Steve Ballmer: Air Force Information Technology Conference

Remarks by Steve Ballmer, chief executive officer of Microsoft
Air Force Information Technology Conference
Auburn University
Montgomery, Ala.
August 26, 2009

STEVE BALLMER: Well, thanks. It’s a privilege for me to have a chance to be here today.

For some of you who have been here before, you will have to put up with my reminding everybody that Montgomery, Ala., August is a really great idea for conference time. Actually I got out for a little bit of a jog this morning, and this is I think now my either seventh or eighth Air Force IT Conference, and this is the first one where it was really comfortable outside, so I want to thank the mayor and the chamber for the fine weather that they gave us this week.

It is for me really a valuable and important thing to get a chance to come and spend some time with you in group and with various subgroups as I move forward during my day.

I’m the executive sponsor for the relationship with Microsoft and the U.S. Air Force. I’ve been doing that 14 or 15 years. And I would tell you the U.S. Air Force is a very dynamic user of information technology, and in many ways a far more dynamic and changing organization than I would say most of any size, let alone the incredible scale of the U.S. Air Force, and I’m talking now about civilian or military organizations.

And so the chance to come every couple of years here to Montgomery and really to spend a day to see what’s happening, to find out kind of what’s on people’s minds, what are the current themes and trends in terms of what you’re trying to do, and really be able to have a chance to map it to where we see the overall tech agenda and the overall Microsoft agenda is a very, very welcome opportunity for me.

And I will try to share today a little bit of a perspective on what we see changing kind of in the broad technology landscape, a little bit what we’re trying to do at Microsoft to take advantage of it, and hopefully how all of that might be applied fairly well to some of the pressing issues facing the U.S. Air Force and the U.S. DOD more broadly, and then have a chance to take a few questions and hear what’s on your minds.

Before I do all that, I want to start with a thank you. The U.S. Air Force is one of our top couple customers in the whole word. Thank you. We’re very appreciative of that. It’s important to us.

But almost as importantly, quite frankly, the U.S. Air Force has been one of, if not the most advanced users of information technology for at least the last 20 years since we’ve had Windows in the market; pushing, embracing new technologies, using them in new ways. I think it’s actually been important for the Air Force, and I sure know it’s been important for the tech industry in terms of proving and finding and discovering new ground, not just with military specific requirements but really with basis horizontal, COTS (Commercial Off the Shelf)-style functionality. But because you have so many people in the organization who are engineering and technology minded, whether it’s computers per se or flying and fixing airplanes, you’ve really pushed the state of the art, and I think it’s been, as I say, a value to the Air Force, but certainly we appreciate the push, the challenge, and kind of the early embrace of important new technologies that we’ve seen at the United States Air Force.

So, we’re very appreciative of this relationship, and I want to say thank you all very, very much.

Big trends. I was with a fellow two days ago. He’s an investor. And he said to me, Steve, you know, what’s the next big thing in technology? You know, I want to invest money, and get in there quick, and make money.

And I said, well, we’ve got sort of some good news and some bad news. He says, well, what’s the bad news? The bad news is nobody is sure who’s going to make money. He said, OK, what’s the good news? Everybody is sure that the technology is going to advance forward and positively transform society.

And in a sense that’s probably the most important message of the day is there are some big trends in technology which are absolutely inevitable. You can ask us, you can ask the guys we partner with, the guys we compete with; it is inevitable that these things are going to develop. Exactly what are the products and how does anybody make money, OK, those things are that’s the history to be written. But the importance of the advance that we’re going to see in screen and display technology, that is 100 percent clear.

This old screen, I don’t know what year that I come to Montgomery, this is not going to be just a good old screen. It will be a digital touch device. It will have a camera in it. When I go like this, it will just advance the slide. I won’t come out looking for this crazy device all the time. I’ll walk in, and it will say, “Hi, Steve, good to see you here today.” But I’ll touch it, I’ll speak to it, it will see me, it will recognize me. That will happen in screens of all flavors.

I’m going to show you my most embarrassing possession of the day. That’s a piece of paper. I still carry one. I notice some folks here in the front row also – well, look, I’ve already admitted to my troglodyte technology usage.

But why? There are still some things that are easier. To take a note and read it later, it’s easier to take it on a piece of paper; to crumple it, be able to tuck it in your pocket in a certain way. And I don’t care what phone we’re talking about, there are still some things that are easier.

