STEVE BALLMER: Well, thanks. It is super great to be here today. As Dan said, the last time I talked at CERAWeek was five years ago, and I’m just thrilled to have the opportunity again.

I didn’t ask anybody if I could walk around, but it seems to work a little better for my style, so I’m going to let the lights guys figure that out.

I’d certainly like to thank Dan, I want to thank Jerre Stead for sponsoring this event, and certainly congratulations on 30 years of CERA. That’s quite an achievement. (Applause.)

IHS, CERA’s parent, is a valuable partner of Microsoft, and I know for all of us has in a variety of different industries provided incredible insight and analysis to a number of industries, including the technology business, as well as the energy business, and that’s phenomenal.

I’d also like to have a chance to thank all of the Microsoft customers who are here in the room. (Laughter, applause.) And whether it’s your company or you personally, thank you, thank you, thank you, and hopefully we’ll pique your interest a little bit today.

I also want to have a chance to thank a lot of the partners that we get a chance to work with specifically who are involved in the energy business broadly, including Alstom, Aspen Tech, HP, OSIsoft, all of whom are also sponsors of CERAWeek. So, it’s a pleasure to have a chance to be with our partners here, and have a chance to share with you some of the enthusiasm we share for the role information technology is playing in the transformation of the industry that you know far better than I do.

It’s an interesting time for us all to get together. The challenges that you face and the challenges and opportunities we face in information technology I think are similarly unprecedented.

In your field, I’ll speak now as somebody outside the business, but I say, wow. Just between now and 2035, energy demand will grow, I don’t know, 40 percent or more. Growing population, shift of people from rural areas to cities, the growth in Asia we had a chance to talk a little bit about at dinner tonight, fascinating. In the just 15 years alone the population of the world’s cities are expected to increase by approximately 2 billion people.

And at least to me it’s clear that we’re not going to be able to just conserve our way into our energy future. Something more than that has got to happen, and it’s going to have to happen, like it does in most industries, on the back not just of efficiency and conservation, but on the back of innovation.

The task will be to invent new ways, affordable ways to fuel homes and offices, factories, vehicles, schools, and cities.

Bill Gates stepped out of fulltime work at Microsoft three years ago, and one of the most important things he said to me as he spends fulltime now with his foundation is, you know, when we talk about helping the people who are economically disenfranchised in this world become economically enfranchised, we’re really talking significantly about those people actually using energy in a way that they don’t today. So, the key is to make sure that that happens in a way that is good economically, and is good, very much good for the environment, and as I said, that’s an innovation challenge, to invent the technologies, technologies that will make that possible.

I think it’s going to be underpinned in no small measure by information technology, and so I want to talk to you a little bit about where information technology is headed, because as we were speaking about at dinner at our table, the ability to use information is part of this problem; to more efficiently produce and deliver is certainly key.

You know, over the last several years, I think we are reminded that it is at least in large measure possible in our industry that most technology advances actually start with the consumer and flow to business. It may be a little bit different in the energy market. It’s a little hard to say how any one little startup and any one little consumer are going to come together and create an energy future, and yet in our business that can happen. So, the forces of innovation and how they might work and how they might work in this business are different, but what we see is technology being popularized in the consumer market, and then flowing into the business world.

Instant messaging in our industry is a great example. It’s something that started with people at their home, and yet now the way people want to ping each other and do real time video link has become increasingly commonplace in the business environment.

So, I want to start today by focusing on the technology advances that we expect to see in the home, and then I’ll talk a little bit about what some of the opportunities are that will open up with those technologies in business and in energy very, very specifically.

Before I do that, I want to show you a short video clip. It’s a minute-fifty four. And it’s not designed to tell you anything specific about anything, it’s designed to kind of loosen you up a little bit in terms of how some things might be different in our future based upon the back of information technology. So, roll the video, please.

(Video segment.)

(Applause.)

STEVE BALLMER: I’m not sure what loosens anybody up at dinner at the CERA crowd, but at least technologically I hope your minds are a little open. You’ve got the girl in the United States talking in an electronic kind of interactive session with the little boy in Asia. You’ve got augmented reality helping people assembling and fixing complex machinery or examining the human body to make sort of more intelligent and more rapid decisions. You get technology that bends and folds and shapes. You get wall-sized displays that enable you to do a whole different kind of real time and interactive training and communication and analysis. I think those are powerful ideas.

