Stephen Elop: Web 2.0 Expo

Remarks by Stephen Elop, president of the Microsoft Business Division, about
Web 2.0 Expo
San Francisco, Calif.
April 1, 2009

TIM O’REILLY: I’d like to welcome Stephen Elop. (Applause.)

STEPHEN ELOP: Hey, thanks.

TIM O’REILLY: So, I’ve given you a brief intro, but just maybe you might want to say a bit more about that, what you’re doing at Microsoft?

STEPHEN ELOP: Sure. So, as you introduced me, I’m from Microsoft, although I will say I’ve spent most of my career here in Silicon Valley, and made the big move up to that place in the Northwest.

The role is very much about helping people with productivity. It could be a corporation, it could be an individual, but essentially it’s using software to help people become more productive in what they’re doing.

TIM O’REILLY: So, when you were at Macromedia, you know, you were a real powerhouse there, and you moved on to Microsoft, and Steve Ballmer recruited you pretty heavily.

STEPHEN ELOP: He did.

TIM O’REILLY: He must have seen something there that he wanted to bring to Microsoft. Kind of reflecting on the differences between Macromedia and Microsoft, what was it, do you think, that made Steve feel so urgently he needed to have you there?

STEPHEN ELOP: Yeah, I think it’s a sign of the times, and perhaps some of how Microsoft is going through transition. You know, it’s very much the case that Steve values diversity in the leadership team. So, you’ve noticed a number of people coming from the outside into Microsoft. And people are bringing different perspectives, different points of view.

I know for me going to Microsoft I quickly realized that things were very similar up there and also very different; similar in that just like here in Silicon Valley there’s a huge concentration of very smart, very aggressive, very competitive, very intense individuals trying to help customers, and so you see that same similarity.

At the same time, there are some pretty significant differences as well. One of them is the scope and breadth of Microsoft. It’s a huge company with a huge surface area, which is sometimes really good. For example, I get the benefit of what we learn in the gaming community, and I can apply that to business productivity. And at the same time…

TIM O’REILLY: You mean like how to lose money? (Laughter.)

STEPHEN ELOP: Well, no, no, not at all. I mean, as you know, we make a bit of money.

But certainly in terms of user interaction design and how you interact with technology, there’s all sorts of great learning.

But at other times it’s quite challenging, because of the very nature of a huge company and trying to get things done, so that can be definitely something you’ve got to work on.

TIM O’REILLY: Yeah, I know that was certainly your experience at Macromedia. You were the guy who kind of cut the Gordian Knot and —

STEPHEN ELOP: Yeah, no, you’ve got to drive hard, you’ve got to push through it.

TIM O’REILLY: Have you been able to do that?

STEPHEN ELOP: No, absolutely, absolutely.

TIM O’REILLY: So, Office obviously is probably the best known and most important perhaps, at least in terms of the historical cash flow of your businesses, but a lot of people are saying, hey, that’s not going to last because of software as a service, you know, what Google is doing with Docs and Spreadsheets. What’s your take on that?

STEPHEN ELOP: So, I mean, it’s a good question because you’re right, the Office franchise is a very successful franchise. It’s used by lots of people out there.

You know, what Microsoft has said, and this was something, one of those famous memos that gets written and shared and so forth, they said a couple of years ago that what we needed to do was fully embrace what we call software plus services, the recognition that as software evolves, there’s an important role for client technology and the software that goes on that client, combined with what happens in the cloud, and truly the best user experiences will come from the combination of those two.

TIM O’REILLY: Right, but one of the things that worries me about that, and actually I gave a talk recently at the Microsoft New England Research and Development campus, the so-called nerd campus —

STEPHEN ELOP: The NERD campus, indeed.

TIM O’REILLY: — and I thought of titling it “Why Software Plus Service Won’t Cut it,” and it really has to do with this idea I talk about here in Web 2.0 land, which is that what we learn from the network as platform is that your product actually gets better by more people using it. And, of course, I don’t hear that in that software plus service mantra.

So, do you guys — how are you doing that in Office?

