Steve Ballmer: Ottawa, Canada – International Technology Association of Canada, Ottawa Center for Research & Innovation

Remarks by Steve Ballmer, CEO, Microsoft Corporation
International Technology Association of Canada
Ottawa Center for Research & Innovation
Ottawa, Canada
December 6, 2005

STEVE BALLMER: Well, it’s an honor and privilege for me to have the opportunity to be here with you today. I did wonder, however, a little bit what was going on. I had not had this trip to Ottawa planned until about August or so, and I come in one morning, I’m going through with my administrative assistant my schedule, where am I going, what am I doing, and she said Ottawa in December. (Laughter.) And I thought this was like an IQ test for everybody involved. Ottawa in August I would have understood. But it is an honor and privilege to have a chance to be here with you today, and to share a little bit a perspective on our industry and where it’s going.

I’m particularly thankful to ITAC and OCRI for hosting this event, because I don’t think there would be any other way to get this kind of incredible group of people assembled at this hour of the morning. (Scattered laughter.) Now I know we have mostly technical folks. (Laughter.)

I’m going to talk a little bit at a very high level about where we see technology going over the next really five or 10 years, and in some senses I’ll be infinitely specific and in some senses I’ll be infinitely vague. And, of course, the key thing to do is to understand generally where things are going and then make the right bets at the right time in your own business, in your own operations about how to get there.

I start with a couple of overall perspectives, and first is the perspective on hardware technology. Hardware technology is the locomotive in some senses, if you will, that has driven prosperity and advancement in the information technology field. And in some senses we always point to this thing called Moore’s Law and we say it’s really Moore’s Law, this notion that we get essentially twice as many transistors every year and a half at the same price as we had a year and a half ago, and that’s been an amazing phenomenon. It started out primarily in the processor itself and processor performance just kept doubling and doubling and doubling. It’s almost hard for me to think back to 1980, when I joined Microsoft, and IBM visited us to talk about their first PC and, what was it, 4.77k hertz or something like that. I mean, you can’t think like that anymore, it’s just too small a number, and we’ve had this incredible boom in processor performance.

We had an incredible boom also though in communications performance, and essentially that’s what’s given us the Internet. And whereas the microprocessor essentially represented a form of free intelligence, the advances in communications hardware have essentially allowed telecommunications to be not free but much closer to free than anybody would have ever anticipated years ago.

The same thing has happened in storage, the same thing happened in graphics, in absolutely every part of the system.

And the good news is that Moore’s Law will continue for about another ten years. Actually, after about ten years, even Intel wonders what happens to Moore’s Law, but we’ve got at least another ten years of sailing. It won’t be quite as smooth sailing as the last 25 or 30 years, because, in fact, Intel, AMD are going to have a harder and harder time of continuing to translate Moore’s Law into faster processors – not that they can’t keep adding transistors but into faster processors because at some point these processors run so fast they get so hot, we need different kinds of cooling systems.

So there is going to be kind of a need to do a lot of work in software to continue to exploit the extra transistors that the hardware industry will give us, and that will imply a set of work certainly at Microsoft, changes in the operating system, changes in the development tools, changes in the way applications get written by folks in this room and many others, but the good news is we at least keep getting more transistors for at least the next ten years. That’s one piece of perspective.

The second piece of perspective I think that’s important for us to all have in mind in some senses is an outlook of optimism for what software will be able to do with the processing power that is given to us. Every few years, and certainly about two years ago, three years ago, we were in the middle of this kind of a cycle, people questioned whether the information technology industry has hit a dead end. And this has probably I think honestly been true about the whole time I’ve been at Microsoft: Every few years somebody thinks the revolution is over, everything that needs to be invented has been invented, and then something else gets invented.

And if we look out the next ten years, I have nothing but optimism for the positive changes that it will bring. In fact, I will be so bold as to say that we’ll look back in 2015 and say that there’s been more positive transformation between 2005 and 2015 than there was between 1995 and 2005.

And if you think about that, that is a mind-blowing statement. 1995 is an easy year for me to remember, maybe easier than most people in this room, because it was the year we launched Windows 95, which was a transformative product for us. In 1995 most people didn’t have computers, most households and most desks did not have computers. In 1995 most people wouldn’t have known what a graphical user interface was, we still had a lot of C:/ blah, blah, that stuff from the old days. In 1995 most people didn’t have a cell phone, as stunning a concept as that is to us today. In 1995 most people didn’t know what the Internet was, let alone whether they wanted to access narrowband, broadband or any other brand. So to say the next 10 years will be even more amazing, I think, is a powerful statement.

