STEVE BALLMER: Well, thanks. It is a real privilege for me to have a chance to be here today, and to address you. I want to thank everybody for that opportunity. I’ll have a chance to talk to you a little bit about some of the exciting trends that we see in information technology and some of the things that we at Microsoft are trying to do to push those forward in ways that I think should be very, very valuable, not only to all people in the IT industry and IT people here in government, but also some of the ways in which I think IT will play a very positive role in impacting society in education, in health, in science, in job creation and innovation. I think our industry has a very unique and fundamental role, and I want to talk about some of our thoughts on that dimension.

I’m here, of course, for this conference, had a great chat earlier today with some ministers. There’s clearly a lot going on in the market, and so I think this should be a very rich and I hope very interesting opportunity for all of us.

I want to start with a little bit of observation and perspective on Brazil. You live here every day, you sit here every day, you’re close to the action. I have the advantage of being further away. When we look at Brazil, and we see not only, of course, the explosion in the economy and all of the wonderful things that are happening, but from an information technology perspective, whew, things are really, really driving forward very rapidly here in Brazil.

This year Brazil will be the sixth largest market in the world for personal computers, and I think quite clearly in the next three years it will be number three, behind only China and the United States. It’s really remarkable to see the rate of adoption of the PC — and not just in business, not just in government, not just in the most affluent households, but we’re seeing the adoption of PCs much more broadly in the Brazilian society.

From our own perspective we think, of course, this is valuable from a commercial perspective, but it’s also valuable from a societal perspective. So, we have a lot of work that we do as a company not just to sell PCs to those people who can afford them, but to continue to push digital literacy quite broadly in society.

We were talking today about some of the ways that we can invest in building local innovation centers, in doing work to support educational initiatives. We happened to talk about one today in terms of an open university for Portuguese speaking countries in Africa. But really doing what we can do in schools, community centers, innovation centers, to try to spread the benefits of digital literacy broadly in Brazilian society is an important objective for our company.

There’s about 1.2 million people — 1.2 million people employed today in the IT world broadly in Brazil. We’re pleased that over half of them are working in some way with our technology.

But there’s about 50,000 open jobs just in the IT industry alone here in Brazil. That puts a burden on all of us to prepare people for the new jobs that will exist in the IT industry, in addition to the digital literacy skills that will be required overall.

We run a program called Student to Business. We have I think about 6,000 — just in Brazil, it’s a Brazil-specific program, we have about 6,000 applicants, and we get about 1,500 students trained in information technology skills to help fill some of those 50,000 open jobs. But I’m sure there’s more that we need to do, and all of us as an industry can do to continue the momentum and the job growth in this business.

We see great development in terms of students graduating from Brazilian universities, and taking and driving significant software R&D activities around the world.

We have an R&D laboratory now here in Brazil, 50 engineers, growing rapidly. We see people with a wide variety of skills coming out of the university, but some of the most exciting work we’re doing in the world in semantic understanding and research is happening at our labs here. I guess we have some people in Rio de Janeiro, as well as in Sao Paolo doing some of this interesting work.

One more example just to give you the little perspective from the outside. We run a competition every year, every year, global competition for programming for students in university. It’s a global competition. The last three years there have been more competitors coming from Brazilian universities than any other country in the world. In the last three years there’s been a Brazilian team in the top three each year, which is really quite an amazing accomplishment.

So, I take a look at Brazil through a lot of lenses as somebody who doesn’t live here, but I’ll tell you as folks who do live here that there’s an unbelievable opportunity not just in IT but specifically here in Brazil with all the growth and development that is particularly strong in the Brazilian market, which makes it another reason that it’s fun for me to have this opportunity to be with you today.

The topic of the conference is transitions. In a sense I give IDC great credit for that title, and I thank them for allowing me to speak. And in some senses I’d tell you we could probably use the title “transitions” for any IT conference in any year, at least in the 30 years I’ve been at Microsoft, because this is an industry that moves, where things change.

In a way it’s remarkable. No industry in history has had such a long run of fast-paced innovation. Not the automotive industry, not the printing industry, you name it. This industry for the last 60 years has produced remarkable innovation. And yet we look out five years, 10 years, 20 years, and we see no slowing down of the pace of innovation.