STEPHEN ELOP: I mean, I completely agree that software gets better, actually not just the software but the data, the entire environment, the whole experience gets better to the extent that you can attract large numbers of people who contribute in meaningful ways. That’s indisputable.

TIM O’REILLY: So, but how does that contribution actually happen in the Office context or other parts of your business?

STEPHEN ELOP: Well, I mean, let’s talk broadly about software plus services. There’s nothing about that message that contradicts the importance of the network effects, but what it does say is that, for example, I’ve read your materials over the years, you talk about different levels of Web 2.0 applications, and the self-actualization layer is layer three where there’s no client, it’s all that stuff. And I think that’s hogwash, I think that’s not right.

Now, I’ll give you a couple of examples. So, here in the audience, we’re in Silicon Valley, how many people here have iPhones? Put up your hand. How many people with those iPhones are using the Facebook application on the iPhone? Just as many, if not more somehow.

The point being — (laughter) — the point being that the device, the operating system on that device, and the rich application, the Facebook app, combined with the service, the Facebook service, the Web-based service, is a better experience all up. That’s what people are self-selecting, and that type of principle —

TIM O’REILLY: No, I understand. I mean, we’re not using Office on our iPhones yet.

STEPHEN ELOP: Not yet, no, you’re not.

TIM O’REILLY: Oh, so is that something that we’re going to be doing?

STEPHEN ELOP: Just keep watching.

TIM O’REILLY: But still kind of coming back to this idea, certainly there are parts of your portfolio, SharePoint, for example, collaboration platform, Outlook clearly a collaboration platform, you know, one of the things that I’ve been asking the social network community for is to make sort of e-mail and the phone address book a really first-class citizen, and I’m wondering what your thinking is about how do we build really a personal information management console for the social network, and is that something that you have in your…

STEPHEN ELOP: So, speaking very broadly, let me make this point, and that is that Web 2.0, as we’ve come to think about it, is very much about the social interaction and everything that you can do amongst people and large groups of people, and it’s also a certain statement on architecture.

What is happening right now is those same principles of Web 2.0 that we’ve been seeing so publicly with Wikipedia, Amazon, eBay, so many other examples out there, that’s now being translated, those lessons that have been learned are being brought into the enterprise, into a business setting. And as they come into the business setting, those same principles, combined with the corpus of information that’s inside an enterprise, which is your e-mail file, and not just the information but the social graph that comes with that, the business connections and so forth, the address book, all of that information out there on file shares, all of that is being brought into an environment that’s very much about the social-computing environment within an enterprise.

TIM O’REILLY: So, one of the things that social networks have done, there’s one very simple way to describe one aspect of Web 2.0 is user self-service. If you think about the typical CRM system, for example, the salesperson maintains records on all their contacts. In a social network people maintain their own records, so it’s user self-services, kind of like the Craigslist of CRM.

STEPHEN ELOP: Right.

TIM O’REILLY: You know, how are you seeing those two worlds converge, you know, you actually have a CRM product and you have, you say, this sort of in your unified communications group you have this focus on personal CRM, if you like. How does that tie together with that public social networking aspect?

STEPHEN ELOP: So, I think that what’s happening behind the firewall is identical to what has happened beyond the firewall in the public Internet, and what people are doing, the concepts of self-service, of large groups of people contributing to a corpus of information and developing that environment, all of those pieces are happening within the enterprise.

The difference in the enterprise though is that you can translate that value into something customers are willing to pay for. So, all of a sudden there are new business models. For example, SharePoint, which is essentially a social-computing platform for the enterprise, portals, wikis, blogs, all sorts of things like that for the enterprise environment, is a business that started not too many years ago, and already it’s a billion-dollar revenue stream, growing at double-digit percentages. And for every dollar that we’re earning on that, our customers are getting tremendous value, and for every dollar we earn, there’s $7 being generated in the community around people building applications for that environment.

So, what people are seeing is that while some of the Web 2.0 platforms and applications in the public Internet space are having a hard time figuring out how to build a sustainable business model, that model is becoming clear in the business context and some really magical things are happening as a result.

TIM O’REILLY: Right. So, this is the software for sale as a subscription? Is it – how are the business models changing?