We’ll have digital screens that are this light, this flexible, this convenient over the course of the next five years or so. We already see the prototypes coming into play through vendors primarily in Japan. And the notion of really being able to have what Bill Gates used to call information at your fingertips on any big screen anywhere, and to have it be interactive is very powerful.

I spent a day this year in Fort Lewis with a number of folks from the I Corps before they shipped out to Baghdad, and they had the command post kind of simulation set up at Fort Lewis. And you look at all of the screens and all the things going on there, and you say, hey, if you had one big interactive digital display right at the front of the room, what would that mean, how would things be used differently, how would you think differently about the whole work process? It’s pretty powerful.

Natural user interface: We think about voice, we think about cameras. You know, I talk about video recognition; this stuff isn’t far away. We’ve announced a new project that will come here in the not-too-distant future with our Xbox technology. Literally it’s a camera. It recognizes you. It knows who you are. You want to play a game of baseball, you can just stand there and do this, no controller, no nothing; it recognizes what you’re doing, it can see your body, it can take appropriate action. You want to play ping-pong with a friend who is across the world, you’re just doing it, because the camera with the processing power is just that good.

I was talking about voice recognition with some folks yesterday. Voice recognition is great, it’s absolutely great, because people want to be able to do things remotely.

But then you take an extra step and you go all the way to natural language, not File, Open or Joe’s Pizza and I need the phone number, but you really want to say to your computer, get me ready for my trip to Montgomery, Ala. It knows. It’s got my schedule. I’m only making one trip this year. It knows where I’m going, who I’m seeing. It has access to our CRM system, the U.S. Air Force Web site with all of the bios. My secretary, you know, she spent an hour, she got me ready for my trip to Montgomery, but there’s no reason my computer can’t do that.

And people can say, oh, maybe that’s a little far-fetched, but this is really an area of technology that’s being probed and pushed in the search area.

In search, most of the game as we and Google and others battle for search leadership is, who’s going to do a better job of really understanding what the user meant when they posed a question, and who’s going to do a better job of understanding what the real information is or knowledge that can be extracted from the data on the back-end, from the calendar, from the Web sites, et cetera. And this will be an area of incredible innovation over the next several years.

Everything goes digital. Now, this sounds like why are we still talking about this? Wasn’t this kind of ’99 type stuff, everything goes digital? Well, I had a discussion with some folks last night at dinner, and we talked about the fact that there are still forms. I guess there’s just a couple; maybe it’s just the court martial form that’s left that needs to be signed in writing. Well, this was last night’s dinner conversation.

But the number of things in the world today that are still not digitized is much higher than you might think. Try to get a container off of a ship, into a port, and onto a train. It’s an all paper-based process.

Think about most of what we still do for video and voice conversations. It’s not really digitized and integrated with everything else that we do with our phones and our PCs. It’s a separate call-out activity.

So, we still haven’t digitized all of the world’s information and transactions and interactions that can go digital.

So, I would say these themes, the one other I’d put underneath it, and I draw that as the cloud, is this notion of taking everything that we do in IT today, and asking how do we run these things not as products that get implemented customer by customer by customer, but products which get instanced as services, which can then be customized in the service form so that we gain efficiency and scale on the O&M, on the operations and management side, not just on the software development side.

Last night at dinner, as I was talking to General Lord, it occurred to me the way to say this is we figured out what COTS meant for software. So, now it’s time to figure out what the COTS of software plus services is. There’s going to have to be a model that makes sense that is COTS-based but embraces this notion of the cloud, because all of the commercial vendors are headed this direction. Does DOD run its own cloud? Possibly for some applications, commercial clouds. These are issues of how to apply this frontier of technology that I think the U.S. Air Force will be on the leading edge of really sorting through.

Our company retains its very deep commitment to R&D and investment in these new opportunities. Despite the economic turmoil, we will spend this financial year which we just started $9.5 billion on R&D. That’s more than any other commercial company in the world. And frankly I think we’ll spend someplace around 3 percent of all dollars in all industries spent on R&D in the United States.

So, we believe – we believe. Everybody is challenged on their belief system in times of economic stress. We believe in the opportunities to really innovate.

Most of the time, we like to get out in front. Sometimes you get a little bit behind. We’ve got a couple areas of technology where we’re running from behind. It’s actually a little bit more fun sometimes to run from behind. When you’re out front you’re always looking around; when you’re behind you just keep coming and coming and coming and coming.

