MR. GATES: Well, good morning. I'm very excited to have a chance to share some thoughts about how business will be done in the years ahead. I think that the breakthrough tools of the PC and the Internet will change business very dramatically. Here we have a tool that for the first time will allow buyers and sellers to find each other in a very efficient way. It will allow people to collaborate across the globe.

What we're talking about here goes way beyond the idea of just having a Web site. It goes beyond just the idea of electronic commerce. It speaks to the very fundamental idea of how information moves both inside a company and between a company and its partners and customers. So, the bottom line is that business is going to change more in the next 10 years than it has in the last 50.

This represents an amazing opportunity for the companies that choose to seize it. It also represents a challenge for people keep doing business the way it's been done in the past. Over the last several years, I've had lots of CEOs and business leaders ask me, where are the leadership examples, what are the concrete metrics they should apply to see if their business is moving rapidly enough to seize the opportunity here? And as I talked about that, I thought it would be worthwhile to go out and find those examples and document them, and to write a report card that people could use to see how they're doing with all this.

So, a little over a year ago, I decided that putting this in the form of a book would be the best approach. And today, I'm launching the book that came out of that, which is called Business @ the Speed of Thought. I really want to thank all the companies that participated in the creation of the book. There were literally dozens that we went out talked to about what they've learned, what had gone well in their projects to create their digital nervous systems, and what advice they had for others, including the benefits that they see from having made that investment.

"Digital nervous system" is a new term. It's to identify the fact that companies need lots of information to do their job well. Information about products, information about profitability, information about customers, even very basic information, like human resource management information. And all of that should be very accessible to empower the people who really do the work in the company. This is not just about taking the BackOffice systems and doing them in some new way with low cost hardware. It's not just about a vertical application, a single department and how it manages information. It's about bringing it together into an integrated system, a system that has all the information about basic operation, that's got all the information about the plans that are being made, and the strategic thinking that's going on. A system that captures every time somebody talks to a customer, every insight the company has about that customer, and makes it easily accessible. And the goal is to redefine a business' reflexes, allow them to make quicker decisions, and better decisions, because they're using this in all of their different activities.

There are a number of principles that go behind it. The first is that the Internet is a fundamental change. Over time, even consumers will get involved in using it many times a day without thinking about it as something special. It will be part of their lifestyle, just like the phone is today, or the car, or the TV. Where the change will happen most rapidly, though, is in the business arena. Businesses have high-speed Internet connections. Businesses have PCs. And the imperative of business is to do the best job. It's to compete very effectively. And so the motivation to use these tools in the right way will be very, very strong. Even in two years' time I believe the majority of businesses will use the Internet as a way of staying in touch, tracking the status of what's going on, and providing the best way of allowing businesses to collaborate with each other.

So, you've got to really believe that this is a huge impact in order to see the opportunities here. In the past, when people talked about business process reengineering, it called up the image of writing a lot of new software on a mainframe, taking years before that software was in place, and having a huge risk that it wouldn't really do what you want it to do. Here, with the latest development tools on the PC that allow you to build these Internet applications, the projects I'm going to highlight are projects that have a three to four-month development cycle. You can have them up and running, be getting feedback from the users, and be getting the benefits in a very short period of time. And they're not gigantic development projects because they're really taking information that's there, and just giving people digital views of that information that help them in their work.

The idea of empowerment runs through this approach, giving workers more data than they've had in the past. You know, a simple metric is, does everyone have a way of looking at the sales data in different dimensions? Can they look at it by geography, over time, by product, can they look at it at a place that tried out a certain promotion and see how that compares to a location that didn't try that same promotion? And if they can do that in a few seconds, and it's part of their everyday activity, including being able to mail it around to other people to share it with them, then they have been empowered to work in a very new way.

Customers need to be at the center of these systems. The idea that they can come in through the Internet is only one part of that. Whether they're coming in face to face, whether they're calling in over the phone, you want to have a common view of what's going on with that customer, including what new products might be appropriate for that customer, and how you want to help them out.