STEPHEN ELOP: It’s all of the above, because what’s happening right now is in part because of Web 2.0 we’re going through a big period of disruption. So, it used to be, for example, you just paid a license fee for a perpetual license, installed some software. What’s actually happening now, of course, is software is available on the Web, it’s available for download, it’s available on a subscription basis, you’re seeing complete diversity.

The way we deliver those products today is with that same degree of diversity. So, we have companies like Nokia and Coca-Cola and others who are actually subscribing to a service from us to deliver e-mail, collaboration, wiki, blogs, all those capabilities to them from our datacenters.

We’ll have other services available with are ad supported. Some of those exist today.

TIM O’REILLY: So, what about interoperability, though? I mean, is this kind of a world where you – you know, if you live in the Microsoft world you get all these benefits, if you live say on Salesforce or you live on the open Web you don’t get them? How do we bring these worlds together?

STEPHEN ELOP: So, let me ask a question of the audience. How many people here would say Microsoft is the most interoperable company on the planet? Anyone? Anyone? OK.

So, I would make the case that that is becoming true, and the reason I say that – I’m going to backtrack you to February of 2008 where Microsoft made a fundamental decision about how it would work with others, and we issued something called the Interoperability Principles. It was this simple document – you can see it on our Web site – that basically says from a connectivity perspective, APIs, SDKs, data formats, adoption of standards, and interacting with Microsoft, that we would become far more interoperable.

Since that time, Tim, let me give you some proof points, because no one would believe the principles, just stick it on the Web site, like who’s going to believe that, until you see the evidence.

We within the Office team, for example, have published 40,000 pages of documentation on every aspect of every one of our most popular products, everything in terms of how to interoperate, how to decode the file format, implementers’ notes, it’s all there.

And most people say, OK, so can you actually do anything with that? Well, again all of those people with iPhones, you notice if you go right now to the menu and say you want to connect your mail client to an Exchange Server, it’s the first thing on the list on the iPhone. The reason is we helped Apple do that. That’s interoperability.

Google – three, four weeks ago – announced that they had licensed patents and used our documentation to provide Exchange ActiveSync services from their cloud to their customers. That’s available from Google today.

So, Microsoft has said fundamentally around these most popular products we have to be interoperable. The same relates to open standards. We now support ODF within the Office suite of products.

These are things that years ago people would say would never happen, but we’re very deliberately setting a new standard as it relates to interoperability.

TIM O’REILLY: Well, I think one of my fundamental assertions is that the lock-in, if there is one, comes from the users, not from the software.

STEPHEN ELOP: That’s right.

TIM O’REILLY: And so effectively if you keep the users happy, you get – and particularly if you have a system that does have this gets better the more people use it…

STEPHEN ELOP: That’s exactly right, and the cloud drives a lot of this as well, because the delivery of a particular capability is often a combination of what we have to provide, other sources of data, you need that interoperability if you’re going to deliver your customer the best solution.

TIM O’REILLY: But still, you know, there’s really a challenge from the cloud. I mean, Google Apps, Google Docs and Spreadsheets is free. It’s hard to compete with free.

STEPHEN ELOP: Oh, actually, no, no, it’s not hard at all. Let me restate that. Google Docs may be free; what you’re really seeing is that bolding, underlining, Italics and footnotes in the cloud are free.

Our job, if we’re going to deliver value to our customers and earn the right to charge money for certain aspects, be that through advertising, subscription or a license fee, will only come if we’re delivering innovation and value well beyond bolding, underlining, and Italics.

And, of course, what we’ve already demonstrated are versions of Word, Excel, PowerPoint, lightweight versions, working in a browser, just as Google has, except it’s Word, it’s Excel, it’s PowerPoint; same experience, same document format and so forth.

So, those elements, to the extent that bolding, underlining, and so forth are free or can be ad-supported, that’s there or coming. At the same time, there’s so much more that customers are willing to pay money for.

TIM O’REILLY: So, what you’re telling people is there will be an entry-level free version of the Office suite?

STEPHEN ELOP: Ad supported, absolutely.

