Steve Ballmer: Microsoft Worldwide Partner Conference 2007

Remarks by Steve Ballmer, CEO, Microsoft Corporation
Microsoft Worldwide Partner Conference 2007
Denver, Colorado
July 10, 2007

ANNOUNCER: Ladies and gentlemen, please welcome Steve Ballmer. (Cheers, applause.)

STEVE BALLMER: You guys energize me! Thank you for that. Thank you, thank you, thank you. (Cheers, applause.)

I’m a broken record. If you’ve ever heard me anywhere in the world, anyone of 80-odd countries, I always tell people the favorite thing I get to do, absolute favorite thing I get to do in my job, bar none, is meet with our partners. Our partners have sort of just the perfect characteristics. We’ve got people who are entrepreneurs, people from bigger companies. We have people who are independent of Microsoft — you’re only here if we’re doing a good job, but you’ve got the same kind of interests and concern and dedication to seeing us get better that our own employees have.

And so for me the opportunity to get up and talk, and I’ve got two or three or four Q&As today, it’s a very energizing thing, it’s a very exciting thing, and I’m certainly honored to see such a large, huge group of our partners, the largest group of partners ever collected for Worldwide Partner Conference, thank you all very, very much for coming, we appreciate it. (Applause.)

You heard from Kevin on how things went, so I’m not going to go through the details, but I’ll just remind you of that one most salient point: Through the first three-quarters of the fiscal year we reported very good numbers, which means you did a lot of fantastic work on both of our behalves. And I’d be remiss if I didn’t thank you for that, and when the tally is ready to post on our fourth quarter, I trust and hope it will reflect that continued strong drive and fantastic work that you’re doing to drive adoption and use and value for Microsoft technologies and customers around the world. So, thank you for that; we’ve got a lot in front of us.

And what I’m going to try to do today is step back a little bit and talk to you about in a broader sense big picture Microsoft and big picture on some of the important changes, transitions, and transformations that we see going on in our industry.

I will speak to you today essentially the same way I speak to our own employees. Our partners, you need that same kind of a shared view on where we think things are going, how we participate and how we participate together.

Kevin talked about the Microsoft advantage, people, multi-core, software plus services, our partner ecosystem, and, of course, our long term, consistent approach to innovation. I want to build on that theme by talking in more depth, particularly in the area of innovation and a multi-core business.

I want to start though with just a reminder and refresher on how we characterize the mission of our company. All companies are there to take care of their shareholders, all companies are there to take care of customers, and yet at the end of the day you have to decide what is your special purpose or mission. Growing up with the personal computer we grew to understand that the fundamental value of information technology is to enable people’s potential.

So, we talk about software may be our core skill, but the core value of software is to enable people and businesses throughout the world to realize their full potential. That is motivating to us, that is galvanizing to us. We think we share that very much with everybody in this audience, who is trying to help its customers enable and realize their full potential.

The fact that software is our core competence is important. Information technology really is a grand enabler, and software is a grand enabler, and almost everything we do, even our applications are really just tools that allow you and our customers to go new places and find new things.

We stepped back this year and we asked ourselves in a very systematic form — we’ve always done this in an ad hoc form — but we’ve asked ourselves this year in a very systematic form where are we going to be, where’s the big innovation going to come four years, five years, seven years. We have product plans and roadmaps, and we’ll talk about those, for the next couple or three years, but where are things going beyond that?

So, we sent a group of technical people and marketing people off to think about this, and they came back and said, “Steve, we’ve got it.” “What is it?” “The list, we’ve got the list, Steve.” I said, “What does it have, four or five things? Let me see the list. Hand me the piece of paper.” And they said, “No, no, no, the list has 70 things on it, 70 important innovations for the future.” And I said, “Come on, come on, come on. I’m kind of a sales and marketing guy; it’s got to be five, doesn’t it?” They said, “No, we can’t shrink it that far and have it be real, not just marketecture.”

And I looked through the list, what’s the future of reading look like, what does the future of television look like, how does voice and natural language wind up as a fundamental part of the user interface metaphor for these computers and for these systems, how eventually do we get all handwriting, reading, and annotation done on the computer. And every one of these listed what are the important technology advances and breakthroughs that are going to be hard but need to get done. Every one of these quests, if you will, would have the potential to power a startup, and every one of them is important to us.

So, I agreed, particularly after Bill pointed out that if you spend US$7 billion in R&D, and you’ve only got 70 things you’re doing, that’s $100 million each, and that seemed like a fair trade anyway, but particularly after that I said, okay, how about if we can put these into some buckets?

