Speech Transcript – Jim Allchin, N+1

Remarks by Jim Allchin, Senior Vice President, Personal and Business Systems Group, Microsoft Corporation

N+1 ’98

May 6, 1998, Las Vegas, Nevada

[Due to the varying sound quality and subject matter of tapes, the information in this transcript may contain inaccuracies.]


JIM ALLCHIN: Good morning.Most of you probably don’t know this.I’m a fanatical musician.And I’ve been playing blues for probably, I don’t know, a few decades.Just last weekend I went to Chicago to go to a few clubs.I also have a friend there that owns a music store.And the music store concentrates on vintage equipment.They also have the new stuff as well, but it’s a lot of vintage stuff, which I happen to like, playing guitar.And while in the store, it was quite a contrast.We saw the very old and you saw the very new.And I got pretty enamored with a ’54 Fender Stratocaster, which will play better, sounded better, and I almost bought it.

On the way back to Seattle, I started to think about how much innovation there’s been in the PC industry and in the music industry.And it’s tremendous.But I thought, you know, what are the similarities and differences, and I realized that there is one big difference, which is that there have been some compromises in the music industry.Old guys really like their Fender Stratocaster from 1954.The computer industry hasn’t had that problem.With all the innovation we’ve done, things have just gotten better.You can write programs faster.The system itself is faster.It’s less costly and it’s more reliable.A lot has changed in the computer industry since that Fender Stratocaster in 1954 was created.It’s pretty mind-boggling.

Andy Grove has said that any variable in your business that changes by an order of magnitude, any factor which — (inaudible) — means that most — all your bets are off on how you’re running your business, because you have to adapt very quickly to those changes.

(Clear audio begins now)

Well, what I’m going to talk about today is a series of five changes and trends that are all moving at an order of magnitude, and what that means to us in the industry, and what it means to people who are taking advantage of those trends.

PC platform trends, communication trends, the business trends, these are all external things that are happening around us, that businesses are reacting to.And then inside companies there are also two other trends.Absolutely more budget pressure on the IT spending.You know, at the same time they’re saying,
“Hey, you’re a fundamental part of our business.You have to help us.We want more out of the IT group.”
Well, in all of these cases we see massive change, order of magnitude level of change.

The one that everyone typically quotes is Moore’s Law.I don’t think everybody realizes what Moore’s Law really means.The CPU processing power in the last 20 years has gone up a million times.During the next 20 years it will go up a million times.And we don’t really see it being abated for the next 40 years.And there’s tremendous research going on, whether it’s in quantum computers or the like, that imply that the computational power is just going to be stunning.It’s 10x growth in five years.You can now buy sub-$1,000 PCs that have tremendous power.

You know, I was thinking that I have a lot of nostalgia for the old computer industry, going back to my analogy that I started.But I certainly don’t want to get a PDC1170 and put it in my living room.And I do want to go get that Stratocaster.So there is quite a difference there.

Some of the other innovations that are going on, you’ve heard all these terms.They’re surrounding.It’s not just CPUs, it’s storage.It’s the way that we’re connecting things into the system.It’s the magnitude of the processing power, whether it’s really small or really large, tremendous PC innovation.

What does this mean for you?It means it’s going to change how you use your PC, what is possible; whether it’s on your laptop, on your handheld or whether it’s in servers, the PC industry is rising to the challenge and adapting itself in amazing ways.

In communication there are a lot of things you could talk about from an exponential growth perspective.In fact, it turns out that communication bandwidth is growing faster than things like Moore’s Law.

On this particular chart, what I chose was the number of connected Internet nodes, just to give you an idea of this kind of change; 10x growth in less than five years.There were about 15 million Internet users in 1995.In 2001, give or take, we expect to have about 175 million connected nodes.Incredible.There’s a lot more than just the Internet connected nodes from an innovation perspective.

There are things dealing with multimedia, how homes are going to be connected.It’s certainly going to be faster.There are a lot of arguments about how that’s going to get connected.Convergence of all the different industries that are providing content in that environment.

And, of course, that whole concept of having telephony be a separate thing just doesn’t make any sense to me.One wire should be able to cover everything.You should have the necessary protocols on that one wire to be able to handle it.

What does this mean?It means it’s going to change the way you can work with others, whether it’s video-conferencing on one wire or just in how you’re doing collaboration with other businesses; a lot of changes.

To sort of hammer home some of the things we see, and how these changes are coming about in the technology, we’re going to do a series of demos.The first one is giving you an idea of what the power of high-performance desktops, laptops can do in this Internet connected space.We’re going to do a demonstration of something we call
, which probably most of you haven’t seen, which we’ll explain a little bit more in just a minute.That’s sort of showing the power on the desktop.

The other thing we’re going to show is how much the PC industry has sort of grown up and how our software is trying to keep up with the hardware innovations in the server space by showing some advanced storage technology that we’re going to be delivering in NT 5.

