Silicon Valley Speaker Series
“The Next Wave of Innovative Productivity Software”
Remarks by Jeff Raikes, group vice president, Productivity and Business Services
Monday, September 23, 2002
BRENDAN BUSCH: Hello. I’m Brendan Busch from Microsoft. Thank you for joining us for today’s Microsoft Valley Speaker Series event.
This afternoon Jeff Raikes, Group Vice President of Productivity and Business Services at Microsoft, will discuss the next wave of software product innovation, the new forms of technology that can improve productivity and the changes that will affect the world of the information worker.
Currently Jeff is responsible for driving Microsoft’s broad vision for productivity and business practices, for business process applications and services. He leads an integrated team of individuals from product groups, including Microsoft Office, the Business Tools Division, Tablet PC, Information Worker Solutions Group and Microsoft Business Solutions.
Jeff joined Microsoft in 1981 as a product manager and since that time has had many roles in the company, including Director of Applications Marketing, the chief strategist behind Microsoft’s Graphical Applications for the Macintosh and Microsoft Windows operating system and the Vice President of Office Systems.
Prior to his current role, Jeff was the Group Vice President of the Worldwide Sales and Services Group.
Raikes holds a bachelor’s degree in engineering and economic systems from Stanford University. He has served on the board of directors for the Software Publisher’s Association as well as participating as the chairman of the board twice.
Raikes also served on the board of the Washington Technology Center and is currently on the board of directors of XO Communications.
Please join me in welcoming Jeff Raikes.
JEFF RAIKES: Well, thank you very much. It’s a great pleasure to be here today, in part because the subject that I get to talk about is very near and dear to my heart. Brendan mentioned my role in the 1980s related to the applications business and I’m certainly one of the people who believes that during this decade there’s going to be another major wave of value created for information work.
And so that’s really the core of my topic today is what are we doing, what are our customers doing, our partners doing in the context of really helping people realize the potential of information work.
So during the next hour to hour and a half I’m going to touch on a related set of topics. I want to give you a bit of a historical perspective that I think can help set the context for how we think things are going to advance during this decade. I want to touch on some of the challenges that we see today in information work, because oftentimes those challenges are a source of the opportunity to create great new value. I’m going to give you some pictures of some of the work that’s being done, some of which is already out in the market today, some of which is coming out into the market soon, but in particular I want to put that into the context of how it is that people apply these technologies to solutions in information work, so I’m going to give a little bit less emphasis on features and more on how we think it relates to some of these opportunities in information work.
So again I welcome all of you and I’m very excited to share some of these thoughts today.
Now, as I begin I mentioned I felt it might be helpful to give you a bit of an historical perspective. And in my opinion I think during the last couple of decades we’ve seen major waves of value created in information and work. And I don’t mean just at Microsoft; I mean throughout our industry.
If you go back to the 1980s there was a real emphasis on using the digital tools to create content, to author content, really an emphasis on creation. In fact, it was that decade when important new categories were established.
Now, it may seem strange to you that I would say that spreadsheet was a new category, but in fact VisiCalc was just introduced in the fall of 1979 and it was really that product that helped to establish the metaphor of spreadsheets, you know, something that we take really for granted today.
Well, similarly if you think back to 1980 or ’81 when I joined Microsoft the concept of word processing was really quite a narrow concept. Word processing was something that got done in the word processing tool with the Wang office system or the IBM Display Writer. And back then you wouldn’t have envisioned the environment that we have today, where literally there are hundreds of millions of people doing word processing every day.
So those are indicative of the kinds of changes. In some respect, I think the reason to look back at that time is because things that were being done on paper, what we sometimes refer to internally as the analog form, were cannibalized by what we could do in terms of tools for the digital form.
Presentation graphics, something that’s very important and very important to our heritage here in Silicon Valley, back in 1987 I recommended to Bill Gates that we establish a presence here in Silicon Valley by acquiring a company called Forethought. They created a product called PowerPoint. And I just thought it was really cool that you could have software that would do your overheads. I mean, think about that for a moment, because I think actually it kind of helps to illustrate what the issues are as we move forward. We just thought it was really cool that you could have software that would do overheads. And if you were very sophisticated you would send that presentation file off to a company called Jenagraphics and you’d get a set of photographic slides back in the mail and that’s how you did presentations.
Now, we believed very strongly that presentation graphics was going to be a very important category and hence we undertook the acquisition of Forethought, but we really didn’t envision there would only be a few years later that people would walk into conference rooms and be able to plug into the projectors and do their presentation
So the point there that I wanted to make or to emphasize to you is that oftentimes we will overestimate how much things will change in the short-term. I mean, that’s software: We always think we’re going to get done before we do.
On the other hand, we tend to underestimate how much things will change in the long-term. We didn’t really foresee just how prevalent presentation graphic software would become. We didn’t really see how prevalent word processing would become. Those are things that are built over a period of time. And I think the same thing will be true in this decade.
Now, moving on from there, in the 1990s there were a couple of very important trends. Those tools, those digital tools for creating content got integrated together, not just by Microsoft but by Lotus and WordPerfect and others, because it turns out that customers liked the idea of being able to have an integrated set of digital tools based around graphic user interface. So that was an important trend.
But there was an event more important trend. The incredible growth of personal computing that was in part spurred by Windows and Office applications, but also by the Apple Macintosh meant that there was an opportunity for the whole to be much greater than the sum of the parts. There was an incredible space of computing out there that could get connected together. And so that was a major transformation for information work. It’s what led to the explosion of electronic mail. It’s what led to the opportunity to have the kind of explosion in the intelligence that we saw.
And there were other investments like in the case of business process, people investing in a pool of acronyms, CRM or Customer Relationship Management, or ERP or sometimes now ERM, Enterprise Resource Management, supply chain management. So another major wave of value was created.
But certainly I know that as I transition back to this part of Microsoft’s business there were a lot of questions about what were the opportunities ahead, was there going to be another wave of value created for information work.
In my opinion one of the first places to start is to look at the challenges, and I see a significant number of challenges where it’s a classic case of the glass is half empty or the glass is half full. Yes, there’s been a major wave or several major waves of value created, but we’re still not doing all the things that we would like to do in our information work.