And we did talk about the innovations that would transform the world for BDMs, for business decision-makers, and there’s a group of about seven or eight of those, and they’re all about rewiring the economy. For all of the talk of e-business today, much of what happens inside individual businesses and cross business boundaries stays on paper. We talked about transforming the datacenter of the future. People I think know, and I’m going to talk about this in the context of software plus services, that the way we manage and handle information is going to change in the future. The future of the information worker, how do we effortlessly connect and put people in control of information, whether that’s reading or analysis or communication and collaboration.

Developers: Developers still write code about the same way they did when I came to Microsoft 27 years ago. How do we move up the semantic level and allow people to express intent instead of explicit instructions?

Consumers and entertainment: How do we really help connect the world of information and entertainment for consumers?

But on top of that and permeating all of that will also be a quest or a set of innovations that affect the fundamental model of computation and user interface for the future. We grew up, all of us, with a model called the mainframe, very centralized, very poor user interface, very few of them. The PC brought a new model of computation and a new model of user interface. Client-server was again a new model of user interface and computation. HTML, the Internet and the Web was a new model.

What we need to do today as we evolve, and what I’ll spend most of my time today talking about is the evolution and the vision for how the core model of user interface and computation changes over the next few years, because that does affect all of us and all of our customers, it affects developers, IT people, business decision-makers, information workers, everybody, and I want to share our view of that evolution with you.

At the same time we’re working very hard on these long term innovations, we are also building new business capabilities. And it’s important for me to stress this because our partners will need to build new capabilities with us.

We grew up as a desktop company. I never knew what a desktop company was; I just knew that we had a tattoo on our head that said Microsoft equals desktop company. And I was sure we were a desktop company, because we spent many years with people telling us we’re not an enterprise company. And we worked at that. Starting in about 1988 we said we’re going to be an enterprise company, and we worked at it, and we worked at it, and our partners, you worked at it, you worked it, and you worked at it.

About four or five years ago, people started saying, “Microsoft is an enterprise company.” Today we get told how we can be a better enterprise company. I’m sure I’m going to hear a lot about that in the breakout sessions that I attend, and we hear it from customers.

But being an enterprise company required a whole new set of partners, it required a new set of sales and marketing, support services, and today as the model of user interface and computation changes, we’re trying to build two new business capabilities, a capability generally in the world of online, of service delivery, of advertising, of subscription, and a business capability around non-PC devices, around phones, music players, gaming machines, TVs, different sorts of devices.

And for us as a company and us together with our partners to fully lead and realize the vision for this new model of user interface and computation, it will require that we all continue to build new business capability as well as new technology capabilities.

The shorthand I like to use when we’re talking about this evolution in computation and user interface model is software plus services. Some people like to use software as a service, and I think that basically has certain implications that I don’t think are right. Some people talk about Web 2.0; that’s got other implications that I don’t think are exactly right.

I think this next generation model of computing needs to bring and will bring the only model that will be able to really supersede where we are today, needs to bring together the best of four very different phenomenon: the best of the desktop PC world; rich user interface; offline and online access; what I call personal integration, the ability to bring things together and integrate them and store them and manage them and link them together in unique and arbitrary ways, not restricted to what somebody will let you do on some server or some service.

The desktop has been powerful. Over 200 million desktops sell a year. People don’t want to give up the benefits of desktop computing. Enterprise computing: Enterprise computing brings individual ability to control, to manage, to enforce security, compliance, reliability. And as we talk about a world of new computation model and software plus service, we’re not going to be able to go to customers who are in the financial services sector and say, sorry, you can’t comply with the banking laws if you move to this service-based infrastructure. We need the best of the desktop, the best of the enterprise, and the best of the Web or the online world.

People like the way on the Web you just click and run any Web site or anything that you’re doing. Because the Web grew up universal, the notions of searching and collaborating, social networking, anywhere access, and high scale, high volume, low cost operations are built in.

And increasingly people want the best of devices: How do I get this in my pocket, how do I get this on my big screen?

The best of all of these worlds will define the world of software plus services. We won’t take steps backwards. People will stay with existing models of computation until the software plus services model addresses every one of these to some degree.

Some people will move on the benefits of one thing or another. Early enterprise companies embraced the desktop, but eventually these things got stitched together. And we’re working at Microsoft with our Windows and Windows Live strategies on a model of computation that does exactly this, the best of all of these environments.

One of the questions I often get asked, which I think I tried to address briefly here, but I want to be very explicit about, is what about the future of user experience. Will the world go to all thin clients and all HTML? And I think that is truly not right — I was going to say nonsense, but it was truly nonsense to think that the world is going to give up the benefits of these rich clients, the controls, the speed, the offline characteristics. And as we talk about things like voice recognition, handwriting, natural language recognition, video processing, there’s going to be more demand for rich clients, not less.

