Bill Gates: Microsoft Business Solutions Convergence 2006

Remarks by Bill Gates, Chairman & Chief Software Architect, Microsoft Corporation
Microsoft Business Solutions Convergence 2006: “Innovation through Business Applications”
Dallas, Texas
March 27, 2006

ANNOUNCER: Please welcome Senior Vice President, Microsoft Business Division, Doug Burgum. (Applause.)

DOUG BURGUM: Good morning, Convergence! Welcome back to Day Two. Wasn’t that another fantastic opening by the group Mass Ensemble? (Applause.)

In addition to welcoming the great audience that we have here this morning, I also want to welcome all of our viewers from around the globe who are taking advantage of technology to watch this as a live Webcast this morning. Certainly this is going to be the largest audience ever that’s witnessed a Convergence keynote, and we’re so glad to have all of you here in person, and it’s wonderful to have all of our viewers watching over the Web.

But here in Dallas in the last 24 hours in the heart of the community that all of you are building we’ve had a wonderful first day. Jeff Raikes kicked it off for us yesterday morning talking about the power of Office, plus Dynamics, plus the rest of Microsoft infrastructure to really enable you to create a People-Ready Business.

A personal highlight for me yesterday was the expo. I only had an opportunity to be there for about an hour and a half, and I barely made it down two aisles, but in that short time I saw just the explosion of innovation that’s coming from our solution providers in working to create additional functional and capability and interconnection for all of you, our customers. And again, as Matt was talking this morning, we’ve got another great opportunity at the expo today, but would encourage all of you to get there to see the great innovation that’s happening in our community.

Another highlight for me yesterday was the Pinnacle Awards. This is our annual opportunity to recognize the best of the best. And last night, Bill Gates and myself had an opportunity to spend some time with the 17 Pinnacle Award groups and those groups include the customers themselves, their partners, and third party ISVs that have helped create those solutions. I know many of them are here in the audience, and if we could very quickly have the house lights come up a little bit, and have all of those 17 teams that were Pinnacle Award winners stand and be recognized, thank you for taking our solutions to new levels: the Pinnacle Award winners. (Applause.)

If one of those groups was standing near you and recognized right now, you may want to grab them after this morning’s keynote, ask them a question and learn from them, because certainly they’ve all got great stories to tell about the successes that they’ve had within their business.

Yesterday, we talked some about community at the opening, and one of the things we did we practiced, we had a little exercise, people got up and met somebody new. And I challenged you to take that back out into the community of Convergence, and certainly you responded. Yesterday, you had a chance to learn, to meet, to connect, to share, to interact, great suggestions, provide feedback, and that happened in great quantities yesterday.

And from these interactions it’s likely that many of you have a new idea, a thought, something fresh, something that occurs from the interaction between you and someone perhaps that you’ve never met before. These ideas that you’re going to bring back to your business build on each other.

And it’s not unlike again the metaphor that we saw with Mass Ensemble in their opening today. When they started today, they had some original music, and maybe you noticed that very unique instrument that was enabling some of that music, and that was a piece they’ve created called an acquitar. It’s a combination of a sitar, a guitar and a bass all brought together in one innovation. You might say they’ve got their own convergence going on there as they bring these together. It’s a very fun invention. And I think it’s great that we still have that ability to invent in the music industry that way, because I’m thinking in another industry that kind of combination might be considered illegal bundling. (Laughter.)

But the spirit of the music as Mass Ensemble began this number maybe even sounded a bit of a cacophony to you as they went in one underlying direction, and then as the beat changed in the middle of their presentation they went to a different direction, that innovation and the new beat led to something new, to something next, and that took the music to a completely new place, took it farther to an end point of creative harmony.

And in this same way we have ideas that might take us one way, they collide, and we end up in another direction with some great innovation. And innovation is our theme for today, and it’s going to be the theme of our opening keynote presentation.

Innovation ultimately when you look over the span of history begins with people. There are certain prerequisites for people who are innovators. There are people who have a deep amount of curiosity, people who are willing to explore, people who are open to new ideas and new cultures and fresh approaches.

The progress that’s achieved through innovation is often not just achieved by people who have got deep, deep subject matter here in one area, but the innovators across history again have been people who have been inspired by knowledge that moves across boundaries, the willingness to learn from people in working in other industries and other professional fields.

Innovators are people who go against the grain, they’ve got the ability to think in a counterintuitive way, to be contra and not always move with the masses.

And then certainly there are the last two elements of any great innovator have been perseverance, they’re willing to stick with it, and again history is replete with examples on everything from the invention of manned flight to the invention of the light bulb, et cetera, of those inventors and innovators having hundreds or thousands of failed attempts before they achieved the innovation which we all now take for granted.

And lastly, in addition to perseverance, there needs to be an element of risk-taking. No great thing was accomplished without risk being taken up front.

We’re so fortunate today to have an opportunity to hear from our first keynoter this morning, because this individual deploy embodies all of these elements of innovation, and he’s demonstrated these elements of innovation in his actions and in his creations for over 30 years.

When we tick back through that list, we think about curiosity, I can’t think of a person that I’ve met that asks more or better questions. He’s a voracious reader, the well publicized approach that he’s had for years where he actually takes weeks of Think Weeks where he just reads papers and papers and papers and just absorbs information from lots and lots of sources.

In terms of the ability to cross boundaries, the breadth of Bill’s interest and depth across math, computer science, business, education, healthcare, history, he’s even now got a deep knowledge of bridge. And if you think about the span of that, that’s just a tremendous breadth.

And literally with the travel that Bill has the opportunity and the life that he has shaped and created and envisioned takes him from traveling from the poorest villages in the world to meeting with some of the most influential leaders and thinkers and scientists around the planet, again pollinating this cross-information.

And in terms of perseverance, you don’t have to look any further than last week’s headlines to see about someone who’s had a superhuman capacity to stick with the big, hard problems, particularly in our industry, and keep advancing them in the face of those challenges, in the face of people who may say that, hey, this is not possible.

In terms of risk-taking, Microsoft itself is a phenomenal success, but when you think about it, it’s really a series of big bets, everything from the initial foray into operating systems, the databases, the desktop applications, the Xbox, now business applications, the Internet and Web services; each of these steps represented significant and large risk-taking by a corporation that was making bets on a future vision, and that vision being driven by Bill.

But all of those things may seem out of reach to a group, an audience where you’ve got lots of folks who spend most of our time in smaller and midsized businesses, but you have to remember that the gentleman coming on stage is also the same person who at 19years of age decided to drop out of college, move across the country to a town where he knew no one and had never lived before to chase a dream, to take the risk of I’m willing to give up whatever dream people may think is appropriate for me as a 19-year-old, and I’m going to go chase that dream; that’s risk-taking and that began the seed which is now the Microsoft as we know it.

This innovation that Bill has helped shape and drive has been delivered across many roles: As a co-founder, as I described, as an entrepreneur building Microsoft during its early days, in the role as the CEO that took us from a small company through IPO all the way up to a very large organization, billions of dollars of global reach and impact, and today he’s in the role of chief software architect, and as our chairman and chief software architect, Bill continues to drive the entire Microsoft organization with his passion for innovation.

It’s so wonderful to have him here today, I’m looking forward to what he has to say. Ladies and gentlemen, Mr. Bill Gates. (Applause.)

BILL GATES: Well, good morning. It’s great to be here at Convergence. Of course, this is a record breaking year, the attendance is fantastic. And I think it speaks to the depth of relationship that we have. The software that you’re using makes a big difference in your business, and we’re here to learn about how we can make that even better.

The discussions at this conference have an impact not just on the applications work we do, but the entire software suite that Microsoft provides, because after all this is where we get to glimpse software really fulfilling its ultimate goal, which is providing business productivity.

Industry Megatrends

Well, the industry is moving very rapidly. The opportunity to do better software has never been stronger because of the range of innovations that are taking place. We even talk about this Digital Decade, and people living a digital work style or a digital lifestyle when they go home, and that is becoming more and more just commonly accepted that as you have broadband in these locations, as your communications get unified together, as you move things away from paperwork and onto the digital approach, that everything is software value-added; your desire to have more information and your ability rise in a very, very dramatic way. The flexibility of being able to stay in touch and see trends or simply to get at the things that you care about are there all the time.

