Good morning, and let me join my HP colleagues and welcome you to HP MegaForum. One of the greatest challenges facing Chinese industry, government and education is to fully capitalize on the benefits of the Electronic World, the topic of my address this morning. We are applying the Packard spirit of respect-filled cooperation in working with 中国 to help build 中国's Electronic World. Later today Mayor Xu and I will witness the signing of a cooperation agreement between 中国 HP and the Shanghai Infoport to create a lab to develop E-Commerce solutions. For many years now, HP has been working towards a world of pervasive information technology that will characterize the 21st century. We call it the Electronic World, and it has four different ingredients.First, there's the Extended Enterprise infrastructure. This foundation of networked systems is based on distributed computing and the Internet. And it allows businesses and people to extend their reach across the boundaries of time and space. Second, there's the sphere of Electronic Business. People are bringing their business processes to “the Net.”And they are using the Net to create entirely new businesses. It's very exciting, and it's happening very fast.But that's not the whole story. There's another sphere developing that most mainstream computer suppliers are paying little attention to, and that's the e-consumer. This world has its own set of technology platforms, information services, operating systems, e-mail applications, etc. Then there is the world of E-commerce, the electronic payment of goods and services. How people exchange value is being redefined, with virtual banks and smart cards and some exciting new devices I'll describe later in these remarks. This is the 21st-century electronic world. And HP is in all spheres of it. Today I want to describe how we are working to build this world. First, we're working to build the foundation —— the necessary technology infrastructure based on distributed computing and the Internet. The environment must be robust, highly available, manageable, and secure. Today I'll discuss the three critical ingredients you see listed here - our systems strategy, the software we offer for making the infrastructure robust and secure, and the services and support we provide.Whenever I begin a discussion of our systems strategy, I use this visual to make a simple point. Customers have a wide range of needs. One size doesn't fit all. And that means that one operating system doesn't fit all. And so we at HP have embraced two —— Unix and NT. We think this approach is well aligned with the needs of customers like the Xiamen Post and Telecommunication Authority.The comprehensive solution we implemented for its Internet Service Provider required both UNIX and NT systems, and our ability to manage and support both environments was critical to the success of the project.Furthermore, we've been working very hard to build bridges between these two worlds. In fact, HP has been the only company with an explicit strategy of bringing these two worlds together. We're working on all levels shown here. We don't have time to go into detail on each, but let me give you some examples in each area.In the area of services and support, HP now provides consulting services in Windows 95, NT and Desktop Exchange. We've created a joint Enterprise Solution Center with Microsoft. And we at HP have created a strong support offering for NT. We're collaborating in the area of high availability. I'll have more to say about that later, when I talk about our PC strategy.In the area of security, Microsoft has endorsed Ver Secure, the cryptography technology developed by HP that the United States government has just approved for export. HP OpenView is the only management platform that is certified for Microsoft BackOffice, and parts of OpenView are being bundled with the next release of Microsoft's Systems Management Server.In the area of messaging, HP is working with Microsoft on interoperability between HP OpenMail —— our messaging backbone product —— and Microsoft Exchange.And finally, we're working on customer-specific solutions in our Enterprise Solution Center, and we're collaborating on platforms geared to the particular needs of the telecom industry and small businesses. In 1997, HP helped to develop with the long distance service of 中国 Telecom a network management system using HP OpenView which links over 400 switches across 中国. This key connection between 中国 and the rest of the world is powered by HP 9000 servers and workstations. So... we have a firm commitment to integrating the Unix and NT environments... and lots of development efforts and results to show we're serious.