And so the key is how do we make the rich client as click-to-run as a Web application built in HTML is today? That’s the key. We have a very good example of the way this can work when it’s working really well in Exchange and Outlook. Outlook is a rich client app. Outlook Web Access is an AJAX app that looks exactly the same, so it’s JavaScript, HTML talking to the same back-end. Office Outlook Mobile is a device form factor, and Office Outlook Voice Access makes this accessible even versus a telephone.

And as Exchange has moved now to also live in a hosted form, it has moved to use HTTP protocols. You essentially have a world in which perhaps the closest model we have to what I think people will really want as the future model of computation is at least emblematic in this one kind of single application experience.

That’s the user interface side, and you see that even in mobile devices. Mobile devices are getting richer, mobile devices are not getting smaller and thinner. Ironically, we and Apple probably would agree on this, as they ship their new phone that’s got big, heavyweight operating system, blah, blah, blah. The world is not moving to just a thin browser; we want the benefits of rich, of enterprise, of Web, and of devices.

We’ve done some work in this area which we announced, version one is now available. We’ve got a very aggressive plan to enhance around a technology we call Silverlight. Silverlight is a rich client runtime that runs on any operating system basically and any browser, and allows you to create rich client applications with very nice user interface.

And I want to have Brian Goldfarb come on out and show you a little bit of Silverlight as part of this new model and new way of thinking about software plus services. Please welcome Brian Goldfarb. (Applause.)

BRIAN GOLDFARB: Hello. Thank you, Steve.

STEVE BALLMER: What have you got?

BRIAN GOLDFARB: Good morning, everybody.

AUDIENCE: Good morning.

BRIAN GOLDFARB: Good morning.

All right, so Silverlight is a cross-browser, cross-platform plug-in that’s going to usher in a new generation of media experiences and rich applications on the Web. It’s a comprehensive platform that enables developers and designers to collaborate together while providing a seamless installation experience for end users. Now, for you this means you can easily leverage your existing .NET skills, your existing tools to target an entirely new category of applications for your customers.

So, let’s go ahead and look at a survey of the kinds of experiences you can build with Silverlight.

Now, the first thing that’s important is acquiring the bits as an end user. I’ve accessed a simple casual game, a chess application, but I don’t have Silverlight installed. I get prompted with a nice logo here that prompts me to click on it. It’s going to download the bits from the site, go ahead and run that, and it’s going to install in under 20 seconds, it’s under a 4 meg download, and once that’s complete, I get my application; so really nailing the deployment scenario for the runtime itself.

Now, chess is an interesting example here, but it’s all about showing the performance of .NET, and what does .NET mean in the browser. One of the challenges we’ve seen with AJAX is performance. There are limitations in the quality of the experience that you can build because of JavaScript performance.

So, what I have here is a simple chess game that I can play against the computer, but what’s much more interesting is to make the browser JavaScript play against .NET. And what you’ll see is .NET is about 1,000 to 1,500 times faster than browser JavaScript alone, meaning if all things work well, .NET wins. (Laughter, applause.) That’s right.

So, with that performance we can transition to media scenarios. This is called Silverlight TV. We have picture-in-picture video coming on-stream, streaming down from the server. But because of the performance characteristics really of what I can switch between, but I have nine simultaneous streams of video coming down at once. We can take this experience full screen and have the same rich level of interactivity, because of the performance of .NET and the quality of our video.

Okay, let’s go ahead and jump out of full screen.

Now, one area we focused a lot on with Silverlight is quality. We provide content that scales from mobile devices all the way to 720p HD video on the Web in full screen. We’re the only technology in the market today that provides this level of quality.

And Fox loved the idea of being able to provide their movie trailers for summer blockbusters in HD. So, here we see a simple player branded with the Fox experience playing 720p HD content. I have some basic interactivity elements like a play list for Die Hard, Pathfinder, other movies. Here we’re seeing Fantastic 4. But when I bring this full screen, you’ll see I have the same interactivity, and as you can see on the screen, very high quality media. The branding is consistent, the experience is consistent, all happening through the browser; pretty amazing, yeah? Yeah. (Applause.) I think so. You want to watch a trailer?

STEVE BALLMER: Yeah, do it.

BRIAN GOLDFARB: Want to watch the movie? We’re going to watch the trailer here for a second — no.

But really it goes broader than just media experiences. It’s about business models, it’s about advertising on the Web. Video is huge. And we need ways to monetize that and connect with customers in interesting ways.

