Seamless Computing Opportunities & Challenges for China Kai-Fu Lee Corporate Vice President Microsoft Corporation

Talk Outline IT & Growth Seamless Computing Opportunities for China

Software : Engine of growth Power of software today: US$200 Billion industry 10 million well-paid professionals Increased efficiency everywhere 5 times faster growth than GDP Will the growth continue? Microsoft: YES! Microsoft R&D: 1998 : $3 billion 2004 : $7.9 billion What fuels this growth? Moore’s law Waves of innovation.

PC Architecture Operating Systems Spreadsheets Word Processors PC1980 Internet1995Applications1990 Seamless Computing 2005 Speech/Writing XML/SOAPHTTP/HTMLSMTP Internet Web Browser Clients Wi-Fi/Broadband Devices everywhere Web Services Rights Management Trusted Computing Hardware MouseGUILANs Desktop publishing Enterprise applications Waves of Innovation Research & Development Engineering  Intellectual Property Market Adoption Intellectual Property  Economic Value

Information Driven Experiences Connected Self- organization Replication Speech & Intelligent UI Content Addressability Amazing visualization Machine-to-Machine Interaction Person-to-Person Interaction Person-to-Machine Interaction Ink & Handwriting Seamless Computing: The Next Wave

Graphical User Interface Natural User Interface User Interface Evolution Command line 1985 PC 1990 GUI Multiple Windows Menus 1995 Internet Hyperlinks Search Engines Digital Decade XML Web Services Smart devices Natural Language Multimodal (speech, ink…) Personal Assistant

Natural User Interface Do what I mean NUI Interaction Natural & task-based Expressive & efficient Scalable & adaptive NUI Interaction Natural & task-based Expressive & efficient Scalable & adaptive “To me, speech recognition will be a transforming capability … when you can speak to your computer and it will understand what you're saying in context.” – Gordon Moore “Speech and natural language understanding are the key technologies that will have the most impact in the next 15 years.” – Bill Gates

A Roadmap Towards NUI Vision TTS SR Dialog Speech Search Help Tasks Q&A Text Delegation & Pro-Active Federation Agents Planning Multi-Modal/Task-Based

A Roadmap Towards NUI Vision TTS SR Dialog Speech Search Help Tasks Q&A Text Delegation & Pro-Active Federation Agents Planning Multi-Modal/Task-Based Buy 100 shares of Microsoft

A Roadmap Towards NUI Vision TTS SR Dialog Speech Search Help Tasks Q&A Text Delegation & Pro-Active Federation Agents Planning Multi-Modal/Task-Based Buy Microsoft stock

A Roadmap Towards NUI Vision TTS SR Dialog Speech Search Help Tasks Q&A Text Delegation & Pro-Active Federation Agents Planning Multi-Modal/Task-Based Find from John about the budget

A Roadmap Towards NUI Vision TTS SR Dialog Speech Search Help Tasks Q&A Text Delegation & Pro-Active Federation Agents Planning Multi-Modal/Task-Based Protect my PC

A Roadmap Towards NUI Vision TTS SR Dialog Speech Search Help Tasks Q&A Text Delegation & Pro-Active Federation Agents Planning Multi-Modal/Task-Based Print address labels from Outlook Contacts

A Roadmap Towards NUI Vision TTS SR Dialog Speech Search Help Tasks Q&A Text Delegation & Pro-Active Federation Agents Planning Multi-Modal/Task-Based What is the best University in California?

A Roadmap Towards NUI Vision TTS SR Dialog Speech Search Help Tasks Q&A Text Delegation & Pro-Active Federation Agents Planning Multi-Modal/Task-Based Send flowers to my wife on her birthday

A Roadmap Towards NUI Vision TTS SR Dialog Speech Search Help Tasks Q&A Text Delegation & Pro-Active Federation Agents Planning Multi-Modal/Task-Based Hold all calls unless it’s urgent

A Roadmap Towards NUI Vision TTS SR Dialog Speech Search Help Tasks Q&A Text Delegation & Pro-Active Federation Agents Planning Multi-Modal/Task-Based I want to plan a vacation to Europe

Speech Accelerated by… … Super-Moore’s Law Enable human-level speech recognition (SR): Leveraging Moore’s Law + more data + research Predictable 10% error reduction or more per year Human-level performance possible in years Also enable natural language, Bayesian learning…. Tasks SR error rate Human error rate SR-Human Gap Free style transcription 30%4% 19 years Alphabet letters 5%1% 15 years Read newspaper transcription 3%0.9% 11 years

IT & Software : Opportunities for China China China = #1 factor in Asia’s growth Huge market #2 PC market in the world #1 phone market in the world Huge growth 25% CAGR in IT 50% in software & services Opportunities Leverage strong traditional industries Large talent pool Outsourcing becoming global trend Challenges Lacks software eco-system Lacks IT leadership talent India is far ahead in outsourcing

India : World Leader in Outsourcing “Ideal” population for outsourcing English-speaking country with good education Entry-level call center jobs with growth path 700 million people under 35 Highly adaptable culture Process leadership Cost optimization “Go to India for cost; stay for quality” Valuable companies with ambition beyond outsourcing Top 4 companies worth US$50B showing astounding growth Good environment for start-up companies Opportunities Insatiable demand for outsourcing Aspiration to build software company Challenges Lacks infrastructure/modern cities Lacks domestic market

Recommendations for China Today: Learn by building an outsourcing industry (like India): Learn from Indian companies, build 2-3 large companies. Stimulate software companies with high-demand US customers Be willing to take on “simple” work (testing, localization) Educate talent with English, int’l sales, large proj. mgmt. skills Develop a Chinese IT software industry (like US): Leverage China’s huge domestic market & traditional industries Build on areas where software value is understood (enterprise) Educate talent with market research, customer-focus experience Lead by finding leapfrog opportunities that favor China: Web services : Disruptive change + advantage for local players Mobility & phone : Unique market that is advanced & large Educate leadership talent by improving higher education “Hard skills” : international business, management, process “Soft skills”: teamwork, communication, “EQ” Future: Software export to international market

Conclusion Opportunities for China Learn by starting an outsourcing industry Develop own IT ecosystem from traditional industries Lead by finding opportunities to leapfrog Educate engineering talent to become leadership talent Software is the proven & continual engine of growth China will harness this engine to become a world technology leader

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