A final principle may seem like an unusual one, and that's the idea that bad news must travel fast. As soon as we got our electronic mail system, many years ago, I started getting messages from people where they'd say, "this is great." "We just won this account, isn't that fantastic?" Well, so I'd send back mail saying, "congratulations." But a few minutes later I'd find myself wondering, you know, what about the other accounts? I didn't get any mail about those. What does it mean? Did we lose every other account? It's human nature that people do a great job getting the good news out. And yet, when you really think about business reflexes, it's having all the information about where things are not going well that really allows you to reshape your plans at the earliest possible moment to see if you need to enhance a product, if you need to invest more in customer support. And so, having the information about the customer that's not totally happy really is the most actionable thing. And you want to create an organization that shares that information and, therefore, moves into action to convert that bad news into good news as quickly as possible.

Now, in everything I'm saying here, I'm assuming electronic mail as a given. There have been a lot of CEOs now who have shown leadership by saying that everybody really needs to be connected up. At Johnson and Johnson, Ralph Larson said to one of his subordinates who wasn't reading his electronic mail, hey, you're never going to hear from me again if you don't get involved and get connected, because this is the way that we've chosen to really stay in touch with our worldwide operation.

At British Petroleum, the CEO was told by his IT people he had a mail system, so he sent out a message to 50,000 employees. About 10,000 never got it, and the rest of the people, the majority of them, couldn't read the enclosure that he'd sent along. And so, in many cases, there's a hodgepodge of systems out there that hasn't become a key infrastructure piece that's run with incredible reliability. And so, that's really a starting point is to have the directory, to have the electronic mail software that gets this kicked off.

Well, in the book I introduce three new terms. For businesses, I talk about how you should step back and think about the key information and put that into digital form. That's the "digital nervous system."

For the workers, I talk about a workstyle, a new workstyle I call the Web workstyle, where your expectation that you can find things out is much higher than it is today. Your expectation that you don't have to go to a meeting where it's just presenting information, but rather you go to meetings when you want to brainstorm, when you really want to have a lot of back and forth. So workers will be spending their time in different ways.

Finally, I talk about the Web lifestyle, and that's when the consumer in all their activities, not just work, but even as they go home, as they plan a trip, as they think about making a purchase, they're using the Web as a tool to help them get that done.

Every one of these things is just at the beginning. I don't think there's any company that's realizing the full potential of a digital nervous system. Even Microsoft, who has focused on this for a number of years, and I use as an example in the book in a number of areas, we can see far more that we can do here.

I'd say that the percentage of people operating in the Web workstyle or Web lifestyle is less than 10 percent, even in the United States. But it's my belief that this percentage will go up very, very dramatically. And over the next five years, the majority of people will engage in the Web workstyle and the Web lifestyle.

Now, from time to time we go out and talk to all the users, we try to get a sense of how they're thinking about these advances. And we captured on video some of the responses as we asked about, how do people think of Web lifestyle. Let's go ahead and take a look at that.

(Video shown.)

MR. GATES: So, we've got a long way to go before everybody understands and lives the Web lifestyle. Now, one of the things that a lot of people ask me to do is be very clear about how somebody would rate a nervous system. What kind of things should they really ask to make sure they're getting the full benefit of it. Because part of the story here is that companies are already investing in the key pieces. They've got the PCs, they've got the software, they've got the network. What I'm saying is that the value that they get out of that can increase dramatically by using it in a new way.

One question that I think is important is, "how good is your corporate memory?" This is a tough challenge, because I say that your corporate memory is not very good unless somebody who is working on a project can sit down at their PC and in less than 60 seconds call up any memos or documents that might relate to a similar project that was done in the past. If it takes more time than that, people probably won't go and find it. So in that sense, your corporate memory is not an asset. People are probably going to be making the same mistakes again, rather than seeing what the lessons were from the past.

Now, this is one where even at Microsoft today it's tougher to do this. And, in fact, by really thinking about this, I made sure that the next round of Exchange, the next generation would have this really as a built-in capability, to make sure it's very easy to go back and find any document, no matter what kind of document it is. So that this test you might call the one-minute manager.

