Remarks by Bill Gates
Tuesday, June 3, 1997
Atlanta, GA
Bill Gates’ Windows World keynote in Atlanta consisted of a question-and-answer format between Bill and Gary Beach, senior vice president of the International Data Group and Global Brand Manager of Computerworld. The questions came from Microsoft customers, from industry commentators, and from attendees at Windows World. At the end of the talk, companies building innovative solutions on Windows were recognized.
MR. GATES: Well, good morning. We're really back to basics here. You can see there's no demonstrations, no slides of any kind. Just Gary with some tough questions. He even went to some of my competitors to get these questions, so I hope they're not too unfriendly.
MR. BEACH:Well, we have 14 sets of questions that we want to ask Bill. And I say, let's just get right to it.
The first question, Bill, is a visionary question. The Internet is akin to what the printing press did for society a number of years ago. It's creating incredible opportunities for people in the audience, for Microsoft and ComputerWorld. Last weekend, the White House was talking about how they see electronic commerce. If we do this right, could be the biggest form of commerce in the United States within a decade. They even talked about cyberspace being a duty-free zone, which kind of sounds like the president raises the road ahead and preaches free capitalism.
So the first question I'd like to ask you is what you see our future here. What are the challenges and what are the obstacles to overcome in electronic commerce?
MR. GATES: Well, there's no doubt that doing transactions electronically is a lot more efficient than doing them any other way. Certainly, already things like the stock market and currency exchange are done that way. But a lot of transactions are still done with the exchange of paper. Like the government likes electronic commerce, because maybe that means they'll figure out how to make it easy to do electronic tax returns, and electronic transactions for the government. They've got more paper generation than any other organization. They have a real opportunity to be a leader.
The key thing holding this back today is simply getting the applications moved over and getting the security systems so that people have enough trust that they'll go with pure electronic transactions. Now, it's going to be tough to measure this because you've got two types of Internet commerce. You've got cases where you take a buyer and seller who would have done business anyway, and simply move that transaction onto the Internet as a way of exchanging the data. And then you have the Internet as a marketplace, where people who wouldn't have been matched up go onto the Internet and use its very powerful ability to search out things of interest and allow those people to get together. And that's the most profound element, where it really lets you look at more merchandise, and look at more prices, and have options that you never would have had before.
And, month-by-month, as we're getting more organization on the Internet, more merchants there, it's becoming clear that all the choices will be easily available.
MR. BEACH:There are certainly a lot of access points to the Internet. As you walk around the show floor here, there are hand-held devices, there are low-end Internet devices. You've brought WebTV, Larry Ellison bought Navio, you have been talking about wallet PCs for a while. What is this proliferation of devices all about? And particularly focus on how do you see them all fitting together?
MR. GATES: Well, I think that as the Internet explodes, the variety of devices that are hooked up will continue to expand. You'll have not only the connected PC that lets you get updated software and lets you get really amazing support. But you'll also have the connected TV that lets you see a customized TV Guide, and even lets you get Web pages and simple electronic mail.
What Microsoft is doing is, we're taking Windows in various forms, Windows CE on the low end, and putting it into those different devices so that software developers who write applications can target many of those devices using the same applications interfaces. And so part of our arrangement with WebTV will be building in Windows CE. That makes it a lot more flexible to the consumer electronics manufacturers who want to do different features, even things like connecting up for home control, or just letting you have a digital camera that you connect up and put photos out on the Internet.
I think it's important to remember, though, that today, of these devices, the PC is by far the leader with 80 million units a year. If you take the hand-held market, pocket-sized machines such as Windows CE-based hand-held PCs, even if you take a broad definition, that's only a few million. And if you take Internet connected TVs, WebTV is the leader, but it's still a pretty small market, on the order of 100,000 a year. So those markets are going to take off as the prices come down, as the connectivity gets built in, and they'll fit in and connect up to the PCs and the Internet in a way that lets you exchange information very flexibly. So I think those markets are explosive in a complementary fashion.
MR. BEACH:Switching gears here, I'm sure you're not surprised that people here in the audience wanted to talk about Windows NT. I think it was three years ago, I know you wanted to introduce that product here on the stage at Windows World and, to your credit, it wasn't ready, so we didn't see it then. To some extent, Windows NT got a much more superior introduction, let's say, than Windows 95 did in August of '95. But in the last 18 months, after we've gone through the introduction of Windows 95 and your book tour and the Internet strategy day in December, there's been a ramp up in market interest from users and vendors in the channel. Our own ComputerWorld research division reports in the next 12 months that the buy and share scheme for Windows NT will approach another 50 percent increase, both as an operating system for the server and for Web service. Yet, last week, in an interview two weeks ago in Fortune, you were talking about the tough technical problems that have to be overcome.
