Will Poole: Microsoft Worldwide Partner Conference 2004

Remarks by Will Poole, Senior Vice President, Windows Client Business, Microsoft Corporation

Worldwide Partner Conference 2004

Toronto, Ontario, Canada

July 12, 2004

Good morning. It’s very nice to be introduced by David Gang of AOL for two reasons. One is because he’s a very smart and creative technologist who I’ve enjoyed working with for my eight years at Microsoft, and it’s always a good time to be working with him and to be challenged by him and his team. But, second, it’s because our deal with AOL last year, our settlement, was a very important milestone for the company in our ongoing efforts to resolve our differences with the industry and to work with regulators to find a way that our business practices are acceptable to governments of the world. And AOL was yet another important step in that plan.

And that is so important to us because it gives us the ability to go back and focus on what’s important, to focus on our customers, to focus on our partners, and to focus on growing the business. And that’s what I’m here to talk to you about today, what we’re doing for our customers of Windows, what we’re doing for you, our partners, and how we’re going to grow this business, and how optimistic we are about the ability to grow the Windows PC business.

Let me start by just taking a quick look at where we are today. You know, we’ve been focusing on this effort, a PC on every desk in every home, for a long time, since the founding of the company. And it’s going really well. We’ve got a great ecosystem of partners, of software vendors, of hardware vendors, of service providers of all kinds, and we’re working together to deliver on the mission that we have, which is to use Microsoft technologies to help people throughout the world realize their full potential. In the case of the Windows PC business, we have 600 million Windows PCs in use worldwide. This is phenomenal. Many of you helped make this happen, thank you.

This is a great place to be, but the future is even brighter, because over the next five or six years, we can see an incredible growth in this business. This is not a business that’s leveling out, this business is growing. We’re seeing great growth in the enterprise in developed markets. We’re seeing developing markets adopting PC technologies like never before. The growth numbers are phenomenal. And we’re seeing the proliferation of new types of devices, tailored PCs that meet the specific needs of specific targeted customers that can add value to their business to help them realize their potential. And we’re seeing the growth of the ecosystem that supports all this activity becoming broader, richer, and more healthy. And that’s really what we’re about here, to realize the potential for Windows over the next five or six years.

Now, while things are going well, and I’m very optimistic, we have to be honest about where the problems are that we face, particularly with the Windows PC ecosystem and around security. And you heard from us last year, this is an important and vital effort for us, you’ve heard and experienced, I’m sure, many, many of the problems that have been plaguing us and the industry. And this slide here shows you just how the problem is happening, and what you see here is the blue bar shows the number of days from when we issue a fix, an update, to Windows, the number of days from when a fix came out and when an attack occurred. So back with NIMDA, it was nearly a year from when that fix came out to when the attackers used that as a blueprint as a way to create a virus to go and attack PCs. SQL Spammer, half-a-year. With each progressive event here, [it] has moved closer and closer. With Blaster, we saw only 14 days from when that update was released by Microsoft to when somebody reverse-engineered that update and took advantage of the fact that all people had not patched their systems; that customers, be they consumers or businesses, had not yet applied that update. And that’s really the point of vulnerability, and that’s the problem that we realized about a year ago, we had to fundamentally change the rules of how we’re going to address the security problem for our customers, and make Windows fundamentally more secure, more resilient to attack.

Let me tell you what we’re doing there, and how this is going to work. So, there are multiple vectors of attack, multiple ways that viruses, worms, and other malware can attack a user’s machine. It can come in through the Internet over the network, it can come in borne as an attachment on e-mail, it can come in via Web browsing, it can infect you in memory, it can make use of buffer overruns. These are all ways that people are finding ways to make software attack the PC and do their bidding. And so the goal here is to isolate and create resiliency in the system, to put effectively a shield in each of these areas, in each of these vectors such that they can not be used effectively as a way for people to infiltrate a system. And that’s really what SP 2 is all about, Windows SP 2 is increasing the resiliency of Windows to multiple forms of attack, giving multiple ways that we help protect customers, and create this new approach to making PCs fundamentally more secure. And what that means, if we do it right, is the attacks come in and they’re thwarted, they don’t take effect, they don’t work.

So, how are we actually doing that? What are the specifics? There are really four areas of technology relative to security in SP 2. The network protection is all about the updated firewall, and by having that firewall on by default and all the time, it’s going to keep the network-borne worms from coming into the PC.

The second one is about making e-mail and Instant Messaging safer, that’s about taking care of attachments, and isolating them, and not making it so easy for customers to click on an attachment and have that run an executable that then infiltrates the system.

Web browsing, we’re making that safer both through the way software is downloaded through Active X controls, making it hard for machines to be spammed with software to be downloaded, and we’re also blocking pop-ups, which is another way that software could be taking advantage of an exploit and hitting a person’s machine.

And, finally, moving more into the bowels of the system, the protection against software overflows is one of the most vital things we’re doing to ensure that even if a virus gets in, it will not be able to use its most common vector of attack, which is to overrun a buffer, insert code, and execute that code. And there are a number of things we’re doing in all of these areas that are going to, together, make SP 2 fundamentally much, much better for customers.