Today you’ll find throughout organizations in effect a disconnected set of islands of data and we find it frustrating that the tools that we use commonly don’t connect into those islands of data as effectively as we would like.
Similarly, we don’t see as strong a connection between digital tools, office tools and the fundamental business process that are much more software based.
So what is it that we can do to improve that challenge or take on that challenge?
We see inefficient collaboration. Work culture has changed dramatically during the last ten years, and I know all of you are experts in it and I probably shouldn’t even spend much time on it but I think it’s important to underscore it.
If you look at just the number of people that you’re connecting with who are outside the physical boundaries of your office, outside your time zone, different geographies, virtual organizations that are outside your organizational boundaries, a tremendous change in the last ten years in work culture. Yet today even with the explosion of e-mail and the Internet and intranets people find that they are not able to collaborate as effectively as they would like to. There’s an inefficiency there. So they want to be able to get people connected to people.
And, in fact, on these three challenges you see a common theme: connection, getting the digital tools and thus the people who use them connected to the islands of data, getting the digital tools and thus the people who use them connected to business processes and getting the digital tools and thus the people who use them connected with other people who are using those tools.
And there are other challenges that I think are very important. The dirty secret that we sometimes don’t want to talk about is the way in which people are seeing a sense of information and e-mail fatigue. There’s a frustration there.
You know, sometimes I joke in an environment like this of just think about how much e-mail you were getting back in 1990 to illustrate what an incredible wave of growth that is. But there’s a sense that maybe people would like to go back to 1990 in terms of the amount of e-mail that they were receiving.
Certainly very similarly people think about the incredible wealth of resource that you have with your corporate intranets and the Internet. Yet it seems frustrating that we can’t get the information that we need when we need it all the time.
And so those are elements of information and e-mail fatigue. Those are challenges that have to be taken on.
Multiple devices and interfaces: For many years we had it really good. We could think about the PC platform or the Windows platform as a primary platform for us to deliver productivity capability. But over time what we saw and certainly today the way in which we have to think of it is the platform is the combination of devices that people use. It’s not only the PC, but it may be the desktop, the laptop, the tablet PC, the Pocket PC, Pocket PC Phone or the smart phone. Now we’re seeing technologies, information technologies migrate into the automobile. So there is a combination of devices and interfaces that people are working with and that is a challenge and opportunity to take on.
And finally — and this is another one of those little perhaps dirty secrets or dark secrets — is the inefficient use of technology. I frequently find when I’m talking to decision-makers both a sense of I’m really glad that I’m able now to get connected with people very broadly via e-mail but we don’t really know how to use this instant messaging thing. We don’t really know how to set up our work culture so that the way in which we have access to Internet or intranet information or the way in which we use electronic communications like e-mail really contributes to greater productivity as opposed to disruption of information work.
So in my opinion the bottom line here is that there’s been tremendous growth in value but it is a glass is half empty, glass is half full type story. We can do things now that we would never want to move away from; our ability to reach out broadly and communicate with people through the Internet, through e-mail. On the other hand that has led to a set of new challenges as well as challenges that we hadn’t yet fully taken on and completed.
But in our role at Microsoft and with the companies that we work with we’re quite excited about the opportunity that we see during this decade. In fact, last fall at Comdex Bill laid down what I consider to be a fairly tough challenge. He predicted that in this decade we’ll see over twice the productivity improvement for information work as we did compared to the 1990s. And that I think is a big challenge, a big challenge for us to be working on, a big challenge for our industry to be working on.
But I tend to be quite an optimist when it comes to this opportunity or this challenge. In my view, there are three core pillars that we need to focus in on in order to deliver on that opportunity or that challenge that Bill has laid down in terms of growth in productivity.
Number one is to serve a broader customer audience — I’m going to speak about that in a moment — as well as creating new customer value through innovation, significantly enhancing what it is that people can do today with their core applications for information work as well as establishing new categories of application value, and finally really taking on that challenge of helping customers truly realize the business value, taking on not only the idea that these are pulled together, think of the information tools or the digital tools as a set of components that can be pulled together as a platform for a solution for information work but also addressing the issues of work culture and policy and guidelines that will help people learn from the best practices in applying the tools for information work.
So in my view those are the three pillars. This is what we’re using to drive our information worker business that’s centered around Microsoft Office.
So let me begin by taking on this notion of serving a broader customer audience. I have proposed to our people what is in effect a new term, and these terms are never perfect: information worker. What it is that I think is important is that we have to think more broadly than our traditional industry definition of knowledge worker. You know, if you were speaking with a CEO of a hospital or perhaps a CEO of an airline, would they think of their pilots or nurses as knowledge workers? If they knew the Drucker, the Peter Drucker definition, is that how they would describe them? Probably not. However, all of those individuals typically in their daily work are using digital tools as a fundamental part of an information flow or information process, which is also fundamental to that business.
And so our industry really dating back to the early ’80s when the Apple Macintosh picked up on the notion of knowledge work, you know, we focused in on that concept but it’s almost sort of an elitist type view. It’s a very important one. I view knowledge workers as a subset of information workers, but I want to push our people internally to not just focus in on that elite, so to speak, but to reach out very broadly to all of those people who are using digital tools as a part of their daily work for an information flow or as part of an information flow or information process.
And so that’s what we mean by information worker. And as I said, it’s not a perfect term, nor in the same way that knowledge worker wasn’t a perfect term.
The thing that’s really important to understand is that notion of reaching out to anybody who is going to use digital tools, software tools as a part of the information work that they do, and that’s what we’re challenging ourselves to do and that’s what we aspire to do within our industry is challenge all of us to take on that opportunity.
Now, in serving that very broad customer audience, which encompasses both the knowledge workers and the broader definition, it’s extremely important to think broadly about the value that can be brought to that audience.
And this is a rough definition by me. First of all, I want to kind of focus in on the top billet points, the access, absorb and collaborate. There’s nothing magical here; it’s just a very simple sketch that I worked with some people on in terms of what are the elements of information work? What we need to do, we collectively, you in your jobs, myself in my job, we have to access information, we have to absorb it. We collaborate with others in different types of ways. We have to author information or author content, author knowledge, author insights that are going to be shared with others. We need to take action, make decisions, move forward. We need to communicate.