What do you account for this ramp up of Windows NT, and what are some of the challenges that you're still working on to make this a scalable offering?
MR. GATES: Well, NT has become a bit of a phenomenon now, six years after its introduction. You know, it's always fun to look back on these challenges and look at what the analysts first said when the product came out. You know, they said, what's the world for NT? You've got UNIX, you've got NetWare, what is it? We had decided that we needed to write the system from scratch to get the security and the robustness to really scale up to the most difficult challenges. And so we took the performance of NetWare and the richness of UNIX, and the user interface of Windows and put those together. You know, it takes many years for something like this to happen. It's just like Windows itself that went a long time where people were skeptical, would the graphical interface be the standard? Then eventually, that came to be taken for granted.
Now with Windows NT, the concept is that you want the rich operating system both on the desktop and on the server. And as we've gotten more tools, we've gotten pioneering customers, as Intel's done a great job making their chips faster -- that's an element of this that's been quite critical -- people have seen that they can put very demanding applications there. And so you get leaders like SAP, BAAN, PeopleSoft, taking things that would have required very expensive hardware and moving them to Windows NT. And that just generates volume, which gets more people drawn in.
Also, with the Internet now, people realize they don't just want a server that's file sharing, they want a server that can run scripts, that can run databases, that can run rich communication protocols, and they want that all integrated into the server. People are also finding that having the same user interface on the server that they have on the desktop is a fantastic thing for them. The ability to write the application and let your portable users run it when they're off seeing a customer, and yet also run that same application at night up on the server, that's very handy, and it avoids writing that application twice.
So NT, as the price of memory comes down, as these applications have come out, it is becoming a very important standard, and it's pleasing to see that that momentum develops. NT 4.0 was a pretty critical milestone for that. We've been cycling the releases about once a year, and now with NT 5.0 being a major release, that will be more like 18 months. But it's a case where, as we take that customer feedback, get it back into the product, get some more applications, it simply moves up to a whole new level.
And we do have a very ambitious view of the role of Windows NT. Our view is, we want to make it so that any application, no matter how demanding of reliability or performance, can run on Windows NT.
MR. BEACH:You mentioned 18 months for 5.0. Is that 18 months from today?
MR. GATES: No.
MR. BEACH:No, 18 months from?
MR. GATES: The 5.0 schedule is that we'll be in beta this fall. We've actually given copies out to developers so that they can understand the Active Directory, which is a very key part of that release. It's the first directory that really uses public key technology and takes all the Internet standards as the way it builds security on top of that. Then we'll go to final release of NT in the first half of next year. And so we're pretty far along with it. We're very close to code complete, but we've got to go through a lot of testing, a lot of user assurance before we get the final version released.
MR. BEACH:You mentioned building NT from scratch. How proud are you of the work that Dave, and Jim and the others have done on that? I mean, compare it to when you and Paul Allen were building the Basic interpreter [Microsoft’s first product]?
MR. GATES: Well, NT is a lot of lines of code. It's now about four million lines of code. So what that team has done that Dave Cutler put together is quite amazing, to be able to cycle those releases once a year, and the diversity of hardware we're talking about is pretty incredible here. And now we've got people who write these demanding applications to come in and give us lots of feedback. You know, we're tuning now not only for two-processor, four-processor, and eight-processor systems, but we're starting to do work even on 16-processor systems. In parallel with that, we're putting in the most advanced clustering interfaces that have ever been available. So you can take each of those systems, even the four- or eight-processor systems, and combine them together. And so the team is just taking on additional challenges. And even as the code size has gotten more complex, they've actually been able to drive the reliability to be better and better release by release.
So it's a lot like any major engineering project, like the Moon Shot or designing the 747. You actually put more man-years into testing and then interoperability. Those two things take up two-thirds of the resources. And so they become the real method by which you measure the team.
MR. BEACH:Dave Kirkpatrick at Fortune a couple of weeks ago was saying, this is the most important product at Microsoft. Would you agree or disagree with that?
MR. GATES: Well, I'm very keen to have all the product teams of Microsoft highly motivated. And if they don't all do a great job, they won't be able to save the company. But, Windows NT is our most important product in terms of the strategic impact it's having, in terms of the evangelism that we're driving. There's no doubt as memory price will come down, NT's role on the desktop is increased, and over the next couple of years, a substantial part of the business desktop, perhaps the majority, will be Windows NT.