Today, you have the typical bumper ad, 15 seconds in the front, 15 seconds in the back, very easy to ignore. You want to capture users’ attention, but you want to do it in the contextualized experience.

So, here’s an example of an advertising scenario where we have content, we’re able to do a toast that overlays on top of the content, so my eyes are never taken from what I want, but I still get the branding impression, and then I can use Web data like RSS to pull in real time information and overlay that as a ticker along the bottom. Just like anything else, we still have the full screen experience.

And one other area for interesting branding ideas, if I can actually use video scaling techniques to push an ad out there for people to see and pull it away, never breaking the content flow. Now, I can use information from users to provide very contextualized advertising in the case of video, and now Microsoft is making bets on this technology.

I’m going to actually open up Firefox here to show true cross-browser, and this is an advertisement for Microsoft Surface, which you may have heard of recently, all built using Silverlight. We have some interesting interactivity elements, and we can go ahead and click on one of these videos and get more information about Surface in a very creative and interactive way.

The possibilities of what you can do from an interactivity perspective, video perspective, and media perspective, both advertising and Web, is very, very interesting.

All right, but what about our partners? Major League Baseball cares deeply about the brand and connection with their customers, and they have a player for providing baseball content online today. But when they saw Silverlight, they realized there was a lot of potential for capturing user eyeballs for significantly longer periods of time.

What I have here is a prototype of the Major League Baseball Silverlight player. Instantly when I load the player I’m giving baseball content, because that’s what their users want, but I have a featured game that I can drill in on inside of this player. I have some information, data feeding down about the game. I can see what else is on. I get great video scaling. I could take this experience full screen if I’m very interested, but I still have all of the information overlaid. If I don’t touch the mouse for a while, it will fade out.

We can jump out of that mode and go into just a full browser screen mode, and start turning on some of these icons, the bases, my contacts, my player tracker for fantasy.

And now what’s going to happen, if you look here in the bottom left, my friend, BigDog01, is going to send me a friend alert. He says, “Hey, Brian, I want you to look at a video.” And when I click on this, I get again a picture-in-picture experience that’s showing me a video clip that he shared with me, so bringing collaboration and interactivity to an online experience.

That’s very cool, but it gets even better when you think about situations where you can go outside the browser itself.

So, this is example of a prototype, a future look at potentially what we can do with Silverlight for mobile devices. And this is an experience that was built by Major League Baseball working with Frog Design on the design, both the mobile app and the desktop app. And we have the games that are live right now, and we can drill into a specific game, and actually see real time data flowing down, showing us what’s happening in the Chicago Cubs game here where we see a ball is thrown, there’s a base hit, you can see the players moving, I get the information.

But we all care about fantasy baseball, right? That is what we want, we want to track our players. So, we have a player tracker built-in. But what’s amazing here is for the players that have interesting events happen, like A-Rod here, we can drill in and see a live feed or a recorded feed of a video of A-Rod unfortunately hitting a grand slam walk-off here.

But the possibilities of what you can do with Silverlight on the desktop and Silverlight on a mobile device as an interactive platform for your customers is quite incredible.

Now, there’s one last thing I want to show. Yeah, that’s right. (Applause.)

So, we moved from the desktop to device in the future, providing all the technology we need, based on .NET. The same skills, the same tools that you have today can now be applied to this category of applications. But it’s more than just media; it’s about line of business scenarios, it’s about customer scenarios.

So, here we see Silverlight airlines. It’s an example of the possibilities that user interface, user experience focus can deliver. You know, how many times have you gone to the travel site and had really a hard time booking your experience? Well, this is a nice intuitive interface where I can pick the dates for my trip, I want to fly back to Denver here, and we can go from Seattle where I live over to Denver. It’s going to hit a SQL Server database in the back-end and instantly present us with a visualization of the different options I have for flights, much different than the text list we have today, and a really horrible flight that was probably the cheapest, so I’ll take that one, but I get a visualization on going through — I’m always looking out for you.

STEVE BALLMER: You kept your job. (Laughter.)


So, line of business applications, media and interactive applications, rich interactive applications, Silverlight is the platform, you have the tools today, you have the .NET skills today; I can’t wait to see what you build. Thank you. (Applause.)

STEVE BALLMER: Silverlight starts that transformation of the user interface model. It doesn’t get us all the way to what rich clients do. It doesn’t have all the personal integration, the offline, but it has richer and richer user interface, takes advantage of the power of the local device, and we certainly have a broad set of innovations to bring more and more of the full power of Windows and .NET into this Silverlight style programming experience.

The other big question I get asked about the future of the computation model is what’s really going to happen on the back-end, what’s going to happen with servers and services? All of us in this room grew up fundamentally with the notion that servers lived on customers’ premises. Over time certainly Web servers tended to be more hosted, and we start to see even servers that are serving an individual business customer’s needs being hosted out in the Internet.