So as I said, there’s nothing really magical about this taxonomy. It’s kind of a simple summary of the types of things involved in information work and we can add to it and change it and different people have different opinions, but it’s a pretty good rough approximation.
But now underneath those bullets you see a set of sub points. And what I was trying to do here is to work with our team to come up with the areas where during this decade we’re going to see the technology trends as well as the customer trends have a big impact on those elements of information work.
So, for example, we’re already seeing that portal technologies are having a significant impact on how people can have access to information and now be a portal as a platform for accessing the people who represent the expertise that will make a difference in our job.
Being able to subscribe or pull the information that is most important to me in what I do as a means to more effectively access that broad set of resources represented by the Internet.
Absorbing information: We’re big believers that it will be during this decade, through the combination of the improvement in screen density, as well as technologies such as ClearType, that people will now do a lot more reading on screens.
And why is that that people don’t read long documents on screen? Why do they print them out? It’s because the readability is better today on paper. But when you get to 133 dots per inch and when you get ClearType technology to improve the resolution, you’re now starting to get to about the same level of readability on screen as you can get on paper; and then you get additional advantages, for example, the ability to electronically annotate and more quickly share that.
So those are examples of how we’re going to change absorbing information or analysis, just the great work that’s being done by a number of companies. Microsoft Research is just one example that’s helping people to improve the way in which they can do business intelligence, to gather insight from the information.
Or collaboration: The convergence of audio, video and the network into a digital medium is going to change the way in which we can connect with people. It will help the way in which we can do tele-meetings. Technologies like the tablet will improve the way in which we take notes and then more rapidly turn that information into action.
Authoring: The tablet is a good example of something that we think will have a big impact, but in particular because it represents a platform where now the interface is not only keyboard and mouse, which continues to be very important, but also is the electronic pen as well as certainly more and more in the future the ability to use speech and voice recognition.
And when we figure out how to bring those together in the user interface so that you actually can use them in combination of ways that provide great strength, for example be with great voice recognition accuracy it can be great to use voice recognition to get the information in to the application but voice is not very good for editing. Pen on the other hand can be very, very good for editing but if you’re a good keyboarder or if you have high recognition you’ll probably be able to enter the information faster with a keyboard than by inking.
So how do we use these technologies in combination in order to improve the authoring of content?
I would say that the area of decision-making is an area where software is today under-serving the opportunity. There’s very little of significance that’s done today in our opinion in terms of how you manage the whole process of tasks and taking action, especially in a group environment.
And similar to what I was saying earlier in collaboration with the advent of audio, video coming together with the network, it’s going to change the way in which we can communicate, the ability to do tele-presentations, the ability to have access to them on demand more effectively, that mechanism of publishing.
So one of the things that I tried to do here is to share with you a picture of what we think will be some of the key areas where technological trends will have an impact on the quality, the value, the opportunity of information work. And by no means is it intended to be a complete model; it’s intended to be a model that will stimulate our thinking, your thinking about the opportunities ahead.
Now, in terms of realizing the business value I want to kind of give you a picture of some of these opportunities and I want to do it in the context of time. So as I talk to the people who use these digital tools, as I talk to the people within organizations who are making the decisions, one of the common themes I hear about is time.
You know, if I could come to you and say here’s a value proposition with the effective use of some set of digital tools, perhaps ours, perhaps others or a combination, you’ll be able to get two more hours per day, you’d get the 26-hour day instead of the 24-hour day, for some people that’s a very appealing proposition. Others basically say, you know, I’m glad to have that 24-hour day; what I want to do is to spend two less hours working in that day. That’s fine too. In both cases it’s a valuable proposition to people and it’s a very personal one. And just given the sense of information and e-mail fatigue, as well as in particular the fact that people are able to work just about anywhere now, there is definitely a sense that people would like to have the tools be more effective in helping them get the most out of their time.
But that’s also true for organizations. Time from a business standpoint, from a competitive advantage standpoint is also oftentimes the most precious resource.
Jack Welch was part of one of the discussions I sat in with him on three or four years ago, talked about the sense of competitive advantage at General Electric Corporation. It really revolved around time. He said the essence of competitive advantage at GE is how quickly they can learn from their customers, and in particular he emphasized more quickly that their competitors. And then the second element of competitive advantage that he emphasized was how can GE apply what they have learned more quickly than the competitor. So learning more quickly than the competitor, applying it more quickly than the competitor; I think a very good quote that emphasizes the importance of time, our most precious resource.
So I think of time both for the individual, for the work group and also for the organization. For example, time to insight: Now, one of the things that people have seen grow dramatically during the last ten years is the essence that competition today is much different or perhaps significantly different than what it was previously because of the information economy. In other words, a lot more of the competition is based on the effectiveness of the information flow, so how is it that people can more rapidly get to insight.
So this is an example of one of those areas that we are putting some significant investment in, how do you get the digital tools that people commonly use connected to those islands of data to more rapidly develop insight. In fact, I like to think of it as not our traditional industry definition of business intelligence but if I may ask your permission to come up with the notion of business intelligence for the masses, how is it we take the concept of business intelligence that tends to be more narrowly applied within organizations and do that for the masses.
So let me go ahead here and give you a sense of some of the work that we’re doing, some of which is available today.
Here I have kind of a classic example. And today it’s becoming very, very popular to have scorecards within the business environment. In fact, there’s a really important business theme underway right now called the balanced scorecard, and there’s a set of solutions that people are putting in place for balanced scorecards.
Here’s an example of a balanced scorecard for a pharmaceutical company called Kontosa. Obviously we’ve changed the name to create a hypothetical company. You have a financial perspective for the company. You have a customer perspective, an operations perspective, employee and technology perspective.
And the essence of the scorecard, the balanced scorecard is to bring all of these things together. And if you’re talking to a CEO or if you’re the CEO or your organization you will tend to in some ways run the company by the numbers. So the challenge is how can we push that down through the organization so more and more people have the ability to run the company by the numbers and in particular to get access to the information that will help them get insight.
