Steve Ballmer: Microsoft Tech-Ed 2004

ANNOUNCER: Ladies and gentlemen, please welcome Microsoft’s CEO Steve Ballmer.

STEVE BALLMER: Well, thanks. That was quite a warm welcome. Let me join in welcoming you to Tech
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Ed 2004 here in San Diego. It is an honor and a privilege for me to have a chance to kick this session off today, and to see so many, and I do mean many, folks here in San Diego for what I hope will absolutely be an informative, educational and perhaps most importantly, a lot of fun few days here in this beautiful California sun.

Actually, you missed that part. I would apologize on that normally, but what we have here is the first extension of our DSI initiative, Dreary Skies Initiative, Microsoft can now span out dreary skies from Seattle absolutely anyplace. It’s all under centralized management control.

What I would like to do to kick things off this morning is to really start at the 50,000-foot level and give you kind of a context of how we see the world, how we see the issues that you’re facing, that you’re raising, that you’re thinking about, and where we see technology going, and what it should permit over the next several years. And, in that context, have a chance to drill into a couple of specific areas, particularly to have a chance to show you some new technologies, some that are entering beta test, some that are getting awfully close, and hopefully get you a little bit fired up for some of the things that we’re working on that we think will absolutely fit in the crosshairs of the kinds of things that you would like to see made easier and better in the IT environments in which you work.

If I was going to characterize — and I’m going to borrow liberally from our advertising — if I was going to characterize the number one feedback that we’re hearing from business people, and IT people, frankly, around the world, it’s the pressure to do more with less. We turned this into a tag line, but I think it really is emblematic of the things that we think, the pressures that we think ,that you are under. The application backlogs today are as high as they have ever been in companies around the globe. The pressures on cost, on IT, because of the tight economy over the last several years, are absolutely as tight as they’ve ever been. So this twin force of having to try to get more done from an information technology perspective, and yet having, if not less and less resources, certainly less and less growth in resources, it’s dramatic.

In some senses I think this is a result of the events, if you will, over the last five or six years. With the Y2K phenomenon, there was a ramp up in IT spending, everybody ramped up their IT spend. And the business people, when it was all said and done, what did they feel like they got for that ramp up? Nothing. Then we hit the Internet bubble, and there was essentially another ramp up of spending as a result of the Internet bubble. And I think, personally, that a lot of great things happened. But, I still think a lot of business people were disappointed at how little the impact, relative to expectations that the Internet bubble brought. And so when the bubble popped, I think we’ve gone through about a five-year period in which IT expenses have been ramping perhaps more quickly than most business people were comfortable with.

So we’ve been going through almost a drying-out process the last three or four years. And I think we’re actually back now to a position that I would call stable. That is, we’ll get back to — instead of a mode of incredible increase followed by a timeframe of decrease in IT budgets — we’ll get back into the pattern that we were in most of the ’90s: good, solid, steady increases in IT spending. IT spending as a percent of the world economy has certainly gone up over the last 20 years. I don’t expect to see that change. But, we’re still all going to have to live in a world where the pressures to do new projects will nonetheless exceed new investments in information technology. And for any company, Microsoft or anybody else, to loose sight of this fundamental fact — it’s the fundamental fact that our customers around the globe are dealing with — would be a mistake. So we have to focus in on productivity, and we have to focus in on total cost of ownership. And I think those twin pillars will largely define what you want, and what you expect of us.

When we have issues, as we’ve had over the last few years with something like security, which winds up increasing total cost of ownership and decreasing productivity, that’s a setback. And as I’ll talk in a few minutes, that’s really why we stepped up to make security a number one priority for Microsoft. Because, beating this problem really helps you both increase your productivity, and helps reduce total cost of ownership.

We’ve been talking with our own people, and to some degree with our customers and partners, over the last four or five years about how we see not only really our mission, but really the mission of our entire industry, vendors and customers alike. We’ve been talking about the notion of enabling people in businesses throughout the world to realize their full potential. Why do I bring that up here? Because I think it’s something that we all do share, or should share, all of us who are in the information technology business.

We’ve got to remember why we’re here. We build tools and products that enable, enable people to gain productivity, to enhance their productivity, their creativity, their imagination. That’s what we do. We’re enablers. We’re, at the core, an enabler of you. You are enablers of your business. You do things that people in the business never thought were possible. At the end of the day, it’s still the people who use all of our work who see that extra productivity, who see that extra creativity, that extra ability to collaborate and communicate, to get something done. This is a powerful mission.

The work that all of us in this room do is very, very important. It’s not just about making a living, or making money, or any of that. All of that is important, but we have a chance, all of us in this room, to change the world in a positive way. And I think that’s important for us to remember. Sometimes we’re dealing with the technologies in a fairly blood and guts, nitty-gritty way. And it’s easy to forget that, in fact, the work we do is probably the number one transformer, in addition to healthcare and education, the top transformers of society today. That’s a special obligation. That’s a special mission, and that’s especially exciting. And I’m excited about what all of us are going to be able to do, not only this year, but as we look out the next ten years, all I see is blue skies, in terms of innovation that we can bring to bear in our companies that positively changes the world.