So, to actually show you what that’s about, let me ask Dee Dee to come out here and give us a demonstration. Dee Dee. (Applause.)

DEE DEE WALSH: Hey, there. I’m here to show you what we’ve done with XP SP 2 to enhance PC security right out of the box. So, I’m going to talk with you about three key features. The first is the new Windows Security Center, the second is Windows Firewall, which is the successor to the Internet Connection Firewall, and the third is some enhancements that Will talked about that we’ve made in Internet Explorer.

So, when you have a new PC that has SP 2 loaded on it, this is the first dialogue that you see. And you notice that now we’re encouraging every customer to turn on Automatic Updates on their systems. And, in fact, the new shutdown dialogue in SP 2 also automatically loads updates as you shutdown your machine. So this past summer, I had the rare opportunity of answering our product support lines because, when Blaster hit, it was all hands on deck, and we all got to answer the phones. It was kind of interesting, and actually a little horrifying because what I found is that so many customers did not know what a firewall is. They didn’t know what antivirus software is, and they had no idea how to even check their machines for that. So, it was actually a little alarming because so many of these customers were so confused about the security state of their machines.

So, we actually have solved that problem for them by consolidating everything, when you go to Control Panel, you’ll notice that there’s a new feature called the Windows Security Center. And what’s cool about the Windows Security Center is, we’ve consolidated all of your security settings in one place, and actually for those of you who run an IT department, what I see at work is a little bit different than this. What I see at work is that our IT department manages this whole thing centrally, so they have control over the whole thing.

WILL POOLE: So, this tool is predominantly for consumer, small business, unmanaged PCs?

DEE DEE WALSH: Yes. Actually, what we found with Blaster was that the majority of machines that were hit were outside the firewall. So, let me talk to you a little bit about the Security Center. Notice that it shows the firewall, Automatic Update, and the status of the virus protection as well. Again, as I said, you can centrally manage this whole thing from the IT department could essentially manage the whole thing.

Let me show you a little bit of a demonstration on how it works. So, I’ll go ahead and go into the firewall. Notice, again, it tells me a recommended state, it says on recommended, and so Will and I will be bad here for a moment, and we’ll turn it off. And, again, it says not recommended. So, if I go ahead and click it off, notice I get this bubble right here that says, hey, your firewall isn’t on. And, of course, there’s no doubt that something is wrong here. I’m at red-alert here.

WILL POOLE: It would be pretty hard to miss that.

DEE DEE WALSH: It would be. So, I go ahead, and it even gives me recommendations which if I click on that it tells me what I need to do. And, in that case, I need to enable it now, and see what happens, there I am back at my green okay state.

So, I don’t know how many of you have used network applications that require an open port?

WILL POOLE: Those are the bane of my existence, when my teenager says, hey, dad, I got a new game and I don’t know how to get through the firewall. You spend a couple of hours trying to figure it out.

DEE DEE WALSH: That’s definitely not for the faint of heart. In fact, if you were bad like me, I just turned off the firewall and left my home machine vulnerable. So that was my fix.

So, I’m going to show you, this is a network game, it’s called Off Road Racing, and I’m going to go ahead and start a game. And what I want to do is, I want to challenge a friend. So, my friend Nancy lives in another city and another state, and I want to play this game with her. And now, notice that we forgot to do something here. So we actually forgot to reset the machine. So, what this was supposed to do was bring up a dialogue that opened a port. But let me show you what happens. Let me go into Security Center, and notice that in the Windows Firewall, notice now under the Exceptions tab that Off Road Racing is listed as an exception. And so now whenever I want to play that and what SP 2 does is dynamically opens and closes the port, but it keeps the firewall up. And you can centrally manage all of this because notice that I can also say, don’t allow exceptions, and this is good for places like coffee shops, or hotels where we’re all staying, those kinds of places that are less secure.

WILL POOLE: So the net here is we’re going to give a very end-user-friendly means of opening up the firewall temporarily for applications that need it, and keeping it nice and tight and locked down for everybody else?

DEE DEE WALSH: Exactly. And, in fact, let me show you a little bit with the antivirus software as well. So, it’s similar to the firewall. If I go ahead and disable antivirus, notice that immediately I’m told that, red alert, turned off the antivirus software. And, in fact, if my signature files were out of date, I would get a similar message that said, you need to update your antivirus software. And, again, if I go ahead and re-enable my antivirus software notice I know exactly where I stand, and it goes back to the green okay status.

WILL POOLE: By the time SP 2 ships, we anticipate having all of the major antivirus software companies integrated with the Security Center, right?

DEE DEE WALSH: And we’re adding more all the time. So, that’s correct.

So, those are the key Security Center features. Again, we try to consolidate it all in one place. So, if you’re an end-user, we’ve made it very easy for you to know the state of your machine, and if you’re managing things centrally, we’ve enabled you to do a much better job on that as well.

I’m going to go ahead and let’s talk about Internet Explorer, and some of the work we’ve done to make Web browsing safer and more manageable. I don’t know how many of you like the famous pop-up ad?