So here’s a classic challenge that we see in today’s business environment: Overall profitability down 9 percent but now up 30 percent in the next time period. So what’s happening? So I may want to be able to just go in and dig in. I want to be able to have the opportunity to learn more about what’s going on in that element.
And at this point in time I’m going to bring up a tool that we brought to market just about a year ago called Microsoft Data Analyzer. And this is an example of the desire to help open up business intelligence, business insight to the masses and to do it in quite a graphical form.
Here what I’m doing is I’m looking at pharmaceutical sales and I’m hovering over California and you’ll notice that the length of the bar is the revenue and the profitability is the color. And so if I hover over New York I get a different picture. I can hover over Washington and you can see a lower revenue and lower profitability.
And if I go in here and I click on California now you’ll see what California sales are like as well as what the profile is of their product sales. Obviously California has a much greater volume of Ciprafen, but if I look at New York I see a different profile of the business than New York, Actifen is a much higher percentage.
Or I can go down here and I can take a look at Washington, and when I look at Washington I notice that we’ve had some profitability issues. So now as the person who’s perhaps the head of sales I may want to go in and just quickly see what’s going on there. And if I double-click then I drill down to that next level and here I see Seattle, Tacoma, Bellevue, Olympia and obviously we’ve had some challenges here in Tacoma.
Now, I notice by looking at Tacoma there was a big turnaround between March and July. And so what I can do is I can just right-click and I can take an action that in effect clips this picture of the business, sends it off to the people running the business in Tacoma and say what happened, what happened between March and July, what insights should we take away.
And, of course, more and more in the future the actual information that you’re sending is the live data so that they see what you see when you’re asking the question. That’s one of the challenges today in business intelligence. You know, your CEO sees one thing that you don’t necessarily see, and you kind of wonder what is he or she looking at.
So the idea is to make it possible for people to dig into the data, to be able to share that information, to more rapidly develop the insight into the business, and so that’s a part of that competitive advantage.
Now, moving on, the next theme I want to talk about it is also within this context of time, but in this case it’s time to competence. One of the key business challenges that people see is the way in which people change roles.
Now, I looked at some US Department of Labor statistics. If you go back to the 1950s people tended to have a tenure within their career of something like 20 years. They could be in a role for 20 or more years. If you fast-forward to today, those statistics are much more like 3, 3.3 years. People take on new roles, they change roles very quickly. It’s a very important business issue, because how is it when you bring in new people, how is it when you have people take on new roles, how is it that you help them get up to speed more rapidly. It takes time. It takes six months to a year frequently for people to come up to speed on the new role, but then if they’re taking on a new role within three years then what is it that you’re doing to, in effect, address that cycle time so people come up to the time to competence more rapidly.
And that’s actually the theme of my second demo. And this is really centered around communications. I’m borrowing on a combination of technologies that are already in the market today, as well as some new ones that we have under development and I’m sure are under development by others.
This is all still set within that context of Kontosa. Kontosa is the pharmaceutical company and this is a Web page, you know, corporate Internet or portal Web page. And this is something that more and more we see frequently is that this is Neil Charney’s page. I’m Neil. I’m a sales representative and I have information that is general to my role in the organization. I also have information that’s very specific to me in my role in the organization. And, in fact, in particular some resources, sales information for my region; I’m in the Western region, and I’ve taken on a new responsibility, which is to represent a new product called Pentacil.
So now what I do is I go to the Pentacil product page and when I check out Pentacil, in effect what I’m doing is I’m getting the resources that are again specific to somebody who’s dealing with Pentacil; not only the information on the Internet but also access to the people who are experts who can help me. Because that’s one of the challenges we have to take on. Today we make it possible for people to have access to lots of information but not necessarily to the expertise that will help us get the most out of that information. So, for example, I could go ahead and I could bring up a just-in-time training video, so instead of taking time off from work I have the ability to take advantage of the latest content that helps me get up to speed.
Or another thing that’s very important is a team site. My team, the Western region team, set up its own site as a way for me to be able to have access to the information or all of us have access to the information that’s important to our collaboration: Upcoming meetings, presentations, the sales information.
And it’s really quite simple for us to be able to go and create a site. We don’t actually have to hire somebody to come in and create a Web site. We have a set of templates that create these team sites, and this has been part of the popularity of SharePoint Team Services and now what we’re doing is we’re increasing the amount of templates.
In a company like Microsoft we have approximately 50,000 SharePoint Team sites, a team site for project planning or for our business planning, a team site for our human resources leadership bench program. And these are things that get set up. It’s one of the things we’ve learned about knowledge management: In order to stimulate knowledge management what you have to do is you have to bring knowledge management to the masses, grass roots capabilities. And so that’s an example of what we’re doing there.
Now let me flip back to a third piece, and I want to emphasize that another element of time is time to responsiveness. Now, one of the things that we think is really going to enhance time to responsiveness is new form factors for computing that will help people have computing power where they are more frequently. And in this particular case I’m excited to give you a picture of what we’re doing in the world of tablet computing.
Now, what you see here is that this is actually a laptop. The difference with this particular laptop is I basically can rotate or swivel the screen. So what I’ve done is I’ve swiveled the screen so that now it goes from being my laptop to being my tablet PC.
And when I use it as a tablet PC then I have a pen. And you’ll notice the pen is I’m not actually touching the display but you’ll notice I’m moving the cursor. The pen is magnetic. We do it that way because if it was pressure sensitive like today’s then basically your hand would create ink on that display. So what we do here is we use a magnetic pen and what I’m going to do is I’m going to show you some of the inking work that we’ve done.
Now, here you see somebody has inked a set of meeting notes and what I’m going to do is actually go ahead and just go to a new page and show you some of what we can do for the ink.
I mentioned that one of the things that’s very important in terms of advancing the form factor is the speed of sampling. A mouse samples at about 40 samples per second. What we’re doing here is we’re actually sampling close to 133 samples per second, which effectively means we have a lot of data points, but the more data points we have plus with the computer science techniques of Bezier splines and anti-aliasing, what you can do is you get good looking ink. So the user doesn’t really have to think about what we’re doing. It’s just basically our goal is to make it just like you’re writing on paper.