Well, what are some of the underlying advances that are really pushing us forward? We’ve had since the beginning of the big computer industry the microprocessor itself. That was the advance that I saw when I was very young, just about 15 years old when the very, very first one came out, and that doubling in power has continued to be a central driving force for this business.

Today, there’s an interesting trend taking place there where they’re continuing to double the number of transistors, but they’ll actually not double the clock speed, and so being able to write software that can run in parallel, multithreaded software is finally something that has to be done to take full advantage of those chips. And people like Microsoft and Intel are investing literally billions in new software description techniques and compilers to make sure that that parallelism continues to deliver the exponential performance increase that should be possible with those new chips.

The performance of these new 64-bit servers has really been phenomenal. We had a high expectation for what people could do there, but it’s gone even beyond what we had hoped for. The ability to take lots of data, load it into memory, and essentially take the disk out of the performance equation has meant that for most customers the cost and the number of servers required for their problems has shrunk quite a bit, and so responsiveness, even when dealing with massive data sets, when mining the activities on their Web sites or looking at transactions across a huge number of factors, these types of data mining things have gone from being something that only a few companies can do at great expense down to something that should be basically standard practice because in the digital business environment you have the information about who went to what part of the Web site and which of them did a transaction or did not, and how that relates to any other customer data that you might have.

The form factors that people are using to connect up to the Internet continue to evolve. The phone is probably the place of the most rapid change, and there Microsoft and others are providing rich software that takes the phone way beyond just a voice device, making it a great data device, a device where your calendar, your alerts from your business software, they all reside there but with the user interface that’s familiar so as you move from that device to a larger screen device, it’s not an abrupt change.

So we’re actually taking the PC down so that there will be no gaps between a high-end phone and a low-end PC. A big milestone in that was the release of the ultra mobile PC, which is a product that got introduced just three weeks ago. It’s a Tablet-type PC with a 7-inch screen, and quite inexpensive, well under a thousand dollars for quite a powerful device.

If you combine those small form factors and their readability with a wireless network, now you’re talking about expanding the ability to work out into new locations. That can mean a claims adjuster for insurance, it can mean a salesperson, it can mean a doctor wondering around a hospital; quite amazing how when you unleash people who have to move around as part of doing their job, and yet give them that data empowerment to see and to input, that that can make a very big difference.

Even in the more straightforward case of people going to meetings, the smaller and smaller portables and the tablets now make it that you’re bringing that richness into the meeting, you can take the notes, you can share data, you can pursue questions without giving up the access or having something that forces you to use the keyboard or it doesn’t fit into that kind of environment.

The digitization of the economy is a big factor in what we’re doing with our application, making it easy for companies that have sales through a traditional channel and sales online to really get the best of those systems to allow a customer to come in either way and yet have the very best experience.

We’re still early in this digitization. Most transactions involve lots of phone calls and lots of paper still today, but year by year that will change. There won’t be any magic moment where overnight it’s completely different, it will simply be that the effectiveness, the efficiency, the familiarity of these techniques will build and build and so every year we get that change.

One of the things we’re most proud of is the anticipation that we had going back to the year 2000 of what the key software foundation would be for the Internet that allows you to do business this digital way. It wasn’t just the connectivity, because after all that came true in ’99, 2000; rather it was a layer of software that would allow data to be exchanged in an understandable format, which is XML, and a set of protocols so that you could exchange that data reliably and securely. And those are the Web service protocols that are now fully completed, fully standardized, built into the tools, very easy for people to use.

That fulfills the dream that’s been around for almost forever that we’ve been in this industry of letting software, any software component talk to any other software component, without caring about the language it’s written in or what operating system or what hardware it’s on; as long as it’s connected to the Internet and uses these standards, you can have those components work together.

And so the flexibility that provides, the opportunity for simple customization without reduplicating things, that’s one of these foundational pieces that allows the digitization to take place, and certainly by starting on that in the year 2000 and redesigning our tools, our databases, our applications around that, that’s been a very important investment to enable this type of new way of looking at applications.

Delivering Value Through Innovation

As we’re talking about our applications, I think it’s very clear that we don’t view these applications as standing by themselves. In fact, we probably get even more value out of learning what the Dynamics applications want from the rest of the system than anything else that we do. Understanding that end-to-end scenario, how should the collaboration work, how should the workflow work, does the rights-management capability in the platform fit into the structure that the customers want; by seeing that in its fullest form in our applications customers, it informs all of our different activities.

We’ve shown four of them here. In the lower left what we’re doing with the extensibility tools, and I talked about the XML and Web services commitments, and the runtimes there are, of course, the Visual Studio environment and the Windows Connectivity Communications Framework, WCF, that was codenamed “Indigo,” is a building-block that makes that very straightforward.

Business intelligence: We’ve built a lot of that into our SQL product, but where we’re getting the most extensive use of the rich new structures that we’ve built there is in the analytics that are built into the Dynamics applications. And so it’s a virtuous cycle of learning what more things people would like and then enhancing that platform, and the way can abstract data into these dimensional models really lets people do things very easily and bring the visualization down to a wide range of employees, not just business intelligence experts.

In collaboration I’m sure if you came last year, you heard us talk about SharePoint a lot, and I hope you went home thinking, wow, they see that as a key building block, they see that as taking so many disparate categories of software, workflow, portals, search, document management, rights management, all those things and collapsing it into a very low price, totally pervasive, high-volume piece of software, just like Office on the client.

And so the starting point for ad-hoc collaboration is you go to a SharePoint template. That connection to our applications is very strong. So if you have a context where somebody wants other people to see what’s going on, wants a list of things, wants some activities triggered by putting things on and off that list, that will be a SharePoint environment, and a lot of the extensibility done by partners will be the kind of things that you’ll see in that environment, because it is so easy to make that richer. If you want to add a discussion board or a blog capability, a Wikipedia capability, the components for that exist and we make that simple. So that’s a huge element that’s coming in to supercharge the Dynamics capability.

Then we have the idea of the role-based experience, and the whole advance in Office. Of course, later this year, both SharePoint and Office reach a very key milestone with the shipment of Office 2007, but the role-based ideas have been pioneered in our applications and now we also reflect that in Office itself.

I think there’s a fifth element that you’ll see us add onto this mixture, and maybe we should have this year because it is emerging, and that is the whole area of real-time communications. Yes, that’s part of collaboration, but this is even more powerful than you’d expect if it was just a sub bullet there.

In the future, you won’t have a dedicated PBX, the ability to connect up over the phone network, you’ll have phone type devices but they’ll connect to the same network as the PC. And the integration that lets when a customer calls in all that information appear on your screen, that will be commonsense. The ability to say who should this call go to based on who’s available, who knows that customer will be very sophisticated. If the call is transferred, if there is a history with the customer, all that context goes with it.

So bringing in this real-time communications that’s now not just voice, it’s also screen sharing and video, but using the Internet so that it’s fullly integrated as well, that’s a powerful element here. Anytime you’re in an application context, you’ll be able to reach out, see the presence of people, get in touch with them, share your screen with them to collaborate together, and a big change in effectiveness that comes out of that.

The Evolving Business App: Role-Based Composite Applications

So applications are changing in their architecture, and the change we have now is that we can’t be monolithic in the user interface, that’s the role-based, and we can’t ignore all of the communications and productivity software advances that are taking place. We need to sit on top of those and let people very easily build the composite applications.

And so we’re taking the best elements of the online world where we’re seeing the mash-ups of people taking elements of different Web services and pull those together; that’s kind of grassroots programming that once you put extensibility in you’re always amazed at what people can do with it.

The advance in the productivity space, this idea of these collaborative portals with templates that IT doesn’t have to provision those, you just do a generic SharePoint server and the editors that change the templates, the so-called SharePoint designer is easy enough that throughout the company you have a broad set of people building the UI that they think makes sense for their tasks, and it’s very, very easy, no code to write, doing that without IT involvement.