I’d be so bold to say, I think the next ten years will bring more positive change and innovation out of our industry than the last ten years. Now, think about that for a second. Ten years ago, most people didn’t have PCs. Ten years ago, most people had never tried the Internet, let along knew what broadband was. Ten years ago, most people didn’t have cell phones. So as we look out 10 years, and we think about the impact of natural language, artificial intelligence, speech recognition, improved search, increased programmer productivity, interoperability, mobility, we see a world that is again dramatically different from the world of today.

Let me do a small audience poll. How many folks in this room agree that the world of IT will be dramatically different ten years from now than it is today? Show of hands? The rest of you can meet me backstage afterwards and I’ll have a chat with you about it. It’s really amazing. Most people don’t get to do the kinds of stuff we all get to do, and even as the pressure is to do more with less, they build, they build, they build, they build on us, they certainly build on you. We’ve got to keep this fundamental enthusiasm, and optimism, and remind ourselves that we do important work, and important work that’s going to do more to change the world going forward than it has even in the past.

As a company, we say OK, that’s a great mission. That’s a great opportunity. What’s our unique role? How can we uniquely serve this market? Yes, we’re in the software business, we’re not in the services business. We’re not fundamentally in the hardware business, with great apologies to our Xbox division. We’re in the software business. But, we also know that we’re in the innovation business. The reason why we all come to a conference like Tech
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Ed is because we all believe, and we’re going to talk about those things that are fundamentally new and different.

And we’ll invest this year almost $7 billion in R & D. Only the pharmaceutical company Pfizer spends more than we do in R & D at this stage. We do dedicated research in software topics. We’re investigating and exploring and building out technology in a variety of new scenarios that I’ll describe as we go forward. And, interestingly, we believe in something that we call integrated innovation. We not only need to enable you to do new things, or to do things you didn’t think were possible today, we think part of our value is integrating these innovations in ways that make your life simpler, lower cost, and easier to take care of.

Some of your may remember back 10 years or so ago when TCP/IP was a separate business from the operating system. People used to sell these TCP/IP stacks. I don’t remember if people remember this, and there were integrators who put them together, and there were hundreds of TCP/IP companies. It was a big business. You could bill $120 an hour putting TCP/IP stacks together with operating systems. We think when we bring together these technologies in an integrated way, a way that you can count on, a way that is predictable, a way that you depend on us for testing, where you know what the programming interfaces are to get at the network, that’s part of the value we bring. So we need to innovate, but we also need to integrate.

Most of the electronic mail I get from our customers is complaints when two of our products seem inconsistent with one another. People say to me, ‘How many data access layers does Microsoft really need? When are we ever going to be able to program against Exchange the way we program against SQL Server? How do we narrow down the number of new skills that we need to build, and yet learn all of these things?’ So, that’s the principle.

Innovation, but innovate in a way that doesn’t create thousands of new concepts, but rather integrate new concepts together in a powerful way. And we’re working on that kind of an innovation with our Longhorn release of Windows. It’s a long slog. We’ve put it a little bit lower priority in order to get out Windows XP Service Pack 2 to really respond on some security issues, but it’s the kind of integrated innovation that I think is absolutely on point for the interests of this audience.

The other pillar of performance we think that you depend on us for is to really be responsive to you as customers, and you could say, well, of course we expect that. But I would say your insistence on responsiveness has gone up over the last ten years. I got to Microsoft 24 years ago, and when I arrived, I would say that the number one thing people wanted from us were just features, features, features, features, features. People still want features, features, features, features, but they also want us to listen, listen, listen, listen.

Do you have the support in place? Are you taking care of security? Are you fixing the problems that we’re facing? Do I have the quick fix that I need to keep my environment, my company in production? So many of the issues are the same, but there’s a lot more focus on really listening to you, and responding to you in real-time.

One of the innovations I’m proudest of that we have in the market today is a thing we call internally Watson. Now, all of you really know Watson. Anybody here ever get a message, ‘An error has occurred. Do you want to send this error report to Microsoft, yes or no?’ Anybody ever get that message, show of hands? Statistically I kind of thought somebody must have.

Now, I could be embarrassed about that technology, or I could tell you, look, it’s one of the biggest advances in computing, because now what it lets us all know is statistically what issues and problems you’re having. It’s so important, in fact, we’re going to build it into the future of our platform and tools, so that as you build applications and run them in your own company, you have an automated way of collecting feedback, making real-time improvements to your products and doing so, doing so with statistical feedback from your users.

So these are the twin pillar we’re working on, integrated innovation, customer responsiveness to really help you do more with less.

Security is an example of the real importance of this responsiveness theme. Look, job one at Microsoft — and Mike Nash will be here later today for those of you who want to go through the details on security, which I think many and many of you have signed up to do — security you can trust from me, from the top of our company, security is job one. The issues that you’ve having keeping these systems up in production through the attacks by these malicious hackers is really unacceptable.

There is no immediate solution. We have an installed base of 600 million users. There is no way to snap our fingers — even if we had a perfect release, we couldn’t snap our fingers together and get them all migrated to the newest releases. And, in fact, we can’t count ever on having a perfect release. We may think it’s perfect, but the day we think it’s perfect and we don’t plan for a bright hacker figuring out a way around it is a bad day.

So we’re working on a bunch of different tactics. We’re working on the core quality and security. We’re working on the tools to help you update and apply patches. We’re working on resiliency and isolation, building layers that help you protect systems, taking the basic concepts of firewalling and antivirus to the next level, and you’ll hear about that.