WILL POOLE: I love pop-up ads.

DEE DEE WALSH: Besides, Will.

WILL POOLE: We’ve already established, though, that I’m a little aberrant in that I watch the Super Bowl for the commercials.

DEE DEE WALSH: You always wondered who those people were, and now we know, it’s Will.

So, I’m going to show, notice that the pop-up ad, and you can get millions of those. In fact, depending on the site you go to, the thing about pop-up ads, in addition to the fact that they’re annoying, is that they can also do bad things to your machine. They can be doing all sorts of naughty little things that you don’t want it to do, and that you might not even be aware of.

So, I’m going to go ahead and show you now that we’ve added to Internet Explorer a pop-up blocker. And so that enables you, I know I use the Google toolbar, and that has a pop-up blocker, but instead of just having that available in certain cases, now it’s available directly from the browser. And what’s nice is, this information bar comes up, and notice that I completely control everything. So, if I want to allow pop-ups, and also in the intranet pop-ups are enabled.

WILL POOLE: So, we’re taking a good idea that’s been out there for a while, and making sure that it’s ubiquitously available to all users of Internet Explorer, so they can both get the convenience of not seeing the pop-ups if they don’t want to, and ensure that they don’t have pop-ups deliver them any kind of security or virus problem.

DEE DEE WALSH: Exactly. I couldn’t have said it better myself.

Let’s talk a little bit about ActiveX controls. I’m going to go to this car site, and notice that I’m going to go ahead and read an article here, and notice that this page looks pretty good. And I don’t know about you, but I think that ActiveX controls are actually great, and they can enhance the experience quite a bit. But there are some case where, like in this case, I’m sure the ActiveX control you figured yesterday it was probably showing something racing, you know how the car sites are. But probably something that personally I’m not that interested in, but it’s trying to load it onto my machine.

Internet Explorer automatically blocks the ActiveX control, except, of course, on the intranet. But it automatically blocks it and, again, lets me control it. So, if I go ahead and click on the information bar, it brings up a new Authenticode dialogue, and we’ve actually greatly simplified the Authenticode dialogue. I don’t know if you know, but in the past the Authenticode dialogue didn’t really limit the text, and so unscrupulous people could put a lot of text on there. In fact, I got an ActiveX control once that had a whole EULA on it, and I probably signed my life away and didn’t even know it.

But now what we’ve done is, we’ve made it so that there are only two pieces of information on there. The first is the name of the control, and the second is the publisher. And then you have three options for it which is really nice. If I trust the company, I can always install it, and I never have to answer this again. If I don’t want to install it, I can say never install and I never have to answer this question again. Of course, I can go for Ask Me every time. But I can go ahead and say never install, and now that’s disabled, and I’ll never get asked that again. So again, I get the control.

So those are the main highlights of SP 2. Again, we’ve added the Windows Security Center, we’ve improved the Windows firewall, and we’ve made some pretty good improvements to Internet Explorer, as well. Our whole goal is to provide greater security for our customers and a better end-user experience, and of course, better manageability for professionals.

WILL POOLE: So we make the computer more secure, and put the users back in control?

DEE DEE WALSH: Absolutely.

WILL POOLE: Thanks. (Applause.)

So I thought it might be interesting to see, what happens if SP 2 was out there when a couple of the very nasty viruses and worms that hit us over the last year, what happens when they came along, what would SP 2 have done for us. Not surprisingly, for Sasser and Blaster we fixed the actual underlying vulnerability in SP 2. You’d hoped that we’d actually figure that out and do it, and get it done, we did. That’s not a big surprise. And if something similar were to come along, it would not be able to attack SP 2, simply because the underlying vulnerability is not there.

But, let’s say that we hadn’t fixed it yet, let’s say it was a new vulnerability that had been discovered that we had not fixed yet. Well, because SP 2 encourages users to get Automatic Update turned on, and I’ll talk more about that in a couple of minutes, we’re going to have Automatic Update quickly delivering fixes to more and more of our customers. And that’s going to help ensure that once we do fix a bug, it gets out there and gets installed quickly. But, if the user didn’t have Automatic Update turned on, if they were in a medium-sized business, an enterprise that did not use the Automatic Update service, well, here we have Windows firewall on by default, and in fact, the Windows firewall would stop both the Blaster and Sasser attack, stop them dead, before they even got into the PC.

Well, what happens if the user turned off the firewall, they didn’t want the firewall on, because of whatever reason? Well, here we actually have another underlying hardening of the system called the GS lag, that actually would have mitigated the buffer overruns that both of those viruses use to attack the system. So that’s an example of how we’re thinking about the problem here, having multiple levels of defenses, and doing everything we can to help make those machines more secure.

So the next question is, how do we get it out the door, how do we get this to our customers? Let me start by saying, we’ve engaged with customers at an unprecedented level to test SP 2. We’ve had the biggest technical beta program ever, over 800,000 people have downloaded and installed SP 2. We’ve done global outreach to get in front of enterprise customers, between 5,000 and 10,000 of them, we’ve actually had sessions, we called our Security Mobilization Sessions, to talk to them about what needs to be done to help protect their enterprise, what are the steps they should take, what they should expect with SP 2.

