Steve Ballmer: Convergence 2007

Remarks by Steve Ballmer, CEO, Microsoft Corporation
Convergence 2007
San Diego, California
March 14, 2007

STEVE BALLMER: Well, thanks. It is a distinct honor and privilege for me to have a chance to be here with you today. I’m not sure what I think, though, about being the last speaker. There was a theory, and I’m trying to gauge the accuracy of the theory right now, that if I was last, maybe some people would stick around for the final afternoon. About 15 minutes ago, 25 minutes ago I was worried, and either this place is still very full, and I thank all of you, or they’ve done a very good job dimming the lights in the back where I can’t see all the empty chairs.

Convergence is a special event, I think, for all of us. Certainly for those of us at Microsoft, for our partners, for our customers, it represents kind of a unique opportunity to get together, to ask questions, to get answers, to talk to peers, other partners, other customers, to have a chance to hear direction from our product development organization. It serves really many, many functions, and I think it has absolutely become kind of an invaluable part of the process. And I hope each of you who has spent so much time with us this week have found that time to be valuable and well-spent. We certainly don’t only appreciate the time you spend here, but the fact that you’re all customers, prospects, spend a lot of time really engaged learning about us and our partners, and our products, and services. And for all of that, I want to offer my great thanks.

Convergence is also, though, a time to kind of recognize accomplishments, achievements. We’ll tell you about how well we’re doing, what’s going on in the market. We had a chance to do some of that. Frankly, I’m very pumped up. We have a real kind of snowball, downhill of success coming as more and more customers pick up our ERP products, our CRM products. I’m going to have a chance to recognize some of our pinnacle customers and partners who have done amazing things with the Dynamics product line in the course of the last 12 months. But before we do that, I want to do a kind of unusual recognition for us, but one I think is very important, and very special.

About 28 years ago, I was in school, before Bill Gates talked me into dropping out of the Stanford Business School, and I was in school at Stanford with a then kid who was actually even younger than I was, which was fairly rare, from the farmlands of North Dakota. I told him I was going to drop out and go join Microsoft. He told me that was nuts. It probably was true at the time, we were only about 30 people. About three or four years later, after he graduated from Stanford, he said he was going to mortgage the family farm, literally, to go buy a software company called Great Plains Software. That man is Doug Burgum. Doug took over Great Plains in the early '80s. He ran it. He joined Microsoft when we did the acquisition of Great Plains, brought on Navision, expanded our scope really very much geographically, and really gave us the courage, and conviction, and desire to be in this fantastic business applications business.

Doug is also the founder, if you will, of the Convergence event, and Doug has told us that he’s going to spend less time at Microsoft at the end of our financial year. He’ll always be a part of the family, but this is his last fulltime Convergence appearance. So let’s recognize, if you will, on stage, the founder of Convergence, and really the father of Microsoft business applications, Doug Burgum. (Applause.)

Inside here, and I didn’t plan just opening it, complicated box, it’s not software operated. We have a Pinnacle Award to the Convergence Founding Father Doug Burgum. (Applause.)

DOUG BURGUM: Thank you, Steve, for those kind words. And thank you for giving me the advice or the encouragement to bet the farm. It was good advice 24 years ago.

STEVE BALLMER: You did bet the farm, we paid over a billion to buy it back, though. So it worked out for everybody.

DOUG BURGUM: Thank you for that, too. I really just want to say a couple of things, because I know all of you want to hear from Steve, including me, but I did want to take one minute and just offer my gratitude on a couple of fronts. The first is obviously, I’m grateful to have had an opportunity to work in this amazing industry for the last 24 years, and that’s certainly an industry that I was really helped to create it. Steve Ballmer and Bill Gates helped create the industry that so many of us as partners had an opportunity to build and create value for customers on top of the Microsoft platform, and I want to say that I’ve got a lot of gratitude for that.