TIM O’REILLY: Yeah, so ad supported.

STEPHEN ELOP: That’s correct. Nothing is ever free, Tim.

TIM O’REILLY: And then, of course, there will be an upgrade path.

Now, of course, there’s been this complaint that a lot of the features are feature-itis rather than actual benefits. What do you see as the key benefits that won’t be in the free version or the ad-supported version that will be in the paid version?

STEPHEN ELOP: Yeah, I mean, what we’re trying to do is at various levels provide users with the functionality that makes sense in that environment. When you’re in a browser environment, there are certain things like, for example, collaborative authoring, working across different people and places and so forth…

TIM O’REILLY: Right, but that’s part of the basic offering of free. I mean, that’s why people use Google Docs and Spreadsheets, because they can share.

STEPHEN ELOP: So, that type of thing you would expect to be in that offering. But when you get into some of the more advanced features and capabilities of the products, integration with the SharePoint environment, integration with unified communications, all of which our competitors can do as well because of interoperability, but we’ll be touting a lot of that as we go forward, to be clear.

TIM O’REILLY: OK. Do you have a timeframe on any of that?

STEPHEN ELOP: So, we haven’t given precise dates of availability, but people should expect to be working with beta code in not too long a period of time, and I think the official statement is it won’t be this calendar year, but watch this space very closely in terms of final software.

TIM O’REILLY: OK. All right. So, if you think about the developer experience, Microsoft has a long history of supporting developers, and yet all the buzz in the last half dozen years has been around Web development. Of course, Microsoft has its offerings there, but in some sense it’s kind of there’s the Open Web and what people do there, whether it’s PHP or Ruby or whatever, and then there’s the Microsoft Web.

STEPHEN ELOP: Are you talking about our standards-based browser, IE8, when you say that?

TIM O’REILLY: Well, no, I’m just really thinking about the community. You know, we have kind of a fork in the community. There’s a Microsoft development Web development community and sort of an Open Web development community. For example, I wouldn’t say that we’ve seen a big migration between the two.

STEPHEN ELOP: I don’t know if…

TIM O’REILLY: Do you have a goal of sort of – by the way, you know, Microsoft ruled the PC development environment, and you certainly made a real effort to get people on ASP.NET and so on, but I think the question is, do you get developers? I know developers per say isn’t your division, but how do you get Microsoft to be cool to developers again?

STEPHEN ELOP: Well, I wouldn’t say whether it’s again. I mean, there’s a lot of people who make their living on that, so let’s not disrespect those millions of people who are doing that today.

TIM O’REILLY: That’s fair. And you go to a Microsoft developer – I used to argue that with the Open Source people all the time who say you think there’s not a Microsoft developer…

STEPHEN ELOP: They would say because they’re making money, they’re more cool than you are.

TIM O’REILLY: … go to Tech-Ed, you know, and you’ll see people just as passionate, just as committed as you are.

STEPHEN ELOP: Exactly.

But let me say this: When you think about the future of development on the Web and also more broadly in the cloud…

TIM O’REILLY: Well, I’m thinking about lightweight development, everything from sort of what’s happening with Amazon Web Services…

STEPHEN ELOP: Sure, okay, so let me talk about that, because…

TIM O’REILLY: …or Google App Engine.

STEPHEN ELOP: …when we said several years ago, fully embrace software plus services, that we were going to do that, people have begun to see that because we’ve delivered online versions of products, you know, what we talked about in terms Office in a browser.

However, what we announced last October at the Professional Developers Conference was if you like the next generation of platform environment for Microsoft, Windows Azure, which is essentially saying there’s an opportunity to provide the raw compute and storage and other capabilities for application development, as well as services that we can put on top of that, now, what we’ve said very clearly is that all of the expected Web standards and so forth that are required in that environment are going to be fully supported and a part of how we approach that, again back to the message of interoperability.

So, what we’re trying to do is provide incremental value. So, yes, within our cloud, if you like, there will be SharePoint services for collaboration, there will be CRM services, database, services based on SQL Server, authentication services based on Active Directory and so forth, but within that environment we’re saying, hey, you can build great Web applications, you can take advantage of our services, but do so in a way that’s standards-based and takes advantage of everything that’s out there.

