrastructure you provide the end users, Windows, Office, et cetera, but also the back end, mission critical applications that you deploy to run the businesses that are the heart and soul of what you do every day. It’s been my pleasure to have this opportunity to talk with you. I’ll look forward to the discussion in question and answer. And if we can help with anything, please let our people know. Let us help you take the first step to a mission critical, Windows, .NET-based application in your business.

Thank you all very much.

(Applause.)

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