I’m also grateful that I’ve had a chance to work in and build, and help lead, because I’m grateful leadership is a privilege, and I’ve had a lot of gratitude to work in organizations that were founded on values, values like caring, and commitment, and courage, and community, those kinds of values. I’m grateful for that, and I’m grateful for the last six years to have been working in an organization led by Steve which is still focused on a mission which is about helping others. I’m grateful for that.

The last thing I would say I’m grateful for is two more things. I’m grateful for what this has meant to my family. I was backstage before coming on, my cell phone range, it was my daughter Jesse, and she said to say hi to you. I talked to boys, too, so everybody is good. So I’m grateful for the opportunity it’s meant for them.

And the last thing I would say is that I’m grateful for the relationships I’ve had. There’s many people in this audience. Last night I had a chance to run into one of our Convergence attendees who has been at all 11 Convergences. The first morning I was walking in here and I ran into one of our partners that started on Great Plains 24 years ago, coming up the escalator. So I got lots of long-term relationships. That’s part of what this business is about. And I’m grateful for all of you to have shared in those relationships, and thank you so much for all of that.

I don’t want to I’m not going to say goodbye, Steve, because I have a plan. A lot of people have been asking me what my plans are going to be next, and you know, I don’t know what I’m going to do, but I know I’m going to make this commitment to all of you, whatever I do it’s going to include me being a Dynamics customer so I can come back to Convergence and I can be out there in the audience asking Steve a question.

Thank you all. See you at the next Convergence. (Applause.)

STEVE BALLMER: Continuing a little bit with the theme of recognition, I want to talk a little bit about some of the awards that we had a chance to present earlier today, so-called Pinnacle Awards, to customers and partners who have been doing amazing things. I want you to pay a little bit of attention, we’re going to show you a little bit of a video that walks through some of the kinds of things they’ve been doing. And I’m going to pick right up on that notion, the notion of what we refer to as People Ready Businesses, businesses that really put the productivity and capability of their employees as job one, and how technology and automation and Dynamics can really help with that.

Our Pinnacle Award winners this year include all of the folks on the slide that we list here, amazing work by a number of great companies. I want to give a special congratulations to the overall excellence winner, Haldex, for the incredible things that they have accomplished in their business. And to all of our customers, and to all of the partners in the audience who assist them, I say congratulations. But, let’s hear about some of the inspiring case studies from some of these leading companies.

Roll video, please.

(Video segment.)

Round of applause for all of our award winners. (Applause.) In our vocabulary, in our way of talking about it, each and every one of the award winners, partner and customer, were involved in making their businesses more People Ready.

When we first came out with this People-Ready message I had a lot of folks ask me, is this a marketing campaign, is this a new product, is this I don’t know, a design philosophy? And my answer really was, in a sense, yes to everything. It is a essentially an approach to thinking about business that I think is somewhat non-traditional relative to where most of the companies, particularly in the applications and enterprise side of the business, have come.

If you stop and kind of think about things historically, computing, information technology really grew up kind of on one side of this chart, with line of business applications, starting with the original IBM mainframes, and everything that came down from that, all of the McCormick and Dodge, all the people who participated in off the shelf business applications, it was all about line of business applications. Do we know how much inventory we have, are we processing transactions correctly, all very, very important stuff.

When the PC arrived on the scene in the early '80s, and through the '80s and into the '90s, there was a new focus in the computing world, really on individual productivity, desktop productivity. It’s my computer, my analysis, my way of expressing myself, it’s about me, it’s very important. Those two worlds, in a sense, bridged somewhat over the course of the last about 10 years, as we all worked to get common tools and infrastructure, security, management technologies, that could be used to manage things in the data center, line of business applications, and could be used to manage things that live out in the desktop and at the edge of the network.

I think the theme of, in some senses, innovation today we see as really on the area that’s in-between personal productivity and line of business applications. This is an area that I would characterize as marked by giving people the access to business information that lets them collaborate, to handle exceptions, to do analysis, to communicate with one another. So it’s not just the transactions on one side, and it’s not just my information and my island on the other. How do I take all of the data in our transaction system, mix it with some data that comes form someplace else, do some analysis, get an insight, and make a difference? How do I take an invoice that has a problem, collaborate on it, and deliver superior customer service back on the other side?