With that caveat, I'd like to talk in more detail about our Unix systems and our PCs separately, and how we are working to provide the performance customers require for their Extended Enterprise infrastructure. HP has a depth of expertise in Unix. We continue to be the number one commercial Unix server vendor, as measured by revenue, and we continue to gain market share. When you add in the disk drives, consulting, support, and all the things wrapped around our Unix servers, they represent a $10 billion business for HP in terms of annual revenue. So our commitment to the business is strong. One of the reasons our Unix systems are ideally suited to power the Extended Enterprise is our ability to guarantee 99.95 percent up time. We're the only company in the industry that can make that guarantee.Delivering 99.95-percent uptime translates to just four hours of unplanned downtime a year. The next best offer in the industry —— 99.5 percent of time —— equals 44 hours of unplanned downtime a year.In the past year, we have accelerated our product-development efforts. The result is a Unix roadmap that we believe will keep us in a clear position of leadership.The V2250 systems we introduced earlier this month are based on our new, 240 MHz PA-RISC processor. They are the world's fastest single-processor Unix servers —— ideally suited for mission-critical and technical applications. We expect to double high-end single-system performance each year. That means that today's high-end of a V-Class system will be the midrange of our family by the year 2000.Furthermore, we plan to take today's 99.95 percent availability guarantee and push that up to 99.999 - 5 minutes of unplanned downtime per year —— by the year 2000.We call this our “5nines:5minutes”vision, and we have succeeded in getting two powerful industry leaders —— Cisco and Oracle —— to embrace this vision and work with us to achieve it.Let me turn now to our other systems business —— PCs. HP has come from virtually nowhere to become a major player —— No. 3 in the world, according to IDC at the end of FY 97.This growth has been fueled by product contributions. Last year, HP earned more than 50 awards for new products introduced in the PC arena. We've been stressing the three major areas you see here.First, manageability.We believe that we can help customers reduce the total life cycle cost of PCs by about half. Notice I said costs, not just purchase price. We have developed a powerful management package called TopTools, and it allows IT administrators to gather 350 key items of information about the PC and to manage the PCs remotely.This information feeds into HP OpenView's Desktop Administrator to deliver the most comprehensive desktop-management solution on the market.HP PCs, NetServers and desktop management system were recently employed by the Government of 中国 in a prototype project which hooks up the Sichuan Province Economic Information System to the National Information Center. Second, availability.We are working with Microsoft to deliver high availability on NT servers. We were the first in the industry to ship Microsoft Cluster Server, which provides shared storage between two computing nodes and automatically restarts an application on another node if one fails.We have integrated into the solution some technology brought over from the Unix side of the house, called Cluster View, which makes it possible to monitor multiple Microsoft Cluster Servers. This is another one of the benefits customers receive from HP's strong support for both Unix and NT. We are able to leverage strengths across these two environments.Finally, performance. Our 8-way, NT-based server is powered by eight 200 MHz processors, each with 1 MB of cache memory. This allows the system to support 14,000 Microsoft Exchange users and 1600 SAP Sales & Distribution users. This is truly enterprise-class performance.Intel and Hewlett-Packard have jointly defined a new architecture technology called EPIC (Explicitly Parallel Instruction Computing). The name signals the ability of the software to extract maximum parallelism —— that is, a potential to do work in parallel —— in the original code and “explicitly”describe it to the hardware.This architecture goes beyond the limitations of current architectures and is ideal for the advanced, multimedia applications of the future.It will enable both Unix and NT to run on the same hardware platform.The architecture provides excellent investment protection for customers running applications on current Intel-based and PA-RISC systems. Customers can run their current applications unchanged on these new systems, achieving somewhere between 60-80 percent of the architecture's peak performance by just recompiling their applications.Our transition strategy is very customer-friendly. Customers can choose when they migrate, and their applications can coexist on both the old and new architectures.We believe we're years ahead of the competition in thinking about this transition. We are working closely with all the major independent software vendors —— industry leaders such as Oracle and Informix, SAP and PeopleSoft —— to make sure their products are optimized for the new architecture by the time it is launched.Finally, we are quite clear about our intention to make this architecture an industry standard. That means there must be a level playing field for our competitors in terms of access to this new architecture. So we're delighted to see strong competitors like Compaq endorse it.We are confident that we can still differentiate HP products above and beyond the microprocessor level. We have lots of expertise in systems-level architectures, high-availability and reliability, advanced compiler technology, powerful middleware and networking capabilities.And we will complete the value proposition with our worldwide service and support capabilities, strong partnerships with solution providers and diverse distribution channels. So differentiating in the new era will be “business as usual” for HP.