Services will bring yet another element to the equation, which is this notion of server farms that are managed, scaled globally, have huge ability, huge scale, huge ability to be moved up and down in terms of capacity on-demand, that are built from the get-go with a very new management model, and over time I think what we’ll see is that the model of computation moves from being primarily on your left to a little bit in the middle, and hardly anything on the right, to a model in which over time more and more of the back-end shared computation is not only done on customer premise, but it’s actually done on these large geo-scaled services as opposed to individually provisioned and managed servers in hosting centers.

This is a long term migration. To bring the best of the Web and the best of the enterprise together will take time. It’s kind of like we’ve been saying, at least my full 27 years at Microsoft we’ve been saying the mainframe is going away. Well, the mainframe hasn’t, but it is still going away. And our current model of computing will evolve and it will evolve generally in this direction.

So, people who say, no, it’s never going to happen, I’m going to stay just on the left of this slide, I think you’re going to look like troglodytes. Some people will want to move very quickly in this room to the right, and I think that will work for some applications and some customers in some scenarios, and not for others.

On-premise you have control and ownership. You get some lower TCO sometimes in a hosted environment, but you take external dependencies, and it can affect your time to market.

On the right you don’t have as much control, and there’s a very different model of management and service level agreement and the like.

So, this transition will be gradual, but on these two issues, rich clients yes, and migration from on-premise servers to services but slowly, I think the answer is yes, and our partners need to know that.

In order for us to fulfill our role in driving the platform for this new model of computation and user interface, we need to not only build Silverlight and Silverlight Plus and Silverlight Plus Plus for Windows and really integrate those things well together; we also need a new service platform. Just as when we got started in desktop computing the first thing we built was an operating system, the first thing we did when we got into enterprise computing was build a server platform, in mobile we built a device platform, Windows Mobile, we are in the process today of building out a services platform in the cloud.

And people will look at this list, and it looks a lot like the names of some of the services we think of as being on servers today, and that’s exactly right. We’re building out a service-based infrastructure, not server by server, but new management model, new development model, new storage, networking, computation model from the get-go.

The programming model remains .NET and Windows, which is great, but we designed these things from the get-go to take advantage of modern technologies that allow for virtualization, scale-out, management, and the like, and we’re going to have a lot more to talk to you about in this arena in the next 12 months.

On top of this new platform, the cloud infrastructure services, we’re also building directory services, rendezvous, device management, the kinds of things that we deliver to you today in our packaged products, Windows Server, Active Directory, MOM, but really transported to this services back-end world, with the same kinds of applications again that have been rewritten to fit in this huge scale, very low cost of operations services platform, productivity services, community, collaboration, commerce and search services, et cetera. That’s the application level.

This is an ambitions project for us, but it’s very important. Starting at the very beginning, and as I said, we have a lot of news and things that we’ll be talking about and unveiling for the first time in this area this year, and I wanted you to have sort of a sense of where we’re going and what the roadmap really looks like, so cloud platforms, server, mobile and client, with a new model of computation and a new model of user interface that really spans.

In this context one of the questions I get a lot from partners is, “What will you offer, Microsoft? What are you going to do?” And so I thought I’d give you a picture of that.

We are going to offer a set of things, and I’m going to try to enumerate them here. First for individuals, not necessarily at work or at home but in their individual personal, we will offer a set of personal services: Windows Live, Office Live, our Popfly mash-up and configuration tool, which we’ve shipped, MSN the portal, Live Search, Virtual Earth. These are all personal services which we have versions in market today, and we’re going to be very, very rapidly pushing forward and innovating.

The second area is business services. Today, we offer something called Exchange Hosted Services. That’s a service we run that does e-mail hygiene and security, and you can resell it as a service to customers who don’t want to instance their own anti-virus, anti-malware solutions for e-mail.

Managed communications and collaboration services: Starting about three years ago at the Partner Conference I talked about an experiment we were doing with Energizer where we were running — as an enterprise we were running their desktop infrastructure. You’ll see us in the next year really try to productize at least a part of that offer in the area of a communication and collaboration service for Microsoft.

For small business we have a small business offer today under the Office Live umbrella. The thing that exists today on the Web will be repositioned Office Live Small Business as we introduce more personal Office Live services. And as Brad had a chance to show you today, we will add CRM and we will add an application development platform for departments and small businesses called Titan. Titan is the technology that underpins and is used for building Dynamics Live CRM.