We’re engaging with partners in the virus community, in the ISP community, so that we can respond quickly as an industry when there is an attack to work with you and to work with the industry to shut down and help you secure the environment.

We’re conducting massive education tours for security people around the world. We’re engaging with government to make sure the policies are right and law enforcement is really doing its job to lock these people up, because there has to be enough of a deterrent.

So on the technical front, on the support front, on the partnership front and on the legal front we’ve made this absolutely a number one priority. Because, if we don’t, not only will you not be doing more with less, not only will we not be being as responsive as we need to be, but the confidence level in all of the people that all of us serve in information technology will decrease, and that’s a very bad thing in the long run. We want people to bet more and depend more on information technology solutions to help improve business performance, and we have to make sure that these systems are up, secure and reliable. And you have absolutely my commitment of the importance and priority we place on that at Microsoft.

I want to talk just a minute about spam in the same context, because while spam is maybe even — frankly, for most people it’s even more annoying, more problematic than the security issues — for most of us it’s not the kinds of things yet that we lose our job over the way security is, but spans another big area that we’re investing in to respond to the issues we hear from customers.

We had 130 Chief Executive Officers from large companies in Seattle last week. The number one question they asked, and actually the number one questions their spouses asked, ‘When are you going to get rid of spam? What’s it going to take? I feel icky sometimes about even turning on my computer based upon the kind of information that gets sent to me.’

This is another area where in the interest of responsiveness we’ve really dialed up our focus. We’ve really put the focus on three different aspects. Number one is what I might call “protection,” and that’s the stuff we’re most familiar with. That’s basically filters and screens and different ways of having recipients look through mail and make intelligent assessments of what is spam and what isn’t.

One thing I find amazing, frankly, is because of the way technology moves the state-of-the-art in terms of people who have up to date systems and the amount of spam they get versus people who are using older systems and the amount of spam they get, there’s a real disconnect. Yes, the systems need to be better, but we also need to help people upgrade to the latest and greatest technologies, e-mail filter, e-mail client, in order to help people have a better experience.

We need to do more to help prevent spam. We’re trying to work on technologies that will allow ISPs to screen out certain e-mail addresses and look for evidence of spamming and just shut down those addresses as senders of electronic mail that people might find offensive. We’re working with industry associations on collective efforts in those areas.

And last but certainly not least, one of the things we’re most excited about are technologies that just make it more expensive to be in the spamming business. If every spammer had to have technology to take a piece of e-mail back from a recipient before the recipient would accept mail — so, something that sort of forces costs into the spamming system by making the sender prove his identity — we could drive up we think the cost of being a spammer by two, three, four orders of magnitude. And the big problem with spam today is it’s too cheap to send, too cheap to send, so we have to put more costs and more burden back on the spammer.

Anyway, a broad set of activities. The key message is, just like security, we’ve made not only the boldly-go-where-no-man-has-gone-before innovations a priority, but also responsiveness to issues like security and spam and other issues, which are very much on your mind.

As we think about where we are today in information technology and the top things that businesses need from a technical perspective, we think about these things as kind of anchored, if you will, in three basic, what shall I say, three basic roles: the people who build applications, the people who deploy them and manage them and secure them, and then the business information worker who uses them to find information, conduct a business process, communicate or collaborate, or anything else. For the app developer, we need a strong platform with great interoperability, good enterprise application integration systems and phenomenal development tools. For the IT professional, we need very strong scalability and security, and then great tools for management. And for the business worker, we’re looking for the tools that facilitate communication, collaboration, business intelligence, information access and visibility, and the ability to do all of those things mobile and on the road.

What I’m going to try to do today is give you a little bit of perspective on where we are with the application developer, primarily. Andy Lees is going to talk tomorrow about some of the key initiatives we have in place for the IT professional, and I’ll just remind you briefly today of some of the things we’re trying to do for the business information worker.

From an application development standpoint, I want to start with the notion that says we really do think, in the spirit of integrated innovation, we do really think about our tools broadly and our products broadly as part of an application development platform. When I say that some people think we just mean Windows and our Visual Studio tools or Windows and .NET, but we also think about SQL. We think about Exchange. We think about Office. We think about Great Plains. We think about Navision. Each and every one of the products that we build isn’t just an application, it also is an extensible piece of software that, if we give you the right capability, you can extend. And it may be simpler and easier and cheaper for you to extend Microsoft Office than write your own piece of code or to extend Axapta or Navision or Great Plains, to use Exchange as the backbone for your collaboration and workflow systems as opposed from starting from scratch.

So while I will spend a lot of time talking about the .NET Framework itself, each and every one of these things we’re trying to bring together under a unified development platform.

How many people do we have in the audience who would say their primary job is application development, show of hands? That crowd, I’ll tell you, will always try to take a look and say, ‘How can I start from something that exists, because the cheapest piece of code to write is the piece of code I don’t write myself but rather that I can reuse and repurpose,’ and that’s the perspective that we bring broadly across this platform.

As we look, say, to the next generation of our Business Solutions as we’ve entered that market with the acquisition of Great Plains, we think about how do we build a general purpose, extensible framework on top of .NET for building that kind of application. As we look to the future of Longhorn, we’re asking how do we unify some of the data access concepts across the file system, across SQL Server, across Exchange. How do we make sure that we take the presentation system across all of these things and extend it in a way that you can take advantage of? So, it’s a big part of what we do is to think through that core platform.