Lastly, we’re going to show snippets of some of the changes that we see going on in the communications space by showing some business streaming media.

Jonathan Perera is here from the Windows NT group, and he’s going to walk us through some of these demos.

JONATHAN PERERA: Hey, Jim.All right, what we’ve got here on screen is actually the first demo you were talking about, which is what we’re doing with the new technology, called Chrome.Now, Chrome is the new technology we’ll be shipping with Windows 98 and also with Windows NT this year.It essentially allows you to do some high-end 3D rendering on web sites.And what’s unique about it is all the rendering is actually taking place on the client’s PC, so all we’re sending down for these complex images is just straight XML and HTML.

JIM ALLCHIN: And while there were APIs before with DirectX that you could program, this is done in a declarative way.And in just a minute, Jonathan will show you what can be done by just going into a script and changing a little declarative statement.So all of you can immediately become 3D programmers.

JONATHAN PERERA: A good example of that is what I’ve got on screen right now.And this is just a simple 3D image block, and all we’ve done is in HTML developers; we’ve actually assigned live web pages to the outsides of that 3D rotating box.And I can change that as easily as I can change HTML.

So, for example, if I switch to another screen — and what I’m going to show here is two images, and actually I’ll just refresh these so they’re spinning at the same time.Now, the one on the top is using this new technology called Chrome.It’s a 3D rotating image.It’s all being rendered on the client’s PC.And the one on the bottom is actually an animated GIF image.

Now, what you’ll first off notice is that there’s a dramatic difference in terms of the file size.So when you’re using Chrome, we only send a tiny amount of data to the client’s PC, so the end user experiences much faster response time.You’ll notice that the animated GIF on the other hand is 71k so it takes up more bandwidth on the network, and also is a little bit longer to download.

Now, you mentioned that it’s really easy for a developer to update content when you’re using Chrome.But what I’m going to do now is just sort of switch over to my handy visual editor here — in this case I’ll be using Word — and what I’m going to do is change the word
on the top to say the word
I’m going to save that file, and yeah, I want to go ahead and save it, and I’ll switch back, refresh the page and you’ll notice that it says
So I didn’t have to be a 3D animation expert or open up an animated GIF editor to make simple updates to my content.

So that’s just sort of a simple example what this technology does.What I can also do, actually, is some really rich, high 3D rendering of content information.

Now, there are certain types of data that make much more sense to share as graphical, as opposed to just straight text.So what we’re doing right here is I’ve sent down basic text, a bunch of data, and some basic HTML to the client’s PC.And as I choose each one of these different views of a fictitious annual report, it’s actually rendering it twice, once on the left as a chart object, and once on the right as a series of tables that it’s going to apply to the sides of this box.

JIM ALLCHIN: Right.If you go back to my comment about trends, we don’t see any level where we’re not going to be able to take advantage of as much power as possible on the client.As soon as we have that power, we think of new ways and the industry thinks of new ways to take advantage of it.So here you see taking advantage of this tremendous power on the client, reducing the bandwidth coming down on the wire, and you see that you don’t have to be a programmer in order to take advantage of some of this.Very, very cool.

How about at the high end?Let’s see some of that storage stuff.

JONATHAN PERERA: Sure.What we’ll do now is actually switch over to a server, and this server is running an early build of Windows NT 5.Now, what we’ve done with Windows NT 5 is really two key things on the enterprise in terms of storage management.First of all, we’ve made sure that we’ve virtually eliminated the need to reboot your server for all storage management capabilities and functions.Secondly, we’ve also implemented hierarchical storage management with NT, also called HSM.

So, in this simple demo what I’ve got going on here is a number of different disk volumes that I’m managing with Windows NT.Now, two of these are actually mirrored volumes. This is actually a software-based implementation of mirroring.Now, what mirroring means essentially is that for high-end-availability systems, when I write a copy of one file to one volume, I write an identical copy of the same file to the second hard drive.So if one hard drive crashes, the other is up and running.

Now, what I’m going to do here is a really simple scenario that a lot of organizations do.Now, what I’m going to do is I’ve launched a little application that will copy data to the M: drive, so you’ll notice that the M: drive is actually my mirrored volume.And what a lot of organizations need to do is to be able to take a snapshot in time of all the data on that M: volume.For example, you might want to backup all the transactions that have taken place in the morning so far.And you need to be able to do it without rebooting your server.

So what I’m going to do here is just go down here to Mirror Demo M:.I’m going to right click on it, and I’m going to choose Break Mirror.And it will say,
“Do you really want to break this mirror?”
I’ll say,
And say,
“Hey, you’re still writing data to drive M:; do you really want to delete it?”
And I’ll say,
So now what will happen is that Windows NT 5 will actually go out in the background and dynamically break the mirror between those two.And what you’ll notice is that I’ve created a backup of that drive right here, which is mirror drive G:.