At the server level, this is our product. And we have no limits in terms of where we want to take it with richness and performance.
MR. BEACH:What about market share? What would it please you if we're sitting here in three years with market share on the server for NT?
MR. GATES: Well, in terms of new servers being bought, I'd say that I think we have the opportunity to have a very, very strong position. Now, that doesn't mean that it will be a pure NT world. People are going to keep around their mainframes. They're going to keep around UNIX systems they've invested in. And so, actually, even though NT share has gone up a lot, we're actually doing more on interoperability than we ever have before. Things like the way our transaction manager that's built into NT works with CICS, the way that our database protocols work with DB/2, and SNA Server. So there are a lot of elements there. NT every year has gotten a lot richer. You know, a few years ago, when people thought of an operating system, they didn't think a rich directory was a necessary part of that. They didn't think the highest-performance Web server was part of that. Now, we've gone even beyond that to transaction management, which will be a standard part of every copy of NT. The queue management software that we put in, we decided to make that a standard part of NT.
What this is all about is that people are building a new generation of applications. They're building them using components. They're building them to run across the Internet. They're building them to be very scalable and very reliable. So that if components run into one machine that’s not available, immediately you can turn and run those on another machine. And in order to make that practical, the operating system has to be very, very rich in all these ways, maturity, directory, transaction. And so NT is rising to that challenge. The R&D budget on NT is being increased because of that. And certainly in terms of what we invest in NT, it's dramatically more than any other operating system.
MR. BEACH:How much are you investing?
MR. GATES: That's about a billion a year into the Windows operating system. So that's about half of Microsoft's total R&D which is a little over a two billion.
MR. BEACH:You mentioned the magic S word in that last answer, and I'd like to ask you that. I was with you and many of us here in the audience were, a couple of weeks ago in New York for Scalability Day. And walking around the show floor yesterday and asking people, hey, I'm going to see Bill tomorrow, do you have a question, the one question that keeps coming up is, does NT scale? And I think you have a point of view on that, and something to show us.
MR. GATES: Okay. Scalability Day was aimed at showing people how we're going to get very, very high levels of performance. There are several things to understand here. First is that the Intel processors are continuing to improve at exponential rates. And so that alone is raising the performance levels. In parallel with that, you get more processors in a system, going from four being typical now, to eight and 16. And in those symmetric multiprocessor systems, NT outperforms anything with eight processors or less. And I mean for database, Web, e-mail. When you get beyond eight processors, then there's a limit in terms of the memory bus becoming a bottleneck. And the only way to move beyond that is to do clustering. That is, to take independent systems and have them work in tandem. We decided that to really --
MR. BEACH:And with Tandem.
MR. GATES: With Tandem, yes, that's right. To really show this happening, we had to take something dramatic, like a billion transactions a day, which is more than four times as much as any commercial organization needs. And show how to use off-the-shelf standard servers and put those together.
In fact, the one thing I brought, a little video clip showing Jim Gray, who is the database expert, show us what this billion-transactions-a-day server looks like. So if we could run that little clip, it would be great.
[Video clip of Jim Gray showing the 20 servers connected to handle a billion ATM transactions a day and explaining how the servers work together.]
MR. GATES: The way NT 5.0 works, it actually stores the data in a compressed form, and so although it's four terabytes, conceptually, they only needed 2.5 terabytes to store the banking information for the 1.6 billion banking customers there.
MR. BEACH:Microsoft is a technology company, and I'd like to switch gears a little bit here. … Corporate users here in the audience and out in the marketplace are also concerned about issues like manageability and reliability. What are you doing there to -- what comfort levels can you give enterprise customers here in the audience that you're hard core about manageability and serviceability in addition to some of the great technology we just saw now?
MR. GATES: Well, I think the whole industry has focused itself on these broad cost issues this year. Our big jihad last year was really getting all the products to incorporate the Internet standards. And there's a lot we're still doing there. We're more involved in Internet standards than any company. But this year, the new thing that we've really tried to learn a lot about is where are the costs coming from. What are the communications costs, the data center costs, the application development costs, the support costs, the hardware costs. There are a lot of pieces that go into what's driving these IT budgets. And there's a lot that can be done by product companies like Microsoft to drive those costs down fairly dramatically.
The initiative at Microsoft is the manageability initiative, and the idea is to let people do things centrally in a very simple fashion. And yet to do this without asking people to rewrite all their applications, because that would be very expensive and would take a long time. And without asking people to give up the richness of the PC, the fact that it's portable, the fact that it's very flexible, the fact that it's very responsive. We want to retain that, and yet let -- and administer at the center to be able to easily update the software, easily control the policies, easily see any problems without going to visit a machine.