Now, you’ll notice also that if I press hard I get a thick line, press lightly thin line. So we make the pen pressure sensitive.
And I want you to watch very closely; nothing up my sleeve here. I’m going to turn this pen over and use the eraser to erase what I just wrote. (Applause.)
Now, a lot of computer science to do some things that we in effect take for granted, but very cool. I mean, take, for example, let’s go back to that previous page. And you know how it is when you’re doing things, you’re taking notes and you think about something so you’re trying to go back in and scribble in the margins or something like that. Wouldn’t it be nice if you could just go in and insert a little paper?
So it’s a very important concept that I think is important to understand as part of the impact on information work. You can do what you do today on paper and more.
This is a utility called Journal that comes along with the Windows XP Tablet Edition, so it allows you to ink all of your notes. This is the Acer Convertible and I’ve been using this form factor for my work since about the middle of June, and I now have approximately 90 notes documents, in other words my notes from meetings and at any point in time if I want to go back and see, you know, what did Jim Allchin and I cover in my one-on-one on August 13th it’s right there on my computer. I don’t have to go and find that yellow piece of paper or go find that notebook.
Or even better, we have the ability to search on ink, which is a little bit of a cheat. What we’re doing is you’ll notice here I can select this text, this ink, but it turns out — and I hope you can see this — I’ve now brought up the recognizer — send out as an org chart.
So now you can see that I can take my notes and I can more rapidly repurpose them into action, but also you’ll notice over here on the right you’ll see that basically I have all of my best guesses for each of these words. Well, it turns out what we do is we store that information with the ink so that now what I can do is I can search for Jim or Allchin throughout all of my note documents for the last ten years, if I had them, and be able to pull all those up. So we’re actually searching on the best guess of the recognition. The beauty is for you as a user you’re able to more rapidly find the information that’s associated with the note taking that you’ve done.
So those are just a couple of examples of how the technology is going to have a significant impact on what we do for information work.
Now, here’s another good example. In order for this form factor, this platform to take off we think it’s very important that you be able to use all of your existing Windows applications software. Now, of course, here I have Microsoft Outlook and I could use the keyboard, but, you know, maybe I’m in a situation where I don’t really want to use the keyboard so what I could do is I could bring up the soft keyboard and what that does is it’s just like a keyboard and I hunt and peck or the other thing I could do is I could bring up the writing pad and I write in this area and that recognizes it and sends it to the application as a way to use the existing application.
So again you could use the real keyboard, the so-called hard keyboard as well as the soft keyboard, as well as inking and handwriting recognition, as well as speech and voice recognition as a way to access the applications.
But perhaps I’m watching a little baseball on TV, maybe it’s the Giants versus the Dodgers, and I want to do a little e-mail in between innings. But, you know, I’m lying on my couch or I have a different setup. What I might want to do is I might want to just go ahead and do ink mail. So you know about Word mail, but in this case what I can do is I can say, “Todd, please let me know that we’re going to launch the tablet PC on November 7th.” That’s an important thing I was supposed to mention is November 7th. And I can say, “Todd, that’s great;” a little bit more expressive than the normal way of doing e-mail.
So I’ve been doing this quite frequently. I’ll be in a meeting or in between meetings and I’ll just ink off a note to somebody as I’m perhaps walking to the next meeting.
So that’s an example of how the technology can be used with existing applications. This is part of what we call the Office XP add-on pack. We have a set of capabilities like ink mail in Outlook or take, for example, in PowerPoint people are frequently using PowerPoint, they print out the slides and then they mark them up, but maybe what you’d really like to do is to be able to go ahead and I’m going to use the ballpoint pen here and I just go ahead and here I write my notes right on the slide, okay, so I can use the pen. Or perhaps what I’d like to do is to use the highlighter and I can highlight items on the slide.
Or when I end the show I have the ability then to save my ink notes with the slide so later on if I want to go back and say, you know, I wonder what I was thinking about in terms of the form factor of the PC.
Now, we have a lot of great ISV partners as well that are working on this form factor. Here you see the One Planner. This is from Franklin Covey. They’re doing this in conjunction with a company called Agilix and it’s basically like your planner and you just flip between the pages and I can ink just like I would ink in my planner. I see somebody right here in the front of the audience who has one. So what I can do is I’m going to the Mariners game and I can draw a little diagram and there’s home plate and basically we are going to meet here. So what I’ve done is I’ve just inked just like I would in the paper-based planner, but I have additional capabilities that are quite nice.
Now, part of the reason why Franklin Covey was able to get this done pretty rapidly is they were able to use a lot of the underlying platform technology, for example, our scalable ink. You notice that when I went to the weekly view it scales the ink down for that view and, of course, scales it up. I can go ahead and skip to the next week and I’m going to bring up the daily view. And you’ll notice that as I go back, Sunday, Saturday, I’ve got a few things I’m doing; what I could do is this item here, the editing my script, I didn’t get it done, so now they’re using our gesture recognition technology, and I want you to watch closely as I go ahead and I do an ink gesture. It recognized that as an arrow. In the Franklin Covey system what that means is that goes to the next day. Or another item, I’ve got my notes printed so I just use the checkmark and now that’s off my task list.
So they’re using a combination of our scalable ink, they’re using our gesture recognition and another technology that I mentioned to you earlier in the context of Windows Journal is the ink recognition capability. I’m going to go ahead and search on “tablet” and it found five instances where I had written “tablet” into the planner, one of which was on June 26th where I said, “Hmm, given the response we’re seeing maybe we should increase the tablet PC sales by 50 percent,” so I’ll let you think about whether that’s appropriate.
There’s one other thing I want to show. I mentioned to you that in some respects this is a new metaphor. It’s a metaphor where paper converges with the screen, and that’s going to open up new areas of creativity. Let’s take, for example, the notion of reading content online. And you know how a lot of times you’re reading a newspaper article or a magazine article and you clip it out and you put a post-it note on it and you send it to one of your friends or one of your colleagues. Well, I have a friend here in the Bay Area whose name is Ray Reed. And Ray is a real Dodger’s fan and I like to kind of give Ray a little trouble, so I’m just going to circle this “Giants Sweep Brewers,” which I know means that they’ve got a two-game edge on the Dodgers, and I’m going to say, “Ray, check it out.” And, of course, one of the beauties of ink is you can be a little bit more expressive.