I’m going to talk about some of the big themes of these innovations and these transitions, but before I do that, I want to just show a short video of some of the things that we think will be possible over the next few years, and hopefully spark your imagination about the transitions to come.

Roll the video, please.

(Video segment.)

STEVE BALLMER: That’s it. That’s our life, that’s the future.

Now, there were so many interesting little things to think about in that video. You had the girl speaking English to the girl speaking Thai in a virtual videoconference across the world with automatic translation.

You saw large digital surfaces, digital signage, biometric authentication, new forms of business intelligence and information collection.

We saw really for the first time really I would say digital paper, which today I look out in the audience today, I see a few cell phones and I see a lot of people with pads of paper. I still have one myself. This is not very modern and high tech. We need the right hardware, the right software for note-taking, for the form factor, et cetera.

So, the opportunities — and that’s not a 10 year from now type of video, that’s the new two, five, seven years.

I should have asked before I got onstage, but in the U.S. there’s a TV show called 24. I don’t know if it runs on Brazilian television, but it’s about a spy, and he’s got all of this advanced equipment that he’s running around using.

The show started seven years ago. My wife was watching the show with me and she said, wow, isn’t that crazy, we’ll never be doing that stuff.

We’re doing everything. We went back and watched the first season again, and most of the things that were space age seven years ago are reality today.

So, I encourage you to think about these kinds of things as being real, and the impacts they’ll have. You saw the enhanced reality as the doctor was looking at the patient, and then had computer-enhanced reality around the examination that they’re doing. That’s a health care example. The education example, scientific research and exploration.

The environment is important to us all. The No. 1 advance we need to improve the environment is actually better science. We can only conserve so much power, we can only do so many things. We need new science to generate new materials that are more environmentally friendly and aware. Information technology will support that through the kinds of technologies that we showed you in the video.

So, the world is a world of transitions, but the world is a world that we can all be very excited to participate in. Whether you sit here today as somebody who’s trying to improve the operations of a government ministry or you sit here trying to think through how to use information technology on some of society’s big issues, I think it’s just an exciting time to be in transition.

At Microsoft the key for us is to deliver exciting new products that help propel and support and carry forward this vision.

We as a company spend more on research and development than any other company in any industry on the planet, and we think that also implies to us a special responsibility to be moving the technologies forward, hopefully having them be very well adopted to try to make these scenarios come true.

We can attempt big R&D projects in a way that some other people can’t, and it’s important for us to properly engage in that responsibility.

Windows 7, our Office 2010 product, our new Windows Live Messenger product, which I’ll have the opportunity to announce for the first time today starting here in Brazil where our Windows Live Messenger is a super popular piece of software that has changed many people’s lives, our new generation of phones based on Windows that we call simply the Windows Phone.

We’re trying to change the world of search. Ten years from now, believe me, we won’t find information and learn and study the way that we do today. If I want to understand the problems of health care finance, I’ll simply type in “show me how much money various countries spend per citizen on health care, how much do they spend on the old, how much do they spend on the young, how much do they spend in the last year of their life, how much do they spend in other times,” and it will create a spreadsheet, it will find the information, it will go to authentic government sources. Where it can’t, it will go to other authoritative places. And I’ll just sit there, after having typed or spoken that command to the computer, and it will bring that information back to me. That’s the future of search.

Or more every day, I’m interested in a car that costs between this much and this much, where I can finance it at this price, and where it’s available with this many doors. I don’t know, I’m making this up.

But these are the kinds of things we really want to know, and we want these technologies to be smart enough to come with us. That’s what we’re working on in our Bing search engine, which is continuously updating every quarter, every six months.

So there’s a range of innovations that we’re bringing to market, and the speed with which we are doing it and our industry is doing it just continues to accelerate.

I got up in front of a group of our employees to give a speech about the state of the company the other day, and I started talking about we just shipped the new version of our SQL Server product, and a new version of this and a new version of that, and I forgot we had also just shipped a new version of our Visual Studio development suite. And some of the people in the company got up and said, Steve, Steve, don’t forget us. Because the pace is so high, not only in our company but sitting in your shoes, you’re looking at these innovations coming from Microsoft and coming from other industry participants.