So the next thing we’re now going to do, we’ve engaged customers, we’ve built a product that we think is pretty darned good, we think it’s ready to go, and in fact, it is ready to go in August. It’s in the final stages of testing and development. We’re going to RTM in August, and we’re going to deliver this through Windows Update. Now, Windows Update has over the last year proven to be an incredibly effective way to get software updates out to customers. Back in the time of Blaster, there were single digits of millions of people who were using Automatic Update as a way to get their machine up to date, and to keep it up to date. And to give you an idea of the growth in the use of this, as of May of this year, over 90 million machines are automatically updated via Windows Update, which is the update that we released in May, 90 million. That’s pretty incredible. Another 30 or 40 million people came and manually downloaded from Windows Update. So we’re talking about a huge part of our customer base that is making use of this technology, this Web-based distribution technology, and we’re going to make use of it again in SP 2.

For those that for whatever reason don’t want to use the Windows Update service, they’re on slow dial-up, they don’t have good quality connectivity, or whatever it might be, we’re going to make it possible for them to order CDs from the Web. You’ll also be able to get CDs of XP SP 2 at retail. Finally, we’re going to convert the whole channel. We’re going to get all of our partners up and running as quickly as we can with the new software.

So you’re going to have new OEM systems that will start to come out with SP 2 pre-installed, we’re also going to be rolling this into all of our appropriate GTMs that we have for fiscal year ’05 for Microsoft, to make sure that we have the right services and infrastructure, and overall air cover necessary aware of, and to get SP 2.

So with that, then let me now change and talk a little bit more about partners and business opportunities. And the particular one I’m going to talk about here is deployment. Now, as I’m sure many of you have read, IT spending is on the increase finally. It’s been a rough couple of years, but actually it is starting to pick up. And we’re seeing that PC replacement, are right at the top of the list of what IT managers are going to be spending money on this year. Back when people bought all those machines for Y2K compliance, those machines are getting old, they’re getting to be three, four, or five years old, running old operating systems, and getting expensive to manage, and it’s time to update them.

Of course, of the 35 percent of the installed base, approximately, that is running Windows 98, Windows Millennium, Windows NT Workstation, those products are actually nearing the end of support, they also need to be updated. So there’s a huge opportunity for deployment here. We’re actually already seeing some of our customers and partners starting to do some massive deployment. We’re actually already seeing some of our customers, and partners starting to do some massive deployments. Deployments are going well so far, but we think there’s a lot more of an opportunity. Let me give you an example of one.

EDS has taken deployment to heart, they see the opportunity here to go and make this happen very cost effectively for their partners, and for their customers, and at Weyerhaeuser they actually updated 19,000 desktops across approximately nine primary and 360 secondary sites in the course of one day, with only one call coming back as a problem. That’s pretty phenomenal, if you think about the ability to roll out that much software to that many customers that quickly. That’s really an example that we’d say, maybe the high-water mark of excellence, in terms of what we’d like to help you all be able to achieve in doing desktop deployment.

So for that reason we have continued to drive our Desktop Deployment Initiative. We introduced this last year, we’re picking up and putting even more into it this year. And if you looked at what we did last year, we were very focused on this question of why should you deploy, building the business value, communications, helping people understand what is the true reason, the cost of ownership advantages and so on, that you would have for deploying Windows XP in the enterprise. I think we’ve made some good progress there, but we have now tried to shift and look at the whole picture, and really make sure that we have helped provide these tools and services so that you our partners can help show customers how to deploy, and equally importantly is how to maintain those systems, and how to get more deployed overtime and how to have this loop continue to focus on bringing the best software to the customer as quickly as possible, increasing customer satisfaction, and creating business opportunities for all of us.

So how are we going to do this? Number one is we’ve got to continue our marketing communications. We have to overcome this legacy, hey, it’s good enough. I’ve got NT Workstation, it works pretty well, this machine doesn’t need to be replaced, I’m happy. We need to overcome that legacy, good-enough perception and provide the evidence, the tools and the training, and particularly the connection around the advantages of Windows XP SP 2, so that people understand why they should deploy.

We then need to work together with you in sales. We need to have a shared ownership perspective to go into the accounts, to work hand-in-hand with our field, and your field, and go in there and get the deployment opportunities to find, implement it, and done. We also need to put together all of the tools necessary for the services that you all help to build.

We need to spend money, in fact, we’re going to increase our business investment fund by four times what they were last year, spending money through our partners to help customers to deploy, to help you make the investment you need for the first service creation that it will enable you to go after subsequent customers and get stuff deployed. And this is going to require a tremendous amount of work with all of you as partners. We need to help you get ready, we need to help you get trained. We need to give you the solutions and information you need to be able to reach all of our goals, and get the best possible software in front of our customers.