When I say things like that, the first thing that comes to some people’s mind is, ‘Oh my goodness. Because they think of this platform as one big integrated thing, that’s going to be a closed environment, I can’t use that Microsoft stuff the way I want to, to plug in and talk to UNIX systems, to talk to mainframe systems, to talk to Oracle systems.’ This is an area absolutely where I want to encourage you to go back and question any conventional wisdom. Our company has made a greater commitment to and investment in interoperability over the last four or five years than I think people often give us credit for. Whether it’s on the platform side, identity, application integration, networking, the range of work that we’ve done as part of our commitment to support open standards and interoperability through open standards is really quite dramatic.

The most important of those I would argue is the work that we’ve done in collaboration with IBM and others and the WS-I, Web Services Interoperability implementers organization, to try to really make sure that we get the next generation of XML Web service standards in place.

Now, people say, ‘That’s interesting. Are you really committed to those things as open standards?’ And the answer is absolutely yes. XML and the stack that goes below it is the best thing that could have happened to our industry, and one of the most important. XML Web services are essentially an architected way to do interoperability. The old way of doing interoperability was to try to build a piece of code that went from every system to every other system. That’s not what we get with XML Web services. And as I’ll describe in a few customer case studies later on, this really is proving to be the kind of lingua franca that lets you start a system that was built on UNIX, extend it with components that are written in Windows and vice versa.

So we’re very keen not only to build an integrated platform that makes your life simpler, but an integrated platform that you can plug the pieces into and add and integrate well with the other systems that you own and that you build that are not based on the Microsoft platform.

So integrated innovation with open standards based interoperability — very, very important.

Today we’re announcing something that we call Web Services Enhancements version 2. This takes the work that we’ve been doing in a variety of these standards organizations, and we will release the next generation of our XML Web services implementation that starts to embrace the emerging Web services security standards.

As part of that, today we’ll announce the technical beta for a set of extensions to Microsoft Office that let it plug in very nicely and take advantage of Web services v2 level extensions, so that Office can be a smart client front-end to XML Web services that live elsewhere in your network or out across the Internet.

What I thought we’d do today is show you a little bit of this, and so I’d like to invite Rebecca Diaz from our Office group and Web services group to come on up and show you some of the advances in Web Services 2.0 and some of the work we’re doing in our Office Information Bridge Framework to bring those together. Please welcome Rebecca. (Applause.)

REBECCA DIAZ: Thanks, Steve. All right.

Hey, good morning. I’m really excited to be here, because today I’m here to announce two key parts of Microsoft’s overall Web services strategy. First of all, we’re going to announce the general availability of Web Services Enhancements 2.0, otherwise affectionately known as WSE. A lot of you people have been asking for that for a long time. We’re also announcing today the Microsoft Office Information Bridge Framework, otherwise known as IBF.

So WSE enables developers, as an add-in to Visual Studio .NET, to actually build end-to-end Web services security solutions. IBF, also as an add-in to Visual Studio .NET, enables developers to actually extend the Office environment to make information workers more productive.

So in this demo, I’m actually going to show you what it’s like for a stock brokerage firm to open up some secure Web services to be able to be consumed by different end-points — in this case an Office IBF solution — securely, to make brokers more productive and provide higher levels of customer service.

STEVE BALLMER: So the demo is going to use both the Web Services 2.0 enhancements, so we can do things securely, and IBF, so you’re going to pack both of these beta technologies or one beta and one new technology into the same demo.

REBECCA DIAZ: RTM. RTM.

STEVE BALLMER: RTM ’em.

REBECCA DIAZ: Yeah, they’ve been waiting for this for a while.

STEVE BALLMER: I always wonder how we managed to call something WSE of anything but that’s a marketing skill only Microsoft can show.

REBECCA DIAZ: WSE, WSE, think magic.

STEVE BALLMER: Yeah, we’ll see how powerful it is.

REBECCA DIAZ: All right. So I’ve got one of my powerful corporate clients here actually sending me some e-mail. I’m playing the role of a stock broker here. And as you can see, I’m going to just go ahead and show you what it’s like to actually respond to Charles here in e-mail. And I see that a Smart Tag actually recognizes my customer account name. So what’s exciting is I can actually pull up information about that corresponding account right here within Outlook. I don’t have to switch out to some cumbersome UI.

What’s happening is IBF is building a series of different task panes here, aggregating information off from different Web services running on the corporate enterprise back-end system. I can see what’s currently going on in the market and I can actually do some things like basic stock trades, for instance, right here inside Office.

Let me show you how you might do this.

So I’m going to go ahead and purchase the 10,000 shares for Mr. Fitzgerald and I’m going to submit that order. And what’s happening is it’s going out over the DMZ, through the firewall, to a secure Web service and bringing back that confirmation number. I don’t actually have to physically be at the brokerage firm to actually use this system; pretty powerful.

Now check out this tight integration. Very cool, huh? (Applause.) All right.

So what happens if I wanted to have more information about this customer’s account, so instead of just telling him, hey, look, I’ve finished this stock order for you, I actually want to provide additional levels of customer service, I want to tell him more about what’s actually going on inside this account.