The bad news is they come fast and furious, so to speak. The good news is they’re all enhancing your ability to achieve some important goal in your work.

As we sit here today specifically and hear from our customers in IT departments, from CIOs and particularly on the government side, the top level themes we hear are agility, efficiency, and empowerment: How does IT let our — not just how does IT move with greater agility, but how does IT help our organization conduct its mission with greater agility? How does IT help us save costs, not just in our own — not just in the IT department, but broadly in the company? How does IT help empower our employees, giving them the information and tools that will help them in an ad hoc way drive better decisions, better customer service, more efficient operations?

In government specifically then the themes are how do we modernize the way government serves the citizen, how do we change the interface with the citizen that does more to engage the citizen and help them appreciate what government is doing?

And how do we create opportunities, how do we create economic opportunity in ways I discussed, how do we create new educational opportunities, how do we create new health care opportunities?

Certainly health care is one of the most information-intensive businesses in the world, and yet today it remains one of the least automated businesses in the world.

And when I talk to government people about IT, we’re usually talking about one of three things: How do we modernize the public administration and have more e-government with the citizens, how do we change education with IT, how do we change health care with IT. There are many other issues, but those would be three of the very much most prominent, and I’m sure three that are on many of your minds, in addition to all of the other opportunities that are on the minds of every IT person in every organization in the world.

That’s the dialogue. Our product set, the way we think about it, the way our industry thinks about it, government is very important. Government winds up being about 20 to 25 percent, depending how you count, of the IT sector globally around the world — in some countries bigger, in some countries smaller.

So, what we and I think the industry tries to do is build very general purpose tools that work for government and nongovernment customers, but then be very specific about some of the specific needs and interests which are different inside the government arena.

The most important product our company has launched in the last year, no doubt, was Windows 7. Windows is a very important piece of infrastructure on literally over 1 billion PCs around the planet, and then the server version of Windows is also very important, running on over 7 million servers around the world.

And we made new releases of both of those products in the fall of the year, and particularly in this economy, in this time, in this tough efficiency environment, the real focus of those products was on enhancing the efficiency of the user using the PC or of the IT administrator who’s trying to securely and effectively and in a low cost way manage and deploy these PCs to perhaps thousands or tens of thousands of people.

I’ve been involved with a number of large government projects, the National Health Service in the U.K. The National Health Service in the U.K. literally does — manages an IT footprint of well over 1 million desktops. How do you drive software for the new efficiency?

The U.S. Air Force is another account I happen to be personally involved with. They own about 500,000 PCs. How do you standardize and measure and manage those things very efficiently? Windows 7, critical part of that.

We’ll finish important work to that platform this summer as we introduce our new Office 2010 product, and all of the back-end server infrastructure that supports those things.

And there’s a range of new features, et cetera, et cetera, which I’m sure our team here in Brasilia would be happy to share with you, but I want to underscore that not only when it comes to new capabilities, but when it also comes down to helping you run your software and hardware environment at lower cost, we’ve made important improvements to this, because we know that too is a part of transition: how do we help you save money doing the things you did yesterday, so you can use money on new applications that will really improve the performance of your organization.

The biggest transition underway right now is the transition to what our industry has chosen to call the cloud.

What is the cloud? That probably is a good starting point. Well, about 15 years ago, roughly, we all started talking about the Internet, the Internet, the Internet. And nobody was quite sure what the Internet was back then, but there was one of these websites and this e-mail, a lot of things popped up.

Someplace around 10 years ago, people said, we can use this Internet in new ways. So, some new terms were invented: ASP, business models, utility computing, blah, blah, blah.

At Microsoft we created a new word, too, Software Plus Services. The rest of the industry liked software as a service, blah, blah, blah, blah, blah.

But consistent, now we talk about the cloud, and what the cloud really refers to is the next generation of application and platform scenarios for the Internet and the microprocessor. Those are the two wonders of information technology invention over the course of the last 20 years — or 40 years. The microprocessor was invented in the early ’70s. The Internet was actually also invented at the same time. But the microprocessor started to get very popular in the early and mid ’80s, the Internet in the ’90s, and every five years there’s a new application of those two core technologies or a new set of scenarios. The cloud refers to the next generation of scenarios, enabled by the power of that microprocessor and the power of the Internet. That’s all it means.

