Steve Ballmer: CXO Keynote

Remarks by Steve Ballmer, CEO of Microsoft
CXO Keynote
May 26, 2010

STEVE BALLMER: Well, thanks. I’m happy to have a chance to be here with you today. I don’t know, just flying in last night from Malaysia was the first time I actually opened up the backgrounder for my trip this time in Singapore, and I’m looking at it, 20 years we’ve been doing business in Singapore. And maybe as the expression goes, time flies when you’re having fun, but my goodness, it feels like at least two IT lifetimes ago that we first opened up and came here to Singapore.

A lot happens in 20 years, a lot happens, whether it’s business growth and success, change in the economy, but if you take a look at what’s happened in our industry, 20 years ago, basically nobody had a cell phone. Twenty years ago, basically nobody had a PC. Twenty years ago, nobody knew what the Internet was. And today we’re talking about infrastructure and tools that really at the end of the day are fundamental to the way we work and live.

And if you project out and you say what does the world look like 20 years from now, I think it continues to change and look quite dramatically different, and quite dramatically better than it does today. The ways in which we’ll all access information, people, the ways in which we will interact with one another will be substantially better, substantially different.

I can think of many scenarios just in the next three, five, seven years that we’re trying to touch, and in a sense it’s almost impossible to predict 20 years.

I certainly can tell you that in the early ’90s there was a prediction once that Andy Grove, the CEO of Intel, he made to the press, he said to somebody, there’s going to be a year when there’s 100 million personal computers sold, and Bill Gates and I thought that was the craziest thing we’d ever heard. Now, we believed, but we couldn’t forecast. And I don’t just mean that in a numeric sense. And yet the industry has so much innovation in it. When we look back 20 years ago, we will be amazed at some of the forecasts that would have come true if people had been prepared to make them.

What I want to do before I talk with you a little bit is I want to show you a short video clip. It’s just a couple of minutes. And it’s things that we can envision, and not idly envision, things that we’re working on doing and making happen technologically over the course of the next several years. And I hope it kind of sparks your curiosity, imagination, and maybe excites you a little bit on some of the new things that you’ll be doing in both your personal lives and in your business lives with technology. So, let’s roll the video.

(Video segment.)

STEVE BALLMER: Just take a look and think of some of the examples: augmented reality, the ability to take a digital device, hold it up in front of the world, and have it tell you more than your eye can see. We saw the doctor using such a device. We saw that in a few of the other cases.

The literal modeling of the physical world in the virtual world, and you see the repairman, the product designer working with large scale, rich, virtual models of the physical world to design the future.

Business transactions, repricing groceries in real time as each customer walks down the aisle, and you want to give the right customer the right deal at the right time.

Large surfaces of information that allow you to dig in and explore data, visualize what’s out there and ways to enable you to see patterns and trends, and make decisions better, faster, more effectively.

The ability to communicate with one another as if you’re physically there; the little girl and little boy communicating, writing to each other, speaking to each other across essentially a virtual classroom, one speaking in English, the other responding in Thai, and having automatic translation.

These are the kinds of things that we ought to assume. I’m not saying you should go bet every dollar in your IT budget today, but certainly as we are investing our R&D dollars, some $9.5 billion this year alone, we’re investing to try to make these scenarios come true.

How do we change the very definition of the phone, the PC, the TV? How does the server and datacenter change in the future to be lower cost, much more effective and efficient to operate?

Every CEO complains to every CIO about the cost and complexity of updating and managing and maintaining IT systems. How do we give tools to let those things be fundamentally redesigned based upon new technology metaphors, and where does that go?

And last but not least, how do we change the paradigms by which people acquire information, analyze information, and communicate information and communicate to people in new and different ways? I think there’s a lot there that needs to be done.

Our company kind of lives on what I would call two beats. Beat number one is we’d better always be bringing you something new that fulfills this vision, and number two, we’d better always be looking three, four years down the road to be creating the next generation of that, always envisioning what can happen in the more distant future.

Our company happens to be in the middle of a pretty exciting cycle of product deliveries. At the end of the day, people often ask me, R&D is an innovation-based business. Yes, it is. But R&D is also an execution-based business. Great R&D has the property that it is forward-looking, that it surprises you, that it amazes you, that it satisfies you, and that it happens on some kind of regular basis.