I’m going to show you how you extend this solution to make the broker more productive and provide better levels of customer service. So I’m going to go ahead and exit out of Outlook here and I’m going to show you what it’s like for the developer over on the investment side of the house, how I can take a portfolio Web service that I’ve basically written here in VB and secure it and make it available for consumption, in this case by the Office IBF solution.

So what I’ve got here is this portfolio Web service. I’m going to show you how you use the Web Service Enhancements integration in Visual Studio to go ahead and secure it. So. the only thing I need to do is right-click here, pull up the WSE setting tool and go ahead and author a policy which describes the security requirements for that endpoint. So what I need to do is basically tell it that I want to secure that endpoint.

STEVE BALLMER: So you’re using the WS-Security stuff here in setting policy?

REBECCA DIAZ: That’s exactly right. This is Web Services Enhancements implementation of it.

So what I want to do is turn on signature encryption to ensure the message confidentiality and integrity of that message. I also want to leverage my native integration into Active Directory because I want to leverage some role-based authorization that’s build into the engine here.

So I’m going to turn on Kerberos and I’m going to say that basically anybody who accesses this system has to be within the role of broker. Then I’m also going to leverage the native integration into the PKI infrastructure on Windows Server as well, grab a certificate out of my certificates store so I can encrypt the message over the wire, and then I’m going to finish out the wizard and show you what it generates for me.

OK, so the wizard generates this policy file for me, and what’s excellent, because I’m not able to code that myself, WSE takes care of it for me. I’m marketing, you know, I can’t code anymore.

So this basically right here is a policy file. Let me tell you some powerful things about policy. First of all, if I have a secure Web service that’s actually running out there in the world and I wanted to augment those security requirements for that endpoint, as an IT operator I would only need to actually change some configuration settings inside the policy file and redeploy it onto the Windows Server environment, and actually the WSE runtime would recognize that and load it up and start to change the behavior on the fly. So I don’t have to recompile. I don’t have to change. I don’t have to bring down IIS: it just applies it on the fly.

Another very powerful thing about policy is that it can actually be used by many of the different Microsoft tools to actually consume that corresponding endpoint.

So I’m going to show you how I can leverage this policy file to consume this secure Web service that I now have using IBF. So let me show you how I can do that.

So I’m switching over to the brokerage side of the house now, and what I need to do is go ahead and create a user interface. I’ve got a Win form here that I want to populate with that information coming from that portfolio Web service. So what I want to do is go ahead and populate this. So let me show you how you go about doing that.

So what I can do is bring up this metadata explorer. This is part of the IBF integration. And I need to write that policy file up to the corresponding endpoints. Let me go show you how I do that. What I do is I find the transformation for that call and I apply that policy file to it.

Now, what this does is it tells IBF how to build that SOAP header, the corresponding SOAP header, and sign and encrypt the message as it goes across the wire based on that policy.

Now, the next thing I need to do is just simply put this Win form in the task pane space that we saw when we were in Outlook. So what I want to do is pull that up, grab the toolbox, you’re familiar with that, just grab that Win form and drag and drop it into the task pane here.

Now, the only final thing I need to do is actually go and publish this to the IBF metadata server. Now, what’s exciting, Steve, is that once you get this out there to the metadata server, thousands of brokers within the brokerage firms now get this new functionality right away. And I’m sure that you guys don’t believe me, so I’m going to prove it to you. Hold on one sec.

So what I do as the broker, writing my e-mail to Mr. Fitzgerald, I do this all the time. I’m going to go ahead and author this e-mail. And as I can see, again I’ve got my Smart Tag that recognizes my customer account information, I’m going to go ahead and pull that up, and let’s see if that portfolio information comes up.

IBF is aggregating all that information from those different secure Web services, pulling it up to these different task panes and let’s see what happens. Market overview, there it is, cool. (Applause.)

So now I could basically just give him a summary of what’s going on in his account, tell him I’ve offloaded some stagnant stock for him or whatever it might be, pretty excellent.

So what did we actually see here? We saw two things. We saw how you can use Web Services Enhancements, integrated into Visual Studio to actually make end-to-end secure Web services, make those available for consumption by any endpoint. In this case, we actually consumed it using the Office IBF solution that’s also integrated into the Visual Studio .NET environment to make information workers more productive.

And what’s exciting is you can actually get this and start building this stuff today on MSDN and/or you can join the Connected Systems Track to get a hold of the bits as well. I’ve got to plug the track. Thank you.

STEVE BALLMER: Thanks, Rebecca. (Applause.)

So two things announced today. Number one, Web Services Enhancements version 2, which brings security really into our Web Services Enhancements, and number two is the technical preview of the Office Information Bridge Framework that lets you use Office as a smart client destination and consumer of Web service functionality — big steps forward from an application development standpoint I think. Big steps forward in our development platform and its support of open standard, but very consistent with the integrated innovation message that I talked about in the context of things you already know, already can do, very easy now to get incredibly powerful new connectivity and development functionality.

Let met talk a little bit more about where we are with our development platform .NET, because .NET has really come a long way over the last few years. Forrester, in their market surveys, will now confirm our internal data that .NET is the preferred development framework of over 50 percent of all developers in the United States, over 50 percent are on .NET. (Applause.) And that number keeps growing. Windows 32 is another choice, Java is another choice, but the clear incumbent and growing is absolutely .NET.