And I’m sure many of you say, “Well, how long before we can get our hands on this stuff? Five years, seven years, eight years, further out?” Actually, I think you’re going to see some of all of this stuff in the very near future, and there will be some of this that will remain kind of an unrealized set of ambitions out for the next five and 10 years. But the fact that we can dream and think about how we’re going to do some of this stuff in reality in the very near future I think is powerful.

You think about just the last few years, and how the number of, as we sometimes like to call in our business “screens” in our lives have proliferated, intelligent screens. The big screen in our living room is getting intelligent. Increasingly some of those same technologies we’ll bring to our conference rooms and our classrooms. You’ve got the medium-sized screen, the PC, the tablet, the slate, for reading. You have a variety of devices now that you’ll find in kitchens, in countertops, in more and more affordable ways.

There’s the small screen that we put in our pocket. We still like to call it a phone. I didn’t go check what Webster’s Dictionary has to say about phones, but the small screen devices certainly that I have in my own pocket and that most of you have in your pockets do a lot more than enable us to have voice communication.

These screens are connected to other devices. They’re powered by intelligent software that’s getting better and better at not only doing what you tell the device to do, but predicting what you want the device to do, to understanding you, to understanding what’s going on in the world, and helping hook up what you’re interested in and what you intend with what the systems know about world affairs.

These devices are utilizing more and more natural ways for us to interact. We interact with touch, with voice, with gestures.

And what makes the technology so valuable is it gives us not only the ability to have some fun and to get entertained and get educated, but it gives us the ability to create, to share, to analyze, and to use information in a variety of very new ways.

Information is no longer bound by the constraints of any given device or any given location. And we think about the new opportunities to store everything about the world, and to analyze it, and to make prediction about it, and it’s really quite remarkable.

That information is instantly accessible on a variety of different devices in all parts of the world.

And I think that’s all very important to you, because this industry particularly has such a significant amount of data that needs to be integrated, that needs to be understood and acted upon in real time. Whether it starts on the invention side, new energy forms, whether it’s part of the exploration for new sources of energy, the real time production and distribution of energy, and every part of the food chain, and in every part of the globe, this use of information in this industry I think is going to be important.

Your industry, as much as any industry, really wants to model the physical world in the virtual world, and use that modeling to guide behavior and decisions. And this industry is one of the industries that really is pushing the bounds on what our industry can do in very unique and interesting ways.

What’s making this transformation possible is the most important technology shift of our generation. And now when I say technology, I may really mean that back office, back-there stuff. We all know about touch and talk and feel, but the backroom is getting transformed by a concept that gets referred to as cloud computing.

I know cloud computing, by the way, is an official term as of last Saturday, because Businessweek had a cover story about cloud computing. I’m not sure I’m going to stop getting the question from my wife about what is cloud computing, and when I was talking to Dan earlier I’m not sure I’m going to answer it for you tonight, but when somebody comes and tells you they’ve got a possibility, there’s something interesting they want to do, but they have to bet on cloud computing, you nod and you look pretty interested, and I guarantee you that will be a wise thing to do. (Laughter.)

Cloud computing combines the power of these intelligent devices like personal computers, phones, even electric cars, with the accessibility and breadth of the Internet, and the programmability and security that we all expect today in our own datacenters.

I was telling Dan earlier, cloud computing is sort of a view that says instead of building big, separate, massive computers, the world is moving to not just a business model but a technology where we can think about a sea of computers, seas of computers, many, many of them, that are so cheap and inexpensive you throw them away, but they collaborate to store massive amounts of data at very low cost, and with very good efficiency of computation.

We just can’t scale the number of people who take care of these computers with the number that we want to put into play. So, it requires a reinvention of the way we think about building software and making it available.

And it’s opportunities that get presented by cloud computing that make this interesting.

The first place we start to see these trends take shape are in our own personal lives. Social networks have changed the way we find people, connect with friends, and build community.

But the amount of information, the amount of information right now, just think about pictures, the number of pictures — well, we think about pictures of our friends and the parties that somebody was at or their kids were going to or blah, blah, blah, blah, blah, but think of all the pictures and the data that’s coming out of this industry that similarly you want to be able to store at very low cost and have be able to be recalled and utilized and analyzed; it’s just another example.