And finally, the business applications, which really sit at the center because there you understand the workflows and the roles best of all. And even though you’re sitting in the UI sometimes of SharePoint or Outlook, the workflow you’re triggering touches the business application where it’s got the master data and it’s playing that coordinating role.

A great example of this is something like a recruiting scenario where many people are involved, you create the position in the Dynamics software, but SharePoint keeps the list of candidates, what their status is, everybody involved can go up there and see that, they can pick a candidate and say they’re going to be the ones to drive that to the next stage. You get to a formal stage, then you want to trigger information back into the application, talking about when the person is going to start, what you’ve done on their salary and things of that nature. And so it’s the best of both worlds, it’s the collaborative world and the financial software world brought together.

I remember even at Microsoft this idea of these paper requisition forms that various people were signing and did you have one of those, and when you made the offer did it get in the system so when the person showed up was that right, the number of systems involved without a way of integrating them made that often a high overhead and even unpleasant experience, and here that’s just one of many scenarios where the structured world of the financial system and the HR system have now been brought together with the very best, the very latest with SharePoint 2007 to say, no, we can all work together even if we’re in different locations, some people around at different times, despite what the applicants and what’s going on with them really becomes a point of total flexibility.

So composite applications are happening; they’re happening for data outside the company that you want to pull in, they’re happening for connecting you up to customers in a new and rich way, they’re happening as these services that we expose in our applications can be called by more specialized environments, they’re happening when you want to take business intelligence information and present that in new ways. And so the flexibility here really ushers in new ways of taking advantage of that.

User Experience

Last year, when I spoke at Convergence, we talked about user interface, and I think this is a topic that’s always worth touching on. This year, we’ll see user interface advances in Windows itself with the [Windows] Vista operating system. There you can say it’s clearly evolutionary, but once you’ve used [Windows] Vista, you have a feeling of the richness, the visualization capabilities, you won’t want to go back.

Likewise, with Office 2007 we actually took a risk there and built a little bit of a different interface with what we call a Ribbon to eliminate the depth of the menus, and features that people could not find where they could not see what was going on, and that’s turned out to be a very powerful approach that’s also being reflected in the applications experiences.

Obviously, as you map these things onto the browser, all of the discussion about so-called “Ajax”-type development, where we have the “Atlas” framework as our way of making that easy to do, that’s improving a lot as well. And then we have things like the Tablets and phones where we want richer interfaces as well. So a very important thing where the platform element is getting more varied and richer as well, and yet we have to pull things together, and the idea of the role-based approach is that you see the things you care about and nothing else.

We do a lot of examination, user studies to make sure we’re getting these screens right, and then, of course, making it easy where we don’t for our partners or even our customers to change those things but in simple ways. We’ve had a lot of project data come in where we’re looking at the use of these screens and how we can make these things better, a lot of focus groups, and even here at Convergence we have the user interface lounge where we’re getting informal data about how people are responding to what we’re doing and how we can make this better.

We do think this is a huge competitive element and an area of very, very strong investment for all of our application work, and, of course, it’s something that we get to share across all the work that we do.

Well, to show you some of this running, and this is a big step forward from the sort of prototype stuff of a year ago, let me ask Darren Laybourn, the general manager, to come on out and show you what we’re thinking about and how it’s coming together. Welcome, Darren. (Applause.)

DARREN LAYBOURN: Thanks, Bill.

As Bill said, we’ve made a lot of progress in the last year, and I’m just going to jump right in and show you. This is the homepage for Susan, the order taker in the future. You can see that one of the features that we’ve added is this new concept called Stack, it’s something you’ll see in [Windows] Vista. Basically it gives you an indication of how much work you have to do in each of the areas. You also have your parts, the key parts, whether it’s BI, access to your Outlook information as well. You can configure this page, add it in so this can be built for a role, but also personalized by the individual as well.

I’m going to go into the sales order page where we have a number of different lists, and as Bill mentioned, we’re using the Ribbon control, so this is a feature that came from Office 2007 so it will be familiar with you when you’re using Office or when you’re using our product as well, but it gives you the things that you would do at the point in time when you’re working with this list.

So one of my customers just called and said I’d like to increase my order. So I’m going to drill into the sales order for him. And see we’ve really changed the sales order for him as well. We don’t have the typical header and line items, and we’ve also added a composite application capability.

So I can see information about the customer right there when I’m taking the order. I can also link to a Web service; in this case, I’ve got MapPoint on the right hand side, and I can also see the item details.

Well, my customer wants to do a little promotion, they’re going to give away a chair every time that you buy a bicycle, I guess they want you to be able to sit down after you’ve had a long ride or something. And there I’ve been able to add that in, and go ahead and jump back in to – oh, let’s see, one more thing I wanted to do over there was I can actually take Microsoft Word and integrate that right in as well. So by clicking on Word, it will create the invoice automatically for me, and I can then send that off to the user to confirm that the order was done and move to 25 of each one.

So let’s go back to the main page. Not only do I have access to all the actions I want to take but also all the reports that are familiar with this list. We’ll go to the list, pull the sale list, and we’re taking advantage of SQL Reporting Server here. It creates a number of nice features from the reporting perspective, I can embed charts along with my reports, but in addition there are actually live reports so I can do sorting. So if I want to sort from total amount of sales from greatest to least, I can do that right inside the report.

So I showed you this on XP, but we’re also doing a lot of work so when we get onto [Windows] Vista that it’s going to light up on [Windows] Vista. So we’ll just pop up [Windows] Vista here, and here’s the application running on [Windows] Vista. Over here on the right is the sidebar, it’s a new feature. I have actually some pictures here of a lot of you that are coming to the show, so if you’re looking up there you might see that. Also the time, clock. There will be a number of gadgets that we’ll be able to add that are actually tied to the business application as well, so you can monitor the business as it’s moving forward, no matter what you’re doing. But in our application we’ve got the ability to have glass. You can see through the window. It’s a familiar feature that Windows will have going forward, and it allows you to see back to the windows that you have there, so you don’t lose things in the back. It looks kind of cool.

Another feature we’ve got is I can see that I’ve got an indication that my items to reorder is too high, so I’m going to go in and order the items. You’ll notice that we’ve got a bread crumb bar here at the top, let’s kind of walk through. And so in the picture viewpoint that we had you can see all the places I went to get there. I can also have the same type of capability. So we’re trying to create a familiar experience no matter where you’re at in the application.

So I’ve got my list of items I need to go in and reorder. I can have a number of different tasks. And as I move from list to list, you can see that the ribbon bar has changed, and it looks in a different way. So underneath the reorder here we’ll just go ahead and reorder.

And what I’ve done here is I’m on this item and I want to go do some reordering. I could have just used a regular grid control and gone through and figured out I’ve got a list of all the vendors that provide this for me, but instead I mapped the UI to a new control, this control was built by a company called Infogistics (?), they built this control on Windows Presentation Foundation. And the reason I decided I would use this, I actually want to do some analysis right in the window when I’m doing it. So I’ve got the ability to just click on the top. This gives me the ability to grab the ratings, sort these and group them by ratings, collapse that back down, and so now I’ve got a list of my vendors by ratings. So my rating is how I determine which vendor I’d like to go with normally who’s provided me the best service.

Now, I usually like to buy items at a hundred at a time. Well, the available stock, which I’m getting from my vendors, is clearly not high enough right now, so I’m going to have to go with one of my B rated vendors, but I really don’t want to do that. And I remember that I think I got an e-mail a while back from one of these vendors that told me what they’re going to get. So I go down to the Start menu in Windows Vista, type in the name of the bike, and Windows Vista just does a tremendous job of searching across your hard drive for whatever you need. So I’ve got brochures, spreadsheets, and I’ve also got e-mail messages. So it’s not only doing documents that are there but also Office, Windows, Outlook documents as well. I’ll pop up the document, I can see, in fact, they did have a big order, it’s going to come on April 1st, I guess I can go with that.

You can see the Ribbon control up here in Office, they’ve changed it a little bit since the last time we got a drop, so we’ve got a little work to do to catch up with them, but you’ll see there’s a familiar experience as you go from one to the other.