Now, I need to make sure that I’ve got a really high level of availability, so right away I need to get a new mirror up and running quickly.Well, all I have to do is right click on Mirror Demo M: and choose Add Mirror.It’s going to go out and find some unallocated disk space — and I’ll choose Add Mirror.Now, it’s going to take this volume right here and automatically regenerate that with a copy of the stuff that’s on M:.

Now, I’ve recreated that drive, I’ve recreated the mirror without having to reboot the PC.

JIM ALLCHIN: Right.This is a partnership that we did with Veritas, which some of you may be familiar with.We are trying to leverage our capability that we’ve got in the operating system with their capability in the storage system, so they have a high-end product that they’ll sell on top of this.This capability just comes standard in NT 5.

JONATHAN PERERA: So the next thing that I want to do is go ahead and back up that volume that we just took — that we just broke the mirror of.And what we’ve actually done here is we’ve implemented some software from Seagate with Windows NT 5 that allows us to easily do a backup job.

Now, what I’m going to do here is click on drive G, which is that backup data, and I’ll choose Start Backup.Now, when I choose start, what I actually want to do is switch that screen over to a tape box that I have located here and you’ll notice we’re going to go ahead and start a backup here.So what you should see is that it’s — that robotic arm will go out, it’s going to grab a tape and then make a copy of all that data and back it up to tape.So that’s taking place right now.

Now, the second thing that I mentioned, Jim, was with Windows NT 5 we’ve implemented hierarchical storage management, and with HSM essentially what that means is that an administrator can assign properties to a volume or a disk or a directory such that any file that hasn’t been accessed in, say, six months or longer is automatically backed up to tape.Moreoever, we make sure that that backup to tape was transparent to the end user.So even though that file has been removed from the hard drive to tape, when the end user connects to that volume, it looks as if it’s still there.

So let me show you an example of that.So what I’ve got here is a number of different JPEG images that have all been archived to tape. But it looks to me as an end user as if they’re still on that physical volume.So what I’m going to do is just randomly select one of these and open it up, and if you notice back up here on the screen again, we should be retrieving a second tape once again to retrieve that JPEG image.

So it’s going to say it’s recalling from storage, it’s grabbing the second tape and running that.

JIM ALLCHIN: Now, what’s so cool that’s going on here is we’ve created a media management layer in the operating system, so we can use one device like this jukebox and have multiple applications to be able to access it concurrently, all very safely.This is stuff that other systems don’t have today.Basically pretty much the mainframe is the level of system that supports this today.

JONATHAN PERERA: So basically what we’ve shown in terms of the storage management of NT 5 is really a couple of things.One, we’ve eliminated the need for reboot, which means higher system-up time.And, two, we’ve implemented hierarchical storage management to make disk and volume management easier in a multi-task way, as you mentioned.

First, let’s change gears here really quickly.You also mentioned what we’re doing in terms of making sure that we’re taking advantage of this whole new generation of streaming media technology.And what I want to do to demonstrate this is show the streaming media services that are integrated with Windows NT Server.

Now, here what we’re looking at is an example of Netshow 3.0, which just went into broad marketing beta this week.

JIM ALLCHIN: That’s right.

JONATHAN PERERA: Now, on screen I’ve actually got what we have on Microsoft’s corporate intranet.It’s called the Microsoft Netshow Network.Now, Microsoft has this global sales force.We have, you know, tens of thousands of employees — well, actually, just about 10,000 employees located at worldwide locations. And it’s really difficult for us to make sure that they’re trained on the latest technology, the latest product, and it’s really hard to get them in one location.So we actually use Netshow to train those users, no matter where they are.

So what I’m going to do is go ahead and click on Windows NT 5 Training and that will actually bring up the training event that took place in the past.

(Video segment)

JONATHAN PERERA: So what we’re seeing here is that we’ve synchronized both audio and video on an on-demand basis for any user who wants this training.And moreover because Netshow –these streaming media services are tightly integrated with other Microsoft products, such as Netshow and PowerPoint, I can easily synchronize a PowerPoint slide presentation with the audio and video that’s taking place.

JIM ALLCHIN: And the key part here is the tools in order to do this, so that you don’t have to be an expert, and again, an author, in order to pull this together.

JONATHAN PERERA: So, one of the things we can do with these streaming media services is make corporate training available on demand.

Now, what I’m going to do is switch over here to today’s events, and what you’ll notice here is that it says Networld + Interop Keynote.So, not only can we make data available on demand, but we can also broadcast information in real time.So in this case we’re actually taking today’s keynote presentation and making that available live across the Internet so anybody can tune in.We’re also multitasking this out to Microsoft’s corporate intranet, so if anybody’s watching at Microsoft, hello, we’re here.It’s all working so far.


So this will take about 15 seconds to reel up, and what we’re actually going to see is Jim and I talking probably about 15 seconds ago on screen, because it takes a while for it to reel.

JIM ALLCHIN: Can you pull that?Can you stretch it?

JONATHAN PERERA: Yeah, sure.I’m not locked into a particular size or shape, so you can see that I can resize that.So this is happening in real time.