TIM O’REILLY: But isn’t there a fundamental challenge to Microsoft’s whole business model with the way that the Web has ended the upgrade cycle?

STEPHEN ELOP: No, I don’t think so at all. Because if you accept that Microsoft is committed to giving people choice in terms of how they value software, ad-based, subscription, whatever the case may be, there are all sorts of different ways to monetize.

So, it doesn’t have to be about an upgrade cycle, it can be, for example, with Windows Azure it can be a consumption-based model where people are paying for what they’re actually using in terms of compute or disk or whatever.

TIM O’REILLY: But do you have evidence that those business models actually can generate the kind of revenues that Microsoft has historically…

STEPHEN ELOP: No, no one has evidence of that today, but what we’re doing when we say we fully embrace this is we’re moving forward and we’re putting those things into play to see what actually happens.

TIM O’REILLY: Yeah, I mean, that’s one of the things I worry about in a lot of businesses, you know, there’s kind of an air pocket where the new model isn’t generating revenue as fast as the old one. You know, we certainly…

STEPHEN ELOP: It’s classic innovator’s dilemma.

TIM O’REILLY: Yeah, exactly.

STEPHEN ELOP: You know, my belief is, you know, I’m responsible for a $20 billion business that has lots of run-rate stuff and goodness, but I’m saying, you know what, we’ve got to put stuff in the browser, we have to use ad-based models, we have to use subscription models, we have to give people that choice, we have to be leaders in that way, and I think fundamentally we’ll be rewarded for that.

Again, though, we have to be out-innovating the competition. At the end of the day, if we provide more value, we’ll win.

TIM O’REILLY: Yep. So, you know, I was thinking we should actually ask for questions on Twitter. If people want to ask Stephen questions, you can just at them to me at Tim O’Reilly, and I’ll check it here.

But I also did – I put out this question – this call for questions a couple of days ago, and I got a bunch of them. I’m going to ask you kind of an odd one first.

STEPHEN ELOP: OK.

TIM O’REILLY: This is from @LouisB. He said, if I’m a PC, what will my child be?

STEPHEN ELOP: If I’m a PC, what would my child be? Well, let me say this. First of all, the PC, you may have missed this, may not have been watching your children closely enough, Tim, but the PC has already had a lot of kids and grandchildren. I mean, there’s a lot of them out there.

And what I mean by that is it is evolving in many different directions, and not just the piece of hardware and what it looks like, but what it represents in terms of productivity.

So, if you think about my division, yeah, I think about the PC, of course, but I think about mobility, I think about the cloud. So, those are its progeny as well. There’s just so many different ways that that’s going.

You see it in unique devices, the Kindle. You know, it’s a beautiful device, I love my Kindle. I wish Microsoft had something like that today; it would be fantastic. That is an outcome of the work that was done originally in the PC environment.

And so you see this going in multiple different directions. What will the devices look like? The one thing I will say is that the way we interact with that technology is up for major innovation. That’s one of our key innovation themes in our division is the keyboard, the mouse, I mean, that is a barrier between you and the experience. iPhone demonstrated this with touch, Wii is demonstrating it with gestures and being able to interact that way. There’s so much innovation that will come there, as one example, that will fundamentally change our experience.

TIM O’REILLY: Yeah, just something you said made me think about what I was talking about earlier in my keynote. I don’t know if you were here backstage for that. I’m fascinated by the way that the iPhone also demonstrates the use of sensors as the new source of input. And I’m wondering if Microsoft is doing any thinking at all about how that is going to affect the enterprise…

STEPHEN ELOP: Absolutely.

TIM O’REILLY: … you know, supply chain, you know, energy management.

STEPHEN ELOP: If you think within the business division, so within my corporate world and what I serve, there is no question that sensory input – and that includes sensors from humans in terms of gestures and what they’re doing and where they are, it includes sensors and devices you may be carrying, for example, to aid in navigation and so forth, there’s all sorts of great examples today, but there’s lots of new possibilities coming there.