The last thing I want to do is I’m going to go down over to the customer’s page. Bill talked about composite applications and what you can do with a composite application. What I did on the customer form here is I’ve actually hooked in Windows Live Local, which is based on Virtual Earth. And if I go in and grab the REI Bike Shop down here, we can go see where that’s based. And it’s in Apple Valley, and some of you might know where Apple Valley is at, but I can actually go back out and see that it’s in Minnesota, close to Minneapolis. Not only can we get a view here, but you can also get an aerial view as well, so you can view back and forth. Not that this is important for business applications, but I thought it was kind of cool. (Laughter.)

OK, the last thing I wanted to show you was again we’re integrating in with Word. I’ll just take my list of customers, create a customer list out here. One of the cool features they’ve added in Office, and for those of you who went to the Office session, you saw a lot of places where they’ve done this, but you just have rollover formatting. So as I move the mouse over the top of this, it just changes. This makes it far more productive, I don’t have to change something, come back and then do it.

But I think what we’ve shown is we have made huge progress in terms of getting to a role-based experience, creating composite applications, bringing together Web services, as well as all the information inside your application at the point in time when you’re doing the work, and we’re really excited about where it’s going, and we hope you’re going to like it as much as we do. Thanks a lot. (Applause.)

BILL GATES: Well, the flexibility of the applications underneath really depend on organizing the application into various components. And we as talk about service-oriented architecture, you can say to yourself are we talking about taking these applications and calling out to your code or vice-versa having your code call into these applications. That’s almost the question of who’s on top, and the answer is that the architecture supports both of these things.

Service Based

The easiest way to think about that is if you’re creating the composite user interface and calling these applications, then they’re simply black boxes that are helping out with whatever task you want to perform. If on the other hand you’re using the hooks that we have, the call out for events or computations, and grabbing those and putting your code behind it, and then that rolls up into the UI that we create, then the application is on top, it’s still driving the composite user interface.

But both of these things, and even combinations of them are allowed, and the fervor and innovation about this in the Web-site world is very, very strong today. Now, some of that doesn’t understand, some of that is oversimplified in the sense that understanding security and reliability and scalability, some of those things aren’t as key in the consumer oriented world, so in some cases they’re using very simple protocols, which is fine, but as they want to adopt to those other things, they need the full family of protocol capabilities, and that’s where you get the full richness of something like the Web services standards or the runtime we provide for that, the Windows Communication Framework comes in and lets you do this.

More and more your applications will be making these calls either to traditional code that you haven’t yet migrated or to code that’s out in a partner site, and so your architectural flexibility is substantially greater than ever before. And here again there’s a dialogue between yourselves and ourselves, you know, are we putting the right hooks in, the right levels of granularity to make sure you can connect in, in the ways that you want to.

Now, as we are having these applications perform richer and richer functions, the question of when do you go from software calling software to software notifying a person or a person triggering software action, we have to get that boundary very formalized. After all, if we drop activities across that boundary, it’s not going to work very well because these are critical activities, these are following up with a customer or dealing with a problem. The software only notifies the user if there’s something that requires their involvement. And, in fact, if you look at business transactions in the past, there was always a dramatic difference between the 80 or 90 percent that went smoothly and 10 to 20 percent that required massive amount of effort, and a lot of that effort was because this boundary of if the product was rejected, didn’t work well, the price was wrong, something was bad, getting that world of communications person to person, and the world of these structured applications to come together and understand the richness of what’s going on, that really didn’t work.

Well, the answer to that is to plug in workflow capability into the application and to have a standard user interface in a pervasive platform that is used for workflow user interface. And, of course, for us that’s SharePoint. And so when you’re sitting adding something new, it can trigger the workflow logic that can go out and talk to the application or applications can start up new workflows there.

Connected Business

And so the idea that we’ve been talking about for a long time about connected business, it’s a lot of this new workflow capability that’s just standard at that SharePoint level that makes that easy to do.

One of the elements in this is the connectors we provide out to other business protocols and business applications; that’s our BizTalk Server, which has been the source of learning about all these different workflows and building this rich engine.

There’s actually a release of that that’s officially this week called the BizTalk Server 2006, and, of course, there’s always been a strong relationship between the BizTalk group and Dynamics group where Dynamics takes advantage of that.

If you have situations where you’re connecting up to other business applications, this newest evolution of the BizTalk Server will be very interesting to you because with the kind of connectors that it has and the richness of those connectors, it brings another level of applications integration in B2B type scenarios just being a visual thing that you can see the state, change the order that things get done in, and understand what’s going on with those processes in a very simple visual way. So BizTalk is another element that’s benefited immensely from use by Dynamics to make sure that we’re enabling these new scenarios.

Well, to give you a sense of how this can come together with what we call the connected business, I’d like to ask Mike Ehrenberg, the architect for Dynamics, to come up and show us some of that. Welcome, Mike. (Applause.)

MIKE EHRENBERG: Great. The scenario we’re going to look at this morning begins with Emil, who’s a product designer for a company called Fabricam. He’s working on a new design and in the course of that design he’s identified a requirement for a new part and a need to get that part from a new vendor.

So he’s going to recommend a vendor and ask Inga, who’s the purchasing manager, to go out and solicit bids for the part. Next we’ll meet Kevin, who’s the sales manager at our parts vendor. Kevin will eagerly respond to the request for a quotation. That will go back to Inga, Inga will check to see if Kevin’s company is already in the system. If it’s not and if she likes the information that Kevin’s provided, she’s going to go ahead and add the new vendor to the system, go ahead and look at the quote, approve that, and then she’d be ready to process a purchase order.

And the challenge that we have today is that across this entire scenario the only piece that is involved with the business system is really looking to see if the vendor is in there and adding the vendor. The business system has no knowledge of this overall process, it can’t really help guide users through it, certainly couldn’t help Emil understand what the status was if Inga was out of town for three days attending Convergence, and it’s certainly not going to help Fabricam understand whether the process is efficient or guide them through changing it, and that’s a situation that we want to change.

So what we’ve done is we’ve built a composite application around Dynamics AX. So over on the right you see we’re using Dynamics AX version 4.0, and we’ve added a couple of standard customizations for information we want to track during the workflow. On the left you can see that we’re using the Windows Workflow Foundation and we’ve modeled this new vendor addition scenario. And the workflow is communicating with Dynamics through the Web Service interfaces that are released as part of our wave one work.

Next, we’ve taken advantage of the enterprise portal built on SharePoint to provide role-based experiences for all of our participants. And one of the cool things that we’ve done is that we’ve actually extended that SharePoint collaboration so that it goes across the firewall between Inga and Kevin at the vendor.

So let’s get started. So now I’m Emil, and we’re looking here at Emil’s homepage. And as you can see, this is a SharePoint homepage, and there’s just an amazing range of information that we’ve been able to bring here. So Emil’s got project information coming from Project Server, he’s got some BI data, he’s got a SharePoint document library, he’s got an RSS feed from one of his parts vendors telling him about new parts information, and here because the Dynamics enterprise portal is built on SharePoint, we’ve got some Dynamics Web parts showing us production orders that are waiting in the system.

So let’s get started. Emil is going to give the information to Inga about his new parts requests, and we’ve done that using an InfoPath form that’s talking to Dynamics through a Web Service. And so that I don’t have to sit here and type anything and make any mistakes, we’ve already pretyped the recommendation from Emil to go to our new vendor. So Emil is going to go submit that. OK, let’s say thanks, Emil, and we’re done with him.

OK, so now we’re on Inga’s homepage, and I’ll refresh that, and you can see now that as a result of what Emil has done, Inga’s got some work that she needs to do. She’s got some new items that need to be procured. And she can see on this one that she needs to send that to a new vendor. So the first thing that Inga is going to go do is send that RFQ off to the new vendor.

OK. Now, one of the other things that we’ve done, as I mentioned, is we’re using SharePoint to help the collaboration between Inga and her vendors. So we’ve set up a collaboration site that is actually shared. It’s a private site shared between Inga and Kevin’s company.