Why? What’s going to happen in the next 10 years that’s going to fuel this revolution? Well, really and truly all of the information of the world, all of the processes of the world, all will be available online. People like to talk about this distinction between bits and atoms; anything that can be made into a bit will be in the next 10 years, and will be available electronically: TV, advertising, movies, books, you name it, any business information you want, absolutely everything will be available to you online.

We have this one kind of kooky researcher who works for us. The guy was one of the great guys who helped found Digital Equipment Corporation, he was one of the early architects, he’s in his 70s now, he’s still doing phenomenal research but he walks around wearing a camera always attached to his lapel as part of his research. What’s he doing? He’s recording his entire life. He has a theory that we’ll all be able to record our entire lives, every second of it, and all the audio, all the video, everything we’ve ever seen or done and it will all be finable and indexable and storage will be cheap enough and we’ll all want to have it. Now, if I think about my life, I’m not sure I like the application yet – (laughter) – but the technology is really a special one to think about.

And so you have this amazing set of things that we can think about happening over the course of the next ten years.

We’re also going to get revolutions, frankly, in the way people use these machines. Today, we use a user interface that was essentially pioneered in some ways, you could say, about 30 years ago at Xerox Palo Alto Research Center, and it was popularized by us and by Apple and it’s wonderful and it’s great, but it hasn’t been scrubbed up really in about 10 years by anybody. We’re going to try some major scrubbing to this approach in the new version of Office that we bring to market next year. But because in some senses this thing hasn’t even been changed since screens got bigger and screen resolutions got bigger, you could put more on a screen, you can change the user interface.

But when we think 10 years, we can’t just think about scrubbing up today’s user interface, we think about pioneering whole new user interfaces. Where do you really use voice, handwriting, but perhaps even more important natural language in the user interface of the future? We do want our computers to understand our intent, what we mean, what we say. When I tell my secretary I’m going to Ottawa, she knows to go and get all the trip reports and everything and put them on my laptop and set me up. My computer insists that I say, File, Open, Search; it’s a very dumb device in some senses. Our computers will learn to process language over the course of the next 10 years.

In fact, I think that’s one of the things we like most about Internet search engines, ours or whoever your favorite might happen to be. (Laughter.) www.msn.com, a good one to try. But whoever your favorite is, one of the things we all really like about a search engine, frankly, is you can type anything you want into it and you get some result. Now, 50 percent of all searches on the Internet don’t lead to any result that people want, but something comes back. And most applications don’t work that way today; most applications you have to give very explicit commands to. So the notion of bringing more and more intelligence into the mix and to process language I think is a big thing over the course of the next 10 years.

The third thing I’ll highlight maybe at this highest level is this notion of better and better interoperability. If you take a look at where a lot, as this audience knows, a lot of the cost and complexity goes amongst people involved in information technology, it’s taking information from source A, source B and somehow bringing it together for some processing purpose, some analysis purpose, whatever the case may be.

The advent of XML as kind of a lingua franca on the Internet, much hyped a few years ago, then it’s gotten a little less attention, but the power of that phenomenon is still all out there, and the industry is working hard to make that the engine of architected interoperability in our business.

So I’ve got a lot of enthusiasm for what we will be able to do as an industry over the course of the next 10 years. That’s why we talk about our mission as a company and in some senses our mission as an industry is helping people and businesses around the world to realize their full potential. Information technology is that; it’s a grand enabler of human creativity, human productivity, and I think we all have to kind of embrace that phenomenon. We all get to participate in a very unique way in the transformation of society. Whether it’s enabling hospitals to deliver better healthcare, whether it’s enabling businesses to more productivity and economically deliver its services, whether it’s helping students to learn in new ways using online techniques, all of us in the information technology industry participate in that world.

So the technology environment exists for all of our innovation, whether you’re a startup, a larger company, whether you are in the services business or the product business, I think there’s incredible opportunities for all of us out there.

The other thing frankly that exists I think right now is the right climate amongst the people we want to sell to. Businesses and consumers around the world are prepared today to lead what Bill Gates likes to refer to as a digital lifestyle or digital work style. And you could say, OK, well, of course that’s true, but it wasn’t true even five, six years ago. I remember a discussion I had with the CIO of one of the largest banks in the U.K., and we’d been selling them Microsoft Exchange, and selling and selling against Lotus Notes, and selling and selling, and they finally made the decision they were going with Exchange, and I’d gotten to know the CIO pretty well, and he gave me a call and said, “We’re not going to do it.” And I said, “Why, what feature, what is it, why did we lose?” He said, “No, no, I’m not going with Notes either.” And I said, “Well, what are you doing?” He says, “I can’t be convinced that any of the executives in our bank are really going to use e-mail.” (Laughter.) “And if the executives don’t use e-mail, I’m not sure it will really be that important to our company.”