You know, there’s an ERP system as part of our environment, and we could demonstrate for you today how touch-based equipment is used to facilitate ERP processes within a warehouse as one example.

So, yes, there’s a lot of that coming. That’s why I made the comment earlier, you know, Xbox is cool and you play around with it, but there’s all sorts of learning you get from that in the same way that all sorts of learning we develop around searching within an enterprise transfers to, for example, the Live Search team. That’s part of the value of the scope of the company.

TIM O’REILLY: I think if I were to summarize a lot of what you’ve said here is: You guys are doing a lot with everything we’re touching out there on the free consumer Web is really coming to fruition, and you have a business model.

STEPHEN ELOP: That’s right. Well, and I think that’s a fundamental point, it’s landing in corporations big time. I mean, the SharePoint platform, for example, I believe today is the fastest-growing product in the history of Microsoft, and it’s because the principles of Web 2.0 are being applied in the enterprise and being applied quite successfully. And corporations, they’re getting the value so they’re willing to pay for not only the software but all the services that go with it.

TIM O’REILLY: So, @TK300 asked, are you happy with the interaction design of Word, Excel, and PowerPoint? And he also asks, can we expect a major overhaul, and is legacy source code prohibiting this?

STEPHEN ELOP: So, I’ll answer those questions in reverse order. Legacy source code is not the prohibitor or anything.

As some of you may know if you’re users of Office 2007, we actually went through a very significant upgrade in terms of the user interface. It’s been very well received by customers and so forth.

But here’s the challenge: If we were to say, hey, just dramatically redo the interface for Word, Excel, PowerPoint and what have you, there would be exactly 500 million customers who would have to relearn that interface. That’s how many people out there are using Word, Excel, and PowerPoint today, a half billion people.

And so the real thing that we have to think about is as we make even significant steps in the user interface, what does that mean to a half billion people, how do we land that, how do we help them through that, because there’s huge costs to people all over the world to do something like that. I mean, even Facebook today, you know, they make a little change, the whole world erupts and they undo it and all that. Think about it in terms of all of those other people who are using those products. So, that’s one of the challenges.

TIM O’REILLY: So, it’s really the drag, it’s where users actually become an inertia on the product.

STEPHEN ELOP: The user, the muscle memory, the things that people know how to do in Excel, but if you say, hey, I’ve got a new way of thinking about Excel, all of a sudden all of those people – I mean, I did some press work earlier today, and I was meeting with a particular reporter, and she said, yeah, my husband, boy, initially he was really upset that you changed the user interface for Excel.

Now, the thing we know is because we do tons of research on this is that the productivity gains we’re delivering to again a half billion people are substantial. We can measure that. We get all sorts of telemetry on these products that help us understand how it’s helping.

So, what we tend to do is if there’s something where we have a fundamentally different idea, you see a new product appear. It could be an experiment or it could be something real.

So, for example, there’s a product in the Office suite that not a lot of people know about that’s called OneNote, and it’s all about freestyle note-taking and management of information for students, for people in meetings, and so forth. And all of a sudden we’ve landed the new experience, a new user interface, a new way of operating, and it’s beginning to take off as well.

TIM O’REILLY: Yeah, actually that was a question from Twitter, too. Jack Schofield asked, why isn’t OneNote bundled with a cheap version of Office? Why not price it to sell to students?

STEPHEN ELOP: So, in fact, if you go out and take a look within a student bookstore or whatever, we’ve done precisely that. Actually I don’t know what people would think the cost of Office is, because by the way, of 500 million people who use Office, only 250 million have actually paid for it. There’s another 250 million who just use it, borrow it, steal it, whatever the case may be.

But if you go on to BestBuy.com or something like that and even if you’re not a student, the cost of getting started with Office is like 90 bucks these days. I mean, there’s been a lot of changes to pricing and packaging as the technology has evolved.

TIM O’REILLY: So, I have a question here from someone named ZillaX04Z, and he says, ask you about this IE 8.1 article from yesterday, and I’m not sure what he’s referring to.

STEPHEN ELOP: The IE 8.1 —

TIM O’REILLY: Yeah, somebody, actually, Zilla, can you provide a little bit more detail, because something apparently was not interoperable according to this article.