We all know social media has revolutionized how we get news and how we enjoy entertainment, and it’s a phenomenon powered by cloud computing.

The connected home will allow consumers to be more active in managing their own energy efficiency, while implementing their own part, doing their own part of the renewable generation process.

How do you get people the information? We’re working on a project like this with Ford right now. People want to know, how do I charge my new electric car, when do I charge it, where do I charge it, how do I charge it most cost-effectively? We worked with Ford very effectively on a program we call SYNC to put intelligence in a car. Now, the question is how do we give the consumer the tools that they’ll need in order to cost-effectively take advantage of an advance that I think many of us are very bullish about.

Consumer energy management systems will need to work in conjunction with cloud services that understand what power is available, where is it, at what cost, can the consumer participate essentially in smart ways with what will go on with so-called smart grid technologies. Those are all very important phenomena. It’s important to the utility, to the power generator, and ultimately to the consumer, be that a business consumer of power or the consumers themselves.

One of the most advanced examples on the market today of what happens when a smart device and the Internet come together in the cloud actually comes from a product that we had a chance to launch in the consumer market at Christmas last year called Xbox 360 Kinect. And Kinect is a sensor — that’s a fancy way of saying it’s got microphones and cameras both in it — it’s a sensor that understands a person’s movements and speech. And in essence it provides a new interface that allows people to manipulate technology, and connect with other people.

You’re in the middle of something in a videogame, and you need to jump, you jump, and your on-screen character jumps for you. You want to tell your TV to do something, “Xbox, pause,” and that movie should stop for you. You wave your hand, and the Xbox says you need attention, I’ll take care of you. You want to talk over the cloud to friends in different cities, you invite them to join you into a virtual room in the cloud for a discussion in the living room. Watch a movie, you choose any movie, any movie from an online library of all of the world’s content, and frankly all of the world’s little video clips and vignettes. No controller, no remote, no fancy education necessary, just you. And I think it represents an important kind of an advance in how we let people access and take advantage of the cloud.

Technology today doesn’t understand we normal people, and the way we want to communicate and talk with each other. So, we’ve had to control technology using procedures that the computer understands: menus, folders, mouse clicks. We think we’re onto something new. You want the computer to do something, you speak to it, you gesture. Don’t just recognize my words, know what I mean.

And we thought we’d show you a little bit tonight. We’re going to show it to you. It’s very consumer, and you say, what the heck is this? There’s the cloud this guy has talked about, and then he’s going to show me some videogame system. I’m going to try to put it all together for you in the energy business after Ron Forbes from our Interactive Entertainment Business gives you just a little bit of a demonstration, hopefully that keeps you loose. Ron, please come onstage. (Applause.)

RON FORBES: Thanks a lot, Steve.

All right, so we’re going to start off with some gameplay tonight just to give you a sense of how Kinect understands my movements.

So, all I have to do here is just raise my hand, and you can see that when I move around Kinect sees me, and when my avatar moves, that’s because I’m moving. If I raise my hands, that’s because my avatar is raising his hands, I’m raising my hands, too. So, all I have to do is throw the ball up and serve it, and we’re already into our gameplay. That’s how easy it is to Kinect and play some volleyball.

All right. And now I’m playing against computer-controlled opponents right here, but through the power of Xbox LIVE I can also play with my friends all the way across the country. It’s always more fun to compete against people that you know.

All right, now, I could beat these guys, but I don’t want to embarrass my opponents too much. So, now it’s time to relax and just watch some TV.

All right, so now let me show you how people are controlling their entertainment with Kinect, as well as using Xbox LIVE to access content in the cloud, so to speak, and share their experiences with friends across the globe.

A great example of this is our partnership with BSkyB, a major television provider in the U.K. and Ireland. For years, we’ve partnered with them to bring on-demand TV, as well as live movies, a first for the industry, TV shows, movies, sports, all to our Xbox LIVE members. BSkyB is a great example of how through the power of the cloud and Kinect together the way we enjoy our entertainment is truly changing.