But innovation and investment belief counts on two things. No. 1, you’ve got to believe technology is going to continue to evolve or it’s really silly to invest this kind of money, just to redo what’s already been done by us or by somebody else.

You know, I get asked, what’s the future of Microsoft Office? Why would you invest in R&D there? And I say, look at what’s happened just over the last five years. And as we look forward to the new release of Office that will be out next spring or we look to what we think we’ll do in the next two, three, five years thereafter, we see incredible advances, not just in the way you type words into a word processor, but transforming those products to understand speech and virtual team and real time communication, understanding how to integrate and hook up a whole engine that’s Microsoft Office today to everything that’s going on in the Internet.

The ability to really let people ask a question and get numerical data back and look at it – ask yourself this question, because this is one I get from CEOs all over the place. Most of the time, when you want to make a decision, you actually have the data that you need. Can you really say, show me the cost of – oh, I’ll use one we were talking about last night. There’s a tension point on the various programs, I gather in, the U.S. Air Force. It’s time to get them to be more secure, it’s time to add new functionality to them. There’s kind of a push and pull around that that we were talking about at dinner last night. If you’re an IT officer in the U.S. Air Force, can you ask the question: ‘Show me all the programs, show me what they cost, show me what we’ve put into security?’ You just want to be able to say that, vroom, and not just have it come back in some kind of a Web page, you really want it to come back in Excel, organized in a way in which you can analyze it and play with it and use it. There’s just an incredible amount of innovation.

In our case we think there will be innovation in PCs and the Windows operating system, and we’ve got kind of a list as long as our arm of things that we think we need to do there; communications and productivity, whether it’s Office or in Outlook or Exchange or SharePoint and Office Communications Server.

Just a small thing on this SharePoint product: It is the hottest product we’ve ever had that nobody talks about in the press. It’s unbelievable the volume, the demand, the interest. I know I’m going to get pushed four, five six different ways over the course of the day, people using SharePoint in the U.S. Air Force in ways we didn’t even anticipate, but make perfect sense.

So, the amount of innovation that’s coming in some of these areas – server software as they migrate to the cloud, phones, enterprise infrastructure. We still write applications in this day and age about the same way we wrote applications when I started at Microsoft 29 years ago. We need better ways to write big applications. If we don’t have better ways, we’re going to continue to get programs that cost hundreds and millions of dollars. And it’s only by improving the tools that people use to create and run enterprise applications that this will be kind of an improvable situation.

So, all of this innovation coming from our company, from our industry, and the question is, what are the key issues, where does IT fit, what kind of a role will it continue to play in transforming the battlefield, and I think that is quite large.

If there’s one theme that has been consistent, probably I would say for the last 10 years that I’ve received from military leaders, is that increasingly information advantage is important to our military capability.

I met with General Kaylor recently, and now, we even went a step further as you stand up the new cyber command, and the question isn’t just how do we get superior information about classic military action; there becomes a whole different set of questions about what is the role of cyber, cyber both from a defensive and an offensive posture, for the United States.

We were talking last night about the ability to communicate directly with the enemy and with enemy’s people via electronic techniques.

And certainly I guess there was a war-gaming exercise I was told about last night which was fascinating, and says the first shot fired in most conflicts now will be a cyber shot. You think about that and you say, OK, this information technology stuff is not going to get less important, it’s going to get more important. And really thinking through, not only for the vendor community, companies like ours, but for the leading thinkers in the United States Air Force on IT, what is this going to mean, how do we digitize the battlefield, what does the cyber battlefield even look like, how do we map that and know that and understand that.

Security: Security used to mean certain things to me when I came and visited with the military. It used to mean nobody gets on the network. That’s been kind of the classic definition: nobody gets on the network. So, now you have people who have got to get off the network, you’ve got suppliers and vendors who have to talk to you, whether they’re on the network or not. You have people who are going to represent – you have your own war-fighters who are going to want to represent their identities outside the Air Force, and other people who need to represent themselves to you, because it’s not a standalone unit. And so the issues of security and identity and how to think about those and validate those are going to get more complicated, particularly as cyber becomes more important.

Speed of execution: I was kind of amazed when I spent my day in Fort Lewis. I don’t know exactly what I expected, but I’ve been talking – I guess it was probably down here two years ago or four years ago, I talked to General Ansmith (ph) about I said I really want to see some of these battlefield systems. You know, I’ve seen spreadsheets and word processors and ERP systems, but come on, let me see some of the good stuff. I really want to know what’s going on.