And who knows, hopefully our industry doesn’t change that word again for five years, because we have a whole lot of work to do, everybody in our industry, the vendors, the customers, we have a whole lot of work to do to fulfill the promise and the application scenarios of the cloud.

There will be new commercial models, software that gets delivered from datacenters, software that gets charged as an ongoing service as opposed to purchase, hardware that works in the same ways. We see that in the telephony industry, because essentially many phones are subsidized and essentially charged as a service.

So, the cloud, as we say, creates a new set of opportunities. There’s a new set of scenarios for customers and for businesses, vendors alike, to create new commercial models.

But the cloud also creates a new set of responsibilities. The more scenarios commercially embrace the cloud, the more we need to do a good job on privacy, on security, on service level agreements between vendors and their customers. So the cloud creates new commercial opportunity and new commercial responsibility.

No. 2, the cloud presents a new way to think about software that both learns and gets smarter as it goes, and that helps its users learn and get smarter as they go.

I gave you the example of collecting health care data. When we do that, when the software does that, it won’t know exactly what you meant. It’s going to try to compute statistically what you were interested in, and it will get smarter. The more people that use it, and the more any one user uses it, the smarter the software will get in helping the user.

Already today you could say every day we have software like Bing, our search engine, that’s learning new things about the world by crawling and indexing the Web.

We have sensors going out to all parts of the world, mapping locations, taking pictures of locations. We get smarter every day. The software learns about you, it learns about the world, and it helps you learn.

Most of the software we’ve all created to date, because it couldn’t live in the cloud, it was based on fairly fixed algorithms, not statistical approximation. That changes in the world of the cloud.

No. 3, the cloud will continue to enhance the way we interact with other people socially and professionally.

Comes time for the World Cup in 2014, and you want to watch Brazil in the finals, I don’t know, playing Argentina I’ll say for now. We’ll keep it very competitive till the end in this scenario. But let’s just say that you have a good friend in Argentina that you want to watch the game with, but they’re going to sit in their home in Buenos Aires, you’re going to sit in your home here, but you want to watch the game together.

Technology will exist that will make you feel like you are virtually in the same place. You’ll be watching exactly that match. You’ll say to your friend, “Hey, did you see that kick, it was phenomenal by Brazil,” and you’ll see your friend’s face change and get so disappointed, and blah, blah, blah, blah, blah.

It will come for the halftime of the match, and maybe you want to kick it around with your friend. The computer will recognize you and your foot, and you can be bouncing the ball back and forth to your friend in Argentina, with the computer taking virtual actions on your behalf.

That’s the cloud enhancing personal or social interaction. But you can think about this in the professional case, too. How does a citizen, maybe the citizen’s accountant, maybe the tax authorities, how do they all securely collaborate electronically on perhaps an issue with a tax filing? Well, today, a higher percentage of Brazilians file their taxes electronically than anyplace else in the world. But if you actually wanted to have an interaction and a discussion and a conversation, very difficult to do, particularly with the kind of security and privacy that government and the citizens both want.

No. 4, the cloud will continue to change the way we use software and microprocessors in PCs, in phones, in TVs, and in other smart devices.

When you watched the video, and you saw the way people were using those devices, those weren’t just very thin, dumb devices talking to a very smart cloud; smart devices talking to a smart cloud, but smart devices that are simple and easy to manage and take care of, and there will be a whole bunch of innovation in the devices for vision, for recognition, for voice recognition, to recognize your intent and what you mean when you say something.

No. 5 transition will actually be in the way the back-end infrastructure, the thing that we call the server today, and the software that runs on it will change.

We have learned, between our Hotmail, Messenger, and Bing services, we run the largest or second largest, I’m not sure, it goes back and forth between us and Google, we run the largest datacenter infrastructure in the world. And what we’ve found is if you want to run a global, high availability, rapidly changing datacenter environment, old style hardware and old style software doesn’t work. You don’t want to manage physical machines. Virtualization has been a step forward. Now instead of managing physical machines, we manage virtual machines, and we have some great technology in our Hyper-V software to help you do that.

But tomorrow you really want to manage the application in these new datacenters. We need new programming models to get there.