Developer services: We’ll be talking later this year about version one of our Windows Live cloud infrastructure services. We announced with Silverlight a service that we will run to host your Silverlight applications for you for certain size and characteristic of applications. We’ve announced and have a beta up of what we call BizTalk Services, which you can use for business to budget, pubsub, queuing, message passing between applications.

And, of course, we continue to have not services themselves but our service enabler for building Web sites and applications, Windows Server, SQL, Visual Studio, all of which in the wave that Kevin talked about will be enhanced to help you build your own software plus service infrastructure.

And for client experience we continue to support ActiveX for IE, richer and richer tools for AJAX development, Silverlight, .NET, and for those of you who have Windows 32-bit applications, Win32 apps, with the technologies that we bought with our acquisition of Softricity, you’ll also be able to provide Win32 apps as a service using the same software technology that’s built into our product, and I just call that Win32 SoftGrid, so you can take any Windows application and deliver it with click-to-run characteristics over the Internet.

So, that’s kind of the set of things that I’d put on your radar screen not for the next five years but really for the next year and two years we’ll have an active dialogue with you, there will be announcements, there will be new features, there will be new capabilities, there will be areas in which we want your feedback and the like.

I want to invite Brian Hall on stage with me now to talk a little bit about some of the Windows Live platform, the services in the cloud, and show you a little bit how you might take advantage of them with your own offering. Please welcome Brian Hall. (Applause.)

BRIAN HALL: Good morning. Steve, it’s a mean thing to make a guy demo after Silverlight.

STEVE BALLMER: Well, you’ve got to demo after Silverlight and before lunch, buddy, so it had better be good. (Laughter.)

BRIAN HALL: So, what I’m going to show today is how we’re taking the Windows Live platform, something that today we have over 400 million active users using on a daily basis for communications, sharing, community, and opening it up. And the key message I want you to take away is what’s ours is yours. Over the next while we’ll be opening up more and more and more so that you can use it to build applications, because when you win, we win.

I want to start here with Virtual Earth. This is a fantastic platform for geographic information and mapping. We have a wonderful SDK for it, very, very simple to write to, and what we did here is we took the database of partners in Australia, and we laid it on top of the Virtual Earth service. So, I can do things like just go search, let’s go to Sydney, get rid of the Western Australia, and it will find Sydney, and what you’ll notice there is it brought in a whole bunch more data points when we zoomed in, I can keep zooming, the more partners will show up.

You can do simple things like control what the thumb tabs do. In this case we have it marked gold for a gold partner, blue for a certified partner, and we have small business specialists on this map.

And as I zoom, zoom, zoom, zoom, zoom, you can see that more information is laying over it, and that’s really at the core of this application. It’s all about taking your data or your customer’s data and layering it onto a map like this, so you can build any sort of application on top.

Here we’re going to go pick a partner. Of course, a Sydney demo has to include the opera house, so we’re going to pick one that’s very close. And this is Contoso, the famous company that’s in more demos than any other company.

When I hovered over this, the thing that I want you to notice is it popped up a set of information. You can do any data can show up through the map as long as you can build it into a Web page. So, for instance, you could have a Silverlight application when you hover over something automatically show up, be able to stat interacting with it, all laid on top of the data.

So, really for inside your firewall and outside the firewall, a great part of the Windows Live platform to go build very, very engaging applications.

So, now let’s go to Contoso’s Web site. And one of the trends that’s happening on the Internet right now is the hierarchical Web site is basically going away. It’s more and more about how do you engage them early on, and how do you build a community around your site. Nielsen Net Ratings actually just announced yesterday that they’re no longer tracking page views as their major measure. Their major measure is share of minutes, how much time are people spending on sites, so it’s not just about page views anymore.

So, on this site we have a set of videos. These are Silverlight videos coming down, as well as — and I can flip between them, do all the great things that engages me, the sizzle on the page right when I get on, as well as we have something here, which is part of the Silverlight runtime in a later release, and we call it Silverlight with Seadragon zooming technology. This is a 1 gigapixel image. If you printed it out, you could print it out in really, really high quality more than three meters by three meters.

And if you watch, it’s not taking time and time and time to load. If I did this fresh, the same thing would happen. I can just start zooming into any of these images. So, zoom, zoom, zoom, takes a second to start rendering.

But this really is an incredible way to post information, rich information, be it a set of photos, be it a workflow from Visio or from project management, architecture diagrams, anything that allows you to go engage in a more meaningful way than click to download the file. And this will also be part of the Silverlight runtime over time.

And the reason that I show you this and the video, with the Windows Live platform we’ll host any application up to 4 gigabytes for you, very, very simple, just go post it up to us, and then we give you the code to go cut and paste into your own site, and we’ll do unlimited streaming while we’re in beta. So, it’s really, really a great way to build Silverlight into your sites and applications.