So, he and I cooked up this idea, and then he was replaced by General Maddus (ph), and he said, well, I’ll tell you, the easiest thing for you to do is right out there in your neck of the woods. Just go down to Fort Lewis.

So, I go down there, and I’m expecting – I don’t know what exactly I’m expecting to see but these screens with these applications that are huge and big with lots of maps, and I don’t know exactly what I expected.

I got down there, and what I found is a lot of people using e-mail, real-time communication, video links, SharePoint, post that for me, and there were specialized applications but at the hub of it all was an information worker workflow that looked more like a trading room floor in Wall Street than I ever would have expected.

And I’m not saying that that to be critical, I’m saying that to say wow, is that an eye-opening activity for me in terms of how companies like ours, before you even get to writing the big, sophisticated applications that you also need, but on these basic information management tasks how much more there is to do to allow speed of execution — speed, speed, speed.

If you want to get something done, it’s not going to be because somebody goes off and writes an application for nine months. We need a solution now to getting this piece of information visible to the post commander; how are we going to do it? Boom, you’ve got to have the tools to knock that out, make something happen.

How do we transform this process? Boom, you’ve got to be able to change the information technology to support it.

The number of cases where speed of execution is going to be super important – in our business we talk about rapid application development and deployment, and that’s not the big procurements, but when you’re in the field and trying to get something done, that’s what’s going to be I think a pretty important element of some of this.

Telepresence: When Teresa comes onstage, Teresa Carlson (sp), who runs our DOD business, comes onstage, she’s going to talk a little bit about some work we’ve been doing with some innovative folks here in the U.S. Air Force to do real time videoconferencing, et cetera, on SIPERNET. That kind of stuff is not going to get less important, it’s going to get more important. The technology is going to facilitate it.

With people under more and more budget pressure, whether it’s travel costs, video costs, voice costs, the pressure to work those things is going to continue to rise. And it’s not just about the money, it’s about the money and the quality of the interaction – the money and the quality of the interaction.

We literally – I will make it my design goal, before I retire from Microsoft, you’ll want me to come speak in Montgomery – I hope still – and you’ll agree that if I did it from that screen, it would feel just like I was here in person. And I’m willing to still come, I’ll do it from backstage or something just to prove the point that it’s just as good as actually being there in person. That’s got to be our goal and aspiration. And when you can think that way with the screens, with everything else, it’s really quite incredible.

The set of demands under which you operate in terms of providing IT solutions to people in garrison, when they’re forward deployed, when they’re en route, reservists, et cetera, that’s getting more complicated also, not less.

I think it was probably four or so years ago we were talking about the speed of essentially putting up a new datacenter in a forward deployed location. As we start talking about software plus services, we’ve got to talk about the speed of delivering the service, whether that’s by dropping in a shipping container that’s essentially a datacenter in a box or whether that’s by providing the right kind of high bandwidth pipe back to someplace else, but to get it deployed, to have it be secure, to do it really quickly.

I think a couple folks in the audience have had a chance to visit our most modern datacenter which we have built in Chicago, and literally everything is being designed to fit in a cargo shipping container. The new server is a shipping container, and it comes with fans and servers and storage and a big old network pipe. So, if you want to open a datacenter, you plug in the power, you plug in the network, that’s it. That’s got to be the design goal to have things move that quickly, and you have a compute and storage facility that can be deployed anywhere.

We need to do it because if we want to offer software as a service, we’ve got to be able to linearly increase our capacity. But it fits very well for the model of remote deployment that is so critical to the U.S. military and certainly to the U.S. Air Force.

There are a lot of scenarios that I think are going to be very interesting. Access to the information and people you want instantly, I talked about some of those earlier.

Unified communications: There are still many modalities of getting to somebody. It is still goofy that we e-mail somebody, we IM somebody, we text somebody; we probably do it to two phone numbers that they own. I mean, we could say that’s cool for a while because for a while it feels cool. At some point, most people are probably going to just want one way how do you reach Fred and it finds Fred in the modality that’s most important and most instantaneous to Fred.

Battlefield intelligence: The tools to let you pose the kinds of questions that I threw out in the sense of cost and project cost, it’s even more important to be able to ask those questions on the battlefield. Where is the enemy, where have they moved? You want to pose those questions in English. You want the systems to be collecting data. You want to be able to process video data and have it be meaningful.