And so, as we've been coming up with solutions for this, things like the Zero Admin Windows, things like the Windows Terminal for light users where you actually want to move the computing up to the server level. We've been running it by customers. We've had our cost of ownership council where we understand about their budgets, and I think the result here is that there's a lot of low-hanging fruit. There's a lot of things we can make simpler. For example, if you mirror all this data on a PC up to a server in a transparent way, but when you go to someone else's system and log in, you can have all that available to you, or if you want to replace your machine, or if your machine breaks, then all that state can be brought down automatically to a new machine.
And so with things like that, we do think we'll be looking at lower cost, even though I think it's going to be very standard for knowledge workers to have electronic mail, and to have productivity software, and that companies are going to be more and more dependent on that as they move the information in their operation into the digital world.
MR. BEACH:You mentioned electronic mail. It's a good segue into … corporate messaging. It's a marketplace, according to IDC, that's growing incredibly fast. Last year, 42 percent, I believe. And you've done two million seats last year with Exchange, and there are some competitors there, Lotus and Novell, who are a bit ahead of you. But, you recently said that companies needed to standardize on a single system. I want to ask you why? Why shouldn't companies here in the audience be able to use two or three different systems, possibly interoperating with Lotus Notes and Exchange? Wouldn't it be good to have a multiple systems with good operability between them?
MR. GATES: Well, absolutely, it's important to have the interoperability. Nowadays, all the mail products support the Internet standards, NNTP, IMAP, MIME, there are a lot of very rich standards out there. On the directory side, it looks like the LDAP will evolve to be rich enough to do directory exchange. And certainly in the case of Notes and Exchange, they're both going to have huge installed bases. And so customers are asking us even to take things like Notes applications and be able to automatically migrate them on to the work group features of Exchange.
Many companies will pick one mail system and have that uniform throughout. And there's a certain amount of simplicity in terms of supporting that, keeping one directory up to date, and knowing, as you do rich file enclosures, how that's going to work. Other companies will say that there are groups that have gotten going on a particular system, and they'll let those islands of users continue to use what they want to use, and yet pick one corporate umbrella system that manages the backbone and is the master directory. And so that directory replicates into whatever the subsidiary directories are. In some cases, it will be Exchange on top of a situation where you have islands of Notes, and sometimes it will be vice versa.
In what we're seeing in the marketplace, that's really where the competitive battle is. Most of the older systems, even our Microsoft Mail, or cc:Mail or PROFS, those systems are being replaced. And, more importantly, people are saying that electronic mail is a super-important application. And it's not just the technology investments to make that happen, it's also the sociological things to get all the systems that have been paper-based onto electronic form. To get people to read their mail every day. And it is quite an investment that only pays off if you get people using it a great deal.
So, I've been pleased to see the takeoff in the market. It's certainly been good for us and the other leading vendors in that area.
MR. BEACH:A follow-on question on Exchange in terms of what we were talking about with NT and scalability. Some say that Exchange is good for smaller environments, and there still seems to be some questions about it scaling up. Can you give us an example of Exchange?
MR. GATES: Okay. Exchange, because, at its heart, it's a transacted mail system, has very, very good mail performance. We showed at scalability day 50,000 users, quite significant mail users, running against a single Windows NT server. Then we showed how you can cluster those together to get millions of users connected up to Exchange. We have GE, Boeing, Microsoft, Digital, British Telecom, a lot of large customers now who have deployed in all those cases over 50,000 mail boxes that are using the system very heavily.
So the real challenges in deploying a mail system is not the scalability. That's pretty straightforward. The real problem is that people find that they don't have enough bandwidth between their various offices, or the way they're getting that bandwidth doesn't have enough reliability. So, often, as you put the mail system in, it forces you to rethink how you're doing data connectivity for your company on a global basis. And it's really helping to guide people through that process that's been the critical path for most of these large deployments.
MR. BEACH:I have to switch gears a bit on the support and service side, still focusing on that. Our research at ComputerWorld in the customer satisfaction area seems to show that companies that are doing direct support service seem to have more satisfied customers than companies that are relying primarily on channels and their partners. How confident are you that your partnerships with HP and Digital and others are really the best way to service the enterprise?