I've spoken about our systems strategy for powering the Extended Enterprise. Now I'll move onto some important software products.HP OpenView is an industry-leading software product that is aimed at helping customers manage their Extended Enterprise —— including systems, network, applications, databases, and the Internet. In terms of market share, it is the number one platform for managing distributed environments, and both VAR Business and Information Weak magazines rated it as the best product in its category in 1997.This past year, we made major investments to strengthen HP OpenView in three key areas.The first - the acquisition of a company called PROLIN - was aimed at what we're calling service-level management. We want to provide IT administrators with the tools and processes that allow them to contract with their business users for an agreed-upon service level —— in terms of things like systems response time and availability.PROLIN's suite of software modules report into HP OpenView to physically monitor whether or not IT has met the service-level agreement they made with their business customers and, if not, where the problem lies. We also consult with customers to help them make the process-level changes required to achieve their desired service levels, including operational assessment, planning, design, implementation and training.HP has long been a leader in managing the thousands of PCs that are distributed on our customers' desktops. More than 100 customers use our software products and services to manage their desktop systems, and many of them subcontract that management to us.This year we strengthened our position by acquiring the networking business unit of a company called Symantec. This provided HP OpenView with new capabilities for software distribution, inventory, configuration, trouble-shooting, licensing for desktop systems... as well as real-time server management for Windows NT.This allows us to offer a single-vendor management solution that combines hardware, software management and services. A third investment last year was aimed at helping customers manage NT-based systems. We evaluated a variety of different approaches to this challenge. A small company called NewView had the best product available —— something called ManageX - and we acquired this company late last year.We think ManageX is the best for a couple of reasons. First, it' s very scalable —— able to handle everything from the workgroup to a full enterprise. We think that's very important, because we see many customers starting out by deploying NT in a workgroup area...and then more broadly across their enterprise. So it's critical to have a tool that can grow.Second, ManageX is based on all of Microsoft's technologies. That's really critical if you want to have a leading product in the NT environment. Most of OpenView's competitors today are trying to take software that was developed for managing mainframes or Unix... and then retrofitting it to NT. That's no trivial task.We have a few other IT-infrastructure software products that I'd like to discuss today, but in somewhat less depth than HP OpenView.HP OpenMail provides the backbone for messaging in a mission-critical, high-availability environment.Most people think of messaging as just sending or receiving electronic mail. If it goes down, that's just inconvenient. But as people are taking their business processes to the Net, the messaging backbone becomes critical. This is the role HP OpenMail plays. Finally, on the right there, you see a couple of HP software products whose role is to make the infrastructure secure. Virtual Vault provides secure Internet access to core business functions and data. It has been used successfully worldwide by the banking industry. VerSecure is a comprehensive encryption solution that has just received U.S. government approval for export —— the first strong encryption technology to achieve that status.MICROSOFT, IBM, Motorola and SAP have already endorsed this approach.Let me say a few words about our service and support capability, because it is key to enabling customers to build and manage an Extended Enterprise infrastructure.The goal of our Professional Services Organization is to help customers implement new technologies quickly, to transfer knowledge to their IT staff, and —— through selective outsourcing —— to provide them with some flexibility in terms of their staffing levels.In the past three years, HP's systems integration and consulting service has shown tremendous growth. It has become a vital ingredient in the formula for our success with our Chinese customers and partners. You see our areas of expertise listed here. The first three are aligned with the software products I just discussed, and I'll talk about the last two when I describe our E-business solutions. So that leaves extended ERP —— enterprise resource planning —— as the only thing to comment on for this list of services. HP has a depth of expertise in helping customers implement applications like SAP. We've done more than 70 installations worldwide, and we have the most comprehensive SAP R/3 services and support offering in the industry.Last year we introduced what we call Rapid R/3, which is a fixed-price contract with an accelerated implementation schedule of between four and six months. We completed a dozen such installations last year.By the way, we have the industry's only high-availability offering customized for SAP R/3, and we have closely integrated HP-SAP support processes.In terms of support, I would call your attention to two items listed here. The first is our high-availability support offering, which provides a continuum of support offerings that span needs ranging from a departmental print server to an online reservation system that must be continuously available.It's also worth noting that we are the only supplier that is certified to support Unix, Microsoft, Cisco, Netscape on a worldwide basis.Our financing Organization provides a simple, single point of contact for financing, leasing and re-marketing products. It also offers innovative “technology refresh” programs that will automatically upgrade a customer's assets and dispose of the obsolete technology.And HP's commitment to be the best customer service organization in 中国 has been a key differentiator and ingredient to ongoing development of our relationships. Our customer service unit was the first to receive ISO 9002 certification in 中国 for total quality. To this day, none of our competitors has yet succeeded in achieving this distinction. We are also committed to bring our proactive consulting services to our customers, opening one new customer support center every two to three months throughout 中国 —— most recently in Zhengzhou and Tianjin. Next week we will open our sixth full branch office in Shenzhen. And we'll open branches in Wuhan and Nanjing in mid-year, which will combine sales with customer support services. In the fall we will add a major call center with more than 150 staff, which will be opened as part of our new 中国 HP Headquarters Office in Beijing.In total we will have more than 10 branches throughout 中国 by the year 2000 offering both sales and support services —— plus several other offices dedicated only to support services.