Now, Inga is also in the process now of rolling out a new business process. She has decided that Fabricam wants all of their vendors to agree to a supplier code of conduct. And I recently did a Web search obviously using Windows Live, and found that thousands of people are in the process of bringing this practice of enforcing a code of conduct across their vendors.

Now, Inga hasn’t had time to work with the IT team to make this part of the system, but because she’s using SharePoint, she’s able to set up a document library that’s part of this collaboration site, she’s got her supplier code of conduct as a Word document, and SharePoint gives her the ability to add an approval workflow to any document that gets added to that site.

So she’s going to go ahead and upload the document, and now we can see down in the corner that Kevin’s gotten some mail. So I’m going to switch over and be Kevin now. And Kevin has received e-mail from Fabricam that says we’d be very interested in a bid. So what I’m going to do is take the information in here, I’m going to go logon to the site that’s been provided for us, and this is a SharePoint site that he’s logging into, and now we see Kevin comes in, he gets a welcome that was added by Inga, and he’s got a couple of things that they’d like him to do.

So the first one we’re going to do is he’s going to take a look at that supplier code of conduct, and this is simply a Word document that Inga created explaining all the practices and regulations that they want suppliers to be compliant with.

And as you can see at the top, SharePoint has automatically triggered an approval workflow. So Kevin will bring up the approval workflow, he likes the terms, he wants to do the business, so he’s going to go ahead and approve this.

OK, that’s all set. Now, Kevin needs to look at the request for vendor information, and again so that I don’t make any typos in front of all these people, it’s all been prefilled for him, but this is interesting because now Kevin is actually filling in the vendor information, Inga is not going to have to retype that or reenter it, the system is going to take care of that for him. The only thing we need to do is I’ve got to enter his unique DUNs number, magic little pattern there, and also he’s prefilled the quote information.

So Kevin is going to go ahead and submit the quote, and at this point the information is being communicated back to Dynamics through the Web Service, and setting up all the tasks for Inga so that she can go ahead and do the approval.

I’ll take the time to do a little bit of cleanup here.

OK, that’s all set, and we’ll come back in to Inga’s desktop, I’ll refresh that, and we can see now that the vendor information is waiting for approval.

So the first thing that she can do is she can actually go out to that collaboration Web site, she can see that Kevin has been a good boy and completed the code of conduct, so based on that she’s going to go ahead and approve the vendor request. So we’ll go take a look at her incoming vendor request. Here it is. You can see that we’ve also got statistics on this vendor creation workflow process, and that’s one of the great things about Workflow Foundation is it provides the ability to build in the measurements you need in order to track process efficiency.

So now she’s going to go take a look at the information that Kevin has provided. He’s ISO 9000 certified, which is the core requirement that she was looking at. She’s going to go ahead and approve that. This is now talking to Dynamics again through the Web-service interface, and adding Kevin as a vendor. So now if we come back, you can see again I’ve got the Axapta Web part on the portal that shows that our company has been added. She can come back now, see that the vendor piece has been approved, she can go look at the quote, see the quote information, approve the quote, and we’re all finished.

Thank you very much. (Applause.)

BILL GATES: Well, another expectation that we’re trying to raise much higher is that people will be able to get more insight into business activity, customer trends, quality trends within the things that are going on in their business. Mike mentioned the idea that as soon as you’re using an explicit workflow, that immediately the ability to audit and say give me an example of a transaction that took the longest, tell me about the average time of the transaction, let me know who’s processing these things faster than other people, and then being able to look at the ones that took a long time and query the person of what made that so complicated, you get this digital environment that’s subject to using its own rich tools for examination and then easily changing those things so they can work far more effectively.

Contextual Business Insight

This is another great example where the infrastructure underneath the Dynamics application is getting dramatically more powerful. SQL with business intelligence has always been a leader, but the release that we made late last year of SQL 2005 was a dramatic step up in the kind of reporting and analytics and understanding of rich business data. You see that through the analysis services, the reporting services, the connections into SharePoint with the so-called Scorecard Manager, and all of that we’re taking advantage of in Dynamics, building analytics that work at a new level.

It’s really a platform, even if you see the reporting piece underneath, the ability to model your business in a rich fashion, import data from many, many different sources, this makes a big difference.

Microsoft itself is starting to use this for all the business work we do, the forecasting and analysis, and it’s really simplified our process a lot versus a number of software packages we used to do that in the past.

So looking ahead, software is doing some very exciting things. You should never think that we’re at the limit of what we can do, because the hardware advance, the architectural unifications we’re doing here, really an immense amount of the overhead in the software, the number of lines of code that have to be written, the amount of monitoring of systems that still have to be done today, next generation of software can eliminate many of those things.

And so if we think out into the future five or 10 years from now, a lot of that energy, a lot of that investment will be much more on that end experience: what does the Web site look like to the customer, how can you get your investments in people, salespeople or support people so they’re really dealing with only the complex issues and anything that’s automatic is done easily.

The New World of Work

A lot of that fits into the idea of what will this world look like, and so what I did is I pulled together what we call the New World of Work demo, and in this I’m going to show a typical day for an information worker, starting here on the left, which is, say, I’m still at home but I’ve gotten up and I’m sort of interested to know what’s going on. So I walk over to, say, a screen that would be in the family room and I can see here it’s a nice screen that’s got kids’ pictures here that I can just move around, look at the time, dive into these things, it’s, you know, family oriented things. I’ve got down here the calendar for the family that combines my business things and the family things. I’ve got a little information, our family allows each other to know where we are, so I’ve got GPS data – (laughter) — about where people are, and I can see everything looks good there.

I’ve got news stories coming up, and this has been filtered according to my interests. There’s one of particular interest that I can touch and just move on and see that, and here I see some news about a problem with some factories that are interesting, and that’s actually going to affect my business, and so I go up and say that I want to track that topic. And so it says that I’ve shown an interest in that, and so whatever device I’m on today, having this story and any updates to the story is valuable to me to have.

So very quickly just by glancing at this screen I’ve gotten a lot of different information. A screen like this will be very inexpensive, either front or rear projection, and so this won’t be that abnormal.

If I pick up my phone to head out of the house, I can see I’ve got the video clips of this news story I said I was interested available here, so I can continue to listen to that as I head off to work.

When I get to work, I’ve got a workspace where I’ve got a lot of screen area, because my ability to just glance and see calendars or business metrics or documents that I want, it’s a big advantage to me to have all that there, and screens like this will be very common.

I go ahead and I just use my fingerprint as a way of getting onto the system, so I can see a lot of data here, the calendar happens to be over there, and groups of people, different sets of documents, and here, of course, that news that I’m interested in is right there.

I can start a conference call about this new development with a group of people. I can see some people are on in video, some are just on in a voice connection, they’ve just got their phones. As I participate in this conference, I can take this tablet device, and this is just an adjunct thing that I always carry with me when I got to meetings, because I can take notes and things. I’ve got this here and I can use this in connection with this meeting that we’re in, and sit here and write things down, mark things up.

There’s a point in the meeting where people ask me about some of the data in our supply chain and how that might work, so I can simply take and drag the data that I’ve got here, and drop it onto this videoconference. And you’ll see it appears there, and it’s not just a chart that I had here, it’s actually structured information so we can look in and see where that data came from, we see Thomas Anderson was involved in that, and so we can say, well, let’s get him involved in this call. We’ll do a side conversation, we pick his name and do instant messaging, ask him if he can get involved right away. And he happens to be available, which is handy, and so next thing he’ll go ahead and join the meeting and all of us are now sharing data, working together, and just simply trying to solve this fairly serious problem.

Now, my calendar here is an active calendar where software is evaluating this, and so as we get deep into this conference call it alerts me that not only is my next thing coming up, but the traffic means that I’d better leave on time to be able to catch my flight, and so I go ahead and close out the conference call and leave my desktop.

Here my phone has got this map showing me where the traffic is, I might want to take a different route, and it just understood that because the software is user-centric, it takes your content for what you’re doing on any device and passes it along to the device that you’re going to have with you.