Now, interestingly enough, when I click on this little icon that came up here, and this one happens to be an e-mail icon, I’m going to go ahead and what it does is it’s just like if you had scissors and I’m just clipping out what was circled on the screen with my annotation and plopping it into an e-mail to send off to Ray. (Applause.)
And one of the reasons I like to show that to you is because I want you to think about the metaphor. I want you to think about screen merges with paper and what that’s going to open up in terms of not only doing what people do today on paper, not only cannibalizing the analog form but doing more than that in terms of the value addition. You can see I think just how powerful something simple like that can be in terms of the impact on our information work.
So in short, through the way in which we can communicate, get connected, create, this is going to be a very rich decade in terms of the opportunity of information work. And I think it’s important that we continue to invest throughout all of our product line. Take, for example, the work that we’re doing on Office 11. We haven’t shared all of that work yet, but I’ve mentioned the importance of e-mail fatigue. We’ve made significant enhancements in Outlook as part of Office 11 to help people reduce the way in which they have an inbox glut. You’ll notice that we’re using the reading technologies and increasing the viewing area for the e-mail.
We have smart search and reference. You know, the idea is actually for computer science you understand the notion of a persistent query. Well, that’s what smart search is. Let’s say I want to put into a folder all of the items that relate to my visit here in Silicon Valley. Well, it turns out I don’t actually want to move them from where their current location is; I just want to have a folder that is the virtual representation or the virtual filter to get to all of those items.
These are just a sampling of some of the things that we’re doing here. And I think it’s very important that we continue all of this work across Office, across the tools that I showed, in part because of this generation, this new generation of information workers.
You know, I have three kids, three children, 15, 11 and 8, and I think about each of them and what the world is like when they come into the workforce. Take my son, who’s 11 years old. By the time he graduates from college, which will be very close to the beginning of the next decade, he’ll have had 20 years of experience working with computers and more than 15 years of experience on the Internet. For my daughter, who’s 15, she’ll have about 15 years of experience working with computers and 12 years of experience on the Internet.
And so if you go back to my analogy about PowerPoint and how we didn’t recognize just how much the world would change and how people did presentations, sometimes I think we underestimate how much the world will change for this next generation of the workforce. They will come into the workforce expecting digital tools to do their work, expecting broadband network access, expecting instant messaging as a way to communicate and collaborate with their colleagues.
And so part of it is taking advantage of these technology trends to meet the needs and expectations of this new generation of the workforce that’s really going to help us in driving new value across the economy.
So from my viewpoint we’ve talked about creation, communication, waves of value in the last two decade and extending that and in this decade you might say that it will be characterized largely by connections, the interconnection of people, process and data as a way to dramatically improve the overall productivity of information work, and I hope that we can do at least a 2X improvement.
So with that, I thank you very much for the opportunity to share this perspective.
So I failed to ask on facilitation for the Q & A, but we do have time for questions and I’d love to take your questions and your comments. I learn a lot just from the interaction with people in a forum like this. We’ve got microphones and if you hold up your hand we’ll run the microphone. Yes, please?
QUESTION: Thank you, Jeff, for this very interesting presentation. I have actually two questions. One question is a bit too technical I would say, but —
JEFF RAIKES: Probably for a guy like me, yeah.
QUESTION: — the one thing that I would see as a category would be contact management, personal contact management, that form in Outlook that you have a category for things that seem to be merging from your suite of products.
JEFF RAIKES: Yeah. Yeah. The gentleman’s first question is about sort of contacts as an important new category and we are big believers in that. In fact, we are big believers that that must permeate the platform. I mean, think about it for a moment. I don’t have it here in my back pocket like I normally do, but I carry a Pocket PC phone. And I have one of these new BMWs where basically it has an onboard computer that sucks my phone information into the onboard computer.
How many different contact lists do you want to have? How many different times do you want to go in and enter the same set of contacts from Outlook to your Pocket PC phone to your automobile, et cetera? The goal is you held up the finger one and I’m with you. And really what we need to do is we need to make that a part of the facility of the platform.
So you probably have heard about some discussion or rumor in the industry about the next major wave of Windows in Longhorn. This is one of the core principles of that work is that you need to have the concept of a contact list that extends throughout the environment to dramatically simplify that for the user. It’s also true for the buddy lists in instant messaging. You really want to be able to be working off one contact list, and so that is a very high priority for us.
And you have a second question?
QUESTION: I had a second question actually that you touched on lightly. You said there was a natural evolution between the keyboard and mouse to the tablet to the voice. You talked a lot about the tablet. So could you tell us a bit more about the voice?
JEFF RAIKES: So the question has to do with my views about speech and voice recognition. And like with many of these technologies I think there are two challenges. One is getting the technology right. The other is helping customers understand how they can effectively use the technology and encouraging that use.
Let me draw a rough analogy to e-mail. You and I take e-mail for granted but, say, people that are maybe two years beyond us don’t necessarily take e-mail for granted. Why? Because they weren’t in an environment where they chose to try the technology, adopt the technology.
Now, of course, more and more you see that. That’s sort of that shape of the technology ‘S’ curve. You’re going to see that with speech and voice recognition. You’re going to see that probably towards the middle of this decade, my prediction, towards the middle of this decade you’ll see the technology move more commonly into the platform.
See, today with Office XP you can use speech and voice recognition not only as a way to control Office XP but also as a way to enter information into Office XP. So you can use Microsoft Word and do dictation.
Now, the accuracy isn’t exactly where you’d want it to be. I mean, we want to continue to improve and improve, but actually I’ve tried it. If you’re in a quiet environment you can get very high recognition accuracy such that you’ll say, “Hey, this is useful,” if that is the way you’re most comfortable entering information into the computer.