The one sort of most important lesson I’ve learned is you have to keep the metronome of improvement going, even while you continue to look for discontinuous innovations that are very different from anything that has preceded it, and we work on both.

As I talk to business leaders and IT executives around the world, I think the dialogue about IT tends to center in a few areas. Business leaders want to know how does technology help me drive culture and communicate with my employees. What will it let me do to better serve my customers, and how does it let me use my network of suppliers and vendors more efficiently?

How does it allow me to be more agile in what I do? A lot of what a business does these days either is essentially an information product — banks, telcos, media companies, they all deliver essentially a product that is IT, and the agility in delivering new products is an IT agility issue. And people that are in manufacturing and other more physical businesses, the question I get is, I want to do something new, but if I’m going to do it, I want a reliable, quality process to deliver it, and I need an IT system to get there, and I don’t want to wait a year, two years, three years, I want the agility to transform my business at any time.

The dialogue goes to cost savings. How do I use IT to engineer other costs out of the business? This is a big theme right now in some senses amongst governments around the world. When people talk about e-government, they talk about citizen support, they talk about transparency, but they also talk about how are we really going to reshape government to save costs and complexity on the back-end so that we can put more government energy into things like education and health care, the front-end which is so important.

Empowerment: Many business leaders will tell you people are our most important asset. And yet the tools and information that many businesses give their people to really analyze, to look in and to make decisions, there’s a lot of room, a lot of room for improvement.

I spent an hour yesterday on a panel with a guy named Tony Fernandez, who started Air Asia, a very interesting guy I thought. But he was just all over this idea of my people are my most important asset. They give me the best ideas to move our company forward. And he was just pushing me, pushing me, pushing me, how do I use these tools, how do we use these tools so that my employees know more about where the bags are, where the customers are, where they want to go. We spent a lot of time talking about how he continues to change the interface over the Internet with his customers, and how does he then take all the information he’s collecting and putting it in the hands of his sales and marketing people to tell the next generation story. It was all a message of empowerment of employees to drive better business productivity, and he wanted to know what else should get expect to get out of IT.

And last but certainly not least, every CE is asking every CIO, how are you going to be more efficient. IT is probably the biggest cost in most companies that CEOs don’t grow up kind of, what shall I say, as native with. CEOs come up through marketing or product development or finance or trading, and then you turn around and you look and some very large percentage of your cost structure is in IT. So, it’s sort of a tough dialogue, but certainly I’ll tell you that our company is really very focused in on making IT itself more efficient.

Maybe I’m a wishful thinker or maybe not. I don’t think IT is going to decrease necessarily as a percentage of world GDP, but I think if we could save most business in this room 10 percent of your IT budget, and you’d save that in people, you’d save it in capital — most people only spend a few percent of their budget on software — but if you saved that money, the first thing you’d do is you’d turn around and reinvest it in all of the applications that simply aren’t getting done that you want to do to drive your business.

We’re working with customers here in Singapore on all of these agendas, but one of the most important agendas for our company and our industry is the embrace of a whole new technological approach that we call cloud computing. We — our industry calls cloud computing.

It’s kind of a funny thing. I tried to describe cloud computing to a group of 100 CEOs at our headquarters in Seattle last week, and I thought I had done a really fine job. And after I was done, a lady in the front raises her hand and says, I don’t mean to be slow, but I still don’t know what is cloud computing. Is it kind of like the Borg or something — bright, smart lady.

So, I’m not sure my goal for today is going to be to actually explain it to you, but I do want to make sure that people understand that I think everybody in our industry accepts it’s the next major transition point in terms of how IT gets done. And when your CIO comes to see you and says, we’re taking a look at the cloud, today maybe they’re on the leading edge of that, not the bleeding but the leading edge, but it really relates to a fundamental change in the way we think about fusing the Internet, best of the Internet, with the best of what’s going on today in your datacenters, with the rest of what people love about the PC, and the best of what they love about mobile computing.

It’s a redo of kind of the infrastructure on which IT is built. It should drive out capital expense. It should drive down operating expense. It’s an opportunity to do things more efficiently by having more of it done in a standard and industrialized way based upon so-called cloud services that are operated by companies like us and our partners.