I've spent the bulk of my time talking about how HP is helping customers build and manage their Extended Enterprise infrastructure. And it's probably appropriate that this discussion has taken most of my time, because that's the foundation upon which everything else is built.On top of that, we have added some fascinating electronic-business solutions that help customers use the Internet to re-engineer their business processes —— or to create entirely new ways of doing business. For example, the 中国 Goods Order System (CGOS) is the first country-wide comprehensive and multifunctional commodity ordering system in 中国, which is approved by the State Planning Commission and will be managed by the Internal Trade Bureau.The aim for setting up this system is to build up a computerized commodity wholesale market in 中国, which can provide commodity trade information, offer transaction service and quicken wholesale procedure.The significance of the system's operation lies in introducing an advanced “network shopping”concept in 中国's commodity trade business.Let me comment briefly on the three solutions you see listed here.Our E-Business software is based on breakthrough technology from HP —— something we call the HP Changengine. It was developed in HP Labs, ... has good patent protection, ... and has been used extensively within HP to automate key business processes.The customer need we're addressing is this: Quite simply, businesses can't change their applications fast enough to keep up with the speed at which they want to change their business processes. The HP Changengine technology makes it possible to pull the process logic outside of the application. This allows customers to change the business logic without changing the application —— thus dramatically speeding up how rapidly they can re-engineer their business processes.We have already introduced two software solutions based on this technology.HP AdminFlow is a software product that automates internal administrative processes. Examples include IT service request automation, automation of travel and expense reporting, and human resource management automation. Sumitomo Life Insurance has used this solution to change hundreds of processes quickly, as they prepare for industry deregulation.HP SmartContact is the integration technology that manages multiple customer contact channels - such as telephony, the Internet, fax, and electronic mail. Blue Cross of California, a major health-insurance provider, has used this approach to create an integrated “virtual”call center that has greatly improved the productivity of their customer-service representatives the satisfaction of their customers. We also have plans to offer a supply-chain solution based on HP Changengine. HP imaging technology is going to play a major role in E-business —— making possible applications like electronic catalogs, remote medical diagnostics and insurance-claim processing, to name just a few.To give you a glimpse of the role imaging will play, let me describe what we're doing with Liz Claiborne, the very popular designer of women's clothing.We're working together to create a “virtual showroom”that will show the latest fashions. It will allow early viewing and on-line purchasing. This approach will provide Liz Claiborne with a new channel to reach potential buyers —— especially those in medium and small-sized firms that are reluctant to incur the expense of a trip to the designer's showrooms in New York City. With the movement of almost all information to digital form —— and the universal connectivity provided by the Internet —— information can be distributed in electronic form, to be printed locally when needed. This has tremendous appeal. For example, Boeing keeps the 100,000 pages of its repair manual on a corporate web site. Repair technicians print only the pages they need to do a particular procedure. That way Boeing can be sure that the procedures are always up-to-date. And the technicians save a lot of time finding the relevant information, because they can do an on-line search for the information they need.Here's a fascinating example of distributed printing. It suggests an interesting future for the publishing industry.The Inter-City Express is a major European commuter line for business travelers. The trains receive the news twice daily via satellite. They take that satellite feed and use it to produce their own newspaper, targeted for their particular customers. The news is printed on an HP LaserJet printer.Unlike some of our competitors, HP has built a thriving consumer business. We have many products aimed at home users and small businesses, and we've developed the supply chain efficiency and support capabilities to serve mass markets.We've also been working hard to establish a higher profile in this arena. We've recently launched a branding campaign with the theme of “expanding possibilities.”It captures the notion of how we are making entirely new things possible. Let me show some examples.I'll start at the top-left quarter of this visual and move around clockwise.First, we're making it possible for people to access or capture information —— and even money —— in entirely new ways.A PC connected to the Internet is providing people with access to a whole new world of information.Our scanners are making it possible for people to capture information that has been only in paper form, and to transform that information into digital form where it can be sent over the network.And VeriFone's personal automated teller machines enable people to pull money out of their bank accounts and translate it into the form of “stored value”on their smart cards, which they can use just like cash. Second, we're also creating entirely new possibilities for creating and manipulating information. With our home photography systems, for