STEPHEN ELOP: And I don’t know.

TIM O’REILLY: And you don’t know anything about it, OK.

STEPHEN ELOP: I haven’t seen it, don’t know anything about it.

TIM O’REILLY: All right. So, all right, CageDether, I’m not quite sure how that’s meant to be pronounced, wants to know if you’re going to get into the micro-blogging space.

STEPHEN ELOP: Micro-blogging. If you’re talking about Twitter as one example…-

TIM O’REILLY: Yeah.

STEPHEN ELOP: … personally sent out some tweets today. So, I don’t have a lot of followers, don’t know why that is, but I’ll have to make it interesting. (Laughter.)

But in terms of micro-blogging, in terms of blogging and all of those things, what we’re doing is experimenting with all of those things in a corporate setting, as well as between the corporate and private setting to say, hey, these are all the ways that people are communicating, let’s bring those together in a way that’s useful for people.

But one of the biggest challenges that we’re faced with as we develop all of this is as you realize the impact of the economy, people are staying in companies longer, so the population is going to get older and older in the workplace, so you’re going to have very senior individuals, older individuals attempting to communicate with young kids coming in at the entry level of an organization, and how do you bridge that communications divide where you’ve got people who aren’t entirely comfortable yet with e-mail at one end and people who just want to tweet at the other end, like how do you bring that together? That’s a really interesting sociology problem.

TIM O’REILLY: Right, if you could solve that problem, if you could figure out how to integrate things like Twitter into the workplace, because of course it’s going in there unauthorized, and certainly companies are already trying to figure out how do they manage it, if only for marketing, it would seem to be a really critical part of your…

STEPHEN ELOP: But these are the types of things within our division that we’re precisely experimenting with and trying to learn about with our customers.

TIM O’REILLY: So, we’ll expect to see something.

So, I have JulioV asks you, what’s the biggest threat to Office, what’s your biggest fear?

STEPHEN ELOP: The biggest fear that we have to worry about over time is fundamentally if somehow innovation slows down, if we’re not finding the next way to increase productivity. As long as we are leading the way and helping people become more productive — and this — by the way, this is an economic statement. The economy is in shambles right now. The only way through it, once all the debt is cleared up, is by improving productivity. That’s true for the last many thousands of years.

So, the fundamental threat is not from someone who has got bolding and underling in the browser or some various versions of software that are available for free. That’s always going to be the case. The real threat is if we’re not continuing to innovate.

And that’s why Microsoft right now in the public press, from our financial community, is taking a lot of heat, because it’s tough economic times and they’re saying slash the cost, slash R&D, slash research, just go for it. But, you know, we’re saying, no, during tough times we have to power through that, we have to continue to innovate heavily. That’s why at the company $9 billion in R&D.

And I know some of your team members were at our recent TechFest, which is where all of our researchers show off the leading edge stuff, stuff that won’t see the market for 10 or 15 years, but nonetheless showing we have to continue to innovate, and that’s something we’re very committed to.

TIM O’REILLY: All right, well, that seems like a good place to stop because we’re out of time.

STEPHEN ELOP: Very good. Now, before you go, before you go, I know there’s often a lot – you know, probably as I was coming up on stage here, there’s more than one person who said, well, here comes the Evil Empire or something like that. And I get that, because I’ve spent a lot of time here.

But what I’d like to do, Tim, just as a token of our appreciation for letting me join you here today, is present you with something that is like all the rage on campus at Microsoft, because we get a lot of people making Evil Empire comments, and it’s something I’d like you to wear proudly here at camp. It’s a t-shirt and it says, “I am the empire.” Thank you very much. (Laughter.)

TIM O’REILLY: All right. Thank you very much, Stephen. (Applause.)

END

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Convergence 2010 Keynote

A transcript of remarks by Stephen Elop, President, Microsoft Business Division; Michael Park, Corporate Vice President, Microsoft Business Solutions; and Kirill Tatarinov, Corporate Vice President, Microsoft Business Solutions, Atlanta, Georgia, April 25, 2010.