JONATHAN PERERA: Now, the last thing that we can do with these streaming media services is that we’ve introduced a new high-end version of these streaming media services, namely the Netshow Theater Server. What the Theater Server allows you to do is essentially have entertainment quality broadcasting of audio and video across networks.

Now, the most likely application to this will be in hotels and cruise ships and airplanes where people want to do video on demand.In fact, the Sheraton Hotel chain has recently implemented the Theater Server in all of their hotels so that they can make video on demand available.

So, for example, if I come down here to this Keynote AVI, or rather this is an MPEG which is being streamed to me off the Netshow Theater Server.

(Video/audio segment)

Now, this is actually DVD quality that we’re streaming down to this client’s PC.

JIM ALLCHIN: And you see, it’s exactly the same video that we showed earlier, only we did that on videotape, and this is coming off of the Theater Server.


JIM ALLCHIN: If you pull back over here just a second, I see that the little picture is up.

JONATHAN PERERA: Yeah, actually — oh, Jim, this wasn’t planned as part of the demonstration, but we’ll go ahead and show it anyway.What we want to do is switch back to the HSM machine, and that’s the JPEG image that we retrieved.

JIM ALLCHIN: Good, thanks.

There are a lot more trends going on.The third one that’s external that I mentioned at the beginning is business trends.We were trying to figure out how to capture this in a slide, so we figured we would try to list all the [ inaudible ] that have created new ways to help business, consultants, if you will, deal with all the changes that are going on.And if you go back a few years, you’ll see that there were a few basic trends.Today — or a few basic philosophies.And today there’s just one after another.

I just read a book called,
and this book is just, you know, trying to have companies deal with the changes, the rate of change that’s going on in the industry.

So it’s a very volatile environment that businesses are living in.

What are some of these trends that we think people are dealing with now more than ever?Organizational changes are just incredible.M & A.It’s just pretty phenomenal what’s happening in almost every industry.And what that does to IT is basically turn them on their ear.

Competition.There’s new entrants.

Products.You need faster time to market.Your competitors are out there.They’re going after you.You’d better hurry.

And then partners.You need to partner with your competition.You need to have joint partnerships.Being able to deal with all of these puts a tremendous stress on your organization.

What does this mean?It will change the way you try to run your business.

It turns out those three trends were external.And I mentioned at the beginning there were two internal trends that we see happening, which is, one, this growing demand for what the IT organization can do in bringing value to the company, as well as maintaining control of the budget.

I mean, make no mistake, IT spending is actually going up.The thing that is pretty noticeable on this chart is that in 1980 it was 25 percent of the spending for a company was in IT.But now in — well, a few years ago in 1996 it was 45 percent.So you’re spending more, $500 billion in the US.People want something for that.I’m sure you’ve heard that.

One of the things you have to do is control the cost of ownership.Now, there’s all sorts of new business value propositions you can offer to your line of business within your company, but if the cost of operating in these environments is just too high, it becomes a tremendous problem to explain to your CEO.

So some of the things that are happening there involve things like the hardware improvements, sub-$1,000 PCs, plug and play, systems management being able to control exactly what happens on clients, and the fact that you need to be able to control what happens on your applications.

You’re going to have to change the way you’re managing your systems.We, as well as other vendors in the industry, need to help you be able to do that.

We’re going to give a demonstration of some of the new technology that we’re doing in NT 5 to help reduce the cost of ownership.In particular today we’re going to focus on flexible user management and what’s possible using the active directory and the rest of NT 5.There are a lot more things that you can actually pull off in NT 5, but today it’s just going to give you an idea of centrally controlling what somebody can do, application distribution and control of that, and the whole idea that your user state can go with you no matter where you’re at, even if you have a new machine.Jonathan’s going to give us a demo of that.

JONATHAN PERERA: Right. So what we’ve got on screen here is actually the active directory manager, which using the active directory, [means] IT can have a big impact in terms of reducing the total cost of ownership associated with managing servers and managing clients.Now, with the directory, essentially, an administrator can really do three things.We can set up standard PC configurations for all PCs in an organization.We can lock down PCs so we can configure what the desktop settings are going to be.Or we can enforce organizational policies or business rule that gets replicated across any user in that org.And then finally with IntelliMirror we also enable end users to be able to customize their own PCs so their information is available to them as they roam from machine to machine to machine.

So what I’ve got here is just as a very basic organizational setup — this is a fictitious company — and what I’ve done is I’ve actually organized my active directory the same way my company is organized, so I have Central Region, an Eastern Region, a Western Region, and within the Western Region I have a number of different branch offices.So let’s drill into Las Vegas, for example.You’ll notice within Las Vegas I’ve got a number of different users, and what I can do now is go ahead and set up a policy for what all the system configurations are going to be.

So, let’s take a look at that.What I’ve got on screen now is the group policy editor associated with that Las Vegas district office.Now, what I’ve done here first of all, if I open up a parent, is that as an IT manager, I can specify what the background color is going to be on every single PC within an organization.