Even on this kind of leading edge move to the cloud, two of our interesting and important reference customers are here in Singapore. The Singapore Air Terminal Service has moved several thousand users inside their organization to cloud computing. RSVP, which is an non-governmental organization here in Singapore, has moved also quite a nice number of users to our cloud platform.

Around the world companies like Nokia and Coca-Cola, GlaxoSmithKline, have been moving with us to the so-called cloud.

And if we do this cloud right, which we will absolutely do, we will improve agility, we will help you save costs, IT costs and others, and we will dial up the level of empowerment and access to data that people inside your organizations have.

As I said, we have a couple of different rhythms of R&D delivery. We’re also delivering a lot of phenomenal products this year that bring new capability almost independent of the cloud: a set of cloud offerings, a new version of Microsoft Office on the right. I’ll launch that here in Singapore later today.

But Microsoft Office has gone way beyond just being a spreadsheet and a word processor. It’s a business intelligence program. It’s a place to manage content. It’s a place to search for enterprise data. It’s a place to communicate and collaborate in real time, to do videoconferencing and voicemail and web mail. It’s also, though, still a spreadsheet, word processor, and a presentation product.

I think everybody will find a set of capabilities in the new Office that each of you will relate to personally and say, wow, I could do that; I didn’t think I could do that.

I will tell you a deep, dark secret. I’m not an expert in the high-end features of Excel. But with the new Excel my ability to dive in, manipulate, analyze data has gone up tremendously.

I don’t design these PowerPoint slides. I don’t sit there, I’m not quite that artistic. But my ability to make last minute changes has gone way up with the new version of PowerPoint. And I guess probably everybody who works for me is glad for it, since when I go out on the road for a week like this, I’m always sort of tweaking and tuning how I think we should talk with our customers about the various things that we do.

I talked a little bit already about the cloud, which, as I said, is this next generation.

I want to end with a couple remarks about Singapore, and particularly Microsoft in Singapore. There is so much going on in this country and in this market. I was talking to the minister before we came in, and he was saying this market by itself probably can’t — it just can’t be that big, and I think everybody understands population in some senses is population. And yet Singapore as a hub, as a real center kind of for access, whether it’s electronic access or physical access to Asia is very important. That’s why we do have a cloud datacenter here for our two big cloud offerings, Microsoft Online Services and our Azure services. We have capability, datacenter capability for both of them here in Singapore.

It’s why we’ve used Singapore — I know it becomes almost kind of a little local motto, Singapore is a living lab. Singapore really is a living lab. For those of us that don’t live here every day, I’ll tell you we appreciate it. The population here accepts new ideas and new technologies.

I was telling the minister and Mr. (Seton Tay ?) not everything works, but you can test a lot of things here. You can test quickly and get feedback. We’ve certainly done that with TV, broadcast over the Internet where this country has been a leader and a lab and a prototype. We’re doing it in education now, particularly around the cloud.

We have a project we’ve been working on for about three, four years that we call Backpack LIVE, how do you really rethink the students’ life. And I don’t think we’re there yet. I do think we want to move to a world where a student can carry a tablet, it’s got a keyboard, comfortable and familiar, that has all of their textbooks that they can mark up, that they can take notes. That’s the world we will get to over the course of the next year or two, and that’s what the real backpack of the future ought to look like.

So, this is for us a hub, it’s a living lab, it’s a datacenter location, and it’s a place where we do a lot of business. And to those of you in the room who are good customers, which is essentially everybody, I want to say thank you, because we really do appreciate your business and the opportunities that we see with you here in Singapore.

So, with that, I’m going to conclude my prepared remarks. I think we have an opportunity for some Q&A. I hope we get to every question. I tend to give a little longwinded answers, though, so we might not. If we don’t get to something on your mind, my e-mail address is [email protected]. Please feel free to follow-up afterward on e-mail. It’s not a joke; I’d be happy to hear from you.

Just two small things. I don’t promise I’ll get back to you in 24 hours. I’m not quite that good. And number two, make sure you write your e-mail so it doesn’t look like spam to the junk mail filter, and I’ll get back to you for sure. Thanks a lot. (Applause.)