The stake, we got the sizzle, we also have the stake. The stake in most sites is really becoming how do you build a community. How do you get the people that are coming to your site every day to add value to it to create that self-reinforcing value of putting the best information at the top and adding information to your overall application?

So, we have here, for instance, the Contoso consultants, a couple of them have blogs. We show the blogs. People that come can comment. This is pulling from Windows Live Spaces, so you can see, for instance, there are four comments to view. We also have embedded presence in this application, similar to what you saw in the Office demo, where this is using the Windows Live Messenger public cloud, and you can do anything you want right through that presence API.

STEVE BALLMER: This is not Windows Live. This is an application built using the Windows Live services —

BRIAN HALL: Absolutely.

STEVE BALLMER: — by any one of our partners, for example.

BRIAN HALL: Absolutely. So, take any feature that we have, over time we’re opening it up, opening it up, so what’s ours is yours. So, if you see something cool in Windows Live, expect to be able to use it with your customers.

So, we’re going to take — so, I’ve learned about them, I’ve dug into the blogs a little. We’re going to jump into the Web Messenger, and this also can be embedded into any site, and I’m going to say, hey, I want someone to come out and talk to me about the applications they can build, and I’m going to hit send. And this was a simple way for me to go start engaging with someone. I could have done it with a consultant. In this case I’m doing it with the sales agents.

So, now we’re going to switch over to the other PC, and I’m going to show you one more thing, which is how we’ve built on Messenger itself as a platform on the sales agent’s machine.

So, I’m over here. I just got this message. You can set this up for queuing, so it goes to multiple different people, a lot of ways to control where the message goes. And I’ve got this person who says, hey, we’d like to have you come take a look. Sure, let me schedule. And instead of going into a separate application you can actually host applications within Messenger.

And so I went up to the action tab and picked “sales scheduler” which is an app that we created in order to build into Messenger. So, you can do this for any scenario that’s a business to customer, customer to customer, whatever you’d want to do. So, I’m going to type in a little bit of information, and the address. Again using the Virtual Earth, so now you can see you also have options to do it not only in the hybrid or image view, but this is more of a map view. Okay, so we have 1 Epping Road. I’ll go the diary, and say we’ll come by on the 12th. The application can now automatically go create the directions from our site, and hit send, and this will now go using Windows Live Alerts, it will look up among our agents who’s online, and who will be available on that day and automatically send the message.

So, if we go over to the phone, if they were on Messenger it would have shown up there, but since they weren’t you can set it up to show up just through SMS, and the message just got delivered.

So, the key thing that I want you to remember is Windows Live has been a consumer platform, and it’s something that we’re going to keep pushing, pushing, pushing. But fundamentally we’re opening it up. It’s something that you’re going to be able to use, it’s something you’re going to be able to go to your customers and really build engaging Web sites. What’s ours is yours. Thank you.

STEVE BALLMER: Thanks, Brian.

BRIAN HALL: Thanks, Steve. (Applause.)

STEVE BALLMER: I get asked a lot what will things look like for our partners, what are the opportunities, where are things going to go.

I think there are a couple things that should be said about the business model. Software licensing is going to continue to exist and grow. Online advertising will grow. Online transactions and subscriptions will grow. But perhaps most importantly for a number of our partners in the room, the amount of value that will be delivered by humans providing customization services, application development services, management services, hosting services, will also continue to grow, and so we see a big opportunity for our partners as we make this transformation to Windows and Windows Live and the new software plus service user interface and computing model.

I want to share a video with you that a number of our partners did with us to talk about some of the early opportunities partners are seeing in this new software plus services world. Roll the video, please.

(Video segment.)

STEVE BALLMER: Rapid fire, but I hope it gives you a sense of some of the opportunities that some of our partners are already realizing.

Before I wrap up, I want to make sure people understand a little bit about what opportunities exist for the folks in this room in the near term, and how quickly I think this phenomenon, this change to software plus service will happen.

In the area of personal services there’s opportunities today to customize the end user experience and to add on with your own Web sites to Windows Live, to Office Live, and to our Popfly mash-up tools. This is a case where you can customize the experience on behalf of your customers, and we can see that perhaps most vividly today with what a number of our partners are doing with Office Live.

We also, as Brian showed in his demo, have the opportunity for people who are building apps and customizing environments to embed our search, our Virtual Earth, adCenter, and other Windows Live services directly into your own software plus service offerings.

In the business services area we really encourage you to resell our Exchange Hosted Services. We want you to put those in where customers don’t want to run their own e-mail protection services.