So as I go to the airport, take my flight, and I’m in a lounge where I’ve got a connection to go somewhere else, I come in, I’ve got my phone, of course, and here’s a table that’s in this airport lounge. Now, this table actually has a camera that scans what’s on the table and some software behind it that’s able to recognize and communicate with devices on the table. And so as I put the phone down, it talks to the device and it recognizes whose it is and says that I should just use my fingerprint here to verify that this is my phone, and then now I’m up and get this table essentially as my screen.

On the flight I was given a business card, so I’ll put that down, and the camera sees that, scans the text. On the back I’ve actually got some notes that I took there, and so I’ll flip that over, and I see that it recognizes that. And then I’ll take the card and put it here to show it that I want to drop it into my contact list, and it shows me that it’s doing that with that capability so that’s very handy. (Applause.) And, of course, that doesn’t mean just on this phone, it’s going to show up on any device that I interact with, because we’re completely user-centric.

Up in the upper right there you see I’ve got my flight schedule, so I know how much time I have here to sit and do things. I can see the press release that relates to some changes we’ve decided on in that conference call that actually Thomas Anderson has pulled together, and this is a very important document that they want specific approval for that. I’ll go ahead and give my fingerprint again to say that, yes, I approve that.

Now I can take my time and essentially browse my e-mail or browse the Web, where it’s actually the software in the phone but I have the full size of this table in order to read text and interact with that text, even though it’s only a small screen on this device.

As soon as I’m done and I pick this up, the camera will notice that it’s gone, so I’m logged out, somebody who comes here with their phone, none of my information has been left behind, it’s simply a generic peripheral that extends what I can do with my portable device.

And so there you’ve seen a number of things. You’re seeing that the devices themselves are working together, you’re seeing that the phone comes in as a very important device, and yet the kind of screen area that you’ll have either at the desktop or in a meeting room or anywhere at home means that that’s also a change and a very important experience.

A lot of this kind of work we get out in front of because of the huge investments that we’ve made in our research activity, Microsoft Research is sort of a jewel in the crown and drives things like the vision type capability there, that demo came out of Microsoft Research, drives the work on what the new screen technologies are going to be.

And so this is what we have in mind as we think about the evolution of the software and what we can do to in a nice upwards compatible way take these applications to a new level. So that combination of deep technology and understanding the complexities of the world and real user needs, bringing those together is where the magic of software really is the most fun, and so I think that represents great opportunities for all of us.

Thank you. (Applause.)

Questions

DOUG BURGUM: Thank you, Bill, that was fantastic, and we’re really pleased to have some time here at the end to offer up to you some questions that have come in. These were presubmitted by the audience ahead of time. And we had many of you that submitted them, thank you very much, we won’t take all of them, in some cases we’ve collated them down into sort of combined questions.

But the first one sort of leads right off to where you started today talking about innovation in business applications. It was five years ago just this month when Microsoft began in business applications with including the application of Great Plains, and the question is how has this influenced Microsoft’s approach and thinking around solutions and how will it shape the future of Microsoft solutions broadly for the benefit of customers?

BILL GATES: Well, I really think it’s critical, not just because of the business opportunity but because the insight to really go the full distance and have the applications that drive a business, that’s going to have a fundamental effect on knowing are we setting the right priorities in the rest of the work we’re doing.

We also saw a huge opportunity for growth in there. In fact, a lot of the innovation is in the boundary between what you would have thought of as the productivity platform in the past and the business applications platform in the past. This whole composite applications area, how you do personnel review, how do you do recruiting, how do you bring a vendor on board, that really didn’t fit nicely into either category because it had so much unstructured interaction and yet it resulted in and it had some neat criteria that came out of that structured world.

Likewise, business intelligence, what had been done was so limited and we didn’t want to simply have our platform only be able to show through the assets the old UI could provide, we wanted more and more to take things like Excel, how we’re extending that, and make sure we brought the business context into it but with the full power of this navigational engine and platform for partners showing through there.

So we feel great about the work we’ve done, some of the other acquisitions like Navision have helped us get to a certain critical mass. That’s allowed us to up the R&D, the R&D is actually quite a bit bigger than the R&D of the various companies that came in, reflect the long term approach we’ve got, and yet that doesn’t take into account the things that historically those organizations needed to do that now they can rely on the commitments they’re getting out of the platform pieces that get done.

So I think it’s absolutely critical for us to have this piece. Last year, we’ve had very good growth in it. I think in a sense we have more headroom in growth here than in almost any other business we’re in.

DOUG BURGUM: OK, great. We also had a number of questions that related to what we hear a lot about in the press today and in the industry about hosted solutions. And there was a series of questions that I’d sum them up by saying do you have a vision that someday everything will be hosted or will desktop applications have a place, how will this impact the future of Microsoft’s both desktop and server solutions, what’s your view on software as a service?

BILL GATES: Well, software as a service is a very important trend and something that we believe in a lot. I mean, it actually goes back a long time ago, seven years ago we had our first company meeting talking about software as a service. But the change of the relationship from here’s a bunch of bits, go use them, three years from now we’ll tell you they’re not good enough anymore and we want you to buy the new ones, to a model where the software is always connected up, you can see what the issues are, where the good performance is, where the challenges are, you can use that to even update the software on an ongoing basis, software as a service is really a change of the relationship between us and our customers.

We’ve had that with Windows with what we call Watson that sees which drivers in the industry are reliable, we see now very rapidly is there a piece of software that’s malicious, we have reputation for all the software that our users download and recommend to people, what does and doesn’t make sense, we’ve got Automatic Update turned on, so there are aspects of software as a service that are built in to Windows and Office and our applications today.

The idea of Help text where now that it’s on the Internet we can make it large, we can have videos, and we get feedback that has us update it literally on a monthly basis.

Now, this is going even further because something like the mapping service, the database is so large it really couldn’t exist except as a service, and so any context where you want maps calling into the work we’ve done, the Virtual Earth, that makes a lot of sense.

There’s a lot of alignment taking place, the authentication that’s been done as a service, what we call Passport is getting aligned with the Active Directory work, because we give a lot of flexibility there.

Now, at each one of these tiers – desktop, server and service – there’s a lot to be done to simplify things. Some people think they’re going to shift from one to the other because they don’t anticipate the simplifications that can be done: desktop state management backup, a lot being done there, that will become very straightforward. And for things like note-taking, speech recognition, rich user interface, you’re always going to want to use the intelligence of the client. So the administrative effort of that will not be higher than doing it on a server, and yet the responsiveness, the offline capabilities, the empowerment will be there as you do a lot on the rich client itself.

Having things on-premise, the ability to manage a pool of servers so that your people don’t have to think which app is on which server but the management software just does it, that kind of radical advance is taking place, we call it System Definition Model, and there’s a lot of policy tools that go into that.

And so if you take an extreme case, say Microsoft IT, we’ve been able to centralize all of that in a few locations with great expertise, we are not going to be that much more efficient if we had it be done by a third party, we’d be less efficient I’m quite sure because we’ve been able to tune it and we’ve got the scale there. And yet it’s only by using the latest software tools that we were able to do that consolidation and drive that efficiency.

So for our software we’re going to make it available on a server basis and a service basis. There are some very interesting architectural things to make sure when you administer the software, understanding where certain fault conditions should go, should it go to the hoster or should it go to the business, but even if you’re running on-premise, that idea of separating out those roles is often very valuable, so it’s not a separate thing.

Historically, when an application had a problem, it would just sort of spit out an error message and then a human would have to try to figure out, well, does this relate to the fact that somebody is violating the protection limits or it’s a policy thing or does it relate to we don’t have enough disk space so it’s really an IT thing, and understanding the action model for every one of those messages that might come out of a piece of software, mapping that back to the efficiency drive, that is going to benefit every tier.

So we don’t think there will be a huge swing towards one model at the expense of the other model. In fact, a lot of people are going to find that the kind of flexibility they have with these new management tools will make the on-premise stuff very, very attractive. Now, as you get smaller in size, maybe the off-premise becomes relatively more attractive, and we just want to give people that choice.

DOUG BURGUM: There are a number of questions that came in relating to technology, and you had a chance, and these questions came in before you had a chance to show some of the cool stuff on stage here. I heard people applauding, maybe they were parents with teenagers, so the teenage tracker software you were showing. But a question that came in said, as the boundary between work and home blur, so that when I’m at work I want to stay in touch with family, when I’m at home I want to stay in touch with work, how do you manage this in your life, what tools are you using today?