Gartner has moved the .NET Framework into their magic quadrant for enterprise application servers, along with a couple of the other Java solutions, recognizing the improvements in advances that we’ve made in terms of enterprise scalability, security and reliability in .NET.

We still have a lot of customers who are on Win 32. We will continue to support those customers. We appreciate the work that they’re doing, but we see a lot of improvements that customers recognize in .NET. Our customer surveys tell us that people who use .NET think it’s 67 percent more reliable than our customers who are using Win 32. Seventy-six percent of them say it’s more high performance than the Win 32 environment. Two-point-seven times as many people will tell you that the .NET platform is a secure place to build applications versus Win 32.

So for those of you in the audience who have yet to make the transition from Visual Studio in its pre .NET incarnation up to the .NET platform and .NET Framework, I encourage you to sort of come across that boundary, if you will, and enjoy many of the advantages that your compatriots are who’ve already made the transition to .NET.

We’re also pleased to announce today, or at least to summarize today, a set of announcements that we’ve made in terms of new partners who are integrating their tools into Visual Studio through the VSIP program. Oracle announced last week that they would integrate their toolset into the Visual Studio framework. SAP has announced that they would integrate into the Visual Studio framework for the extension of their applications. And today, TIBCO is announcing that it too will move to embrace Visual Studio as an extensibility suite for its runtime and its platforms.

So a lot of great momentum as customers, as partners, as industry, as analysts all move to embrace .NET really as the future for the way applications get created.

We have coming next year the next big advance, if you will, on the .NET roadmap with a new version of Visual Studio — Visual Studio 2005 — and a new version of SQL Server that builds the .NET Framework into the SQL Server programming environment. These will be big advances the first part of next year. On the SQL side, we really moved to embrace not only .NET for programmability, we embraced XML as a native data type, we make a lot of improvements in high availability, security and real time business intelligence.

In Visual Studio 2005, I’ll show you some of the advanced functionality here in a minute that we’ll bring to market but we’re seeing about a 50 percent reduction in the amount of code that people need to write in common scenarios, we’ve improved deployment and security, made it easier to write applications that run on mobile devices and have done a lot to simplify the user experience.

These are two of the absolute biggest releases we’ve ever done in terms of improving the programming and application developer experience. The biggest thing I think though is the work that we’re doing in Visual Studio 2005 to extend to a broader range of functionality the amount of the application development lifecycle that we support. So we’re announcing today for shipment next year Visual Studio 2005 Team Systems, where we add new capability for group development, modeling, testing and deployment. And to show you some of the new capabilities that we’ll bring to market I want to invite Prashant Sridharan from our development tools group to come on up and give us a little bit of a technology preview of Visual Studio 2005 Team Systems. Prashant? (Applause.)

PRASHANT SRIDHARAN: Thanks, Steve.

Application development has never been harder. These days, solutions are comprised of numerous distributed components and Web services, all of which need to be deployed and managed by your IT operations. At the same time, your teams have become increasingly specialized and geographically distributed, resulting in pockets of information that breed silos of communications. We need to break through these barriers to communication and drive integration throughout the IT lifecycle.

The Visual Studio Team System is an integrated suite of lifecycle tools that expands the Visual Studio product line to include new offerings for operations managers, architects, testers, project managers and, of course, developers.

I’m going to take you through a typical project walk-through using the Visual Studio Teams System.

On the screen is a work item assigned to me by my project manager. Work items are integrated throughout Visual Studio and they enable teams to communicate information about bugs, deliverables, requirements, status and more.

This is the application that my team, Adventure Works, an online retailer of sporting goods, uses to manage its suppliers and its inventory. My job here is to modify according to the project manager, through the work item, is to modify this application to connect to a new supplier.

So before I do that, I’ll first go back to the Visual Studio environment and set the status of the work item so that my entire team knows the state of my project at any time.

STEVE BALLMER: So you’re saying right in Visual Studio we’ll provide the workflow for managing essentially specification-level information now, in addition to some code itself?

PRASHANT SRIDHARAN: That’s exactly right, Steve.

So naturally my partner has exposed its internal system as a Web service. The Visual Studio Team System includes this design surface for graphically building service-oriented architectures.

I’ll go ahead and start by adding a new Web service to my project, and then I’ll use the integrated directory to find my partner’s Web service. Once I’ve found it, I’ll add it to my solution.

Now, up to now visualizing these kinds of service-oriented applications has been extraordinarily difficult, but with the Visual Studio Team System it’s now just a matter of drag, drop and connect.

Now, this is a service-oriented application and in order for me to successful deploy my service-oriented application, I need to work closely with my operations staff. This is a diagram given to me my by infrastructure manager that describes the Adventure Works data center. Now, this isn’t just a pretty picture. Using this diagram I can validate whether or not my application will work as it’s been designed.

STEVE BALLMER: Now, you’re saying now back into Visual Studio itself, we get information about the environment into which we’re going to deploy so you can build this thing, and as you’re building it, you’re building it essentially to be managed and operated well in the data center?

PRASHANT SRIDHARAN: That’s exactly right, Steve, and if we look at the error list, we’ll see that we have no errors and that tells up front that our application will deploy. This is what we call Designing for Operation and it enables architects and operations managers to communicate more effectively.