A more straightforward question is, what is your strategy with paper forms? I was filling out a very complex paper form one day that had to do with adding positions, and you had to indicate were these new or transfers and what the salaries were, and it was really quite an amazing form. And I thought to myself, why am I doing this on paper? You know, it isn't the right way to do it. It's error prone, I get no feedback, I'm entering in the same information, it's not visible to everybody who might want to know. I just wanted to ask some questions about what I was doing here. It's hard to mail it around to people. And so I asked for somebody to bring all the forms we had in the company. And there were hundreds. You know, human resources had 60 forms, the sales people had dozens of forms.

So I said, look, I'm the CEO here, we're going to get rid of all these forms. And, in fact, we have managed to get rid of all but a few. We still have the government insisting we send them paper forms, so there are a few dozen that are still there. But, we're encouraging governments, and not just the U.S. government, to also move to this digital approach, and allow people to interface in that way. The benefits here are quite substantial. You know, take something as simple as managing a 401(k) plan, showing people their options, showing the history, making it so that they don't have to go somewhere and visit somebody to stand in line to talk about this. So it's simple, it's very empowering, it's a way to get things done.

When you put these forms online, the wonderful thing is that you get lots of feedback. We include with every form the ability to click and say where you think the form might be confusing or how it could be better. And so these systems tend to iterate pretty rapidly, to get into a really good form. The expense report system we've got, the head count management forms we've got, each of those have gone through a number of versions. And the simple rule we have here is, you ought to be able to look at the form and understand it in 30 seconds or so, and be at work taking advantage of it.

Another key question is, have you made self-service for your customers a core activity? Have you taken everything that they could do and made that so they simply come in on the Internet, and see the information that they're interested in? Federal Express is a great example of this. They made it so if you know your package number, you can see everything that's going on with that package. The cost savings to them were really quite dramatic. And it was better service, more customers find it easier now to, you know, inquire without taking much time. And so that's really become a requirement for anybody in that business to have that kind of rich capability.

Likewise for selling books. Barnes and Nobles, Amazon, many companies have built sites that give you that depth of inventory. They let you search, they let you see what other people are saying about the site, and commenting on different books. And so self-service has become something that's just another way of interacting, and a lot of customers are choosing to go that way.

I think another key question is this idea of customer feedback. If somebody from your company has a phone call from a customer, where that customer is indicating they'd like to see something new or different, is that available to anyone else who might see that customer later. Is it available to the product team? Are you using this feedback loop to make sure you're setting your priorities in the right way. When you have a company that's successful, your customers want to guide you in the right direction. And it really takes a breakdown in communications for you not to take full advantage of that, and have your product plan be absolutely on track.

Marriott is a great example of this. Their original Web site was really just like a brochure. There was a lot of information. They made it a bit interactive in that you could look for different hotels with different capabilities. But, the really big benefit to them came when they made it an interactive site. And today they get over 7,000 comments per month, people who are saying where the service is very good, people who are talking about new facilities that they'd like to see. And so they've turned their Web site from a monologue into a dialogue. It's helping them stay closer to their customers, and that's a huge benefit to them. Now, when you set up a Web site like this, where you're getting this customer feedback, you've got to make sure it flows into your company, so you can acknowledge that feedback and so that you really are taking action on it, not just having it up there as a bit bucket.

I think another key metric is, are you able to involve partners and share the portion of the information with them that would help them work with you in the best way. Business in the future, I think, will be more dependent on partnerships. A lot of things that companies have done inside, I think that they'll go to the Internet and find the best partner, and by using the Internet they'll be able to collaborate at a distance. And so the empowerment of that partner with information is very, very critical.

Xerox decided that this was so critical to them that they actually took the internal system they had, which was quite unique, and completely redid it, building on top of the PC, and making sure that it would connect up to what their customers had and what their partners had. So they went from having an isolated system, to having one that let them reach out, and now they have many partnerships that they're using, both to design products, to get their products out into the marketplace, that are helping them be a lot more successful.

Another question, one that I think is the most interesting one, is a little hard to measure. You really can't put numbers against the business reflexes that your company has. Can everyone rally to respond to a crisis? Can you get people in different locations to share their insights, and even turn around a key decision within a 24-hour time period? Business is going to require that, and the leaders will be the ones who can deliver on it. Certainly, we've seen a lot of developments recently, whether it's the Asian crisis, or currency exchange rates, that make you rethink some of your business strategy.