And that leads to the third challenge. So one challenge is making sure we continue to improve the accuracy. The second is customer education, helping them see how they can use it, wanting to take advantage of it. The third thing is getting it right from an interface standpoint, and I think that will be one of the exciting things towards the middle of this decade.
How is it that you design the user interface so that actually it’s very seamless to use the combination of keyboard, mouse, hand, voice or pen and ink and handwriting recognition and voice? I think there are challenges there, that we have people who are doing the research especially in the Longhorn context.
So I think that you’ll see more in the way of emphasis on inking and handwriting recognition in the next few years.
And by the way, obviously handwriting recognition is far from perfect as well. You know, we’re big believers that one of the things people will learn — we think that the first thing journalists will do is they’ll sit down and they’ll try and ink and recognize a bunch of stuff and then they’ll make fun of the recognition. (Laughter.) But after a while people who really use the technology will find out that the real value comes from being able to ink and have access to that ink and in some cases recognize it but a lot of cases you’re quite happy having it in an ink form, but it’s a more valuable ink form.
So that’s part of what I mean by customer education. I mean, there’s a period of time where people have to go through those transitions and understand that.
So those are three of the elements that I think are going to be important in terms of that user interface.
QUESTION: I have in my closet gathering dust an NEC Tablet PC.
JEFF RAIKES: A 3110.
QUESTION: Yes, exactly, with multiple battery packs, et cetera. And it was running 3.1, whatever you called it at that time. It was good for its day. What makes you think now we’re ready for it again?
JEFF RAIKES: This is a great question. The gentleman, and it turns out I’ve been optimistic about this for a long time. (Laughter.) I don’t know if that means I’m a good test case or not. Maybe I’m just too much of an optimist. But, yes, 10, 12 years ago we and others in our industry really began a fairly concerted effort around the development of these technologies and it kind of waned.
And I think part of the reason it waned is not only the software, the combination of the software, hardware and technology probably wasn’t where it needed to be in order for it to take off — parts of that people got a little confused on some things and that being in particular the issue of how important was handwriting recognition, et cetera. But let’s just for a second thing about how far we’ve come.
From a hardware standpoint what you were describing was actually pre-Windows 95, so that’s a big difference. So now what you’re talking about is a hardware platform that is about ten years more advanced in terms of the horsepower. The sampling rate is so much higher in terms of the ability to do quality ink. The recognition technologies have improved dramatically. Just think about your NEC 3110. I don’t remember what the weight was, but these are in the 2.5 to 3 pound range. These are sub notebook class computers, so getting very close to — still a little heavy but getting much closer to what you’d want.
The battery life here I think is really more in the 3 to 3.5 hour range, but I’m seeing estimates that within a year or so we may be able to get to 4, 5 or 6 hours. That will be a big improvement, especially when you use the ability to go almost instant on and instant off. I mean, we’re not quite there yet but I go into standby and come out in two or three seconds, and so I basically can use my tablet most of the day without recharging. Of course, we need to get it to the whole day without recharging.
So those are some of the challenges that have been taken on and there’s been enough of an improvement, in our opinion, that what you’ll find in this next year is a lot of people will say, you know, while it’s not wholly perfect it is the way of the future and I’m glad I’m using it. And if we meet that test, then I think we’re off to the start where you get the positive cycle.
QUESTION: Thanks, Jeff. There was an article in Business Week a few weeks ago in which you said that you expect the small and mid-size business unit, which is just comprised primarily of Great Plains and Navision right now, to grow to about 10 billion by 2010. That’s a pretty big increase and I’m trying to get a sense as to what you expect that to come from.
JEFF RAIKES: Yeah. Well, it’s a great question. The question has to do with my aspirations for Microsoft Business Solutions, which is our unit that focuses in on business applications for small and medium businesses, and how could I think that that business could be approximately a $10 billion business ten years from now.
Well, first of all I’m not sure how many of you in the room have looked at the size of the enterprise applications business. You know, if you take SAP and Siebel and JD Edwards and Logistics and Manugistics and you put them all together; that’s a US$25 billion plus market today, which serves fewer people and fewer desktops than small and medium business. So already today I think the opportunity for small and medium business is greater.
And I would also point out that small and medium businesses today tend to be relatively under-served as compared to larger companies in terms of business applications.
So in my gut, in my heart I believe that there will be a dramatic shift during this decade. I think 2010 you won’t pick a doctor, a lawyer, a contractor for your home remodel, an insurance agent unless you can electronically communicate with them, electronic billing and payment, electronic scheduling of your time, the ability to securely collaborate with them over the Internet as a part of your estate plan or your insurance plan or your home remodel project. I just think the world changes dramatically in the next ten years for small and medium businesses because of this new generation of information workers who have the expectation that that’s the way the world should be.
And so my goal with Great Plains or Navision and bringing that together wasn’t just to do good accounting work; I think we can do that. I think the opportunity is to do great value for those small and medium businesses in terms of when they move onto the Internet or more fully embrace the Internet, how can we help them work that much better with their customers, their partners, and that’s what excites me and that’s why I believe it will be a $10 billion business for us, and I think that will only be a third or less of the overall market. That’s why I believe. I believe!
QUESTION: Jeff, one question related to the same one as Microsoft Business Solutions, and then you said that one-third of market share will be won. Who will win the rest of it?
JEFF RAIKES: I’m sorry. One-third will —
QUESTION: Basically one-third of the market we will win. You said about Microsoft Business Solutions —
JEFF RAIKES: That we might be able to get one-third of market share?
QUESTION: Yes. Who are the other competitors in the market who will achieve the two-thirds of that?
JEFF RAIKES: I don’t know. (Laughter.) But let me make one comment. I think the Great Plains product line in the U.S. is probably the leader in mid-market accounting, but their share may only be 15, 17 percent. So that is a different kind of software business. It’s a very fragmented type of software business.
And so I think one of the things that will really change during this decade is that with the work that we’re doing and perhaps others will do we’ll raise the bar for what small and medium businesses will expect in terms of the underlying software architecture to do all of what we just described, and so I think there will be a little bit less fragmentation in the market, but I think there will be still huge amounts of opportunity for partners.