BILL GATES: Well, there is a missing piece of software that we’re working on that takes the idea of who’s trying to get in touch with you, either calling you or sending mail to you, and it makes it very easy for you to say, OK, what group are they in, and so the idea of how you respond to that is context-based, it understands what you’re doing, what device you have, what your calendar looks like.

And so today an out-of-office message is very strange because it’s the same message for everyone, and if you’re not sure how much to say, you know, what vacation you’re on or how long you’re going to be gone or who should be contacted, it often ends up being a very complex thing.

What should happen is in the same way that Outlook rules let you take e-mail and take actions based on that, the out of office message should be categorizable in that same way. Likewise, when a phone call comes in, the idea of I know who it is and therefore should I be interrupted, should it be forwarded to another device can be handled there.

And once this is done, you get rid of the idea of having multiple phone numbers, because you know this software can decide should it be forwarded to your home phone or your mobile phone or whatever that is; and if you’re not available, the idea of saying, well, let’s offer them up the next time I’m free, the software can simply do that for you.

Today, I get immense benefit from the so-called Inbox rules in Outlook, deciding all the mail from Microsoft and various partners and anyone I know comes directly to me, so I process that myself, and mail that’s of a general nature for the company I can have somebody look at that, categorize that for me and make sure that gets handled the right way. So these Inbox rules make a huge difference for me in terms of how I organize these things.

E-mail is nice because you can work on it whenever you want, over the weekend when time is free it’s there, late at night it’s there, when you travel it’s there, and particularly the offline thing that got so rich in the latest version of Outlook that I can do this stuff from the plane or with intermittent connectivity, and yet get my full productivity.

DOUG BURGUM: And staying on the home for a minute, you’ve got in one of your other roles as dad along with Melinda with three young children, what technologies are they finding interesting, what’s fun for them, what’s cool for them, how are they using technology in their home or in school?

BILL GATES: Yeah, my kids are fairly young, the oldest are 9 and 6, and so they’re just coming into this world of technology and have gotten excited about it. My son, who’s 6, loves cars, and so he’s always going to different car Web sites and pricing out the different options. (Laughter.) In fact, he spent so much time on the Ford Web site that they’re now trying to contact him saying, “Gee, you’ve been on the site a lot, you haven’t bought a car yet – (laughter) – what can we do, you looked like such a hot prospect.” (Laughter.) And, in fact, his knowledge is very high, he’s always printing these things out and making up stories about these things.

My daughter is more involved in looking for pets that we might be able to buy – (laughter) – and she found a lot of rabbits, but we were lucky, not only did she find rabbits there but also as we looked on some of these we saw very clear warnings about how difficult rabbits are as a pet, so we avoided making the mistake of actually picking a rabbit and steered her to a less difficult pet experience.

And so it’s been fun to watch them learn. They’re learning videogames a little bit. We don’t have them involved much in instant messaging, I know that’s coming in a big way, but they just take it for granted. If they’re curious about something, they will go and search, find those things, bring that information back. And so this idea of if it’s something you want to know, you just go to the computer and find it out, it must be amazing growing up always knowing you’re not going to hit a dead end in terms of learning things.

DOUG BURGUM: Is there a preferred search tool in your house? (Laughter.)

BILL GATES: Well, they’re good about using the MSN Search. (Laughter.) They do know about Google, because that’s a term that’s out there, and I’ve told them they’ll have a clear preference not too long from now as all the innovation we’re doing there that I think is being underestimated gets out in the marketplace.

DOUG BURGUM: This question came in from someone who describes themselves as a parent of a 12-year-old. Bill, what’s cooler for you in the last year, being knighted, and that was as a knight in England – and this is from the perspective of your kids – what did your kids think was cooler, you being knighted, mom and dad being on the cover of Time Magazine with Bono, or you doing the spoof video with Napoleon Dynamite? Which of those three was cooler, from your kids’ perspective? (Laughter.)

BILL GATES: I don’t think they thought any of them were that big a deal. (Laughter.) You know, they don’t really understand about the history of the British monarchy, and what a big deal all that is. They think, wow, that’s an unusual house that the queen lives in. (Laughter.) And that really wasn’t that big a deal for them.

Bono they know, he’s come over to the house a lot and he seems like a super nice guy, very friendly, but they don’t have an appreciation of that at all.

You know, their world is, they don’t think of the world as being a world of 6 billion people, it’s still a world of maybe 3,000 or 4,000 people, and over time they’ll get an appreciation that other people don’t appear on covers of magazines quite that often, that it’s not a typical thing. (Laughter.)

The most interesting thing recently was when my 6-year old saw this whole thing about, OK, the money that’s going to the foundation and he said he wanted a private discussion with his mom and I, and he said, “How should I think about this thing that you’re not giving the money to me, that you’re giving it to the foundation? (Laughter.) I just want to understand that and think about that.” And I said, well, that’s a conversation we’ll probably have on an ongoing basis for some time — (laughter) — but it’s very clever of you to start it at age 6. (Laughter, applause.)

DOUG BURGUM: And speaking of the foundation, Bill, even with some of the awareness that’s come in the last year about the work you’re doing, it’s still maybe not – at least for me it doesn’t seem that everyone fully understands the impact. I think that you’re approaching almost $6 billion that the foundation has delivered against healthcare priorities worldwide. (Applause.)

And with the research you’re doing, the awareness, and with the collaboration with other groups, obviously you’ve made huge progress in a relatively short period of time against some major disease areas that perhaps other health organizations weren’t focusing on. But if you want to maybe just spend a minute on that, but also share with us sort of what’s next when we look out the next five years, given the huge impact you’ve already had, where are the big problem areas, what do you focus in on, and how do you think about in such a complex world picking the things that you want to really help make a difference on?

BILL GATES: Yeah, the foundation works in two areas, global health and then U.S. education. And global health is an amazing thing in the sense that because the diseases that cause the most deaths are in these very poor countries, there’s no market incentive to create these new interventions. And in some cases there’s even things like vaccines that exist that should be delivered that the resources aren’t there.

Now, foreign aid should get in and take the drugs that exist and get them out there, that just wasn’t being done at quite the level with the energy that it should be.

In terms of discovering new drugs, there’s no organization that’s had that charter. You can’t expect the drug companies themselves to do it without special support, and there’s no agency of the government, we have FDA to approve drugs, we’ve got CDC that tracks epidemics, we’ve got NIH to do amazing research, and those are great organizations, but our partners in this effort to go after developing world health, which is the greatest inequity in the world and it causes this problem that you end up having large families because the risk of your children dying is so high, and yet you need to have children survive to be adults to support you in your old age.

And so the surprising thing is as you improve health, you reduce population growth dramatically, which gets rid of issues about malnutrition and educational resources, and everything gets easier once you improve health, literacy, farming, all of those things.

So in any case, fortunately there’s a small number of these diseases, about 25 in total, but the big five account for almost 80 percent of it, and so working on new interventions, a malaria vaccine, that’s one of the five, AIDS has now risen to number one, tuberculosis, diarrhea and respiratory, those are the rest, so now you know the big five.

In the next five years we hope to have big advances in each one of those, a vaccine for malaria could come in that timeframe, certainly an advance that will stop a lot of the spread of AIDS, put that in check, unfortunately the vaccine for that is further out. And it’s been great to see as we’ve created this new framework that there are ways of drawing in people who wanted to play but just couldn’t, like the drug companies, many of them stepping forward to help out.

And so year by year there will be medicines, we’ll learn how easy those are to deliver in the conditions of the developing world and take this inequity and bring it down quite dramatically.

You know, we basically say that our priorities are pretty simple, because with these advances we can save a life for less than a few hundred dollars, and so that’s an investment worth making, and there’s this community of brilliant people that we’ve managed to galvanize and bring together and get to critical mass. So it’s a lot like the creation of the software industry where all it took was some standard elements and the right science and kind of the magic things happened. And we’re at the very beginning of this; you know, five years from now there ought to be a lot of breakthroughs with a dramatic reduction in all of the big pillars.