MR. GATES: Well, Microsoft has decided to focus on its key competence, which is building software products. So we are not in the system integration business. We're not broadly in the consulting business. But to go together with out software product business, we've got a large field sales group, in fact it's very specialized, there's part of that just works with enterprise customers, and there's part of it that works with smaller customers. And we've built up our Microsoft consulting operation, which here in the U.S. is close to a thousand people. We're going to expand next year our sales force to call on a bit broader set of customers. We're going to expand Microsoft consulting.
But our strategy continues to rely on solution providers, Digital, HP, Anderson, EDS, companies that have as their core competence systems integration and writing lots of applications for customers. And they can bring a broad set of skills to that that are very complementary to what we do. And so we focus on making sure they've got the training and the background.
Now, we stand behind the products 24 hours a day, seven days a week. We're there to help with anything that comes up. But for really advanced solutions, our customers are calling these people in and getting a lot of benefit from the breadth of what they do. And I think that's the future of the computer industry. I don't think it's one company who brings the hardware and software and all the pieces, including the services that go with that.
MR. BEACH:Like we had in the '50s.
MR. GATES: And, again, that's the way the industry grew up. It's only with this rampant pace of innovation that people were forced, largely, to become more specialized. In our case, having the one area that we focus on.
MR. BEACH: I'd like to bring up a topic that seems to be on everybody's mind these days, the Network Computer. One of your competitors argues that the PC is a personal mainframe. He points out that just about every universally deployed system, whether it's a television, a radio, a telephone, electrical water supplies, all use the model of a simple end-user device linked to a complex network.
I'd like to ask you, in the long-run, do you think the PC industry will follow that same model, or will it be different, and why?
MR. GATES: The PC is a unique tool. It is there to let you browse information and to create things, and it's got to be very responsive. The future of the PC is to be able to hear your speech, to be able to talk to you, to be able to see your gestures, and to do that we need to have an operating system right there by you. We can't take speech and run it up to some central computer and try and process it and then come back. You just won't have the responsiveness.
Now, through the miracle of low-cost chip making, it's possible to put that richness right there. Now, we need to couple that with a lot more simplicity, so you don't have to think about moving the state of the client machine around or updating the software. Certainly a lot of opportunity there. But we're not going to take away portability. We're not going to take away the responsiveness as we go forward and do those things. And I think another key point is that we don't want to break the benefits that the PC industry has brought. People, today, as they buy these powerful servers or desktop machines, they have a choice of several hundred hardware vendors. And so the things they're spending 90 percent of their dollars on is absolutely biddable at any time. That's because there's a software standard that makes sure these machines are the same. And so the software industry gets all that volume, and they don't have to specialize for the different manufacturers.
The NC approach is to go back to a world where each manufacturer has their own user interface, their own processor, all deviating from a set of base standards, just as in the case of UNIX. So the NC is not compatible with the PC, but the NCs are not compatible with each other. And that's why they call it NC, because it stands for "not compatible." [Laughter and applause.]
MR. BEACH:Are you surprised?
MR. GATES: No, seriously. I mean, some have a disk, some don't have a disk. There's nothing else that they have in common there. So the real question is, the PC with its compatibility continuing to get better, versus a revolutionary approach where Oracle goes in one direction, Sun goes in another direction, IBM goes in another.
MR. BEACH:You were talking about this in your CEO Summit a couple of weeks ago, and you just mentioned it again. The PC, the model of Oracle having its Network Computer, and Sun another, following the UNIX model. And the NetPC initiative would be more broad-based?
MR. GATES: The NetPC is a very natural evolution of the PC hardware specifications. It gives you remote booting, automatic identification of all the network stuff, nothing that the user ever has to do, it's just a box. And many people will have those out for about $1,000 later this year. So that's just a refinement of the PC.
In the case of the NC, any time the system software is being developed by the hardware manufacturer, that's the fox guarding the chicken coop, basically. Those software developers are going to make their UNIX or their NC better in some way. And so the engineers at Sun think, well, we'll do this. The engineers at IBM think they'll do something else.
Now, every few years, they get together in a committee and say, yes, UNIX is a total standard, but then immediately for any new state-of-the-art issue, they go in a different direction. So the rigid testing we do to make sure that PCs don't change the system software, and so you can have something across the board there, that's a different model. And this model has been in competition. If you had asked people five years ago, would UNIX have higher volume than NT, 99 percent of the people, and 100 percent of the analysts would have said, absolutely.
Now, as the PC has grown up, you'd have to say at least some of them would see it differently.
MR. BEACH:I have a couple more questions. Somebody in the audience from the show yesterday gave me this one. Security is an important issue, especially Internet security. Could you just briefly talk about this, and then also … your point of view on the U.S. government's export restrictions on strong encryption.