Merrill Lynch is a good example of a company that lives in a very dynamic environment. And what they've found is that their financial consultants were spending a lot of their time just trying to track down information, trying to get the right stock quotes, and the right reports, and put things together for their customers. And they wanted to dramatically increase the percentage of time their financial consultants were spending with customers. And so they built a PC-based system that is now being rolled out to these 15,000 financial consultants. And the feedback on it has been incredibly positive, because they've really captured the way these people work, and allowed them to have access to the information they need. And so they are far more responsive when clients are calling up and any time there's a change they have the information right there to help those customers out.

So what I'm talking about here is not a completely new hardware infrastructure, it's not a completely new software infrastructure. It does require being very serious about the electronic mail reliability. It does require being very serious about taking things like sales data and putting that into pivot tables, so that people with a spread sheet can do views, and they can see the information in a way that might change the strategy that they're going to recommend.

So the building blocks are quite clear, these are high volume, low cost building blocks, and the competitive edge comes from applying them in a very deep fashion inside a company.

What is Microsoft's role in all this? Well, we have several different roles. One of the things we see ourselves doing is continuing to highlight best practices, whether it's on our Web site, or things like the book, or sitting down with individual customers and saying, within their industry, how do we see the Internet coming in and changing the way things are done?

Our products will continue to be what they've always been, high volume, standard software products, where we put in billions of dollars of R&D to make something that will be used on a very global basis. The key products are the ones we have today that people know very well. Windows, Office, BackOffice will be the key tools that we're providing. In addition, we have the development tools, and we have our Internet activities, which are all done under the brand Microsoft Network.

We have many initiatives across these different products, and that's why you've seen our R&D expenditure go up very substantially many years, even faster than our sales have gone up. The Internet has been a top initiative for us. Ever since the Internet exploded back in 1995, we've made sure that every new feature we're doing is built around the Internet. We're very involved in the standards committees because the Internet does need to continue to evolve. Issues like security or sending video or audio information across the Internet with the high quality capability, those are still not solved issues, and yet there's great work going on there, so those will be a standard feature of the Internet.

Also very key to us is interoperating with all the other systems, making sure that if you move your application development down to the Windows environment, you can still reach out to your database that might be up in a mainframe. And that's required us to do very sophisticated work to have transaction integrity between the Windows system and the mainframe system. And there are some great examples of customers using that so they can move to the new application development tools without having to change their database at the same time.

Scalability is a very key initiative for us. This is the idea of having performance beyond any system that's been out there. The number of transactions that will come in across the Internet really demand that. And so, between the hardware and software advances, we are making incredible progress.

The final initiative is simplicity, making sure that even as we put more power into these products, we reduce the number of commands that people have to learn. That we take situations where you'd get an error message and avoid having that message. You're seeing this in all the new product shipments. For example, Office now, if you've deleted a file or somehow messed up the Office installation, it will automatically go back to the server, find the right software, and bring it down without the user having to get an extremely cryptic error message. And so, we have a lot that we can do to tap the power on behalf of the user, and make things simpler even as the tool delivers more and more value.

Let me focus in on this scalability issue, because this year is going to be a year of major, major advances in PC server scalability. One of the advances we have is the state of the individual processor. Intel and others are doubling the clock rates every couple of years, and that translates immediately into pretty incredible performance.

We're also going through a transition now where, at least on the server, we'll start to see 64-bit chips. What that means is that you can have really very, very large amounts of memory. And so, instead of going off to the disk to get information, you simply fetch it out of the memory. And that can speed up all kinds of operations very, very dramatically.

Windows will be there, fully exploiting these processors, like the Merced and the Alpha, as we come out with Windows 2000 and as the Merced chip gets finalized by Intel and HP. So, it's very different than the transition to 32-bit, where it took a long time for the software to catch up. The memory model was very different, and developers had to do a lot of work. Here, the tools make it simply a recompilation to have 64-bit versions of the applications. And so certainly on the server where this performance is important, the transition will be very, very rapid.

Now, in addition to having individual processors that do incredible things, we're able to build the system that has many processors. Today, that's typically a four or eight-processor server, or in some cases a 16-processor server. With some of these new memory bus approaches, including an approach called NUMA, non-uniform memory access, we'll be able to get that up to 64 processors, and so you get a big boost there because you get the power of all of those coming together.