JIM ALLCHIN: And that’s a very important cost saving.


JONATHAN PERERA: Well, the point is that this is just one example of what you can lock down.But, thanks, Jim.


JONATHAN PERERA: Okay, what is more interesting though is that I can actually go to the My Documents folder, and I can specify what shows up in the My Documents folder of every PC in the Las Vegas district office.For example, if I add a new user, a new employee to Las Vegas, their new documents — their My Documents folder is going to have an HR policy document automatically available.

I can also go to Start Menu settings, and what I can do here is I can lock down a lot of those things in a PC that typically generate a lot of help desk calls.For example, I can disable the run command from the Start menu.I can remove the Favorites command.I can remove the Shut Down command.There’s no end in terms of what the IT administrator can lock down on that PC.

So I’ll go ahead and choose okay there.

You also mentioned, Jim, that with the active directory we have the ability to deploy line of business applications to all the PCs within an organization.So what we’re looking at here is actually the applications deployment screen.And what you’ll notice is that I’ve got a number of different applications deployed to every single PC within that organization.

Now, there’s two different types of apps that I can make available.One application we call
Essentially an assigned application is an app that must be running on the PC at all times, maybe a line of business application.And we also have a different type of application we call
Now, a published application might be an application that shows up in the add/remove programs list on a client’s PC.So, for example, today, if there is a sort of application that an end user needs, where they typically have to go out to a networked location to download it, now we just make that available and add the new program.

So what I’ve done here as an administrator is I’ve basically locked down the configuration.What I’m going to do is switch over to a workstation in this Las Vegas district office, and I’m going to go ahead and log on as myself and show you the effects of this.So what we’ll do is go ahead and log on, and here you’ll notice that oh, so important black background you were talking about.You’ll notice, first of all, that on my desktop, the Network Neighborhood has been removed.You’ll also notice if I go to the Start Menu that the Run command has been removed as well.

Now, what I want to do here is actually sort of some simple customization to my desktop.What I’m going to do is open up my computer and I’ll just switch over here to the C: drive.And let’s say, for example, there’s a business document that I’m working on.Typically when I have a business document I’m working on, I make it available on my desktop.And what we can do now is using IntelliMirror, I can make sure that that document is available to me no matter which PC I happen to be sitting at inside the Las Vegas office.

So what I’m going to do now is actually just go ahead and log off this machine, and when I log off this machine what will actually happen on the server is that it will replicate all of my personal settings up to the directory, so as I go to a new machine those settings should be available to me.

JIM ALLCHIN: It turns out that in NT 5 it actually happens in the background as well, so as you make changes on your laptop, if you’re connected — or on your desktop — to the network, that it’s flowing those changes back there.And the — one of the key things about our approach on this is that it doesn’t really require any additional bandwidth.When we’ve shown this to people, they are pretty stunned by the technology we’ve got here.But they say,
“Oh, well what is it going to do to my bandwidth?”
And basically almost nothing, because if, in fact, you wanted this stuff replicated, it’s got to be copied up at some point, but it’s not like it’s going to take additional bandwidth from what it already has.In fact, go ahead and log on here.

JONATHAN PERERA: Jim, you’ve decided in this scenario that I’m such a great guy that you’ve gone out and bought me a brand-new high-end laptop, and this laptop has never been used before, so I’ve never logged on to it before. And what I’ll do is just go ahead and hit enter.And what it’s going to do is refer back to the directory and remember what the personalized settings were for Jonathan Perera.And they should hopefully automatically make them available to me on this brand-new PC system.

So the first thing you’ll notice is that My Documents has gone ahead and been copied here, so that’s made available to me.

And you also mentioned that we have the ability to deploy applications to client’s PCs in the organization.Well, I’ve never run Word on this machine.As a matter of fact, it’s not installed on this machine yet.But you’ll notice that the Microsoft Word icon is available to me.So if I click on that, it’s actually going to bring up the Microsoft installer.It will automatically reach out to the network.It understands where Word is installed, and it will go ahead and attempt to install it on this machine.

So, but I’m actually going to — I guess I clicked on — (inaudible) — by mistake.

The other thing that’s interesting about this is that, you know, I might be hooked up over a 28.8 modem, and maybe I don’t want to install an application.So here, for example, not only can you launch the install process, but I can cancel out of it, and it will back out altogether.

JIM ALLCHIN: It’s very, very effective for controlling the user state.And we’ve also talked about machine state.We talked about the problem that, let’s suppose your machine has totally crashed and you need to put in a new machine.We’re not going to demonstrate that for you today, but that’s another capability that’s in NT 5.This is a capability that requires almost no changes in your infrastructure in order to do this.You don’t need remote boot servers and the other capabilities that are needed in a machine replacement.But this gives you most everything you need.

One of the key things we’ve done is tried to separate the different states, whether it’s machine state per user, whether it’s regenerable state or plug-and-play and the like.Tremendous power here.