When you take a look at the things that we’re talking about in our Dynamics product line, which grew up on the right hand side of the chart, and our Office product, which grew up on the left hand side of the chart, a lot of the innovations that we’ve been talking about are essentially in the middle, collaboration, unified communications, portals, workflow, document management, the Office Dynamics Client, business intelligence, better data analysis. And the truth is, it will no longer be sufficient for any company in our industry to just say, we’re great on the left or we’re great on the right. We need to be great across all of the pillars.

Many of the themes that you see, not only in our Dynamics product line, but across Microsoft, are really built on this premise, our new PerformancePoint product line focusing in on business intelligence, the directions in which we’re taking SharePoint. We made an acquisition today of a company called TellMe, which has voice recognition and IDR services, which can, in some senses, link the customers into this entire workflow with speech recognition as the core engine. So when we think about the People Ready Business we think about all of these pillars and how we make technology enable the employees in a business to serve the customer or make better decisions that help improve business productivity.

I’ll tell you a story which really has a profound impact on my thinking about where we need to go with business solutions and applications. I was in Italy late last year, I was meeting with the CEO of a firm called Monte Dei Paschi Di Siena Bank. I won’t try to repeat it too many times, but it is the world’s oldest bank. It was the bank that financed Columbus’ adventure in America. They reminded me.

We were doing a big project with them, and I was talking to the CEO and he said, you know, one thing that really surprised us, five or six years ago when the Internet was sort of coming or seven years ago when the Internet was coming into fruition people were telling us we were never going to need branches anymore, everything was going to move online, there was going to be no need for people, customers will completely self-serve. And today we find we need more sophisticated technology in our branches than ever before, and our branches are as important and busy as ever before.

And I stopped and looked at him and I said, what are you saying? I don’t get it. He said, what we found is we were able to move all of the simple transactions online, but now our employees, the people who sit in the call centers and the branches, and the customers who want to interact with us in those places, they actually have more complex requirements, they’re more complex, it’s more interesting, they’re more valuable. We sell them higher value products. They have more complicated customer service needs.

So this notion of really taking transactional systems and end-user simplicity, and weaving it together is fundamental to what that bank is trying to do, even as it evolves to a world where more and more routine transactions are handled in a simple, straight-forward way by the line of business systems. So this is, if you will, our focus as a company on the business customer, Dynamics, Office, the space in-between, and the infrastructure to support it.

The personal productivity world is rich in innovation. We just launched Windows Vista, Office 2007, this will be the last time I have to say to this audience, yes, it took a little too long to launch Windows Vista. I will concede that, yet these two products I think are amazing in what they enable, in terms of individual productivity. The new user interface that we’re pioneering in Office I think will become a standard, if you will, that many, many companies will follow, because it finally takes a significant step to making the capabilities of any program easier to find, more discoverable, and will let people do more of the things that they know they should be able to do, and want to do, with these tools.

Windows Vista, a significant upgrade in terms of what it allows me to do, search, finding information, things that I want to do with different media types, video, photography, et cetera, is another landmark release. Our Windows Mobile product, with Windows Mobile 6, we now really have a full-fledged PDA and phone companion to the Windows and Office product line. And just a small show of hands, how many Windows Mobile device users do we have in the audience? This is an unusual group, higher percentage, and for those of you who didn’t raise your hands, I encourage you to check out the new Samsung Blackjack device, the Motorola Q device, the HPC Dash device. The ability to really take your world, personally and professionally, with you on the road has really never been as strong as it is today with the Windows Mobile product line.