So to do that we’ve created two new sub-competencies, within the partner competencies that you’ve learned about already at the conference here, and you’ll hear about more over the next couple of days. For the network infrastructure solutions we’ve got a desktop deployment sub-competency. This is focused at mid-market partners, and it’s what we call a light-touch business desktop deployment solution. It’s a little bit more approachable, it is not zero-touch, which we’ll talk about in a minute, but it’s one that’s appropriate for those mid-market customers.

We’ve also looked at the needs of the enterprise customers, like the example I talked about with Weyerhaeuser and EDS, and there we have the advanced infrastructure solutions, the desktop lifecycle management, and here we have the zero touch initiative. And this is what enables something like 19,000 desktops to get turned over in the course of one day, at an incredibly reasonable cost to the customer.

So to that end, let me ask Alain to come up here and talk to us about zero touch deployment, and show you something that I think will blow you away, in terms of getting Windows XP deployed.


ALAIN MEEUS: So we’re going to demonstrate zero-touch deployment today. What we’re going to do, we have a brand new PC here, with nothing on it, no OS. I’m going to install a full version of Windows XP on this PC hopefully within the next six minutes.

WILL POOLE: Now, how long would that take without the zero-touch thing, because we might be here like after lunch, we’d be coming back to look at this?

ALAIN MEEUS: Well, it could take hours to install it fully.

WILL POOLE: Hours, okay.

ALAIN MEEUS: We’re going to do it in under six minutes. What I’m going to do, I’m going to insert a USB drive here, 1-gigabyte USB with Windows XP on it, and boot the PC from the USB drive.

WILL POOLE: Now, I think we have a shot clock that we’re going to start up here in a second, just to take a look at how long it’s going to take. Here we go. Keep your eye on the clock up here while we go. Now, you’re using a USB drive, is that the way you’d expect this deployment to happen, or would it happen over the net?

ALAIN MEEUS: Well, in reality, in the real world people would go to PC from the network and load the operating system from the network. In this case, it’s not on the network, but we are loading Windows Pre-Installation Environment, which is actually a slimmed down version of Windows XP used for deployment and management. It’s supports all the drivers, the hardware drivers, the network drivers for Windows XP, it supports NTFS partitions to handle data from that. It supports scripting for post-boot execution. And the version we’re using here is actually shipped with Windows XP Service Pack 2, so it also has the security features of Windows XP, including the personal firewall, to protect the system even before it gets installed.

WILL POOLE: So basically we’re getting rid of those boot through a DOS disk, and copy things over and come back after lunch experience that people had in the past, by using the Windows Pre-Installation Environment, you’ve got the full facilities of Windows XP SP 2, including the drivers and security.

ALAIN MEEUS: Yes, that’s what we are doing. So it’s executing a script now, for its deployment. It’s partitioning the disk. It will format the disk, or has formatted the disk, and start copying Windows XP, including Service Pack 1, onto this machine.

WILL POOLE: Service Pack 2?

ALAIN MEEUS: Service Pack 2, yes. And this will take about a minute to copy the full image of Windows XP onto this machine. So

WILL POOLE: How are you copying that image, is it something new here?

ALAIN: Yes, we are using Windows Imaging, which is actually going to be released together with the Systems Management Server 2003, operating system deployment feature pack that was talked about previously. Windows Imaging is an innovative tool in the sense that it doesn’t take a sector by sector copy of the original machine to put it on, but it takes a file-based copy of it, and creates one file that can be easily handled and copied over the network, and copied to the machine. It uses advanced compression technologies to make it very small, so that we gain in speed here, and speed means money.

WILL POOLE: That is us.

ALAIN MEEUS: So it’s going to reboot right now, and Windows XP has been copied onto the machine, through a simple installer. The graphical portion of the installer for Windows XP professional, and that will be available for the user to use.

WILL POOLE: Now, you have not I’ve watched, you haven’t touched the keyboard at all, and there’s nobody backstage driving either?

ALAIN MEEUS: No, this is just a standalone PC, connected to this USB drive, that’s all that’s being done.

WILL POOLE: It’s truly zero-touch?

ALAIN MEEUS: It is truly zero-touch, yes. So zero-touch will be delivered through the Solutions Accelerator for Business Desktop Deployment Enterprise Edition, actually the guidance on how to deploy, what the processes are, how do you do application compatibility, how do you use state migration, how do you use the network infrastructure, how do you set up the security for deployment projects. All that end to end guidance is included in the solutions accelerator.

Today we already have a light-touch version of the Solutions Accelerator available on our Web site, our partners can download and build their own solutions for their customers. Actually, LL Bean, a customer in Maine and New England, a partner that helped LL Bean was able to use this Solutions Accelerator and lower the number of hours needed to build the standard image from 14 to 2, as an example of what the automation tools can do.

WILL POOLE: When you say a standard image, that’s the LL Bean standard image, that has both Windows XP SP 2, plus all of the applications that they use standard in their company?

ALAIN MEEUS: Yes, that’s correct.

WILL POOLE: Stuck together in a single image, which you can then deploy?

ALAIN MEEUS: That’s correct.