Just take a look even at what’s going on with our Bing maps or competitors’ products. The way in which we can digitize information for civilian static purposes is quite amazing. Are we going to be able to get access to the equivalent kinds of tools and technologies to military personnel for military applications to have the same kind of instantaneous access?

I’m not sure exactly what I expected when I went to Fort Lewis, but I thought there would be all of these sensors all over the place and the commander would be sitting there looking at all of this sensor data and it would be overwhelming. It didn’t quite work that way. There was a lot of data, but really bringing it together, really putting it at the fingertips of the person who needs to make the real time decisions I claim is still a challenge that’s in front of all of us, vendors and folks in the Air Force.

Common infrastructure: The work that was pioneered, for example, here in the U.S. Air Force for common federal desktop, that work is not over. Desktop, next generation desktop, phones, servers, security infrastructure, boom, boom, boom, you know, I congratulate the Air Force for leading on the effort that became the federal standard, but there’s still a lot more work I think and a lot more opportunity to improve agility by driving standards in other places.

I talked about the cloud and the kissing cousin of the cloud is virtualization and management. Because if you don’t use a commercial cloud, you’ll want to use all the technologies of a commercial cloud in a DOD cloud or an Air Force cloud, and those technologies will imply increasing use of new virtualization and management technologies like our System Center and competitive products in that arena.

We’re in the processes as a company of making that transformation from software to software plus services. And you could almost write down any product we have, and I’m telling you we’re doing something to transform it for the cloud. Exchange Server: Exchange Online is our cloud offering. SharePoint: SharePoint Online — SharePoint is a toughie. SharePoint is a collaboration site, but it’s also an application development environment. If we’re going to let people build applications, we’ve got to let them build them securely. And if we want them to run on a shared infrastructure across companies or across organizations in the cloud, the amount of work we have to do in the security arena and in the resource utilization arena is high.

SQL Server: SQL Azure. Windows Server: Windows Azure.

Office: We’re doing the work to allow Office to render in a Web browser, not because that will be the best way to use it. People like rich apps. That’s kind of the – we relearn this lesson every few years. People say the world is going thin client, and then somebody comes out with a thick client app that somebody really wants. In a sense you could say that’s sort of the number one message of the Apple iStore. People really do prefer thick client apps oftentimes to just the browser-based rendition. And so it’s important that we render to an arbitrary browser in case you’re not near your own desk, but it’s also important that we give you access to full capability in products like Microsoft Office and Office Mobile.

So, a lot of work to embrace software plus services, and a lot of work that we hope we get a chance to work again on the leading edge with the U.S. Air Force to really push forward and to pioneer.

This happens to be – I’m getting into the habit now of saying this every year, but this happens to be a big year for us. We’re shipping a lot of important products. Windows 7 is an important product for us, and I think will be for the Air Force, Office 2010. Bing may not be mission critical to the U.S. Air Force, but I hope at least a couple of you have reset your search default to I’m not allowed to get up and give a speech without saying that anymore; it’s important to me.

We shipped the first real version of Windows in the cloud, Windows Azure, a new release of Windows Server with much improved virtualization and management capabilities, some Xbox stuff, new version of SharePoint that we’ll ship, et cetera.

What we will try to do as a company is to be the best partner we can to the U.S. Air Force. We’ve got over 50 technical people working every day on projects with the U.S. Air Force: consulting, advising, developing, working with you. I gather we’re getting there on a project to go from 17 down to one Active Directory tree. I’ll give you a lot of credit, I’ll give everybody a lot of credit when that project gets done, because at your scale that is really quite an achievement. And yet with issues of security and identity being so paramount, I think you’re really being prescient to push it.

But our job as a company has got to be how do we harness all of this wonderful, massive technology that is coming, and help you really make it work for the U.S. Air Force.

At the end of the day, I would say we think of ourselves as a provider of tools, we think of you as really the people who figure out how to make those tools really serve the interests of the U.S. Air Force. And partnering around that and spending the time and energy that we need so that you understand what’s possible, and whether it’s with our stuff hopefully a lot of the time or somebody else’s stuff, you can really go out there and solve the issues of the next generation of information technology in the battlefield and the cyber battle over information technology itself.

I thank you very much for the chance to make a few remarks today. I think I have a few minutes left according to the clock to take some questions. I don’t know what the protocol is, but let me say thanks in advance, and put your hand up or maybe there’s some folks with mics. But thank you again for all your support and your time today. (Applause.)

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