Now, you all laughed and that is interesting, but there are still plenty of desks, particularly – unfortunately there are still plenty of desks even amongst senior leaders where you don’t see a PC or where it doesn’t get turned on very often. You see it more in government, I’ll say quite frankly, organizations than you do in commercial, but we are starting to see – we’re not starting to see, we’re in the middle full on of a shift where leaders of government, leaders of business, leaders of all forms expect to get information in a digital format.

I’m in Ottawa, so I can make fun of Washington, D.C. while I’m here, but there’s still a rule in the U.S. Senate that you can’t take a laptop computer on the Senate floor, and you’re not really even supposed to have a mobile data device with you, like a Pocket PC, but I know a couple Senators who sneak them in, in their pockets. It tells us that there’s still some transformation left to have in terms of this kind of a work style and lifestyle.

This is important though; it means that as all of us are starting new businesses, thinking about the future, you’ve got to make bets that pay off in whatever timeframe make sense, but we all can bet on a climate that is different than the climate of five or six years ago. We can bet on kind of a pervasive acceptance that people would not have bet on a number of years ago, and I think that’s extremely important as you think about new business concept, new ideas. And frankly if you want to sort of stop and pinch yourself and say, “Boy, am I lucky, I’m in the greatest industry in the world,” the technology is going to change, we’re going to make a positive difference in an incredible way in the next ten years, and absolutely everybody wants this stuff. We’ll give away an Xbox 360, that’s a nice thing, but it really speaks to the notion of a digital lifestyle. More and more people want to live a digital lifestyle, whether it’s digital entertainment, whether it’s digital business information, the list goes on and on of things that people want to see.

As we think about this transformation, and now I’m really at the software layer, I’m away above all Moore’s Law and all that great locomotive stuff, this is where I think things get switched on and turned on for end users. And if you’re in the hardware business, I’m sorry, I’m a little extra enthusiastic about the software side, but I think it’s the software that really brings these technologies to life. It’s software that’s going to transform the user experience in some of the ways that I talked about. It’s software that’s going to change fundamentally the way we all write applications and the way they get deployed and managed. It’s software that’s going to be key to changing the way people communicate and collaborate.

Sure, we like e-mail; sure, we like instant messaging, but we’ve only really just started. I want one place where all of my e-mail, my voicemails, my IMs, my phone calls, they should all just come to one place, and I should be able to write a set of rules – if it’s my wife, put her through; if it’s my secretary, make her indicate whether it’s a crisis or not; if it’s my stock broker, give me a double beep; if it’s my son with good news, put him right through; bad news, wait till I’m calm; whatever the case may be. (Laughter.) We get report cards today. (Laughter.)

But I want to write those rules and I want them to work, I want them to work wherever I am and whatever device I’m on. I don’t want to have a set of rules for the phone and a set of rules for the PC and another set of rules for the Xbox Live, blah, blah, blah.

Information access and organization: Most people still can’t find the things they’re looking for online. Fifty percent, as I said, of searches don’t actually wind up with an answer that somebody was expecting. Most people will tell you it’s harder to find things in side their companies than it is to find things on the Internet itself, which, of course, is ultimately bizarre.

I sat next to a fellow on the plane – oh, this is now three or four years ago, but I still love the story. I’m sitting there reading some PC magazines, and he looks over at me and he says, “Work in the computer business, do you?” (Laughter.) I said, “Why, yes, I do.” And I don’t like talking to guys on airplanes, so I’m getting a little nervous, and he says, “We’ve got a lot of computers in my company.” And I said, “Well, that’s excellent, of course.” And he says, “But I’ve got a question for you.” And I said, “What’s that?” He says, “My job is to set the price of auto insurance in the state of Colorado, and I have a theory. I have a theory that people who buy auto insurance on the last week of the year are higher risks than people who buy other times. I think if you go in to buy” – he says if you go into buy auto insurance on December 31st, his view is you are likely thinking of imbibing too much for New Year’s Eve, and you are a higher risk. And it’s a perfectly reasonable theory to me; who else would buy auto insurance on the 31st of December other than somebody who’s planning on getting a little bit, you know, smashed that evening. And he said, “The problem is I know the data is in our computers, I know our computers have the information and could tell me what our loss experience is with people who have bought insurance on that day; why can’t I just type something and find it.” It’s all software.

Business and e-commerce: For all we’ve talked about it, most transactions are still not as digital as they could be. Think about just the way you process invoices inside your own company. If it’s all routine and fine, it probably just stays inside the ERP system, but suppose you need to pull the invoice, send it to somebody, have them comment on it, circulate it around, what manages that operation, things get manual, you send e-mail, it’s very complicated to actually tie the unstructured processing of business information with the structure.