ALAIN MEEUS: So by the fall of this year we’ll be releasing the enterprise edition of the solutions accelerator, that will focus on this zero touch, where you can actually deploy using Systems Management Server infrastructure, images to existing PCs, without the intervention of any technician at the desk site to do this. And, as you earlier mentioned, EDS, for example, they calculated in a project they can save 30 percent of the cost of deployment by using these zero-touch capabilities, which actually translates very quickly to a lot of business opportunities for our partners.

WILL POOLE: That’s great, so you can get paid for doing higher value services, and make the deployment an easy thing for every customer to do.

ALAIN MEEUS: Indeed, that’s what we’re targeting. So taking out the cost of deployment, making sure that we accelerate deployment projects is our main goal in bringing these solutions accelerators to market today.

WILL POOLE: That’s great.

So how are we doing on time here? Five minutes and five seconds.

ALAIN MEEUS: Here we are, fully installed.

WILL POOLE: Hey, that’s incredible. (Applause.)

WILL POOLE: And that is up and ready to go.

ALAIN MEEUS: Yes. Ready to go, it’s fully ready to go.

WILL POOLE: Has anybody ever seen a PC get set up that quickly. That is incredible. All right. Thank you very much.

ALAIN MEEUS: Thank you. (Applause.)

WILL POOLE: I hope you all are as enthusiastic about that as I am, because there’s nothing more frustrating than having software that you know solves your customer’s problems but knowing that they’re not installing it, because it’s either too hard, too time-consuming, too expensive for them to get that software up and running. And, of course, there’s a lot more that goes into this, there’s application compatibility testing, there’s training. It’s obviously more than just loading the software on the machine. But what we’re doing here is eliminating a huge barrier to deployment, and we hope that you all can help us get this software out there for all of our customers as quickly as possible.

So, our call to action here, No. 1, we want you to get ready. We want you to make sure that you can reach the requirements for these new competencies in the initiative, and go and get trained for the business desktop deployment. We want you to get set and go out there, look at the business opportunities, work together with our field, make use of the marketing collateral and service offerings that we’re creating, and go out there and sell. Engage with a sub, engage with the local district, and make it happen. Go out there and close some business, do some deployment, and use that as a great way to build the relationship with your existing customers, and also to establish relationships with new customers.

Let me switch back to growth now. We’ve talked about customers, we’ve talked about partners, we’ve talked about the long-term growth. Let me just quickly look at what do the short-term growth opportunities look like for the Windows business. Well, last year was a phenomenal year for the PC business from a growth perspective, 13 and a half percent growth in worldwide PC shipments. That’s pretty amazing. It really went ahead of our expectations and many others. However, with that growth came costs, which is actually not new this last year, but it’s one that’s been actually helping customers in the industry for years, which is the commoditization, which means that the ASPs came down. And that means that as there is commoditization in the hardware space, and the services space, we need to add value on top. We need to find new ways to deliver new value to customers.

And two of those that we’ve been very focused on at Microsoft for the past couple of years are Media Center Edition and Tablet PC. And here those arrows maybe misrepresent the size of the growth, but honestly because they’re starting with those are the true numbers they’re starting with a much smaller base, we’ve seen tremendous growth in the uptake of Media Center Edition, and the growth of the specialized PCs out in the consumer channel, and also in the year-over-year growth of the Tablet configurations, whether those are pure Tablets with digitizers and no keyboard, or the convertible form factor that are getting to be very popular where you flip around the screen and use it with a pen, or use it with a keyboard. So, we’ve seen some very good growth numbers in Media Center and Tablet, and these represent very solid new opportunities that we’ll continue to invest in over the next couple of years with you and others in the industry.

To that end, we’ve recognized that our work with Media Center going only through our large, predominantly multinational OEMs is something that we could actually take further if we were to directly engage the system-builders channel. So, I’m very pleased today to announce that we’re going to make Windows XP Media Center Edition available through the system-builder channel. (Applause.)

Thank you, there must be a couple of system builders out here, we’re excited about it, too.

And what this means is the system builders can now ship this in 13 geographies. It means that we’re going to have a partner support kit available. We’re working very closely with ATI and NVIDIA to create a single kit that’s going to give you what you need in terms of a tuner card, the right graphics card, a remote control, IR receiver, everything you need to put together a Media Center PC in the specific configurations that your customers want. And, we’re going to create this new design for Window XP Media Center Edition logo program so you know what products are certified to work in those Media Center configurations. And you can see the Web address up there, it’s ready to go over the course of the next couple of months. In September, it will be ready for the system builders, and in mid-October, we think, is the time when these are actually ready to roll out for consumers. So, we’re very pleased to make this announcement, and hope that those of you who are system builders will take advantage of this offer.

More with partners, I love making announcements about partners at meetings like this, because we’ve got a lot of great stuff to do for you. And this is something we’ve been working on for a while that we’re incredibly enthusiastic about what the Windows Marketplace can do. Now, you’ve heard about Windows Catalogue and probably seen that in Windows XP for quite some time. And Windows Marketplace is the next iteration, it’s actually a superset of that, and it’s something that we are very enthusiastic about, its ability to add value to customers to make it possible for people to really discover the entire world of products that are available for Windows PCs.