JIM ALLCHIN: One of the things that’s very clear to us is that as we move ahead, it is the people in the organization that you can say it’s always been this way, but they are so key in making your business more effective.And on this particular graph we show what’s happened to the average revenue per employee as time has gone on.Up to $250,000.In order to make sure that you can continue to drive that up, you’ve got to leverage your key asset, and that’s people in the org, and give them the tools so they can get the information when they need it, they can — they know what’s going on, you can marshal your entire company towards some particular problem.You’ve got to unlock their productivity.

Now, we’ve talked about the things that you need in your company in order to get real return on investment.You need to be able to do great collaboration, knowledge management, data analysis, as well as tracking your operational systems.These things are going to change the value that you can get out of IT.

What we’ve seen over time is first starting off in LAN file and print services, moving to LAN client services and now what we believe is the future is the Digital Nervous System.Now, what we’ve done in this chart is sort of superimposed a log scale and all the changes that are going on in these five trends.Now, we didn’t concoct any of these numbers.It truly is — order of magnitude changes are happening in all of these areas.And about the only way that you’re going to be able to grow in the future is to get your company more able to adapt.

And we’ve talked about the Digital Nervous System.Bill has been talking about this for some time now.And the whole concept behind this Digital Nervous System is to make the analogy to the human body.The human body has some basic operations:breathing, it does it automatically.In your company you’d better be doing accounts receivable and accounts payable pretty automatically.

The body can deal with planned events.You’re going to go play tennis.Your company should be able to prepare and plan and execute a product launch or whatever just in a routine way.

Or reacting to unplanned events.If you get sick, your body deals with the illness.And in a company, if a competitor announces a new product, you’ve got to respond very, very quickly.And so on.

We don’t think that this has to be some major, major change in your company, which is done overnight.We think there are steps to it.And I’m just going to walk through some of the incremental steps that we think you should be doing, along with using our technology or other vendors’ technology to get you to this platform for the Digital Nervous System.

The first is getting an IT infrastructure.You need advanced networking, things like quality of service built into your network.You need things like security built in as a fundamental level.

You need to get to a standard presentation system and update system if you own the client.Truly a lot of great things have happened in the area of web clients and browsing.

You also need to ensure that your company and every island is totally connected with integrated information.When something happens in that company, you need to know about it, every employee needs to know about it.You need to be able to have them work together on projects and track what’s going on.When something happens in the industry, pretty much everybody inside Microsoft knows it very quickly.We use e-mail incredibly hard inside of Microsoft.We suggest that that is a way, particularly in geographical locations, like how you need to run your company.

We also believe a next step is try to get logical centralization of your information.It doesn’t mean that you all have to put it in one database, but it better appear a lot more seamless than it is today.And while you can use a browser to go and get heterogeneous data, it’s much better from a management perspective, as well as doing things like join over that data if you can get it into one place.

New systems are incredibly complicated, and it’s up to us as well as you to try to put systems in place that can manage themselves.

Last is that you need to get component services and the tools so that you can spend your time writing business value on top of this platform, instead of spending your time, you know, trying to just make the platform work.

We think of this, all these components as this foundation for the Digital Nervous System.

So you’ve seen all this.Why Microsoft?Why deal with Microsoft?Well, the first thing is integration.Our focus is to improve simplicity and reduce the cost and hopefully put enough in the system so that you write a lot less code.

Second, to create a comprehensive system.And we don’t mean just the client, we don’t mean the server, we mean the whole environment.We want a distributed system’s fabric created that not only works great in the Microsoft environment, but it interoperates with others.

We also want to track the technology trends.We want to leverage that innovation that’s going on in the industry, give you more choice in terms of hardware and applications with the richest communications support.

Lastly, we work with partners to give you that enterprise-class service and strategic technology alliances that you need in order to keep moving.

I think there is something that we want to show dealing with directory enabled networks.

JONATHAN PERERA: Actually, what I want to do first of all, could we switch back to that last hot PC really quickly.I just want to show that I messed up on what I was clicking on earlier, so if we’d switch over to the laptop PC.What you’ll notice here is that earlier I had an error message, and yeah, I hit go ahead and install Word down to this machine.

JIM ALLCHIN: One of the cool things about the install process is it cleans up everything that was on the machine so you can just do it again.So let’s switch over and a key thing about business value that people have been talking about is directory enabled applications.And most of the things that I’ve been seeing at this show are all what I call very simple applications.What we’re going to show is line of business applications that are planning on using the directory system.Line of business applications are probably most of you have in your businesses today things like SAP and Baan.These companies have committed to leverage the data that’s in the directory system to make their applications simpler and more integrated.