MR. GATES:Well, the encryption thing is one thing I think you'll find everybody in the industry strongly aligned on. The understanding of how to do strong encryption is known worldwide, and so restricting the U.S. software developers from exporting reasonable encryption is not serving any purpose in terms of preventing other countries from encrypting their information. It is putting us at a commercial disadvantage because now people are doing add-ins that work in strange ways and are hard to upgrade, and they're even using this as a way of saying that people shouldn't buy their software from U.S. providers. In fact, I'll be in Washington, D.C., tomorrow talking about this, and seeing if there isn't some compromise that can preserve some of the goals that the security agencies have. And still allowing the software industry to get on with making the Internet more secure, including things like 128-bit keys that are actually hard to crack versus the 40-bit keys we're allowed today that have gotten to be almost trivial for people to break into.
Now, that's only one aspect to this whole security thing. The security thing is a very, very important issue and quite a broad issue. Another aspect is smart card, making it so that the PC keyboard has a smart card slot, and so that instead of just using a password, you have your smart card and your password to authenticate who you are.
On these, once you get out on the Internet itself, there's a question of what policies you have. And although these browsers can warn you when you're downloading a little applet [which might contain a virus], what happens is that when you're going to your intranet, you keep getting that warning message and you think, oh, geez, this is inside my company, I don't want to see that message again. But then when you go out to the broad Internet, you've turned that warning off, and so you're really at risk. And so we're putting into Internet Explorer 4.0 a new concept that I think will be broadly adopted called Security Zone, where an administrator can decide what is the intranet, and how much to trust that. What are the key partner sites, and what level of trust to have with those. And then what policies to have for the broad Internet. And the administrator can keep those lists and manage it for everybody in the company on a central basis. And so then you can say, look, for the broad Internet, never take arbitrary code, because that is a risky thing. Whereas, on the intranet, yes, you want the richness of having little applications that run on those pages.
There's a lot of work to be done competitively, and a lot with the industry working in concert before we can say that the security thing is behind us.
MR. BEACH: We have a question here on Java. Yesterday on this stage, Jeff Papows said, "The future of information technology depends on a religious insistence on how to present pure Java apps. Java is our last best hope to write once to run anywhere." He says it's clearly more than just a language. He sees it as a crucial and critical technology of the future of computing. And I'd just like to ask you directly, do you agree or disagree with Jeff's point of view?
MR. GATES: Well, certainly Microsoft is supporting Java. Our Java compiler is out there, and it's quite popular. And we've done a lot to make Java practical, things like what we've done with the performance and the debugging, and we're going to continue to contribute to that base. Now, we see Java not being the only computer language. We don't think just rewriting all your applications to run in interpretative mode. That's not necessarily going to happen. Rewrite everything is not a very strong pitch. We also think that whenever people are writing applications, they should have a choice. If they want to stick to the least common denominator, like they could have with COBOL or C or a variety of languages, and run everywhere, that's is just great. That is just fine.
But if you're, say, a MacIntosh user, and somebody comes to you and says, by the way, there's a religious movement in the computer industry, and we've decided that none of the applications on your machine should exploit the MacIntosh user interface, the MacIntosh clipboard, the MacIntosh extensions, because we're so pure that exploiting the machine you invested in, we're not going to do that. And if there's any innovation, we're just going to call up Sun and hope they'll submit it to the standards process before we take advantage of any new thing that goes on. We're not sure that's how everything -- all applications are going to be developed.
There will be applications that take advantage of Mac. There will be applications that take advantage of Windows and the richness of what's going on there. Some of them will be written in Visual Basic, some will be written in C, some will be written in Java. We're giving the richness of components, garbage collection, transaction management, to all languages, so you don't have to go back and rewrite everything. You can take your C code and put in a few calls, and boom you have transaction management. Likewise, for all the different languages that people have used. And so I think it's a little strange to get religious about this. There are user requirements. Sometimes those requirements ask for portability, and sometimes they ask for a richness against a particular platform.
MR. BEACH:So do you agree or disagree with Jeff? [Laughter.]
MR. GATES: I'm sure he and I agree on a lot of things. And I'm sure we disagree on a lot of things. Actually, he's one of the software CEOs that will be with me tomorrow when we go up to Washington, D.C., and talk about broad industry issues, including encryption and immigration and copyright, and things that we definitely have in common. When it comes to which is the best mail system, I'll bet we disagree on that.
MR. BEACH:I wouldn't be surprised. Who are you seeing tomorrow? How far up the food chain are you guys going?