Now, all I have to do here is just wave my hand, and this brings up a spotlight hub. So, I can just hover over live TV, and we’re in.

All right, now you’ll have to forgive me a little. Since Sky is based in Europe, and we’re streaming live from a service across the Atlantic Ocean, buffering might take a while. Let’s see if we can get to that. Let me just try that one, one more time. All right, cool, and there we are. No remote control needed, because now I’m the controller.

I can also browse to see what else is on. And as I browse the catalogue, Sky will let me know what my friends are also watching. (Laughter.) It can be a little fun to make it more of a social experience.

All right, so now it looks like one of my friends is also watching sports, so I’m going to watch with him, too. Again, data is kind of flying across this little pond called the Atlantic Ocean, so it can be a little jarring, might take a minute just to connect with him.

Give it just a second longer, but we’ll just keep going.

In this situation now Gripspark and I, my friend across the Atlantic Ocean, are both watching from my penthouse suite in Seattle. Go ahead and take a look around, maybe we can pan around a little. All right.

And once we’re in a room together, we can use our remotes to actually express our thoughts to one another. These remotes are context sensitive. So, if I’m watching a sports match, for instance, I’ll act differently than if I’m watching a movie. So, when Gripspark sees a great call, he can just use his avatar to tell me about it, just like that. (Laughter.)

Through the power of the cloud I can enjoy live TV or movies on-demand with up to seven of my friends, and together we can interact through our avatars, and chat through Kinect.

Sky on Xbox is just one example of how we deliver live and on-demand TV shows, sports, and movies, enhanced by the rich interactivity that people have come to expect from their entertainment.

In the U.S. we have numerous partnerships with content providers, so people have access to thousands of movies, TV shows, music, and sports, all made more interactive and social through the power of Kinect and Xbox LIVE.

And finally, with Video Kinect we’ve created a new video chat service that allows you to communicate with your friends TV to TV, or even from your TV to the PC. On the weekends, I chat with my parents across the country with Video Kinect and Windows Live Messenger. Even though we’re on opposite coasts, it’s like we’re right back in the same living room enjoying each other’s company.

While these amazing experiences are centered in your living room right now, you can imagine how the technology behind Kinect and Xbox LIVE can be harnessed and applied anywhere, from a classroom to an offshore platform to a conference room. This is just the beginning, and personally I can’t wait to see where it goes.

Thanks for your time. (Applause.)

STEVE BALLMER: I get it, it’s 8:30 at night. They wanted us to watch Sky TV. That’s what we were trying to do.

Now, what we’re trying to do is give you a few things that are going on in the consumer world, the ability to interact with technology naturally, to bring that together with a community of people around the world, and in this case with an incredibly rich library of data.

And you think about that, and in almost any industry that’s really what we’re trying to do, natural human interaction, giving access to the people and information that are most important in your life.

You can immerse yourself in the experience. You don’t have to take time out in this world to go be with the technology. You’re in the environment of what you’re doing, and the technology, with the power of the cloud, and these new styles of user interface let you immerse.

The kind of technology we showed you is the result of many years of research in our labs. And while we’re currently using these kinds of advances for the entertainment world, we’ll bring this technology now into the business world by connecting it up, for example, to the PC or the phone.

And if you think about that, you know, Ron was sort of having some fun, and he mentioned an offshore platform, but the scenarios that our researchers have played with are really quite dramatic. A surgeon is sitting doing surgery, and wants to control the scan information and pivot it and view it in different ways, you nod with your head. You want to talk and communicate with a specialist in another part of the world, that happens, the expertise and knowledge of people stored up.

In fact, as I said, in the next few months, we’re going to give software developers the tools to take this technology onto Windows, so that with any PC and any environment in the world you can have this kind of interactivity, and the possibilities are endless.

Now, I talked about medical — scientific research, education, business interaction — you know, we think about putting this kind of technology in an oil and gas collaboration room in Houston, and having engineers in the farthest flung parts of the world be able to communicate with one another to safely investigate and manipulate, for example, a subsea reservoir model, and collaborate with the offshore engineering teams with the kind of precision that is as easy with words and hand gestures but perhaps very difficult with a keyboard.

As I said earlier, the energy industry is on the leading edge of what technology will do not only for business but for business and science. There’s a lot of data in your industry, there’s a lot of visualization of information that comes and is important in this industry.