They’re going to have a great experience. They’re going to be able to find more than 100,000 products that work with your Windows PC at launch. They’re going to have advanced searching tools, and browsing, try-before-you-buy features that are all going to make this process of finding, sampling, and adopting technologies for your Windows PC possible. And we’re going to connect this into a community. This is not just an advertisement for Microsoft, or specific Microsoft partners. This is going to be a living, breathing site, where the entire end user community will be able to rate products, to talk about them, to find reviews, and to really understand the value of the technology that they can add to their Windows PC.

We had close partnership with CNET and Download.com to get content into this, and there will also be a huge amount of community content developed on the site as it develops over the next couple of years.

So let me ask Dee Dee to come back out here, and let’s take a look at what the Windows Marketplace is going to look like.

Dee Dee?

DEE DEE WALSH: All right. Today I’m going to talk to you about the Windows Marketplace, and the Windows Marketplace will be a comprehensive, easy to use, shopping and download portal that helps customers discover and purchase software and hardware. And the cool thing about this whole thing is that millions of customers are going to be visiting the Windows Marketplace, because we’re going to be promoting it in a variety of ways.

The first is, it will continue to be on the Windows XP Start menu, then we’re also adding a link in Internet Explorer, and then we’ll also promote the heck out of it on Microsoft.com properties all over the place. Microsoft.com is, what, the

WILL POOLE: No. 5, maybe.

DEE DEE WALSH: Most popular site, so we’re going to be sending a ton of traffic to the Windows Marketplace.

So let me talk to you a little bit, this past summer when I wasn’t on the phone for Blaster, we were actually doing a bunch of customer visits and focus groups, and we learned a lot of things, but basically our goal was to understand how customers purchase technology, and how they think about purchasing technology, and how they make the decision, both hardware, software, and peripherals. And again, we learned that it’s an alarming situation. Actually, the typical customer goes to 20 different sources before they make a technology purchase.

So it’s kind of a confusing world out there, and we were thinking about how we could make it a better place. And we kind of came up with basically three, almost like guiding principles, I guess you could say. The first thing that customers made very clear to us is, please simplify the world for us. Both in vocabulary, as well as a lot of times they’ll go to a technology site, and they won’t even know what they’re looking for, and even if they do know what they’re looking for, they still don’t know how to find it. And they said, please just simplify it for us.

The second thing is that they’re looking for in certain cases they just want us to present the whole solution to them. So outline the whole scenario, and solve it for us. Then the third thing is that they want to talk with people like themselves. So let me kind of go through the Windows Marketplace, and give you an idea of what we’re doing to solve that.

So the first thing is, just to look at the screen. We’ve simplified the layout. Notice that you can go to software, you can go to hardware, very simple, very intuitive, and keep your eye on this right pane over the next couple of months, after we launch after the next couple of months, but this right pane is all about the whole solution. So this is scenarios, this is where what we’re doing is, we’re doing a lot of customer research now, and we’re going to continue doing a bunch of customer research to understand what are the problems that they want us to solve, and then present the whole solution. So keep your eye on this, because this will continue to evolve.

Let me go ahead and dig a little deeper on the Windows Marketplace, and show you kind of how a customer will interact with it. So let’s say for a moment that I am a customer, I’m looking for a product that will print nice-looking reports for my database, and the issue is that I’m not sure what I’m even looking for. I’m not sure what the product would be called. I certainly don’t know how to find it. So what I’m going to go ahead and do is browse in the Windows Marketplace, and I’ll show you the taxonomy, and how we’ve defined a pretty rich taxonomy. In fact, in this case notice that we outline the taxonomy has business, enterprise, and consumer products. Of course, in the future we’ll add services to the taxonomy, as well. And notice that as I drill into the taxonomy, that I can refine my search through the whole thing. And this is based on talking with a bunch of customers. I can refine by manufacturer, and these are the most popular ones, by price range, by compatibility, even by store, where if I just want to know, I only want to purchase from a particular store, then I can refine that way as well

WILL POOLE: Dee Dee, I noticed that there were some Microsoft competitors on that list?

DEE DEE WALSH: You bet, this is run by the community, for the community, by the community. So everybody will be there, it’s everything for Windows, it’s comprehensive.

WILL POOLE: That’s good.

DEE DEE WALSH: It’s comprehensive. So I’m going to go ahead and choose to refine my search by designed for Windows, because actually what our research shows is that customers are more likely to purchase when it has a designed for Windows logo. And also notice that I can sort my results by a bunch of different ways. In this case, I’d like to see what everyone else thinks is the best product. In this case it’s Crystal Reports, and notice again that I’m given a lot of the information that I need to see if this is actually an interesting product to me.

I can go ahead and look at user reviews, and see what other customers have said about this product. And, in fact, I, too, can rate this product, and I can review it, as well. If I go to the product specs, notice then that I get a product description here, and I get all the technical information that I need to let me know if this will run on my system. In fact, this information, Will mentioned CNET, this is being brought to the customer by CNET, and as many of you know, CNET is actually one of the most trusted names for providing this kind of information.