STEVE BALLMER: I think for those of you who are in the IT side of the house, this is where we really come to the forefront with Dynamic Systems Initiative and make sure that the application development process and the management and operations process get integrated, so there’s far fewer disconnects and problems on applications that either you’re building or others are building for you.

PRASHANT SRIDHARAN: That’s exactly right.

So now let’s say I’m now the developer. I was the architect and now I’m the developer. My architect has finished his work, and using a work item, has handed off the work to me. My job is to write good code, reliable code, code that works as it’s been designed. So let me go ahead now and implement a portion of my application.

And I’m a marketing guy, too, so I’ll just go ahead and paste some code in. (Laughter.)

Now, my project manager has used the integrated process guidance in Visual Studio Team Systems and has declared that all production code must have static analysis, units and code coverage tests. The Visual Studio Team System includes integrated change management tools that not only give you enterprise grade source control but will also enforce this policy throughout the system.

So let me go ahead right now and run all of my unit tests.

Now, you’ll see along the bottom that all my unit tests will pass. Now, on the surface it appears —

STEVE BALLMER: So the test tools are all built into Visual Studio Team Systems?

PRASHANT SRIDHARAN: That’s exactly right, exactly right. We are driving integration across the IT lifecycle. (Applause.)

Now, you’ll see that all my unit tests have passed, and on the surface it seems that my application is working and has been tested thoroughly. But the Visual Studio team system includes integrated code coverage tools that give me more information about my project.

On the screen the red areas represent areas of my code that have not been exercised. Effectively, I’ve written a lot of new code but I haven’t tested it thoroughly enough. Before I check in my code, I’ll have to write unit tests to exercise all of my code. This enables my operations managers to have the confidence that my application is well tested. (Applause.)

Now, in a lot of organizations, security testing is left to the end and, of course, we all know that’s a really bad idea. The Visual Studio Team System includes —

STEVE BALLMER: We do.

PRASHANT SRIDHARAN: Yeah, we certainly do.

The Visual Studio Team System includes integrated static analysis tools that give me more information about coding and security errors in my application.

I’ve compiled my code and I have a number of errors but one of my warnings says I have a buffer overrun. If I double check my —

STEVE BALLMER: Let me make a point. We built the whole new set of tools in our research organization to try to help us in the process of intelligently looking for potential security vulnerabilities as part of our get-well plan on security. Most of those tools effectively are now going to be built into Visual Studio Team Systems, so they’re available for all of you to use to write more secure code as well.

PRASHANT SRIDHARAN: That’s exactly right. And this isn’t normal code. This isn’t ordinary code. This is the same code that was exploited by the Slammer virus. And in response to a lot of these issues, as Steve said, we’ve been building a lot of tools internally as part of our Trustworthy Computing Initiative. These tools will ship in the box with the Visual Studio Team System, so that you can perform security analysis just like we do at Microsoft.

Now, before I deploy my application I want to ensure that it’s ready for the rigorous performance demands my users will place on it. The Visual Studio Team System includes integrated load testing tools so that I can verify the performance of my application.

I’ve gone ahead and I’ve executed my load test, and you’ll see that the results are beginning to display on this graph. These results are displayed alongside the Windows performance counters and this lets my testers and my operations managers communicate information about not only the project health but also that of the underlying hardware and operating systems.

So clearly writing applications today is about a lot more than writing code. These days, it’s really about getting your teams to work better together across the IT lifecycle. The Visual Studio Team System reduces the complexity of building Web services based applications but it also facilitates communication and collaboration across the IT lifecycle.

Thank you, Steve. (Applause.)

STEVE BALLMER: So not only are we making all of the core improvements to the .NET Framework and Visual Studio, but we’re adding tools for security testing, load testing, workflow, modeling, will all be available in a variety of different forms for people in different roles in Visual Studio Team Systems version 2005, pretty exciting and, frankly, one of the key milestones I think in terms of the Dynamic Systems Initiative that we announced for management last year.

The Dynamic Systems Initiative is about a lot of things. It’s about improvements in products like Microsoft Operations Manager, or MOM, and Systems Management Server, but it’s also about starting end-to-end to think from development on through operations. And as Prashant just showed you, starting now, when software gets written it can be modeled and taken a look at from an operations perspective as well as from a development perspective.

I want to turn now a little bit to that third tier, the business information worker, because I think that’s an area where we’ve brought a lot of new product to market that still hasn’t been fully mobilized. I’m really very excited about our Office 2003 product, the SharePoint Team Services work, the SharePoint Portal Server that we’ve brought to market and now our new Live Meeting service for online interactive meetings. Collectively these technologies really form the backbone for letting you enable people to communicate better and to collaborate better.

A small show of hands, how many people here use Office 2003? How many people here have a SharePoint Team Site that they’ve put up? OK. That’s one I’d really encourage people, because what we’ve seen in Microsoft is that the productivity enhancements from an end-user perspective, in addition to some of the nice manageability features of SharePoint, have made it really a productivity boon to our people. The ability to set up a site quickly, to be able to collaborate conveniently on information is really very, very powerful. And when you combine that with the work that we’ve been doing on Web parts and now the Office Information Bridge Framework, you really will have a very powerful way of letting people have their own personalized view of information very well integrated in with the key information that you want to give them from line of business processes.