From an infrastructure perspective, this means a lot of things. It talks to security, reliability, and availability. It talks to the efficiency and total cost of operation of the IT environment. And we’ve gone from a company, five, six, seven years ago that had some basic capabilities built into Windows, to a company today that really has a whole line of management products, under our System Center brand. We will have delivered a fairly complete line of security offerings under our Forefront brand here within the next few months. From a privacy and rights management, information rights management perspective, we’ve taken big steps. So if you want to protect a piece of information, you can protect your e-mail, your document, your folder, your record, as confidentially as you want to, with the rights management services which are now integrated into both the Windows and Office product set.

One of the questions I do get a lot in the context of Dynamics is, are you enterprise-ready? And I think enterprise readiness has a number of dimensions, but perhaps the most significant are, are you secure, are you reliable, and are you scalable? And I would say on all of those dimensions, whether it’s in Dynamics, in SQL Server, in Windows Server, we have really scaled to new heights. I can fairly say to you that I feel very enterprise ready across our product line.

We’ve made some very conscious design choices in Dynamics to favor ease of implementation and ease of use over some of the kind of rare scenarios of this world. But, from an enterprise scale, reliability, and availability perspective I have never felt more comfortable about the entire Microsoft product line, and yet I know we’re going to have customers in this audience and others continue to push, and push, and push, and I encourage you to push away. If you have specific issues, I’m always interested in hearing from you on these and other matters.

This middle ground I talked about, finding information, what we’ve done with search, not just SharePoint search, and Windows search, but the way we now allow you to connect enterprise search up and rights connectors that see into the backend ERP systems. At Microsoft, for a lot of legacy reasons, we still have some Siebel around. We’re changing that. But, the old Siebel, I never want to look at one of the screens, I just want to go search, find out who is the account manager for Ford Motor Company. We’re enabling search from within SharePoint Search to see deeply into our Dynamics product line.

And when we talk about the Office Client for Dynamics, we’re talking about a client that knows how to find information, extract information from further analysis, and understanding, and we’re looking at the tools that allow us to create unstructured workflows in Exchange, and SharePoint, and Office Communication Server around the basic structured workflows that exist in the Dynamics ERP and CRM products.

So this has been an area of big innovation, both for our Office team and our Dynamics team. We have a lot in the market today. And as you’ve sat through the Convergence sessions I hope you’ve been impressed with how much energy we’re putting into essentially helping real people who work for you get access to and participate more fully into the capabilities of these backend, line of business systems.

From the line of business applications perspective, I’ll say it, I hope you believe it, because you’ve now been here three-and-a-half days, we have never had such a compelling line up of line of business applications as we have today. The Dynamics CRM 3.0 product I think is very strong. We certainly have incredible interest and demand amongst customers, the biggest pipeline we have.

Dynamics AX 4.0, which was shipped last year, was really a landmark release, in terms of the maturity of that product line, and it’s scalability and reliability, I think are absolutely impressive. We announced at the show GP 10.0, which really is the first of the line up to get the new Office user interface, which I think really revolutionizes the way we’ll think about people using the ERP systems themselves. NAV 5.0 and some of the fine work we’ve done there in terms of depth and richness of functionality, and SL 7.0, which continues to take those verticals which have been strongly grounded in the SL product line up to the next level.

I get asked, are we committed to all four product lines. We are absolutely committed to all four product lines. We have invested to enhance all four product lines. We’re sharing code now better and better across all four product lines, and the sharing of code means all of these releases will get new capabilities faster and better than ever before. It was funny, I was asking our guys about Great Plains or GP, my mistake, GP 10.0, and I said, I thought we were on GP 9.0, and they said, yes, this is 9 months turn between releases. And it’s just it’s really, really amazing.

So rich innovation, really across the entire product line up, and today I can fairly say, we really have completed the Wave One we talked to you about over the last couple of years, in terms of really bringing these things into our stated strategy, shared code across all four of our ERP products, and a very strong CRM product to complement it.

To give you a little bit of a sense of the People Ready Business and how some of these pieces might come together I’d like to invite up on stage with me Russ Burtner, product designer in what we call our Center For Information Work. He’s going to show you some demonstrations that reflect on the future of manufacturing.

Please welcome Russ.