example, people can edit their own photographs —— perhaps deleting someone they don't want in the photograph —— and create their own family newsletters, calendars or greeting cards.Third, our network-ready PCs enable people to transmit information to friends around the world —— or to share it with people they don't even know by posting it on a Web site.And, of course, we're providing the capabilities to print and duplicate that information. In fact, our all-in-one products do more than that. They print. They scan. They copy. They send and receive information via fax.This is just what the home user or small-business requires, because they don't have room for lots of different pieces of equipment.An E-Commerce competency is becoming a critical success factor for financial institutions around the world. HP has been working closely with Chinese financial institutions for several years to pioneer best E-Commerce practices in 中国. Let me highlight some of HP's contributions in this area. In 1995 we began to work with the 中国 Construction Bank to develop a fund clearing system run on HP's UNIX platform. Today, HP's servers, PCs and support services are used throughout the bank's 44 branches across the country, helping to reduce typical transaction clearance times from up to 10 days to now less than 24 hours.This month, we are launching a trial solution with the Bank of 中国 to enable their corporate customers to perform their standard banking transactions on-line. This marks a first for 中国.HP's VirtualVault solution was chosen over other solutions for its superior security and reliability, as well as service support. HP, together with our VeriFone subsidiary, is continuing to work with Bank of 中国 to build on this platform, so that by the end of the year a full range of E-Commerce services will be available on line, again marking a first for 中国.I will leave it to my colleague from the Bank of 中国 who will speak to you later today to tell you more about this exciting cooperation between HP and the Bank of 中国.Let me say a few words about VeriFone's capabilities.They started by providing solutions in the physical world with equipment such as payment terminals. The company then moved to become an early adopter of client/server computing, developing its solution on HP 9000 servers. As the Internet has grown in robustness, VeriFone has duplicated its capabilities in the physical world with products for the “virtual” world. v.WALLET is a PC-based payment utility that is embedded in Netscape and Microsoft browsers to allow consumers to make payments using credit cards.v.POS —— which stands for Virtual Point Of Sale —— is software that sits on the merchant's server and provides the tools for accepting secure Internet credit card transactions for a virtual store. These include real-time, on-line authorization, settlement, and other payment management functions. v.GATE is Internet gateway software that resides at the financial institution, where it manages transactions from multiple merchant Web servers.Finally, integrating these three worlds, we have created the Integrated Payment System, which is an open, client/server-based platform that enables the processing of all these forms of payment. So electronic commerce is coming of age, and it's happening quickly. With the combination of HP's and VeriFone's capabilities, we are driving this change.
So this is the Electronic World HP is helping customers build.We want to help you build and manage the IT infrastructure that allows you to extend your reach into new opportunities.We want to help you move your business processes to the Net quickly —— and to use it to create entirely new ways of doing business.We want to serve the needs of people who are working at home —— and even those who want to use technology for fun.And we want to help transform commerce by making the Internet a secure and efficient way of moving money.We are working to deliver value to customers in each of these arenas. But I also think it's important that we are operating in ALL four arenas. Because with the coming of the networked world, the boundaries between these different arenas are becoming blurred, and we can help you navigate this sea of change.Beyond our strong portfolio of hardware, software and support services, HP is committed to building the Electronic World through hosting special events that raise awareness and build the capabilities of our customers, channel partners and colleagues in government and academia. HP MegaForum is one example. This year's HP MegaForum will tour six major centers in 中国, starting with this opening event in Shanghai. In total there will be more than 30,000 participants in HP MegaForum in 1998, taking part in seminars on a wide range of topics, product demonstrations and trade shows. To my knowledge, an IT event of this scale and comprehensiveness represents a first both for 中国, and for HP.中国 HP also hosts another important IT event each year aimed for end-users called HP Electronic World. This year, it will be held in July in Beijing and will also focus on E-Commerce. We expect to welcome more than 40 vendors, and 10,000 visitors, with over 100 seminars on the full range of issues facing the IT industry in making E-Commerce a reality in 中国 and around the world.This year at HP Electronic World, we plan one more first for 中国, and that is to link via videoconference audiences in Beijing, Taipei and Hong Kong in a common forum to discuss cooperation in Building Together our Electronic World. I suspect that David Packard would have been particularly honored to speak to this Chinese audience. We are certainly honored to have the chance to be part of it.The Electronic World represents a whole new way of doing business. I urge you to embrace it and use it to make your organization more successful than it has ever been.