DOUG BURGUM: Fantastic. (Applause.)

Coming back a little closer to home, you mentioned education and particularly I know you’ve been very focused on the U.S. and high school education, graduation rates, high school graduation rates. You’ve got a number of fun things that are happening there, you’ve got a project, a pilot project, High Tech High. Tell us a little bit about technology and new approaches, what kinds of things as parents might people be thinking about in their own educational institutions.

BILL GATES: Well, education has a characteristic that’s the same as health, which is when you first really dig into it, you’re struck by how much worse things are than you might have thought going into it. That is, the way that dropout rates have been measured has been wrong, it’s been people who start in 12th who don’t graduate as opposed to going back to 9th grade. And when you really do it well and you take the people who get lost in the system, dropout rates nationwide for high schools are about 35 percent, and for minorities it’s over 50 percent, both black and Hispanic.

And those are horrific numbers because more and more in this economy if you don’t have that education, your ability to get a decent job really just isn’t there, and so you can map that to unemployment rates or incarceration rates, it creates a follow-on of serious problems.

And so we really have to learn how to get everybody to be college-ready. That’s a very high standard to set, but it’s more true for the U.S. than any other country. Other countries, if they get only 10 or 15 percent to be college-ready, that’s okay, not for us. This is an economy that only will have a certain type of job.

A lot of the testing results from No Child Left Behind and other things are also making people realize there are some very bad high schools in this country and the comparison with the U.S. to other countries where by the time we graduate we’re about the worst of all the rich countries, yet in 7th grade we’re still amongst the best. So the fall off is taking place between 7th and 12th grade, and a lot of it has to do with the sort of impersonal nature of that high school experience, not really making the subjects be relevant, and so we along with others are trying new high school designs. So now there are over 700 new high schools around the country trying out designs that are more theme-based, they’re smaller, they use technology.

When I talk about themes, what that means is they might be a high school focused on arts or construction or Outward Bound is one of our intermediaries that goes and creates these high schools. We first work with an intermediary to do one to see if it works, and then if it does, they replicate it around the country and the goal is to prove this out by over the next four years getting to over 1,500 high schools redesigned. That would be about 7 percent of all the high schools in the country, and be able to show a dramatic difference in college readiness, attendance, violence, teacher morale; you know, all these things that can really work.

There are many places you can go to see this happening, we have a lot here in Texas, we’ve got a lot in New York. I was just recently in California, and you’ll see – those people who watch Oprah Winfrey will see in a few weeks a couple of shows where she was down there with us looking at the problem and kind of the despair of an unreformed high school, but then going to some of these reformed ones and talking to the kids, and that was so much fun to see that this can really work, that sitting down with the kids, we had about 12 of them, two of them were the ones who had fought the conversion of their high school from being one big high school of 3,000 kids to six 500-student high schools that were literally walled off from each other, so you get to know those teachers, and eliminating the idea of eight classes in a day, you only take four classes so they’re more intense classes.

Anyway, the kids who had fought this thing came in and said, gee, we were wrong, we thought that preserving the environment where we could get lost and just be in our social niche would be good for us and that this new world would be no fun, but, in fact, they were finding that the expectations of them and the relationships they were building really made them think about college since nobody in their family ever had. The high schools there are 70 percent minority. And this is non-selective, none of this stuff has to do with selective admissions.

Anyway, it’s a very complex issue that gets into curriculum reform and who should have control and what the labor practices and incentives should look like, but it looks like there are some models here that are showing some hope, not only in getting a lot of kids college ready, but also the high schools that have these high tech themes are very popular. High Tech High in San Diego is one unbelievable example, and that looks like from the early data we’ll be able to stop the decline in the number of people going into math and science in the United States, which to me is a very scary trend that if you present these subjects in high school in a very project oriented, approachable fun way, that we do get a lot of kids that will continue in those subjects. So I’m very optimistic about it but it will be three or four years before we can really take and say which of these approaches work and which don’t.

DOUG BURGUM: OK, great. Well, we’ve got a lot of other questions that came in around the foundation work, and we don’t have time to get to all of them, but I would tell people GatesFoundation.org is the place to go and there’s a lot of information there to learn more about what Bill is saying, but it’s fantastic what you and Melinda are doing across both global health and education, that’s absolutely great. (Applause.)

Our last question, Bill, came in, you talked in the intro a little bit about innovation and the risky bets that you took as a young person to help create the industry and the community that we’re all participating in. Some people have said today that even there’s one company out there that even advertises software is dead. I think it would be interesting when you look ahead to not the next five but even the next 30, sort of the rest of maybe your expected lifespan – (laughter) – unless you’ve got some other things cooking in the health research – (laughter) – but maybe it will be a lot longer than that, but I’m just saying when you look ahead over the long term, tell us a little bit about your view of software, its impact on humanity and software, its ability to help us achieve true human potential.

BILL GATES: Well, the impact of software is just going to continue to surprise people again and again. Some of these are things that people have heard about but their kind of quality just wasn’t there. Take speech recognition; everyone knows that when that really, really works, it’s going to be a huge deal. The problem is knowing exactly what level of quality and training complexity people are willing to put up with. The industry, including Microsoft, in years past was a little naïve about when it was ready for prime time. We’re getting very close to that being ready for prime time, and if you give the right timeframe, there’s no doubt that visual recognition, speech recognition, ink recognition, all of those things will be there.

You know, we even looked at scenarios like today you have not only digital identity theft but you have people forging signatures and things like that. We can actually use software to take all of those kind of theft and fraud models and get rid of those things. The digital infrastructure actually can be a lot better. We can actually take currency and do things where it will literally be impossible to fake currency or fake a certificate or if you have stolen auto parts you’ll never be able to get away from there being a digital identity that’s easy to read of exactly where that thing came from and who made it.

And so the impact out into the physical world as things like robotics that’s still in the very, very early stage actually become real, that you get the speech, vision, planning, locomotion elements that come into that, it’s pretty phenomenal.

One of our researchers, Butler Lampson, whose work goes all the way back to Xerox PARC, he’s one of the biggest contributors ever to the world of software, says we should have a goal of cars that are never in car wrecks. And he’s right that software will do that. It won’t do that in the next ten years, although there’s been some neat progress where there’s this contest to have these autonomous vehicles drive across the desert, this last year was the first year that any of the vehicles made it, actually six made it through, and it’s that kind of software refinement that will get us to the right place.

In healthcare what this can mean is very, very dramatic. Obviously new medicines but constant tracking of your activities and good advice to use that’s easily available to avoid problems; in education ideally getting it so that subject matter is interesting and motivating, and there isn’t this big gap between what the kid experiences using the videogame at home and versus how the subject is presented to them and explained to them in areas that they care about as part of that educational experience; communications is wild what’s happening, particularly with young people embracing that in new ways.

So we’re not running into any limits here. People often say, well, can people absorb these new technologies. Well, if we make them easy enough, which is the challenge, certainly they will. We’ve never seen any holding up on that. One really cutting-edge product we have, this Xbox Live where people are doing contests and being spectators and talking to each other and getting accomplishments in their gamercard, those kinds of things, and even we underestimated how big that would be and how it would draw people in.

What’s the future of media viewing where you can see anything that you want? Well, we’re building the infrastructure for that with what we call MSTV on this IPTV approach, but even there I think we’re underestimating once you get that in place how it changes viewing of news and game shows and sports, a lot of great experimentation going on with video on the Internet today.

So the next 10 or even 20 years I think some of the possibilities are quite clear, there are things that are too expensive today, too impractical, unusable, but they’re in the labs being played around with. And so software is sort of the ultimate assistance, the ultimate empowerment vehicle, lots left to do, but maybe getting very close to the ideal on that within 20 years.

DOUG BURGUM: Great, very fun to hear that vision, and I want to just again say on behalf of everybody that’s here in the audience and everybody that’s sitting in on the Webcast, thanks for being with us live today, thanks for sharing your thoughts about the future and especially thanks for everything you’re doing with the foundation. (Applause.)

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