We need new hardware. The modern, if you will, server will actually be more like a datacenter that comes in a box. It may have the equivalent of thousands of servers in it, but literally it will look like a refrigerator or a shipping container. To build a new datacenter you’ll put down a slab of concrete, a fence, probably a rain cover. You’ll plug in a power cord, you’ll plug in a network connection, you’ll plug in a hose. It used to take a fire hose to cool what we use in our datacenters. Now we can do it with a garden hose. Much more environmentally sound, because the power consumption footprint has been reduced.

So, we’ll take — we’re working with the hardware vendor community to take the cost, to take the complexity, the construction cost, the waste, and really reengineer the whole software and hardware architecture for what we think of today as the server, what we’ll think of tomorrow as the cloud.

If we operate the cloud, we talk about it as the public cloud, but these same technologies will be available over time to our customers with a special support relationship with us, for example with our Windows Azure and SQL Azure technologies, so that you can run your own private cloud, if you will, in addition, and benefit from these same technologies.

So, the cloud is the big transition of today. It’s the next generation use of microprocessor and Internet, and it’s going to drive transition and innovation in these five critical ways.

At Microsoft we’re committed to these transitions, and specifically today to the cloud, but today, here and now, we’re also very committed to making sure that you can do more and more with today’s products, to serve the various application and scenarios that you see inside your organizations.

And when you look at the range of new products that I list on the right of the board, what we’re really trying to help you do is not just search the Internet, but how do we make it easier for you to search your organization’s data, how do we put that information that’s embedded in your systems at the hands of the users in your ministries. We’re trying to help your users be more productive, get more things done by improving the toolset that they use every day at work.

How do you really take your work on the go with you? We focus in on that in our phone software.

People spend a lot of time collaborating: voice, e-mail, other forms of collaboration. Enterprise applications, payroll, finance, accounting: How do we help?

CRM. CRM used to be something that was only interesting in the private sector, but now it stands for citizen management, not just customer management. We’ve found it quite popular, quite popular, quite important in government applications, and moving things forward. We actually do a good amount of our CRM development actually here in Brazil.

Virtualization and datacenter management. The first step to the cloud is to have a highly virtualized datacenter environment. Our Windows Server product with Hyper-V goes that direction.

Business intelligence. There’s some of the most important questions I get from our customers today is, how do we give better access? Think about the amount of statistical data and transaction data, and yet people’s ability to use that information numerically is limited. We take big steps with our Office 2010 and our new SQL Server release. And the list goes on.

So, we’re not only committed to the longer term transitions, we’re committed to trying to help you today, answer the needs that you’re hearing from your users and give you the tools to do that as cost-effectively as possible.

I see a very bright future in information technology. It’s one thing I get a chance — I’m going to give a speech today at the University of Sao Paolo, and they’ll have a bunch of students there, and I don’t even know if they’ll know how lucky they are to have picked careers in information technology.

When I was a kid, there was a movie that came out with Dustin Hoffman called “The Graduate.” He was a recently graduated college student. And he’s getting married, and the father of his soon-to-be wife comes to him and says, “I have just one word for you — one word: plastics.” The young graduate looks back, not understanding. He says, “Plastics, the future is in plastics, that’s where the opportunity will be.”

Well, that might have been true when the movie was made in 1960-whatever, but today it’s all about IT. The future, so much value, whether it’s in science, health, education, job creation, economic development, so much opportunity across the world will be created by people driving from an information technology point of view.

I don’t want to say there aren’t other great careers, I don’t want to say there aren’t other important problems in society, but information technology, almost like education, is one of the basic building blocks on which societal advances will happen.

So, the chance to be here today, to talk about some of these transitions, to talk about the important role all of us in our industry can play in transforming society and economy overall, it really has been my pleasure to have a chance to do that. I thank you very much for your time. I thank you, we have a lot of very good customers in the room. For that we’re very appreciative. Always more we can do. Our team here in Brasilia is happy to follow up. And I will say that if there’s anything I can do, any question I can answer, since we don’t have time for formal question and answer today, please e-mail me. I’m [email protected], and I’d love to have a chance to hear from you further.

Thanks and enjoy the rest of the conference. (Applause.)

END