Remarks by Steve Ballmer, CEO, Microsoft Corporation
Microsoft Government Leaders Forum (Europe)
September 17, 2003
STEVE BALLMER: Good morning. Honorable prime ministers, ministers, esteemed deputy ministers, delegates, ladies and gentlemen and Microsoft colleagues. I am very honored today to be here to participate in this important discussion about how technology – especially through public-private partnerships – can help create local economic opportunity, strengthen communities and help modernize government services.
The great European leadership here in this room. I recognize a number of people from government with whom I’ve had the great honor and privilege to work with in the past. And there’s also our own great European leadership – people like Umberto Paolucci, Patrick De Smedt, our chairman from Europe, and of course, Jean-Philippe Courtois – all people who I’ve had the pleasure and privilege to work with over a great number of years, since our European subsidiaries opened 15, 18, 20 years ago.
People like that, and Jean-Philippe especially, represent what I like to think of as the best in Microsoft – a passion for technology, a genuine belief that the work we do, the software we create, really can help people, business and government around the world realize their potential, and a commitment to helping create a sustainable information society to address the complex and constantly changing issues that we all face.
I know Jean-Philippe talked about it a little yesterday, but I’d like to emphasize again that the work government leaders are doing in Europe to leverage the benefits of information and communication technology to help meet the goals of Lisbon Strategy and the eEurope Action Plan and I think that work is really tremendous.
These efforts are meeting with success because they’re rooted in determination and action, and they have very, very strong leadership behind them. When I see that Internet penetration in homes across Europe has doubled, that most companies and schools are now connected, and that more and more government services and information is available online, it’s clear that the goals of the 2002 plan are being met and that that success has laid a strong foundation upon which to buildto address the challenges of the 2005 plan. My goal is that the partnerships we build with you are long term and the commitments we are making in Europe will contribute to even greater progress in the years ahead.
I’d like to begin today by posing a simple but perhaps provocative question. Is the PC revolution dead, a quarter century after it started, or has it really only just begun?
It’s not out of idle curiosity, or because I happen to be the CEO of a PC software company, that I ask this question. It’s because the question is being posed by others in our industry and the answer is important.
Let me explain. I don’t think anyone would argue that the personal computer has revolutionized how we work, how we communicate, how students learn, how teachers teachin a sense how we’re entertained. It has led to major advances in productivity in the private sector, and much better citizen access to information and services in the public sector.
Yet, some industry pundits are suggesting that IT no longer matters; that what was once a transforming technology has really reached the end of the road in terms of innovation, that IT provides little value beyond processing payroll checks and order entries, that customers should just optimize for costs and outsource their IT for efficiencies.
In short, pundits are saying that IT today is “good enough” and that IT won’t get much better. I don’t subscribe to that view at all. While cutting costs is very important, doing it without thinking about long term productivity can be a very short-sighted decision. The bottom line for any company in the industry is that we have to meet customer expectations and drive customer expectations, through a relentless focus on innovation. Innovation has been the motivator of our company and we aspire to contribute even more in the future. We invest heavily in innovation – $6.8 billion in R & D this year alone.
Some of the work we do in Arken in Germany at our new European Microsoft Innovation Center, as Jean-Philippe talked about yesterday, is part of the important growth.
This long-term approach focused on innovation, has been effective for us and it’s an approach that our industry must take to serve customers and deliver new values. It’s the approach that produces some of the most powerful innovations in the industry. I’m thinking of visible things like the Tablet PC, some of the exciting new capabilities for information protection in management in our new versions of Microsoft Office and the Windows Server.
I’m also, though, thinking of work that other companies are contributing, for example, Business Objects based in Paris, really pioneered business intelligence, to help consumers deal with, and get data out of databases. Another company doing great, innovative, leading-edge work is SAP, which has been a leader innovating in areas like decision making, business analysis and other important business needs. These kinds of innovations are what the technology industry is capable of delivering, even in uncertain times like these. I know that at the end of the day, we have so much more to contribute for our customers, and we will face down the current challenges facing us today.
One of the big challenges facing the technology industry is ensuring we have the highest levels of security, in a world where destructive worms and viruses are unleashed by hackers. Many of our customers are feeling the pain. They are frustrated by vulnerabilities. They are feeling the impact of time and money spent on securing systems. Our company and our industry has to meet this challenge.
Concerns about technology security can really weaken public confidence in technology, which in turn could slow the growth of the industry and, even more importantly, the adoption of new technologies that increase business productivity, power e-commerce and help government run more efficiently. I can tell you that Microsoft is 100-percent committed to meeting the challenge of these new security threatswhile at the same time continuing to innovate. In fact, we believe better security and constant innovation really go hand in hand. So we are in many ways humbled by the developments of the last few weeks. We recognize the concerns of our significant customer base and are further redoubling our efforts to ensure we have a comprehensive approach to better security for our customers.
One of the people I was talking to at work came up with a good analogy. He said the banks didn’t shut down because of the bank robbers; they improved the security systems at the banks, they improved law enforcement, they went after the problem.