MR. GATES: I'm not sure how the final schedule worked out, but actually our industry does get a lot of access. Politicians at the highest levels are interested because of the number of jobs that are being generated by the software industry, and by the excellent record we have in terms of exporting and really driving innovation forward. It's almost too bad we have to go to Washington, D.C. It would be nice if we didn't have to think about that. But as we've gotten more involved in communication, and communications bandwidth is one of the key factors that's going to determine the success of our industry going forward, you just get more involved in what the regulatory issues are.
MR. BEACH:That's understood. Reading your speeches recently and in the column in the New York Times, I'm intrigued with your digital nervous system concept. I'd like to have you explain what you mean by that to myself and the audience?
MR. GATES: This is a term I just started using a few months ago. And what I'm referring to is the idea that when you think of a company, you can have a certain way of reading how that company deals with information.
MR. BEACH:Quantifiably?
MR. GATES: Well, we're trying to make it quantified. We haven't gotten there yet. The nervous system is the term for how you deal with information broadly, meetings, memos, forms, and then the digital nervous system is the part of it where you're using computers to send that information around.
One thing I did at Microsoft is, I said, bring me all of the paper forms that we've created. And I thought, we won't have many because we're such an electronic mail company. But, in fact, they brought in about a thousand forms that we have. And it's just stunning, a thousand forms. And even for something like 401(k) we had eight forms to get in the program, get out, change one thing, change another thing. And you had to go to somebody to get the form and fill it out. If you wanted your status, you'd submit it and 24 hours later you'd get the answer. Well, it was very easy to just say, hey, we're going to get rid of those and just use the mail system for all that kind of exchange.
And so even for mundane tasks, you want to make sure you're processing them effectively. The big leverage, though, comes in things like customer management. Is all the information about a customer easy to call up? Can you and your company sit down, type in the name of that customer, and see everything that's going on with them? If there was a crisis with that customer, or it looked like they were unhappy or they were going with a competitor, would you quickly be able to get everybody involved collaborating together, even if they're in different locations, and make a decision best how to make that customer happy or keep their business. If you have a project that goes off track, does everybody see that immediately, and are they able to analyze it in the same way? And so, some companies are doing this very well. They're starting to use electronic systems to eliminate meetings and paper, and to get the speed of decision making to be a lot better.
I think electronic mail is just the starting now on the core of this. You've got to have it, but there will still be a lot of differences in how smart people are thinking through the digital nervous system.
One of the things we want to do is highlight best practices. Really talk about some people who push the limit in different parts of their company, whether it's budgeting or sales analysis, and use electronic tools, because around the world now there are companies that are diving into this, and we can make this happen a lot faster by showing the way and talking about where people who are really ambitious on it, and where it's really come through for them.
MR. BEACH:Let's make the Exchange team feel better. It sounds, when you keep talking about digital nervous systems, Exchange I would think becomes even more important to your strategy?
MR. GATES: Well, certainly all the elements that you used to think of as separate from the operating system, like the directory, message transport, those are now moving into the OS, because lots of applications are all calling them. So the boundary between Exchange and the operating system … more and more of it is moving down in. A knowledge worker is going to have electronic mail certainly at work, and eventually out to the home, whether it's a PC or WebTV or a little hand-held device with a wireless connection. And so electronic mail will be like fax, where a few years from now, if somebody hands you a business card without that mail address, you'll say, hey, what's going on here, this is very strange. And even people like your doctor and your lawyer, you'll want to be able to stay in touch with them through electronic mail.
MR. BEACH:Well, that's a good segue into -- we've got some quantifiable aspects to it. We have in the audience here today some really good examples of digital nervous systems in our Windows World Open. And they've been sitting out here. I think it's time to tell them who the award winners are. Should we go over and do that?
MR. GATES: For many years now, we've done what we call the Windows World Open, which is to recognize the leading developers of custom business applications, and it fits right in with this digital nervous system. These are people who are leading the way and taking the information in their company and making it very effective through the use of Windows-based systems. Microsoft is a sponsor of this Sixth Windows World Open, along with ComputerWorld, and Softbank COMDEX.
What people do here is they submit these custom applications that really show off the Windows environment. People this year, all of them, were using the 32-bit environment. We’ll recognize six winners out of 20 finalists who built these applications. And we're going to be real efficient in this and recognize six great applications.
MR. BEACH:Absolutely. These 20 finalists are not only here but they're important to the entire industry, and the program enables us, first-hand, to recognize great talent in terms of not only end-users, but solution providers, and organizations, and how they've all come together to solve business problems. And we'd also like to say a special thank you to Wall Data who, for the third straight year, has been a sponsor of this award.
