Steve Ballmer: User Conference for Microsoft Services, Tokyo

Keynote by Microsoft CEO Steve Ballmer
User Conference for Microsoft Services
Tokyo, Japan
November 5, 2008

STEVE BALLMER: Well, thanks. It is a great honor for me to have the chance to be here today and talk with you a little bit about the changing world of information technology. For all of you, I know this is your lives. I know many of you spend a lot of your time planning, thinking, and working with Microsoft technology specifically. I certainly want to say thank you to that before I go further.

I’m going to talk in a high-level about some of the important developments and particularly the phenomenon called cloud computing, or Software-plus-Services. At Microsoft, we speak of Software-plus-Services because we see the world, the world that you and I have grown up with, the world of information technology of evolving, building on the skills, building on the capabilities that all of us have developed as we move forward. And I want to give you a little bit of context on that, particularly this week which follows our Professional Developers Conference last week in Los Angeles where we had a chance to announce many new technologies that may be of interest to you.

I want to start with a characterization of our vision. At Microsoft, we talk about our mission, mission, our purpose, enable people and businesses throughout the world to realize their full potential because at the end of the day, information technology, the business we are all in, is about giving people the tools to be productive, creative, insightful, and efficient.

But if we ask how are we going to achieve that mission, we’re going to achieve that mission by creating seamless experiences that combine the magic of software — we think of software as a pretty magical thing — the magic of software, the power of the Internet across a world of devices — PC, phone, TV, and server. That seamless experience can be a communications experience, it can be an experience in which somebody wants to find and derive insight from a piece of information, but a seamless experience from the user interface all the way through all of the servers and Internet services that form that integrated and wonderful experience.

Seamless, software-based, Internet, and many devices. That’s our vision. That’s what we, Microsoft, as a company will execute against. And so the question is with this vision and with this notion of enabling people and businesses to realize their full potential, how do we apply that vision specifically to the world of information technology today?

If you look historically, I arrived — I guess I have to say now I’m an old timer in the computer business. I arrived 1980 to Microsoft, and the center of computing was the main frame, the main frame. That’s where all of the activity and interest and focus was. That shifted to the PC during the course really of the ’80s and early ’90s. Now, each of the main frame and the PC represented a different philosophy of how to build software and applications and solutions around that vision.

Main frame, very centralized, total IT control, very poor user interface and very expensive. The PC was a new model of computing in the user’s control. Hard for IT to manage and take care of. Very powerful and friendly user interface. During the course of the ’90s, it switched again to something called client-server. In the client-server world, there was a balance. Smart PCs, smart servers, better management of the desktop, good user interface, perfect. Except, in a sense, it was too hard to build and deploy applications to that model.

And then along came the Web or the Internet. And the Internet brought new value. In some senses, the client-server computing model was superior, except the Web opened up the whole world of information and computing and people in a new way. So client-server was very good, but too narrow in corporate environments. And what we’re really trying to do as the world moves to Software-plus-Services is bring together the best of what we’ve learned from PC, from Web, and from client-server into one seamless model of how software and applications and projects get built and deployed by people like you around the world. Where software can be built and managed and deployed intelligently in phones, in PCs, in data centers that you operate, and across services that we and our partners operate that run in the Internet cloud.

So it’s the best of client-server with the best of the Web, if you will. So when we talk about Software-plus-Services, we’re talking about client and server and Web, but we’re also talking about other devices, the phone and the TV. The phone’s perhaps the easier one to think of. The phone today has grown up separately. It has its own separate e-mail systems and contact systems and applications and over time, the world of the phone must integrate in this new model of computing.

This model has rich, smart clients talking to servers or services in the Internet. We don’t assume that all of the world’s computing will be recentralized like the main frame model or like some of our competitors will say. We think of this as a world of smart clients and smart servers and smart services that all cooperate. This is a world in which user experience and user interface is very important.

I had a dinner last night with four people who have been involved in the so-called E-Japan Initiative, led by the Japanese Government to open up e-government services. And a lot of their discussion with me was about the ongoing complexity in the user interface in some of these systems. So the world we’re moving to is not a mainframe-style world, it’s not a world even of just HTML computing. It’s got all of the richness that a PC or a phone can offer.

And it’s a world in which so-called Web 2.0 techniques come into play. When people talk about Web 2.0, they’re talking about social computing and social networking. They’re talking about blogs and wikis and user-generated information. All of that needs to be woven into this model of Software-plus-Services and that’s our target. Our vision is to support the most modern computation model in the world with great operating systems, great development tools, and great platforms that help users and IT people build applications to the most modern computing model available today.

Last week, we announced an important part of our Software-plus-Services platform, something that we call Azure. Now, what is Azure? There’s a very simple way for me to describe it. I love this slide, but let me be simple: When Microsoft was first getting into the PC business, the first model of computing, what was the first thing we did? We wrote an operating system for the PC. It was called Windows.