And last, of course, but not least is entertainment, and the future of entertainment is clearly all digital, it’s all digital, all movies, all music, all video. I’m a Detroit guy, I’ll admit this in advance, before I get this Ottawa Senators thing going on, I’ll admit I’ve grown up a Red Wings fan. I’m probably not supposed to admit that today. But growing up as a kid in Detroit, I have a lot of enthusiasm for my high school. And my high school has a fantastic basketball team, and I now live in Seattle, Washington and there’s no real reason why I can’t watch my high school’s basketball games on my TV set. Well, of course, they’re not broadcast, but at every high school game there’s somebody videoing. And I know my high school puts them up on their Web site. Why can’t I just sit there and watch that video on my television? Answer: In the next 10 years I’ll be able to.

There’s probably some guy taking a video of this speech, there always is. Nobody ever watches them. (Laughter.) I feel sorry for these video guys, but they’re never searchable and findable and manageable in any reasonable way.

So all of these scenarios I see as very open and available for innovation. And this is just a subset of all the things that I think can be interesting and fascinating for us to do, for our industry to do, for startups to do. And every time people say, hey, look, there’s no opportunity; hey, look, there’s some new set of startups that come along that are doing interesting things, or there’s some new group inside bigger companies like Microsoft that are doing interesting new things. And so I just think that the opportunities are phenomenal for all of us in this business.

I talked about enabling people as a key phenomenon, and I do want to emphasize to you how pervasive this is. We can help make each and every one of us as individuals more productive. We can help make businesses more competitive. I know there’s a big dialogue here in Ottawa about prosperity and productivity in the Canadian economy. I do believe that investment in information technology – and you could say it’s self-serving, but I believe that investment in information technology has been key to productivity advances where they’ve occurred in most parts of the world. Government efficiency, we might not say competitiveness, but government efficiency will also be driven in this way. Most of what government does is deal in information. There’s no manufacturing process in government. Making government more efficient is essentially a process of using information technology to better access, serve, move, process information.

And, of course, the IT industry itself doesn’t just contribute to every other industry’s growth and productivity, the IT industry itself is a source of productivity and prosperity and growth. In the United States today the largest sector of employment in the U.S. economy is still auto manufacturing, number two is electronics manufacturing, and number three is IT, i.e. all things software.

So our industry together is by far the largest employer in the U.S. economy. So while we can and our number one mission as an industry has got to be to make everybody else more productive, it is important I think for policymakers to recognize that our industry itself is an important employment sector and an important area of growth.

I’m going to wrap just with this slide. This is a subset of all the new products that we’re introducing in the 12 months that we’re now in. This is for us a very exciting period. There has never been a 12 months – and if you go back probably two months from now to 10 months from now, this 12 month period Microsoft will put more new interesting products into the market than any other time in our history. I don’t think that that’s necessarily the case – you know, for the next 12 months we’ll continue to dial up the pace, but we’ve got a major new version of Windows, a major new version of Office, major new versions of Visual Studio and SQL Server, a new version of Windows Mobile, new ERP and CRM offerings, Xbox 360, and perhaps most importantly we’re really moving forward with the notion that we’ve talked about, which I think is important to all of us, but an important notion for us for a number of years, software as a service. No self-respecting piece of software will be without a set of components that both run on devices and also are managed and provide connectivity and services out in the Internet.

So we talk today about Windows Live, the service component to Windows, we talk today about Office Live, the service add-on to Office, and I think all pieces of software will go through this transformation where you say how do I rewrite myself, assuming that I always have broadband connectivity to the Internet and assuming I can use that connectivity to manage my software, to feed it additional functionality, to help the user manage his or her data, provide better help, better support, better everything else, and I think it’s a very important concept for everybody to embrace, whether your business is horizontal productivity software, as ours is, but we’re looking at it in our server business, Xbox and Xbox Live have this relationship, all self-respecting devices and pieces of software need to think through what their service strategy is. And when I say service now, I mean software service, I don’t mean people services. And probably over the next two or three years this is the most immediate and pressing transformation

With Windows Live we’re going to try to build a platform, a platform so that those of you who want to add services to your software can piggyback and use our platform to authenticate your users, to bill your users, to roam their data, whatever it is you want to do we’re going to try to provide that platform out in the cloud just as we’ve provided a platform at the client and a platform on other devices and a platform on the server for the applications that you build.

With that, I want to wrap my, I’ll call them prepared remarks, although I got a little fired up there and rambled a little bit, but I want to end these remarks by saying thanks again to OCRI and to ITAC for this opportunity, and I do want to have a chance to take a few questions, comments and thoughts. I will say in advance that if we don’t get to something that’s on your mind, I’m steveb@microsoft.com, and I can’t promise you 24-hour turnaround anymore – I used to – but I’d love to hear from you via e-mail if we don’t get to your question or comment.

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