To our commercial and to our public sector customers, my message is very simple: We will address your security concerns, we will make the investments in innovation that are necessary to continue to let you stay ahead of these evolving threats.
How are we going to overcome the new wave of destructive worms and viruses that have been unleashed on the world? First, we have to continue to raise the bar on the quality of our product when it comes to security, and we’ve already started down that path. In early 2002, we announced our initial Trustworthy Computing initiative, and we took the unprecedented step of literally stopping the development of Microsoft Windows and its 8,500 people while those people participated in 10 weeks of very intensive, advanced security training.
We are extending that same level of security on all of our products and all of the updates to our products, so that they all have entire levels of quality before they are released. But we know the security threat is not static, and we need to continue to push, to make products as resilient as they possibly can be to attack.
I’m pleased with the progress we’ve been making with our Government Security Program, which provides national governments and other organizations with access to the Windows source code and technical information, including how we at Microsoft formalize our security architecture and design process. This knowledge enables governments to create and implement more effective and more secure solutions for government. Fifteen countries and organizations now participate in the GSP, including NATO, China, Russia, the U.K., Finland, Turkey, Norway, Austria, Taiwan, Australia, and Chile. More than 35 other countries currently are evaluating the program, and I’m pleased to announce that both Switzerland and Malta have also recently signed and joined the program. We also signed an agreement yesterday with the Italian government to give them access to our Windows source code.
Second, we’re continuing work with law enforcement on the other side of the problem, finding the hackers and helping to prosecute them. These are not innocent pranks. They are very serious crimes that could affect defense and hospital systems, as well as the businesses that drive all of the world’s economy. Law enforcement is certainly taking up the challenge. We’re going to work with them to deter hacking in the first place, using new methods to detect the source and eliminate the worm or virus writers.
While Microsoft products have become a target for hackers, our products are not the only target. Our industry colleagues understand that the entire technology infrastructure is really only as strong as the weakest link: router technology, databases, ISP connections, and other segments of the industry are also at risk and need state-of-the-art security. It’s an industry-wide problem that must be fought not only by Microsoft but by all companies in our industry large and small, and we have to do this with a sense of full partnership and cooperation with our customers as well as law enforcement.
Third, we find today too many users are not fully using security technologies and designing their networks for maximum security. This is a critical message the industry needs to convey to business and government customers and it’s also really important for consumers whose systems are attached to the same network thanks to Internet connectivity.
There are many partners we have in this fight, companies like Panda, Sophos, F-Secure, Alladin Software, Cisco, Symantec, Checkpoint, and many countries through Europe and around the world, are helping to protect systems on the Internet, and we must all help our customers better deploy security technologies.
To assist us all in getting the word out, we have to turn up the volume on how customers can protect themselves from viruses and protect their PCs. We recently launched an education campaign, called “Protect Your PC,” to raise awareness of this issue – really on a global basis – and to try to help customers understand what they can do.
Fourth, we’re also working to make the installation and deployment of security patches or fixes for viruses easier for customers of all sizes. We know our responsibility does not end with simply providing patches, but has to be based on a multi-pronged strategy that ensures we’ve provided the tools, the education and the support for customers to deploy these patches.
And fifth and finally, perhaps the most important technical area we are focused on now is what we call “shield technology.” We know that the hackers are going to keep writing viruses. Our goal is to block them before they can ever get onto the PC, and, regardless of the cost and level of investment required, we will strive to accomplish that goal.
From the start, our business model has been based on open standards, interoperability and the broadest possible base of hardware, software and services partners. An example of industry cooperation is the work we’re all doing around XML Technologies. We are working with partners and competitors to develop a set of common open standards that will make data accessible across systems.
Commercial software vendors like Microsoft, SAP, Software AG and others are all embracing interoperability through open standards. This model of cooperation and partner focus has really generated unparalleled opportunities for IT firms around the world to create new products and services, and really even whole new markets.
Today, 7 million developers write software for the Windows platform –7 million — and more than 750,000 companies around the globe – nearly half of which are outside the U.S. – create products and services that add customer value to the Windows platform. In Western Europe alone we have nearly 260,000 technology partners. The independent research firm, IDC, did a study for us recently that showed that every $1 in Microsoft revenue generates an additional $8 in purchases of software, hardware and IT services from other companies. In 2001, that totaled more than $200 billion worldwide.
Nowhere is the opportunity for economic growth greater than here in EMEA, which accounts for one third of the overall worldwide IT market, and is growing at a faster rate than almost any market in the world, with the possible exception of China.In fact, the IDC study projects that over the next three years, 55,000 new IT companies and 2.2 million associated jobs will be created in Western Europe. In Eastern Europe, 5,000 new companies and 210,000 new jobs will be created by 2006.These are local jobsin local businessesin local communities throughout the EU which are generating billions of dollars a year in tax revenue national, state and local governments.