The final technique, and perhaps the most important, is taking these systems and combining them through the clustering approach. Now, clustering is a very, very important technique, because it gives us not only the very high scalability, it also gives us incredible reliability. We've added a piece of software to Windows called the Windows load balancing server, so that when Internet requests come in, we redirect it to the machine in the cluster that has the least load. And it makes sure that the requests are always passed to machines that are up and running. And so, even if one machine in the cluster goes down, the people coming into the Web site don't notice that at all. To them, everything runs and the responsiveness is still very incredible. So, the clustering approach lets you scale Web sites, databases, and electronic mail in a fantastic way.

Now, there's a lot we're doing at the software level to make this possible, such as building transaction support into the operating system. That's critical because if you do have a hardware failure, you've got to be able to have the database roll back to the logical starting point, so when the other system takes over the work, it's starting at a clean point. Without transactions, that just doesn't work properly. And so, instead of forcing every application vendor to do that work, we're putting it down in the operating system. And we've had a great reception to that.

We're also taking the new directory and using that for a rich level of system management that lets you allocate what the priorities are on the clusters, and also to administer all the parameters of the system without going out and visiting each of those individual systems.

The PC model is succeeding here. We've got the R&D of all the companies in this industry, companies that are specializing, companies that compete across these very compatible systems, and this will allow us to move beyond what's been done in the non-PC model in the past. And that's really a requirement, because this digital world is going to put new demands on computer systems that are really quite amazing.

Recently, we've seen great results in this. We've seen Windows NT clusters go up to more than a terabyte. We've seen people take clusters and do over a billion transactions a day. We've also got a lot of partners who are now offering programs where they have guaranteed up time, 99.9 percent. And as we work on Windows 2000, and work with these partners on the hardware configurations they're doing, we're going to go even further, we're going to go to even higher levels of guaranteed availability.

Innovation in this business is moving faster than ever. And that's partly why I think the impetus for businesses to rethink their approaches is stronger than many people may appreciate. The PC is going to be far simpler than it has been. One of the new form factors I'm very excited about is what I call the tablet PC. And this is the idea of taking these portable machines that have gotten so small recently with such high performance, and actually creating a form where you can detach the keyboard. You can take it into a meeting, and you'll be able to do handwriting on the display to take your notes. And that handwriting software has improved quite dramatically. A few years ago, the products that used that were not received well, simply because the hardware-software combination wasn't good enough. But we have stayed focused on this problem. We've been working hard on the software and there has been great progress there.

A key element to this is having these higher resolution screens, making it so that you'd really want to read even long documents off of the screen. And we have software advances like ClearType and the LCD manufacturers are also doing a great job upping the resolution, so that even documents of 10 and 20 pages will make sense to read off of the LCD.

We also believe in the smaller devices, the pocket-sized devices, that will have wireless connections, the computer in the car, the intelligent set-top box that will connect you up with your electronic mail and your information. All of those have got to connect to the same network, and allow you to access your files or anything you're interested in, without having to give a lot of commands to move the information around.

Another big advance that I think you're going to hear a lot more about is this Internet standard called XML. This is a way of taking business information, like a health care record or a purchase order, and expressing it in a standard form that can be exchanged across the Internet. All of the previous business standards, including things like EDI are being transformed into XML. XML is more flexible, more interactive, and we've got it as a top priority to build tools that let people deal with XML. So Visual Studio, SQL Server, all of these things are going to have rich capabilities built in for XML support. And that's going to make it much easier to write business applications and exchange business information.

This is the key interchangability issue, exchanging the semantic information. And we can do that without asking people to go back and rewrite their applications. We can do that and still give people a choice of any of the new languages that come along, and mixing and matching code, whether it's in C or Java or Visual Basic, and yet dealing with information in a common way through XML.

Speech recognition, that's a scenario we've talked about for a long time. There's very good progress there, but I don't think you'll see dictation as something that most people will use in the next couple of years. The extra processing power, getting the extra memory I think has us on a track to provide that, but for most people, I think it will be more like a five-year time frame before that's a standard way of interacting.