JONATHAN PERERA: Well, what we’ve done here is that SAP and Baan have actually done a very deep level of integration with the active directory.What that means is that those applications will take advantage of settings that we’ve applied to groups within the directory.So, for example, in this simple scenario Jonathan Perera in this organization is currently a member of a group called managers.Now, I’ve extended the directory, so what I’ve essentially done is created a property such that the spending limit for managers in this organization is only $1,000.So now what I’m going to do is go ahead and click on purchasing area.This might be a simple, you know, order entry application on your corporate intranet.And you’ll notice right away that it went out to the directory, and an active server page found that, sure enough, my spending limit is $1,000.

Now, on the bottom where it says request a purchase, what I’m going to do is request a purchase out of SAP.So when I click on okay, I’m going to try to buy a $14,000 system.So I’ll go ahead and request that.Now, SAP leveraged the business rule that we set up for that organizational group, and knew that managers don’t have the authority to do that.I’ve automatically essentially changed the behavior of that.

Now, what I’m going to do is go ahead and go back to home.And, Jim, you’ve decided we’ve done such a great job with these demos —

JIM ALLCHIN: Well, I don’t know.


JONATHAN PERERA: Nonetheless, you’ve decided — (laughter) — to promote me to a vice president in this organization.So I’m going to go ahead and add myself to the vice president group.Now, we also have a setting in the directory such that all vice presidents have a spending limit of $100,000 in SAP.So as I come back to this purchasing area, automatically it knows from the directory what my new spending limit is.And if I come down here and try to purchase that same server for $14,000, it will go out to SAP and figure out, sure enough, I’ve got the authority to do that.

A quick point on this.SAP is UI.Their client system doesn’t necessarily look like a web page.But the power of what SAP and Baan are doing is exposing their business logic as COM objects.What that means is that an administrator or web developer can customize these types of rich solutions and have this sort of access.

So essentially I just want to show one more thing here, and what I’m going to do is an example of some data mining that I can do by virtue of the fact that I have information stored in the directory and information stored in SAP.

Now, today if I wanted to do a simple query with Windows NT 4 and figure out, you know, all the direct reports of Jonathan Perera, how much have those people spent in SAP.That would be a multi-step query today.

JIM ALLCHIN: Very hard.

JONATHAN PERERA: First of all, I’d have to query the directory in (LDAP?) and figure out who are the direct reports of Jonathan Perera.I would then have to do a second query to SAP to figure out what the spends of those people were.And then I’d have to manually join them together with a third query.But what I’m showing here is an example of — I know you don’t want me to say this, but it’s a heterogeneous join.Essentially, what I’m doing here is I’m querying simultaneously with a single query information out of the directory to figure out the direct reports of Jonathan Perera, and also on this side is the information that got called out of SAP in terms of what they spend, and in the middle you see how we heterogeneously join those together.

JIM ALLCHIN: A key aspect that we’ve been talking about for some time is unified storage.Here is an example of technology that lets you have one API, which is very simple, which can be scripted, of course is what we’ve done here, that goes to multiple different data sources, with the directory acting as nothing more than a database that you can get access to.And, of course, the applications like SAP and Baan are also just using it as a database.But it’s tremendous power by being able to integrate those technologies together in one single swipe.


JIM ALLCHIN: The other reason why you should consider Microsoft is our focus on innovation.We started off in graphic user interfaces, Internet integration.We have a tremendous focus on simplicity as well as costs of operation reductions.We will continue to innovate in Windows and take advantage of all the trends that are happening in terms of hardware and software that we can put into the operating system to make your jobs easier.

Sort of switching to the here and now, Windows 98.We plan to release it to manufacturing on May 15 th .We plan to have it available at all stores where you could purchase it on June 25 th .NT 5 we’re working hard toward Beta 2.Since Beta 1 we’ve produced two interim developer releases, the last one about a month ago was basically feature complete.We provided it to 5,000 or 6,000 people for some testing.The team is committed to an early summer Beta 2, but I must say that our focus is quality. We’ve instituted some new technology to do long-running reliability tests, and what we want to get through, having gone through all our support calls, is an environment that with Beta 2 it is deployable in pilot for our rapid deployment customers, and we feel very, very good about that.

We’re making great progress there.The key aspect of what, you know, the driving factors, even though you’ve seen some great storage capability and the like in NT 5, the key thing that we’re trying to do is build a comprehensive distributed infrastructure for the system.We also want to maintain compatibility in superset Windows 98.

We will release this with the Workstation Server and Enterprise Edition all at the same time. And it will have the technology that we’ve talked about as Hydra as a part of NT 5.It will take a separate price to be able to use that from the client side, but the software on the server will be included there.

We do have a version of the Hydra technology, the Windows Terminal Server for NT 4, that will be available this quarter.That is actually a comprehensive integration of that technology in NT 4, so it is the whole operating system, versus NT 5, where it’s just going to come natively integrated in.

You’ve probably heard us talk about 64-bit NT.We have now successfully booted that on, on Alpha, as well as on the Merced Simulator.We’re making rapid progress there.

The BackOffice applications, we’ll also be targeting that.So great progress there.We don’t have any dates to talk about there, but we’re making good progress.