I'd like to highlight several facts about this year's contest. There are 101 different tools from 58 different vendors. This is truly a cross-platform multi-vendor contest. And six of the finalists all used Internet applications in their solution.
So, I think, Bill, now it's time to get on with the awards. The first category we have today is the business intelligence systems category. The finalists here are the Associates/Manufacturer and Dealer Services System, Cerveceria Polar/Iceberg 2.0. It's easier to say Iceberg 2.0 than the front part. And John Deere Health Care/Decision Support Systems.
MR. GATES: And the winner in this category is the Cerveceria Polar for Iceberg 2.0. Iceberg manages the entire operation including control, and inventory, and accounts payable, and the company has cut its costs by 80 percent.
MR. BEACH:His Spanish is better than mine. The core business system category was so fiercely competitive, the judges couldn't decide on only three finalists, so we brought five here to the Windows World Show in Atlanta. Those five finalists are my bank back in Boston, Bank of Boston for a credit processing system; the Kmart Corporation for Kmart Allocation Application 1.0; Merrill Lynch for Private Client Shell, Promus Hotel Corporation; and the U.S. Air Force Reserve/Air National Guard for a system called Falcon View 2.1 which, among other things, guides Air Force One.
MR. GATES: The winner in this category is Merrill Lynch for their Private Client Shell. Accepting the award for Merrill Lynch is Tony Pizi.
MR. BEACH:The Client Shell provides consistent access and uniformed use of market data. I saw an application of it yesterday. It's now running on 20,000 desktops. It's going to go to over 30,000 desktops in 18 months. And Tony tells me it's going cost a billion dollars. A big application.
MR. BEACH:The third category is customer service and customer support systems. The finalists in this category this year are the California State Automobile Association; the Hewlett-Packard Corporation for Keep Incoming Calls Simple; and for Lawson Products for Lawson Agent Works.
MR. GATES: This award goes to the California State Automobile Association for the CSAA Online Guide and Online Guide Author. Accepting the award is Autumn Wagner for California State Automobile Association.
MR. BEACH:This product is among other things cut some response time on the telephone call center, improved it by 90 percent, 90 percent of all the calls answered in less than 60 seconds.
MR. BEACH:The next category is employee information access. The finalists are Buster Enterprises for Buster Link Estimator; the Lawson Products Company again for Agent Order Systems; and NASDAQ Regulation, Inc., for Cornerstone 2.0.
MR. GATES: This award goes to Lawson Products for their Agents Order System. Accepting the award for Lawson is Jim Mack.
MR. BEACH:The Agent Order system is a complete sales force automation system that places orders and keeps track of 33,000 product lines.
MR. BEACH:The next category is process control systems, and the finalists here are Entergy Operations, Inc., for ANO-1. I saw this yesterday, and if this product doesn't work, $60 million gets fried. The next finalist is -- this is a global contest -- Laboratorio Analytica Bioquimico; and the Stepan Corporation for Stepan SCADA System.
MR. GATES: The award goes to Stepan Company for the Stepan SCADA System.
MR. BEACH:Accepting the award is Gregory Warner. This interface that Gregory has built allows operators control and monitor five areas for Scanda. It's been a big success.
MR. BEACH:The sixth category is workflow systems and collaboration process systems. The finalists here are Athans and Taylor for their product called Synergy-CPA; Electronic Data Systems for a product called Process Sourcerer 2.0; Southern California Edison for Retail Contract and Pricing.
MR. GATES: And the winner in the final category goes to Athans and Taylor, Chartered Accountants, for Synergy CPA.
MR. BEACH:Accepting for Athans is John Athans, one the principals, I presume. Synergy CPA is an enterprise-wide solution for managing electronic documents. It registers marketing information, and is comprised of a unique client approach, and keeps John on track.
MR. GATES: Well, congratulations to the winners. We had another great year here with some really incredible applications that people are doing. And I'm sure next year, with all the tools and software getting stronger, I'm sure we'll see even better results.
MR. BEACH:Thanks again, Bill. And I would like to once again thank everyone here for participating in this year's Windows World Open, and congratulate all of our contestants. I'd also like to thank the judges and the sponsors again for their tremendous support for this program.
MR. GATES: I'd encourage everyone to stop by the Windows World Open Pavilion. It's out on the show floor, and you can see all the finalists' applications out there. I know you'll be impressed by the innovation, and we hope some of you also will join in and enter your creative solutions.
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