I believe these facts show the commitment and progress that our company and our industry are making in Europe. The impact our partner model and the commercial software industry, that is companies that are in the software business as a business, to make revenue and make profit is having on market creation, productivity growth and economic growth, is really quite incredible. When I hear suggestions that other models of software development can match the outcome of the commercial software industry, I am skeptical given the historical performance of our industry.
We hope to continue our progress in Europe with our many European partners and customers. Although there’s always more we can do, I also feel good about the partnerships we have created and are continuing to build with governments throughout Europe.
Additionally, I think it is very important that industry and governments work together to create an environment conducive to entrepreneurship and the start-up of new high speed companies. This entrepreneurial environment has resulted in a strong industry ecosystem for the software and technology industry in Europe but one that can be even stronger. We are pleased to see a trend in governments around the world, including in the European Union, to adopt neutral and transparent public-sector procurement practices, not favoring commercial software, nor favoring the alternative.
For example, recent policy statements from the U.K., Denmark and Italy regarding software procurement each point to the importance of selecting software on a “best value” basis, and underscore that removing restrictive preferences from procurement laws maximizes choice and allows governments to select the best software for the job.
Our company, and our fellows in this commercial software industry, we welcome competition. Customers might not choose us every time, but we want to have the opportunity to demonstrate the value of our innovation and the benefits of the solutions we bring. We will certainly always do our best to offer customers the very best long term value in selecting our products.
I’d like to take a minute and just highlight a couple of examples. In the city of Turku, Finland, we faced tough competition with IBM, who has traditionally been a strong player in the country. After careful consideration, the City of Turku chose Microsoft as part of their technology solution on the merits of our value proposition.
Similarly, the city of Riga, Latvia, evaluated open-source options but eventually decided in favor of a Microsoft solution to enhance citizen access to government information for its new “e-Riga” system.
I know the mayor is here in the audience and had a chance yesterday to present some of his experiences at a session yesterday. In brief, he and his IT deputy outlined several reasons for selecting Microsoft over the competing choices, better training offering, greater confidence in the quality and security of our software and a long-term partner to give advice on re-engineering their processes.
This last topic I want to touch on before I end my remarks today is, has the greatest importance, I think, and it is the subject of “lifelong learning.” Lifelong learning is especially important for developing nations. Without meaningful investment in IT skills training, etc., the knowledge gap that currently exists in underserved communities and nations will continue to widen. Working with our partners in government, in education, and NGOs, we’ve contributed $1.4 billion in cash and software over the last 20 years in an effort to enable greater access to vital technology, tools and training worldwide.
But it’s clear that if we really want to solve this problem, we need to do even more. Our goal-and it’s pretty ambitious-is to make lifelong learning a reality for people and communities around the world.
We call what we’re doing “Partners in Potential.” Partners in Potential is made up of two separate programs; one is locally based called Unlimited Potential which provides skills training tools in communities. As all of us know, life-long learning is critical in helping to eliminate the digital divide. Technology skills based training will help you prepare citizens for knowledge worker jobs to help fuel productivity.
Second, our new program we rolled out just yesterday is a global education program for primary schools called Partners in Learning. This program provides our Windows and Office products at very affordable prices to disadvantaged schools worldwide. In addition to access to software, we also provide a Grants Program to help bring the software alive in the classroom: teacher training, student certification, and curriculum development are all part of it.
The Partners in Learning program has already been adopted by several countries including India, Brazil, Thailand and Italy. Our investment of more than $250 million dollars (U.S.) over the next five years in the Partners in Learning Grants Program is a direct result of listening to our Government and Education partners throughout the world.
We are excited about taking a global leadership approach to help improve accessibility to software and in enabling teachers and students to use that software to improve the learning process. We will leverage our 700 IT Academies here in Europe to deliver these academic training and certification programs. I’m particularly delighted about the Partners in Learning Agreement with the Italian Ministry of Education that was signed last evening. More than 10,000 Italian teachers have already registered for our online training program.
The cornerstone of our lifelong learning strategy is broader and includes what you learn outside school. We call it “Unlimited Potential,” or UP. UP is really a natural evolution of all the investments we’ve been doing in communities around the world these past 20 years, but it’s more focused on a single goal: offering technology-related skills training for disadvantaged young people and adults through community-based learning centers. We’re committing more than $1 billion to cash and software, through this unlimited potential program over the next five years, so that gives you some idea of how important it is to us.
Working with all our great partners in education, government and the industry, we believe we can really help bridge what is called the digital divide, but what we really understand is the technology skills gap. Between us, we have the people, expertise the technology solutions that can significantly close the global skills gap-and create real social and economic opportunities.
Education transforms lives, families, communities and ultimately nations. It takes the potential that is in every man, woman and child, and makes it a reality. It’s an investment that we believe always, always pays off. And it’s an investment we all, very much have a responsibility to make.
It has been a pleasure to have the chance to address you today, I’ll look forward to the opportunity to take your questions and I want to thank you again for the time, not only with me, but for the participation in this conference and for all your support that you’ve shown our company over the years.