If you read the Business Week article, which I think this gentleman referenced, I grew up on a farm in between Lincoln and Omaha, Nebraska. And I visited a software company in Lincoln that is a leader in community banking. And it occurred to me while I was chatting with them they do their own general ledger, accounts payable, accounts receivable for these small banks as well as their community banking software, but do they really want to do that.
So it was a challenge to me and Doug Burgum, who runs that business and his team, how can we do the underlying technology architecture in a way that our business applications are a platform so that these companies who have great vertical expertise can build on that platform and add value in that way. And that is a more optimal resource for the marketplace frankly. I mean, a more optimal use of the resource, having everybody inventing, reinventing that wheel is probably not the best way to serve all those small and medium businesses. They’ll be good competition but probably the thing that will be most exciting and where the greatest value will be driven during this decade is having a platform where people can do all of that vertical application work on top of the business applications platform.
So I think there will only be a few companies that can do the business application platform at that level, but there will be lots of companies that can do banking software, doctor office software, dental office software, bicycle shop software, retail, point of sale retail. I mean, there are going to be lots of opportunities in that way.
QUESTION: Jeff, I have a quick question for you. You touched on the decision part in one of your bullet points and you said you felt that was a sector that was under-served and you talked about better task management and taking action. What’s Microsoft’s position on, say, decision processing and where you’re going to go with that?
JEFF RAIKES: I’m a little bit sorry to say that I don’t think our thinking is as advanced as it should be. You know, today we have some very rudimentary work — valuable, but rudimentary. Outlook has task capabilities. Project can tie into that task management capability. But in terms of sort of decision process software we have some work going on in Microsoft Research but it’s not like we have lots of product plans today that say we figured out how to use the decision-making trees in an organization that will change the way in which people think and do decisions. We don’t have those things.
I’m actually a little skeptical about that. Part of the reason I’m skeptical about it is that I find as I work with lots of companies, lots of organizations the way in which they undertake decision-making, I mean it’s pretty culturally based. I mean, there are different styles, different approaches.
And so I think what we have to do is we have to figure out how can we find the common essence of sharing the right kind of information that leads to the insight that helps to drive decisions.
And so that’s why you hear me focusing a little bit more on how the tools connect to the data to help people get the information or the insights that they need. That I actually think is probably the most valuable part of what we can do today, because it’s a much more common thread.
But I do hope that over time we really can peel the layers of the onion more in that decision area. I wish I had more in that regard and maybe we’ll come up with some partners who have great ideas that we should collaborate
QUESTION: Yeah, hi, Jeff. Could you talk a little bit about your goals or targets for Office or other applications within the desktop applications group? John McPeak today predicted that you were going to say that you had a target of $20 billion for Office alone in the next several years. Was he wrong or are you waiting to give us that in the end?
JEFF RAIKES: Who said that?
QUESTION: That was John McPeak at Prudential.
JEFF RAIKES: Oh, okay.
QUESTION: That was in Business Week too.
JEFF RAIKES: Yeah. I just wanted to know. It’s a test case for me to figure out how much I connect with people on these points.
I do have that dream. In the same way I have the $10 billion dream I have the $20 billion dream. (Laughter.) If you want to talk to me about Microsoft software to small and medium businesses I have the $30 billion dream, so I like these nice round numbers.
Okay, so why could I have such an audacious dream? Well, first of all I don’t think of the $20 billion opportunity as what you think of as Office. See, Office today for many people is the brand name for our productivity software but it’s also for most people the package of word processing plus spreadsheet plus presentation graphics.
See, my view is there is going to be growth in that portion of the business but there’s also going to be new categories of application value both from a client standpoint but also for servers and services. And when I say services I mean in the XML Web services point of view not the consulting services point of view.
So I think when you take that together and you think about some of the technological trends that we’ve suggested today, can we create enough value that this business could on average during this next decade grow 10 percent or so, I absolutely believe so. I do. I can’t prove all of the elements of it, but I have in mind that that’s approximately $10 billion of growth and a few billion of that can come from continued growth in Office. A few more billion can come from new categories of application value and a few billion can come from servers and services.
And we don’t today try to break that down very precisely, yet it’s my job to help push our team internally to aspire to that kind of a goal. And part of the goal is it can be revenue or business, but a big part of the goal is what we can do to help people who are using information tools.
And today we have more than 300 million people using Microsoft Office applications. And five years from now if that’s 500 million people who are not only doing what you think of as Office today but it also includes real time communication and collaboration and XML based paperless workflow and note taking and business intelligence for the masses, and if that turns out to only be 15 billion instead of 10 billion I’ll still feel very good because of what we’ve been able to do to create value for people. That’s what motivates me. That’s what motivates the team.
Now, lots of people like to say, “Well, what does that mean in terms of the overall revenue picture,” and it is a responsibility for us to think through that. But I want to emphasize that when I throw out a number like $10 billion or I throw out a number like $20 billion, the thing that’s really important is to push people to dream for the kind of value that they can create, because the technological opportunities to serve people in new and significantly enhanced ways are incredible. And if we just think of Office as word processing, spreadsheet and presentation graphics the one thing I can guarantee you is that ten years from now or before the end of this decade the business will be the same size or smaller.
The real opportunity is we’ve got a good competitive challenge and our competitors are trying to clone where we are today. What we are doing is we’re moving beyond in terms of thinking through that value.
Go back to that picture of information, the model of information flow. PowerPoint trick: If you know the slide number, just press in the slide number and press enter and it takes you right to that slide. Now, how many of you knew that? (Laughter.) About 10 percent of the audience. This is where we have to help customers realize business value. (Laughter.)
So think about this: In my opinion there is no other company that’s taking a holistic view of the value of information work. You know, IBM works on it a little bit and Sun will claim with Star Office that they’re working on it, but they work on just a piece and they’re not really trying to advance the state of the art.
So my best is that there is lots more to do. We’re the one company that’s really making a big bet out of it, meaning significant R & D. We’ll spend probably $3 billion plus in the next five years and that it will be a good business if we create that value. But that’s the job. The job is to create that value. If we don’t create new and significantly enhanced value, then I probably shouldn’t have spent the 3 billion.
So thank you very much. I appreciate the opportunity. Thank you.