There’s a lot of collaboration in this industry, not just inside each company, but across the industry, from the people who are working together to invent new sources, the core science, to the people who are in oil fields, right through the production processes and into the generation systems.

So, what are the possibilities if you take next generation technologies for interaction, and combine them with cloud computing, which helps us mass and collect information about masses of information about the world and the people in it?

I’m going to walk you through four possibilities. One is the possibility to manipulate complex models of the physical world and the virtual world just by rotating your hand to test ideas, and use the results in real time to perform actions in a remote location.

The second possibility, you want to integrate an entire ecosystem of service providers, be it a small three-person shop that’s doing maintenance on equipment, or a large international service provider, everybody connected virtually, working off the same data and providing secure collaboration and data integration and communication for the service and repair of a part in far-flung locations.

The third possibility is to capture the intellectual capital and insights of experienced engineers who I understand many of whom are nearing retirement in this business, and to share it with a new generation of employees via the tools that they understand from their personal live, social networking, search, applied though now to the professional world.

The fourth possibility, securely access all of the data you need with a variety of computing devices that fit in your pocket or wall size, wherever you happen to be, to visualize and understand the data that helps you make smart, safe decisions quickly, as you manage digital oilfields, smart grids, and a variety of other mission critical infrastructure for the planet.

Advances in communication and collaboration, massive data aggregation, and business intelligence on smart devices that real human beings can interact with, that’s what we’re focused in on, and that’s what we’re focused in on in conjunction with the partners I mentioned at the beginning, and many others, to bring those advances into the energy field.

We have a customer using cloud computing today for energy trading applications. That customer moved to the cloud because they actually had difficulty scaling conventional technologies in order to determine spot and futures for buying and selling power. Now they’re able to scale the amount of computing power they need to run trading simulations, and have reduced processes that took days to hours.

Another great story is the work we’ve been doing with Baker Hughes, more than 50,000 employees, 80 countries, helping oil and gas operators make the most of their reservoirs. The work there involves complex simulations that literally consist of hundreds of thousands of calculations. Those simulations used to take nine months to build and run. Baker Hughes has reduced that to less than 30 days, working with us, with some of our new cloud infrastructure that we call Windows Azure, which is a new version of Windows designed to support this next generation of applications living in the Internet cloud, and hosted in datacenters operated by Microsoft. This technology is enabling Baker Hughes scientists and engineers to run more accurate simulations, and deliver better results and at much, much faster pace.

The partnership with Baker Hughes gives Microsoft and Baker Hughes the capacity to take on bigger and more challenging computing needs as their customers push them to deliver new orders, and want to scale up their business.

We’re excited about the partnership with Alstom. Alstom’s plant control systems are based on Microsoft technologies to deliver cost efficient, scalable and flexible solutions that can manage the introduction of intermittent renewables into the generation portfolio.

We share a vision for transforming today’s energy infrastructure by using the power of cloud computing to enable utilities, operators, transportation system managers, and individual citizens, as I talked about earlier, to help participate in the power generation right on through to consumption processes.

We’re actually hosting a breakfast tomorrow morning, 7:30, with Alstom, and someplace up here I actually can tell you where it is. I promised Dan I’d do this. It’s in Hilton Americas 335B tomorrow morning at 7:30 for those of you who are interested.

An important part of the drive towards greater efficiency is some work we’ve been doing that we call the Smart Energy Reference Architecture for power and utilities industry. We’ve been doing a similar set of work in upstream trying to promote a certain set of standards that help people bring their work together in a combined and unified way.

We’ve been designing these reference architectures in partnership with the people in this business: Alstom, Aspen Tech, IHS, OSIsoft, and many other companies, to try to build platforms that really help support industry-wide collaboration.

There’s just a few examples of some of the great work that I think will be possible with the next generation of natural user interfaces and cloud computing. I think there’s a big set of opportunities out there to make a difference. I think you’re going to see all this stuff flying by in your personal lives, and every time you look at one of these new technologies I want you to think on how do we generalize, how do we apply, where do we put that to work in our business, because companies like ours are trying to push both on the consumer front, and then to bring those technologies to life to help transform the industry you’re in, and many others across the globe.

END