When we wanted to enter the world of client-server computing, what did we do? We wrote a compatible operating system called Windows Server. When we wanted to enter the world of mobility, we wrote an operating system called Windows Mobile. And now as we enter the world of cloud computing, we’re essentially creating an operating system that runs in the Internet cloud that we call Windows Azure.

Now, why Azure? French word for “blue” blue sky, clouds, sunny days. Windows Azure. And what we’re doing with Windows Azure is exactly what we did with Windows Server. The Windows Azure programming model which runs in the Internet, not in corporate data centers, not on PCs, but in the Internet will have running on top of it .NET, Windows applications, SQL Server, SharePoint, Exchange Services, and many others.

We’re adding to the Windows Server platform something we call Live Services. And Live Services bring Web 2.0-type capabilities to the Windows Azure platform. So Windows Azure is another element and then the job we have as a company is to tie together Windows Mobile, Windows, Windows Server, and Windows Azure. So you can build and deploy and distribute applications.

I do not believe that cloud computing is going to change tomorrow what every one of you do. You’re going to continue to run servers and data centers for a number of years to come. But it becomes another option for the deployment of applications and solutions. It’s an option that is scalable and open. It’s an option in which essentially we have an infrastructure in which you can build and design management of high-scale applications directly into your application. It’s a world where we’re going to give you full database capabilities and full .NET programming environment in a very straightforward way.

So Software-plus-Services means phone, PC, server and cloud, operating together, same programming model, same deployment model across these areas.

Live services, as I said, is sort of the new element, the element that brings in Web 2.0 capabilities — management of users, devices, applications, the notion of who am I, what am I doing, who am I willing to communicate with, who are my friends, directory, identity, communications, presence. These are concepts that in the corporate environment we will add back into Active Directory and other technologies so that you have the potential to also bring new Web 2.0 capabilities to applications that you run inside your own corporate environment. So Live Services will pioneer in Windows Azure, in the cloud, but will also bring back to Windows Server over time through Active Directory and SharePoint and the like.

I think this is an inevitable trend towards software plus services or cloud computing. And yet at the same time, even ten years from now, I’m sure there will be important applications that you choose to run yourself in your– behind your corporate firewall. So one of our important objectives is to make sure that we give you good choice and flexibility by having consistent implementation between the server and the Azure Services platform so that you can write an application, and when you’re writing it, you shouldn’t have to decide is this going in the cloud or is this gonna go in my corporate data center?

First introduction, we have some inconsistencies, but really bringing these things together. Common management model, common deployment model, common programming model is absolutely the direction. Then you can choose to write an application, put it in your own data center, host it with one of our partners, or run it on our Azure platform in the cloud.

All of what we’re doing here for Windows Azure, but also for Windows Server and your corporate data centers builds upon a fundamental technology advance, which all of us I think are focused in on today, right now, an advance around virtualization. Virtualization is a key technology, and particularly in the tough economic times in which we now find ourselves, technologies which give us all the opportunity to take cost out of the IT process is very important.

And so even without the cloud, products like Microsoft Hyper-V, the Microsoft Windows System Center Virtualization Manager product, these products give the opportunity for us to work with you to consolidate servers and take out cost.

Microsoft has a broad virtualization strategy. With Hyper-V, you can virtualize operating systems in the data center. We let you virtualize applications and deliver applications virtually to corporate desktops, eliminating desktop management costs. We help you virtualize presentation with our terminal servers product so that you can run an application centrally.

We’ve done a lot of work in our Hyper-V and System Center products so you can manage VMware virtual machines. Less than 5 percent of all servers today are virtualized, and yet the advantages are large. We’re trying to provide you a low-cost option, much lower cost than competition, but with great interoperability with VMware, the most popular, competitive alternative.

I shifted with this slide. I left the world of Software-plus-Services to talk about one of the important enabling technologies for Software-plus-Services, but also a technology that you can use today in the here and the now to improve IT operations in your companies. As we move to the future, it’s important that we continue to invest in user experience. Our Outlook product is a good example of that, and it moves with us to this world of Software-plus-Services.

Outlook grew up on the PC, but sometimes when people are away from their desks, they want to be able to just go to a terminal through a Web browser and get access to Outlook, sometimes on their phone, sometimes even through the telephone, people want to call and get their e-mail. And so as we think about this migration to a world of Software-plus-Services, we have to ensure that we provide a full range of user interface experiences as we move forward.

I’m going to conclude not on the topic of Software-plus-Services, but really on some other things that we’re doing at Microsoft that I think should be very interesting to all of you as IT professionals. This year, Microsoft will introduce more new, exciting technologies, in my opinion, for our enterprise customers than ever before.

We’ll introduce a new version of our Office Communications Server product which really helps facilitate audio conferencing, Web conferencing, virtual meetings. We’ll introduce new enterprise search technologies so that users in your companies can look deeply into the data that lives in your companies to find the information they need to get their jobs done, along with business intelligence technologies that let them analyze and model and present that data to make it actionable.