RUSS BURTNER: I think I have one of the coolest jobs at Microsoft. I can really look at customer’s problems and how emerging and new technologies can help solve them. The Center for Information Work thinks out in terms of five to seven years, it’s all vision and conceptual. We take the new technologies that we’re working with, and we create a compelling new vision and innovation message.

I brought a desk with me to show you, it’s really cool. So what this is, this is a two-day or two-week old project here. There are only two of these in existence. What I have is a desk with a nice touchable surface with heads up display. So imagine I’m a manufacturing foreman, this is my desk. Across the top I’ve got personnel schedules, production line diagnostics, and even a master schedule for the entire factory floor. On the right side here, I have sort of a communication engine, everything that’s relevant to what I’m working on appears here. I’ve got key industries and processes, current projects. This is kind of cool here, the schematics, this is the factory floor, and I can click on any one of these factory floors and actually see who is working, where they’re working, it’s role-based, what their responsibilities are, if there are any errors happening on the line.

Now I have here, I got a fax from one of my customers, Tray Pharmaceuticals, and it looks like they want to increase production a good 285 percent. And that’s sort of an issue. Everything here is process driven, and to have something that’s paper takes it outside of the process. So this is going to be a little bit about how I can bridge analog and digital. So I’m just going to take this, and take a picture of this document. I’m not just taking a picture of it. When it takes a picture, it’s going to actually convert it to text. And, on top of that, there’s a watermark inside this document. Whoops, I think I picked it up too soon. Hang on. Yes, I did. One more time. I got a little excited. I’ll take a picture of the document this time. So it’s actually look for a watermark to put on this document, and it’s going to look out across the entire document store. This may be my customer’s document, it may be my document, but because it’s got the watermark, I know where it exists, so I can bring up the actual document instead of having a piece of paper.

Now it’s digital. What I can do, again, it’s completely touch sensitive, is it works just like a normal document. I can move it around, rotate it, I can scale it using the handles. It takes a really nice high definition picture. I’ve also got inking capabilities, so I can take it, scribble on it, maybe sign my name. All right.

Now that it’s part of my process, I’m going to close it down. Now, 285 percent, I really don’t know if I can fit this new requirement for my customer, so I want to do some analysis. Notice, I have no mouse, no keyboard. But I do have the capability of searching through voice. I’m going to bring up search, and I’m going to use a natural language query. So I’m not typing in anything, I’m just going to speak to it. Show me production requirements for SNRX Clinical Trials Compound. Now it’s gone and converted to text for me, and it’s actually key off what it’s going to search against. When I search, I’m not searching my local PC. I’m actually searching the entire document store. It could be local, it could even be the Internet. And it’s giving me results here all based on relevance. The top document is exactly what I’m looking for, I’ll open that up.

This desk to me is really about visualization of information. More importantly, it’s the manipulation of that visualization. What I have here is a production analysis pitted against my material requirements, and labor requirements. In the future, we’re seeing all inventory has been RFIDed, so the software knows what’s in the warehouse. There’s also a connection between my HR department, so I know basically what all my labor is. All I have to do to find out what happens when I increase is, I move the graph up and down, and you can see how it affects my material and labor requirements. If I go up to 285, I’m exceeding my current inventory.

Again, it’s all about the process, it’s all digital. So all I have to say is increase. When I do, it starts to place an order on my behalf, and I have a service connected to my vendors, my suppliers, and I can actually see before I place the order if that supplier can meet the demand. The good news is, they can, so I’ll just place that order.

Now 285 percent is quite a bit, and there’s no way I’m going to do that without affecting the schedules, which is what just happened. But the master schedule up top isn’t aware. So all I have to do is select it, and I’ll basically click it up to the heads up display. I’ve obviously affected another project, not that big a deal, again, because it’s all digital, everybody is connected. What I need to do, though, is basically tell the rest of my team and the customer that I can meet this new need.