I can go ahead and click on compare prices, and this shows me all of the vendors who sell this product. In fact, notice that downloadable products are mixed right in there, as well.

WILL POOLE: In this case, this is actually not just to purchase, but also you can get a free trial?

DEE DEE WALSH: Yes, it will offer free trials, as well, and this is all available through Download.com.

Now, in this case, I think this is Vaio Software, actually looks pretty interesting. It’s got a good price, and free shipping is always an interesting thing. When I go ahead and click on that, this goes ahead and puts that product into my shopping cart on the vendor’s site. And actually the vendor will handle the whole transaction. The Windows Marketplace does not get involved in the transaction. So again, just to be clear, our whole goal with the Windows Marketplace, is to make it very easy for customers to find your products, even when they’re not sure what they’re looking for.

So let me go ahead and show you a little bit on the search. The search, we’ve actually rewritten the search engine to look exactly like the browser, so no matter where you are in the Windows Marketplace it looks the same.

Now, in this case, we’re looking for a Designed-for-Windows hardware product, but this could be anything, it could be a graphics card, it could be a DVD burner, a sound card, whatever I want. When I go ahead and click on it, notice that I get a result set, and notice again that on the side there I can narrow by manufacturer, by compatibility, and it’s also appropriate to the product. So in this case, in digital cameras it will give me more information on things like megapixels and digital zoom. And I can go ahead and click on a couple of products to compare, and I can even do it on multiple pages of results, and when I go ahead and click compare, this shows me all of the features that these products have in common, and I can compare them side by side, and I could even remove them.

So this is just a short demo of the Windows Marketplace, and there are many more features that I haven’t shown you. But, again, our goal is to show you that the Windows marketplace is one of the most cost effective ways to reach the millions of Windows customers, and also so that you can benefit from the vibrant Windows ecosystem.

Thank you.

WILL POOLE: Thanks, Dee Dee. (Applause.)

So the call to action here is get involved. Sign up. You can see the URL there, Microsoft.com/partners/windowsmarketplac e. It’s easy to remember. We’re going to be rolling it out this fall. If you’ve got products that are not currently going through the WHQ, Windows Hardware Quality program, you can go up there and get it up there. And you should really make use of this. And you should also stay abreast of what’s going on, because I know many of you are going to have services that we’ll want to list and make available to customers when the next release of Marketplace comes out. We’re not going to have services in the first version, but it’s a very important effort for us to do that in the next version.

So no talk about Windows would be complete without some discussion about “Longhorn,” what’s going on there. We don’t have time to talk to you about it detail today, hopefully many of you have been either to the Professional Developers Conference, or the Hardware Evangelism Conference, and you have some good ideas of what’s going on with “Longhorn.” It continues to be a bet-the-company effort for Microsoft, we’re putting a lot into it. Though, we quite honestly have tried to delay it somewhat, based on the security work that we’ve done, because we’ve got to put our customers first, we’ve got to put security first, and that’s what we’ve been doing with SP 2.

So, from a “Longhorn” perspective, there’s really three things you should do. No. 1 is, you should expect to see a Beta 1 release in the first half of 2005. We are still working towards that.

No. 2 is, you should make sure that you or somebody in your company attends next year’s Professional Developer’s Conference or Hardware Evangelism Conference.

And No. 3 is you should start investing in “Longhorn” now by moving your application development, getting your people trained on .NET FX and Web services, and all those will, of course, translate very nicely into the “Longhorn” environment.

So, to close, I just want to give you an idea of what the roadmap looks like for Windows. As I said when I opened, I’m incredibly enthusiastic about the opportunities for this business. We’ve got a lot of growth, a lot of excitement, more innovation coming out over the next couple of years than we’ve had for a long time. And what you can see here is that over the course of the remainder of this calendar year, we’ve got Service Pack 2 coming out, we’ve got our update of the Media Center, we’ve got a service from MSN Music. We’ve got Media Center Extenders coming out which is more revenue opportunity in the consumer space. We’ve got new hardware devices out in the entertainment space, both from Microsoft and from partners. We’ve got an update to the Tablet PC Edition which is going to give you better handwriting recognition, better user interface, and support of a bunch of great new form factors. We’re also going to see the 64-bit technology starting to roll out. And then, of course, in 2005, we’ll see the “Longhorn” beta come out.

So there’s a lot going on. I hope you’re fully engaged in what we’re doing and are able to partner with us effectively to help take advantage of all these technologies. The key things that we want to do with you is to get our customers, our mutual customers, more secure with the Windows XP SP 2. We want to make sure we can engage in the deployment opportunities that I outlined today, and make sure we can bring them to life for customers, and get into all those aging PCs either upgraded with new software or replaced. We hope that you will take advantage of Windows Marketplace. This is the beginning of a long journey for us in helping to further increase the value of the Windows ecosystem both to you and to our end-user customers. And we want to continue to work with a solid and exciting two-way connection through the partner program which Allison and her team have rolled out for you at this conference today.

So, with that, thank you very much. (Applause.)

2004 Microsoft Corporation. All rights reserved.

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