And so there’s a lot of work in our XML area, the work we’re doing in portal and search. You’ll see a lot of new innovation prompted by good competition on the search front, not only in the cloud, but also at the enterprise level and at the desktop level.

So big areas, important areas of investment, to actually take all the rest of this functionality for the app developer and for the IT pro and IT manager and really bring it alive for the end user.

The other key piece to that for us is the investment we’re making in business applications. We’re very, very serious about our investment in this area, in supply chain, in CRM, in ERP and we’re very dedicated to having absolutely the best infrastructure for you to run your business, the best applications to run your business, bar none, for any of you who are in smaller or medium or even some quite large organizations.

Our design point will not let us do the supply chain for General Motors but I would say for 99.5 percent of all businesses in the world we will be able to deliver you applications which are the simplest to use, the simplest to install — most enterprise applications have amazing, amazing time and cost to get configured and set up — the best TCO, the most general purpose programmability environment that builds off of our Visual Studio work, the best business intelligence through the work we’re doing with Excel and SQL Server, and still with the kind of connections to other business applications that you may want to use.

We have three key product lines today: Axapta for higher-end manufacturing companies; Navision, very strong in a broad set of markets in Europe, and Great Plains in the United States. Over time we’ll have one unified product that brings the best of those products all together, and helps you really run your business, an important new investment for Microsoft that I think is very important for me to highlight for this audience today.

I’ve talked a lot about what we hear from you, I’ve talked a lot about market momentum and showed you some technology, but the real proof is in the pudding: Our people using these things, our real customers benefiting. And so we’ve picked three customers that have made significant enterprise investments in .NET applications, and I want to talk to you briefly about each of them because I think they really demonstrate the kind of value that people can get by embracing these new innovations.

The first is a company named Menlo Worldwide, which is a supply-chain, logistics and freight company. They were bidding on a big piece of business with the United States Postal Service to provide movement for the Postal Service of an incredible amount of U.S. mail every day. They had a requirement to have a set of tracking services for the bags of mail that they were carrying for the U.S. Postal Service. By the time they got deeply into the bid process, they had only 75 days to build the solution. They built that solution in .NET. They had to be able to track. They built an application that could not only work with PCs but was provisioned on over 700 mobile devices at airports around the United States, 105 airports, greater than 99.9 percent availability and the mission-critical application for them to win, to keep and to satisfy their largest customer, the United States Postal Service.

The second application I want to mention is from McGraw Hill, their construction division. McGraw Hill is a leading publishing company. They’re the leading publisher of information valuable to people in the construction industry. They’d been working literally two years, two years on a Java-based solution. They weren’t getting anywhere very fast with that approach. One of our partners and some of our people in New York got them to take a look at what was possible with .NET and with Web-services approaches, because their information, their construction information was distributed on a variety of systems, most of them not Windows systems, frankly. And they pulled together a solution that uses Visual Studio .NET and the kind of programmability that we showed you in Microsoft Office to build, monitor and distribute construction information to their clients around the world; important, mission-critical applications at McGraw Hill.

The last is perhaps to me the most satisfying. Robertson Research Institute is an organization dedicated to healthcare. Dr. Robertson had a very unfortunate death occur with a son of a friend of his. He took a look and said, why, what was wrong in the healthcare delivery process? The problem, it turned out, was it was very difficult to get enough information to doctors [in] real time so that they can absolutely make the right diagnosis.

So much healthcare information is locked up in so many different places in silos and they said, look, we’re going to build a solution that really helps docs do a better job of diagnosing and solving patient problems. They’re giving their solution away free to doctors as part of an emphasis to try to really do a better job and encourage people to do a better job of using information technology to solve healthcare issues. It’s a very comprehensive tool. It was built in .NET.

They’ve found that because it’s all for free, cost, complexity were very important. They cut their costs by about 90 percent, their development time by about 58 percent. They’ve got something like 35 to 40 percent as much code, so better solutions delivered more quickly, more maintainable and supportable in a very, very, very mission-critical environment, that environment being the doc trying to deliver real-time healthcare services.

All of this I hope for you translates into a few things from us. When you take a look at us versus the competitive options that you have, IBM, Java, Linux, there’s four things hopefully we can stand for. No. 1 is more integrated innovation. No. 2 is better responsiveness and trustworthiness, whether it’s fixing the issues you have or responding to issues. No. 3 is partnerships, not only between our companies but partnership with the independent software vendors, the systems integrators and the rest of the ecosystem that you need to make your world come alive. And last but not least is choice, more applications, more interoperability, more ability to fit Windows systems into your environment conveniently than any other platform in the world.

That’s what we hope we mean competitively to you and we know the folks who come to Tech
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Ed, you are amongst our very best, best customers in the world, and we will very much work to continue to earn the incredible support that you’ve given us and to make sure that the decisions that you’re making every day to use Microsoft products are good decisions.

Our mission, or the mission of IT, is to help you realize your goal, your goal of helping your businesses do more with less. Our approach is to bring integrated innovation with interoperability across the entire IT lifecycle.

It’s been a lot of fun for me to have this chance to kick off. We know we have an exciting and fun-filled Tech
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Ed. If we didn’t get to a question that’s on your minds, I’m [email protected]. I’d love to hear from you and let’s just go have a great Tech
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Ed 2004. Thanks, everybody. (Applause.)