Advanced collaboration, that's a big part of this new world, the ability to share documents and collaborate on them, even if you're halfway around the globe, and including the video and audio in that will make it simpler. This will become part of a standard business activity, which it is not today, because it's too expensive, it's too hard to set up. And we have to advance the software and the Internet protocols to bring this into the mainstream.

We'll also see the Internet not just be about wires, we'll see wireless digital data. So, in your business, you'll put in a transmitter, and that will give very high-speed connectivity to people, whether they're walking around with their small device, or they're walking around with their tablet, taking it to a meeting, you'll be connected up at several megabits a second with that network.

Eventually, the wide area network, even the voice wireless network, will get that kind of data capability, but that will take much longer than putting in the campus size networks that will be a replacement for the PBX and give people new flexibility.

Well, the belief I have is that successful companies will be the ones who seize these opportunities, companies that use digital tools to reinvent the way they work. I think the opportunity here is really a fantastic one, and we're very excited about working with all of you to make this a reality in your company.

Thank you.

(Applause.)

MR. JONES: Okay. What we'd like to do now, we're going to bring up the light a little bit, and then the Microsoft folks will be coming through the aisles, and any questions you have, please hand them to the outside, and we'll pick those up. And I have a couple of questions to get things started, from earlier today.

What's the first thing a company can do to get more value out of their information systems and foster collaboration in their companies?

MR. GATES: Well, the information that counts in a business varies wildly from business to business. Certainly, that customer-centered data is common to almost every business, so you should think about how you would get that online, how would you share it in a new way. That may be the first project people want to tackle. I talk a lot in the book about how if you pick a project that's going to get the right backing and make a difference, that counts a lot, because it builds positive momentum. People start thinking, well, if I can do this on the screen and share it with people, why can't I do this other thing. And although it's got to start with some leadership from the top, once you get a few successes then you'll see incredible activity where people will be suggesting ways you can use the system better. So pick one or two things that really impact people, make sure you do those right, and then you'll be off and running.

MR. JONES: Great. You mentioned that in a digital age you need to make knowledge workers out of every employee possible. How do you accomplish this without completely upsetting, and this is a commentary on their company, I guess, our positive employee culture?

MR. GATES: Well, think of the jobs that people have that are fairly clerical in nature, where somebody is calling in on the phone, simply asking a question, or where you're taking forms and simply entering that data into the computer. Those activities will no longer be necessary. And so you think, why can't I take those people and involve them in customer service, you know, if a customer is calling in, if they have the information, if they still have a problem, they want us to do something better, and if you give that person the right tools, train them in the right way, they can add dramatically more value. And so that kind of rich job I think of as a knowledge worker job, as opposed to the clerical kind of work, which has characterized a lot of the jobs in the older workforce.

MR. JONES: Okay. One of the biggest challenges facing my company is the need to integrate across a variety of platforms. Some legacy systems and even some different productivity applications from a merger we did. How can the Microsoft vision of a digital nervous system help me with this?

MR. GATES: Well, I'd say that 98 percent of our customers live in a mixed world, where they've got mainframes, they've got UNIX systems, you know, when you get mergers you get different approaches in the software that people have. And so this idea of moving the information around is a very, very critical need. I think that the initiatives we've taken, things like the standard database drivers, the ODBC drivers, what we've done with SNA server, what we've done with the transaction interoperability, it really has made a big difference in letting people use their old systems and yet move the newer applications down onto the PC.

That an area that we're constantly evolving, you know, the ability to read all the different file formats, using HTML more and more as a standard way of doing interchange. And Office 2000 brings that forward in a very dramatic way. And so, you know, I think that it's a fact of life to get these systems to work together, and I think XML is actually the new frontier that's going to make that easier than it has been.

MR. JONES: In your 1994 COMDEX talk, Information At Your Fingertips, do you think we are on track or even ahead of schedule?

MR. GATES: Well, I'd say that in 1994 I was a little concerned that people still weren't thinking of the PC as a tool for communications. They were still really thinking of it as a standalone productivity device. And the Internet and online services hadn't caught on. You know, nobody was talking about a new way of doing business, or creating a marketplace by connecting PCs to the Internet. In late '95 and '96, as the Internet just skyrocketed and it became clear that the protocols we were going to use to achieve information at your fingertips were the Internet protocols, I think that the progress became very rapid.