Something that we started working on a few months ago, because we were requested by companies to do this, is to take NT and make it a more embedded product, so it could be used in all sorts of devices, whether it be switches or other types of home automation equipment and the like.So it’s technology to reconfigure NT, to get rid of the keyboard, the mouse, terminal, everything dealing — remote management.So we’re definitely going down this path.

Now in BackOffice — there are a lot of applications in the BackOffice family.All of them we’ll rev to take advantage of NT 5, so you can expect releases after we ship NT 5 for all of them.

Before then, though, we have some big releases coming out. The first one is SQL Server 7.0.We’re on track.That will be absolutely available this year.The key things that we’re trying to do are get some more scaling in the system in terms of huge databases, terabyte-sized databases, and to make the system extremely easy to configure, and autosensing of its sizes and its requirements, so you have to spend less time messing with that and more time running applications. Also there’s some great data-mining capability that we’re building into that product.

We also have a new version of the Systems Management Server that will be coming out this year, and the capability of that, given the feedback that we’re getting from the Beta, is that people think it’s much simpler to use, a lot more powerful, and it can help customers deploy either Windows 98 or NT 5.

Of course there are many other products, but I don’t have time to cover them here.

There are many announcements that we’re doing at this show.Some of them you may have heard about.I certainly haven’t tried to cover them here.These are some of the high points.We did release a beta that’s available now for the Microsoft Commercial Internet System. This is a commercial Internet platform so that companies such as MCI can offer commercial Internet services all based on NT technology.And tremendous reception for this.And the key thing is that it’s a nice migration if somebody is in the Internet services business, that they can, you know, get accustomed to NT and then they can just apply the MCIS environment and they can be on their way to offer the outsource business functions.

Something that I haven’t talked about, which just follows our trend on interoperability, is a new product that we’re going to create, it’s an add-on for NT 4, and of course be available with 5, is an NT services for UNIX system.And we did a press release that says that we’ll go to Beta with it this summer.Now, what this is, is that customers have been asking us for some time for continued interoperability, whether it’s with the mainframe, with UNIX, with other databases and the like. They’ve been asking for more interoperability with UNIX.And so this is included in NFS Client, in NFS Server, Telnet support, new scripting capability in the system, a set of BIN commands from MKS that we’re including so that you’ll have an environment, if you’re familiar with UNIX, you’ll have an environment very similar to that on NT.

So great interop on the wire and then there’s some support actually in the system for being able to run those shell commands.

We mentioned the Netshow 3 Beta which is available now, you can download it off the Internet.Just a standard part of us trying to make Windows a great streaming media platform.

In terms of customers and partners, Computer Intelligence came out with a statement that there’s a 200 percent increase in deployments of Windows NT Server in the Fortune 1000.I think 86 percent of those companies are now using NT Server.

In a related note is one of our partners is helping us develop an active directory.Cisco came out with some new features that are leveraging active directory that will give some additional (accessibility ?) in the network space, which we also think is great.

At the beginning of this talk, I mentioned the Stratocaster, and I mentioned that I’ll probably go back and get that Stratocaster, because it just sounds better. And it’s all because I think there were some compromises as technology has moved ahead. In the computer industry, we haven’t had that problem.We’ve gotten innovation without those compromises.

Now, if you look at all the trends I’ve talked about, and I’ve talked about five of them, three external and two internal, if you just lump them into two basic ones, business trends and technology trends, the key thing that’s going on here is as new technology becomes available, businesses are able to take advantage of it for new opportunities. And as soon as they do that, the businesses put new requirements back on the technology space. And so it’s quite a cycle of integration between them.

We think that this integration leads to a platform, this Digital Nervous System platform that’s going to have these characteristics as we move to the future: an adaptable foundation.If your environment in your company can’t adapt to change and new competitors, new unexpected events, then you’re in trouble, and the software that you’re using had better be able to do the same.

Logical centralization.No matter how global you get, you still want to be able to control what’s going on in your business.

Intuitive and helpful.These machines are way too hard to use, although we’ve come a long way, it’s still clear that at some level the best is yet to come in terms of what we can do, in terms of speech and vision.

Unified storage.Well, we gave you a little view here of what a common API with common querying environment above multiple sources can do.Just imagine if you can get more of the storage unified together.The fewer things that you have to manage, the less configuration that you need to do in terms of your disk space and the like.

Seamless communication.Communication should just be totally embedded in a system.You shouldn’t think about it.It should just be like electricity, regardless of what media is coming on it, you shouldn’t have to make any configuration changes whatsoever.

Maintenance free.Our target for this Digital Nervous System platform is to be able to get to an environment where the system is figuring out what’s wrong with itself.Now, we’re making progress in this case in NT 5, but there’s still so much more to go.But we think that this is the platform that you need as you move ahead.

Well, we’re spending probably in my group alone close to a billion dollars in R & D.There’s 5,000 people in my organization, and they’re doing just one thing.This one thing is trying to build this platform so that you can build a Digital Nervous System in your company.

Thank you very much.