I’m going to use something we call a radial dial. This little dial in the corner is kind of like Office 2007 and the ribbon, it’s sort of the vision of the future of it, all contextual, all actions happen based on what process you’re in. I’ll hit publish to the Web, now it goes back up to the Web space to show that I was able to make the need, but affected the schedule. Again, this is a team space, so it’s all about communication and collaboration in the future.

So that’s pretty much just a peek of what the Center for Information Work is playing with. Have a great afternoon. (Applause.)

STEVE BALLMER: The purpose there was really to kind of give you a context, how do we want things to evolve, what kind of experience will not just the current hardcore users of today’s ERP and CRM packages be, but how will every employee in the People Ready Business of the future expect to try to interact with information, model the future, predict, what-if, collaborate, and I think that gave you a pretty good sense of how all those elements can come together with the right work in the user interfaces, in the office productivity packages, in the business applications, et cetera.

One of the themes which is most on my mind these days is the transformation which is going to happen to software as a business over the course of the next five to ten years, and this is the transformation of software from a package business to a business in which we think about software and Internet services as one integrated experience. Some people tell you the world is going to be all Internet services and no software. Some people will probably try to tell you the other. I will tell you that essentially there will just be a continuum, how much gets hosted in the cloud, how much gets hosted on premise on corporate servers, how much gets hosted or run and executed locally on clients, mobile clients, PCs, et cetera. We are hard at work at Microsoft on building the platform that supports that transformation. Just as we built Windows as a platform for client development, Windows Server as a platform for customer premise development, Windows Mobile as a platform for mobile device development, so too we’re building a platform in the cloud, our so-called Live platform, that facilitates building this kind of interaction.

Windows will have a Live experience, Office will have a Live experience, Dynamics, first CRM, and over time more of the Dynamics product line will have a Live experience. Xbox, Windows Mobile, and of course Search, and mail, and all of these experiences go Live. I think we’re doing this in a thoughtful way, a platform-based way that will allow third parties to extend our experience, which is very important, and we’re excited that later this year we will ship our first business application really in its Live form, which will be the Dynamics CRM product, CRM Live product, which will be available later on this year, and to show you a little bit of where we are in the development of that product, and talk a little bit about it, please join me in welcome Brad Wilson from our CRM group.

Brad. (Applause.)

BRAD WILSON: Steve, thank you. Good afternoon.

I want to give people a quick peek at the progress we’re making towards our Dynamics Live CRM product. It’s based on our upcoming Titan release of software which will power both the on-premise, the partner-hosted, and our new Live world. Let me go ahead and show it to you.

I’m going to open up a Web browser here. When I do that, I’m going to go ahead and click on my Favorite here, and open up Dynamics Live CRM. Now, at this point, this is a mock up screen, so it will be a real pretty Web site you get to initially when you go there. But in this case, I’m going to go ahead and login using my Windows Live login ID, the same one that gets me into Windows Live Mail, or into Office Live. It gets me into Dynamics Live CRM as well.

When I get here, this is a fully multi-tenanted application. What that means is that a customer might have multiple organizations internally, different groups they can log in to, or a partner might have multiple customers that they’re supporting, and they can log in all based off their one Windows Live login ID. In this case, I’ve got two organizations, one is events, and one is marketing. I’m going to log in to my events organization. Now, this is not local software, this is hitting our Windows Live data center. Right here from San Diego, we’re going all the way up to Washington and back to do this, performance is fantastic. I’ve got my workplace here, which has all my activities, calendar SKUs, I’ve got full sales here, I’ve got marketing with all my marketing campaigns. I’ve got customer service. This is all over the Web. I’m having it fast served right to my desktop with my service scheduling application.

We’re also bringing out a new resource center. The resource center is meant to be beyond core CRM functionality to bring the community right into the product, give you message boards, blogs, training tips, to help you really be successful doing sales, service and marketing. In this case, I’ve got a pretty standard sales, marketing and service metaphor here, but I have an event group within my company. So I’m going to come over here and look at how I can customize this.

Again, from a pure SAS model, I can customize sales territories, business units,