You know, today you look out there, there's start up companies every day, there's new companies with incredible valuations. And so it's focusing people's attention on what's possible here. You know, a lot of businesses wonder if somebody new who builds their business from the beginning around the Internet, are they going to come in and present a competitive threat? And part of the answer to that is that you've got to get out there early with your brand name, get onto that learning curve, and get going in order to make sure that you stay ahead and transition your key assets into this new world. So I'd say the progress in the last few years has been really quite gratifying. And what we're talking about here is really the realization of that vision.

MR. JONES: You speak a lot of a Web-based business, partnering across the Web, et cetera, how do you see the legal industry fitting into this scenario?

MR. GATES: Well, the law firms are a perfect example where you've got a lot of different documents that you want to find and keep track of. You want to be able to communicate with clients, you know, look at a contract revision and send that back and forth, see what changes have been made, perhaps even do a conference where you're editing together across the Internet. And so it's an information rich business that all these principles can apply to perfectly well.

MR. JONES: What is the role of middlemen in the totally wired world?

MR. GATES: I have a chapter in the book that talks about the middleman and how their role will be very different. The simple principle is that the middleman has to add value. People have to feel like there's a level of expertise being applied. So, for example, to take a travel agent, if that travel agent is just processing a transaction that the consumer could have done themselves, then the consumer will probably do that directly and not involve the travel agent. But, if it's a trip where they're helping to select different destinations, it's a fairly complex trip, the value added is very strong there. And so across the Internet, if you want a certain type of trip you'll be able to find travel agents that have in-depth knowledge about that. You'll be able to check out their references very easily, and then work together with them to make sure that they can help you out, and that's a real benefit. And so that expertise can be applied to a broader set of customers than ever before.

MR. JONES: The book talks about the integration of some of the newer technologies in the workplace. Having traveled to Italy not so long ago, how do you rate that country's readiness to adopt the technologies to its business practices?

MR. GATES: I think if you look at business, the United States is by far the best in adopting the Internet approach. Of course, we're still at the beginning. But, we have this benefit that a high percentage of the college students in this country have been using these tools simply to hand in their homework, or to sign up for courses, or to stay in touch with their friends. So they're agents of change. They come in with a very optimistic view about how this can be done. They don't have the very low expectations about information availability that have been built up through the old practices of having information flow primarily on paper. And so I think a lot of the competitive edge that the United States has developed, a lot of the great results we're seeing in our economy, come from the flexibility and willingness to embrace technology.

Every country I visit they say, you know, how can we catch up, what can we do to have those same benefits? The one area I'd say the United States is not a leader is actually using these tools in government. In that case it's really been some smaller countries, Singapore, New Zealand, some of the Nordic countries, that have been able to get their heads around the idea that you've got to do this across departments, and you've got to really put the kiosks out for all the citizens, and solve the authentication problems. And they're definitely the leaders in that area.

Europe is a whole is somewhat behind, including Italy, but the awareness is there. Even politicians now are talking about how they're going to lead their country in the right way, and how it's important to make the investments, have the right rules for communications costs to come down. And so I don't think Europe will stay behind for very long.

MR. JONES: Communities who have been left out of the traditional systems, how will they be brought into DNS?

MR. GATES: Well, there's a lot of different communities that they could be referring to there. I think that, you know, all the employees, even people down on the factory floor should be able to have visibility, you know, what is the quality, what's the real-time feedback on how we're doing our job. And do we have a tool to make suggestions on how things could go better. Saturn, in the book, is an example where you're really involving communities that in the past you wouldn't have thought of working with the PC at all. And they do that partly with full sized PCs, partly with these hand held devices that they've given out to people.

In terms of rural areas, one of the big advances we need is the low earth orbit satellite system, because those will provide high-speed connectivity to every point on the globe. And companies like Teledesic and others are making the investments to do that. What that means is that no matter where you live, you'll be able to collaborate in a high quality video exchange, sharing documents. You'll be able to be a consultant, even though you're living in a place that it's hard for your customers to come to.

MR. JONES: Let's see, all these are similar questions. PCs must become easier to use. What are you personally doing to make that happen?