I talked about virtualization. Cloud services, social computing, mobility. This afternoon, we’ll be part of a major announcement that NTT DOKOMO is making here in Japan of Windows Mobile phones as part of the DOKOMO lineup so that even from a handset, you can participate in this world of Software-plus-Services at work or at home. And certainly we look forward to partnering with many of you on that opportunity.

The world of information technology is really, from my perspective, exciting. Of course we’ll go through some difficulty in our industry. IT budgets will be slashed. But if you look at the core value, all of us have a chance to bring to the businesses for whom we work, it is amazing. In this environment, I think the theme for IT departments everywhere has to be to management. We can help our businesses make better decisions, move with greater agility, and at lower costs.

And certainly, if our vision is to enable seamless experiences that combine software, Internet, and devices, then our tactic for this year is to work with you to enhance business insight, business agility, and low cost because it’s that notion that I think is really going to help you help the companies you serve in these tough economic times.

With that, I’m going to end my prepared remarks. I want to thank you all again not just for your time today, but I want to thank you for your support as customers. I’m going to have a chance, I guess, to take a few questions. If there are things you would like to follow up on, my e-mail address is [email protected]. I’d love to hear from you also via e-mail at some point in the future if there’re other things you’d like to discuss. Thank you again so very much, and I’ll look forward to your questions. (Applause.)


(Japanese remarks.)

STEVE BALLMER: Well, it’s interesting. If you specifically ask the question about the cloud, Amazon is the number one retailer in the world from the cloud. Google, number one search company from the cloud. But if you actually ask who’s trying to build a platform for IT that runs in the cloud, Google has yet to introduce a platform, and Amazon does have a platform, but it has no service level agreements, no guarantees of performance, and no applications.

So these are both very good companies, but in a sense, they haven’t fully embraced the platform for IT as their business. Now, even I have to say Microsoft is a company who does make its living providing platforms to developers and information technology people. But Azure is very early. So even I will say while I am proud that we are early in providing this capability, there’s a lot of competition yet to come. But this is our number-one focus as a company — it’s not the number-one focus of these other companies.

Google has yet to enter — I know that’s surprising to people — but Google has really yet to enter. Amazon has entered, but they’ve entered what I would call casually without a real focus on business customers. And we’ll see. I think they’re both great companies. We’ll have great competition, but I think we’re a great company too and we’ll do good work for you.

(Japanese remarks.)

STEVE BALLMER: Well, I started on a couple of these themes in my remarks, but I’m going to emphasize them to you. I think in tough economic times, the first thing the business leaders are going to do is turn to the CIO and say, “Cut the IT budget.” I think that’s likely. And I think you’re going to have to be prepared to say, “We’ve got good ideas.” We’ve got good ideas. We understand virtualization. We understand moving applications off of main frames. We understand standardization of systems in order to save cost. We have ideas. But every good idea comes with some cost. It can come with an economic cost or a transition cost, but I think you have to be prepared with ideas to save IT cost.

At the same time, though, you also have to be prepared to say, “And I think we can make it so that IT is part of helping us save cost or improving revenues in other areas.” You have to say, “I think that if we were to enhance our accounting system, we could actually give better business insight on where to save cost in manufacturing, in customer service, in R&D.” It’s the insights that people will get from the IT systems that you build that will let you drive revenue and reduce other costs.

So when the CEO comes to the CIO, I think you have to say, “We understand how to run IT more efficiently, but we also know how to invest in the systems that are going to allow you, CEO, to figure out how to run the rest of the business at lower cost.” So don’t just cut IT budget, also look at IT as a source of the key informations that are necessary to run the rest of the business more intelligently.

(Japanese remarks.)

STEVE BALLMER: Microsoft is a company that was built from the start on the notion of partnership with other companies in our industry. When Bill Gates started Microsoft, the name of the company even, Micro — Soft — microcomputer, software, those are our specializations. And so from the start, we said we’re going to partner with hardware companies. Then we said we’re gonna partner with SI guys. We’re gonna partner with vertical applications companies. We partner, we partner, we partner.

Here in Japan, I’m visiting for two days. I’ll spend about half my time with customers, and about half my time with technology company partners of Microsoft. We partner with people who make underlying technology, companies like Sharp and Cannon and Sony and Toshiba, people who build PCs and phones, people who do systems integration like Fujitsu and NEC, Hitachi, NTT Data, and others.

And as we move to a world of Software-plus-Services, the exact work that we do, that you do, and that our partners do may change, but our dedication to working with our partners to serve you will not change. We will have detailed discussions about the right partnering model between us to support this new world of cloud computing here in the Japanese market.

So we have deep and very long-term — I’ve been visiting Japan for over 20 years. I have been meeting with our partners in Japan very consistently. I’m probably the only person left in the industry who was here 20 years ago, maybe, but we’re building new friends, new relationships, new partnerships and certainly for many companies here in Japan, partnership with Microsoft is at least from our vantage point, a very important thing, and we will work very, very hard at that.

(Japanese remarks.)

STEVE BALLMER: Thank you all very, very much, appreciate it.

PARTICIPANT: Thank you. (Applause.)