While we will start offering much more transparently and vigorously these managed communication and collaboration services, based upon the work that we’ve done with Energizer, we will want you to resell those services, we will also want to support partners who choose to host their own communication and collaboration services using Exchange, OCS, Active Directory, SharePoint, et cetera. So, this is a case where we’ll have a service that we want you to participate in, and we’ll want to support you in offering your own direct services.

With Office Live small business and Dynamics Live we want you to customize but we also want you to be able to resell. And as we already have shown today online, there is a retail model for partners targeting small businesses for Office Live that we will continue to extend.

In the case of Titan there’s an opportunity for you to build applications that would literally run on our servers. You have to use the kind of declarative programming model, workflow model on which our own CRM product is built, but you can, of course, write your own Titan applications either on-premise hosted or hosted in our datacenter.

For people who really are more ISV oriented we have a set of developer services. We will be accumulating feedback this year and encouraging you to start writing applications for some of the new computation and storage services in Windows Live infrastructure, and we’ve already shipped these BizTalk and Silverlight streaming services that Brian and some of the other folks have had a chance to talk about.

And, of course, we’ll continue to be active as we ship Windows Server 2008, SQL Server 2008, and the new version of Visual Studio. We’re going to want you to build your own services using our tools and using aggressively the rich client technologies like Silverlight and others that we’re pioneering. A lot of opportunities here in the short run.

With that said, I think most of the business that we all do together this year will continue to be on traditional customer premise software, but the era of software plus service is beginning, the time is now. We are as a company innovating, writing new software. We’ll be out with betas and design previews to talk to you. We’ll be looking for feedback. We’ll be shipping some of the most important products. It’s time to engage.

From a customer perspective the consumer aspect of this is already in process. The Web is the Web. Consumers do expect a move in this direction. And I think people can build these rich software plus service experiences, and have consumers accept them, even with the state of technology today.

Small businesses, the technology is starting, and the customer receptivity is there. We’re seeing a little liftoff.

Our enterprise customers I would say are planning. Yes, some enterprises have moved to hosted solutions, but many of the customers I talk to now are saying, I’m going with the new Exchange, I’m going with the new SharePoint, I’m going with the new Office, but I’m going with them because I know you’re going to move those things to a hosted service, and I want the benefits of enterprise and Web and device and desktop.

Literally I did a roundtable with the CIOs of 30 of the biggest companies in the world, and it’s not out of their minds, it is on their minds, and it is part of their decision-making today. I talked about our two, three, four-year plans as part of the process of really helping customers understand why they ought to move forward today with Office, with Vista, with Exchange, SharePoint deployment.

The mid-market I think will take off a little bit more slowly, and developers are starting to move. We’re starting to see a lot of interest in developers in using these hosted cloud services as fundamental to the way they build their applications.

I get asked by our partners, does this affect me. This affects the ISVs in the room, and should be important to you. This affects and should be important to the hosters in the room, the system integrators in the room, the resellers in the room. And everybody is welcome. And whether you’re a training partner, a distribution partner, or somebody else I didn’t list here in the limited slide space, the fundamental transformation to software plus service that’s happening in the model of computation and user interface is upon us, and it will affect us all, and I guarantee you Microsoft will lead in driving this next generation of computing and user interface as we have the last couple of generations of computing and user interface.

You’ll all have choices, but suffice it to say priority number one in terms of our long term outlook is this transformation, and we’re going to make sure it’s a very successful one for our customers, for our partners, and, of course, for Microsoft.

With all of that said about software plus services and the future, I do want to remind everybody that we’ve got a lot of business we can do today. Kevin talked about how we shipped all those great innovations last year. We haven’t sold them all. We have a lot more selling, deploying, customizing of Vista, of SharePoint, of Office, of Exchange, of Office Communications Server. And on top of that, as Kevin described, we have way more new products and new innovations in historical enterprise and desktop computing coming this year.

So, I thank you for your interest in our future, I thank you for what you’ve contributed in the past, but I also want to implore you, this is a year that we’ve got a lot of great stuff to take to our customers together, to drive Windows clients and Windows servers, to compete aggressively out in the marketplace, to deliver value, and, in fact, with all of the new technology we and you should be able to raise the level of value that we deliver to our customers, raise our revenue, raise our profitability, and have our customers feel like they got a great deal at the same time.

So, let’s get out there, let’s knock the ball out of the park, let’s make sure we execute very well so that you make money and we do in the next 12 months, but we’ve got the home fires stoked and burning, and we’re also going to drive this next generation of software plus services.

Thanks, everybody. Enjoy the conference. See you as we travel the world. Thank you. (Applause.)