MR. GATES: Well, it's interesting to think, if you go back over the last 10 years and say to yourself, what was the thing that I was doing with the PC that was hard and frustrating, and think, are we frustrated with the same things? I think that the expectation people have of the PC continues to go up, and that's a very good thing. You know, it used to be hard to find printer drivers. Every application had its own set of printer drivers, and they were completely out of date. Well, now we've made that a lot better. People used to get messed up with fonts or memory management, or adding a graphical interface, or getting connected up to the Internet, you used to have to go and pay more than the price of Windows to buy just the TCP-IP stack, and then you had to pick a browser and put that on top of it. Today, that functionality comes integrated into Windows. And so as soon as you have the machine you can be on the Internet very, very easily.

Now there are a lot of things we need to improve. We have too many cryptic error messages. It's too hard to deploy software on to these machines. That's been a major advance that we brought to Windows 2000, easy, easy deployment of the software.

We're going through systematically and looking at all the error messages and saying, why did we do that, why can't we be more helpful, or does that have to come up at all? We're also saying, you know, why do we have so many utilities, people don't use most of these, why are they there on the system? And creating unifications where the way that you browse your file system, the way you browse the Web, the way you browse your mail, all of that will be brought together under one shell, so you have a single set of commands, and you don't worry about which piece of information is in which place.

So there are a lot of frontiers out there. We'll make all the current things easier, and then people will come back and ask us to do more. And, you know, that's what we're here to do.

MR. JONES: You refer to the fact that companies should consolidate all information throughout their organization. With companies that grow quickly through mergers, how would you attack streamlining this information in this case?

MR. GATES: When I say that you need to make information available, it doesn't mean putting it all in one database. You can have a very distributed approach where different customer information is on different systems, and your business results, your project management are on different systems. And because users navigating through these links don't have to know whether it's coming from different servers or not, and they can even pivot through the information that comes into the data warehouse from different sources, you can retain a lot of flexibility. The only thing that has to be common is what are those rich views, and therefore the schema, the definition of the data that really counts.

So, if you have a new division that you acquired, you've got to reconcile their schema of customer information so that that unified view showing all the interaction across the division can pull that information in. So, with the right data architecture, you get the best of both worlds, unified views, but distributed development and distributed storage.

MR. JONES: What do you see as the best demonstration of what you just spoke about in a government setting today?

MR. GATES: Well, the book isolates four special kinds of enterprises, and gives examples of what's going on there. Government is one, also education, military and health care.

In the government area, it's definitely smaller countries that have really seized the opportunity here. I talk about Ireland, where they've put a PC into every post office, and they have the applications from every department of the government running there. You can look at your pension, you can look at your taxes, you can look at your voting records, all through a single system. And that's been fantastically successful. People don't have to know how the government is organized, what the different departments are. They just come in and say, I'd like to start a new business, or I'm changing my address, and the notifications flow back to all the different agencies that might want to have that up-to-date information.

So governments can be one of the biggest beneficiaries here. They've got more information that's supposed to be available to citizens than any business, and they just need to adopt some principles about putting those things on the Internet first, and making it very searchable. And then, enabling all the transactions through the electronic approach.

MR. JONES: This will be the last question. What are the three top current trends in technology that will change commerce over the next three years?

MR. GATES: Well, I focused in on use of the Internet with XML as something that for every vertical industry there will be standards that allow for very rich interchange. We're incredible involved in that, we're driving that forward, and making it easy to write applications that work in that fashion.

Just basic electronic commerce, getting rid of the paper work of business to business, that is going to stun people by how quickly it moves. You know, companies are not going to have purchase orders or invoices that get moved around from department to department because it's not that hard to get rid of those things. You can have more visibility of the products you're buying, what the discount should be, and Microsoft and many other people are moving very rapidly there. So, business to business done without paperwork going in-between the companies involved.

And then finally business to consumer. That's the on that gets all the press visibility, and it is very important, because people have to position themselves today to be a leader there, even though it's a small percentage of consumers. And there are some great examples of people taking PC technology and literally for hundreds of thousands of dollars having a site up that does more business than a store that would have cost many, many millions of dollars.

MR. JONES: Thank you very much, Bill. We really appreciate you being here.

(End of event.)