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Good evening! It is a great honor for me to share this stage with the Lord Mayor, chief executive of Hannover, with Mr. Yang, and in a few minutes with Chancellor Kohl.
I have been looking forward to this evening for a long time, because I have known for many years how important CeBIT is to the global Information Technology industry. So before I go any further I want to thank you very much for inviting me to participate in this important forum.
Now I have given a lot of thought as to what I would say to you this evening. On the one hand, I am here as a representative of the Information Technology industry on the event that is bigger by orders of magnitude than any other technology exhibit. That is quite a statement in a industry that is good at many things, especially celebrating its own creations. On the other hand, like most of you, I have spent most of my professional life as a customer of this industry. So I know that after the splash and promises comes the harsh light of morning and often the customer is left standing alone wondering what happened, or as the head of one of our most important German customers put it, "Yours is an industry that is very good at weddings and not so good at marriages." So tonight, while I will talk about the power and potential of Information Technology, I hope the temper of my remarks with the perspective I had when I came to IBM five years ago, the perspective of a customer.
Now it is certainly easy to see why raw technology dominates these events. It is adoptive; it is breathtaking; and it is penetrating every aspect of our lives. Today there are more PCs sold annually in the world than TVs or cars. The typical luxury automobile today has 20 to 30 microprocessors in it, more computing power by far than was inside the landing-craft that took the first astronauts to the moon. Last year there were five times more E-mail messages sent than the number of pieces of paper mail delivered worldwide, 2.7 trillion E-mails. And I got more than my share. There is another way to look at what is going on. In the mid-1970s, the first super computers appeared. They were capable of about 100 million calculations per second. And they cost about one million dollars. Today the laptop computer that college students carry in their bags, packs, is twice as fast as that first super computer, and it costs less than 3000 dollars. The trend in data storage is even more impressive. In the early 80s, the standard unit of computer storage, one mega-byte, or one million bytes of information, cost about 100 dollars. Today, it is 10 cents. In two years, it will cost 2 cents. These gains are driven by continuous advances in how we pack information into smaller and smaller spaces. If the US Library of Congress could shrink its collections of 17 million books by the same factor we just discussed, it could replace 800 kilometers of shelf space with less than 40 meters of space. These advances are going to continue and accelerate the rate microprocessors, storage, communications, memory, and all the other engines that are propelling this industry or continue to lead to the products of the faster, smaller, and less expensive, just as they have for 30 years. But as we stand here today, the opening of CeBIT, we are on the threshold of a very important change and the evolution of this industry. In many ways, this industry, a very emitory industry, is about to play out in its most important dimension. That is because the technology has become so powerful and so pervasive that its future impact on people and governments and all institutions will dwarf what has happened today.
I believe there are two trends that are most significant here, and bare the closest watching.
The first is what we call deep computing. The term is inspired by our chess-playing super computer Deep Blue, which I believe many of you know competed with the Grand Master Gary Kasparov last year. Deep Blue is an amazing machine, capable of 200 million moves per second. But speed, while essential, is not enough. After all, Deep Blue's predecessor was quite fast, but it loss to Gary Kasparov two years ago. The difference in second time around was an infusion of knowledge, human chess knowledge, thousands and thousands of chess moves, games and outcomes, captured as mathematical algorithms. This is what led Deep Blue to mimic the workings of the human mind, and race through millions of possible chess positions and extract the best one. And it worked rather well. But Deep Blue is emblematic of a whole class of emerging computer systems that combine ultra-fast processing with sophisticated analytical software.
Today we are applying these systems to challenges that are far more vital than chess. Let me talk about two important application areas, starting with simulation.
Simulation is about replacing physical things with digital things, recreating reality inside these powerful computer systems. In the farmer suitacle industry, the ability to simulate the interaction of chemicals, and do it in the computer rather than in test-tubes and Petri dishes, can speed up by years the discovery and testing of new farmer suitacle. Mercedes, BMW, Fiat, Volvo, SAAM all design cars today on computers, no physical markups, no models. And aviation does so, pioneer many of these techniques, and Boeing broke new ground when it designed the 777 airplane entirely on computers. It was a very bold move, and even some of Boeing's engineers had trepidations. I had trepidations because three month after I joined IBM I went out to Boeing to see my good friend Frank SCHURZ , who was the CEO. And Frank said to me, "Since this new airplane was built on your computers, maybe you should go on the first flight." And I said, "It is my wife's birthday." And he said, "I did not even tell you the date yet. Coward!" Computer simulation saves time, saves money, and it gives customers a competitive advantage, and it can do more than that. Recently the US department of energy asked IBM to build a gigantic super computer to simulate nuclear weapons so that they will never have to be exploded for test purposes, ever again.
The second type of deep computing is what we call data mining -- some people call it business intelligence, the ability to extract inside from mountains of information, and see relationships and trends that previously were not available or invisible. Banks are looking at spending patterns and other demographic data to see which customers are more profitable over the long haul. Health-care companies are analyzing millions of patient records to find hidden indicators of disease. These tools are also helping slash the staggering cost of insurance fraud in the health-care industry, which is a hundred-billion-dollar problem in the United States alone. Insurance companies can now spot every billion practices. One company in the United States has saved 38 million dollars, having invested only 400 thousand in this technology. In one instance they found a doctor, who was sending it a bill once a week for a procedure that particular - usually was done once or twice in a life time. At some times the patterns and relationships that are uncovered are truly baffling. One retail chain discovered the following correlation -- for whatever reason, new fathers buy disposable baby diapers and beer on the same shopping trip. This led to many, many thoughtful ideas not at least which was they never discount diapers and beer on the same day.
So we believe that deep computing is a trend that will have a profound effect on commerce and on society. Of course a concept throwing big problems at computers is not a new idea. Its rules can be traced at the very origins of the industry. The difference today is that the systems are so much more powerful and so much more affordable that they can be used by businesses and governments and institutions of all sizes.
The second major development in Information Technology is of course for a topic, already discussed here this evening, and that is the rise of global networks, like the Internet to create a network world, or what some call a network economy. About 16 million people use the Internet today. And the estimates are that that number will grow to 500 million, and perhaps someday to a billion. Now what will these connected people going to do, or they want to do? Not too long ago, people in my industry thought that the action was going to be an information dissemination - news, weathers, sports scores, online magazines called E-zines, and short consumer information. IBM has had a different view for some time. We believe the real potential of the network world is for conducting transactions of all kinds, between parties of all kinds, an effect that seems to be what is happening. Consider that across Europe Internet sales of about one billion dollars last year are projected to reach 30 billion dollars by the year 2001. One study says that the worldwide Internet commerce activity will double, double in the next six month alone. And most of that is business to business transactions. We see the total market for Internet commerce hitting 200 billion dollars by the end of the century. And that is a conservative forecast. It is not just about buying and selling. About a year ago IBM coined the term E-business to describe all the ways that people will derive value from the Net. Transactions among employees within the business to prove how products are developed, how ideas are shared, how teams are formed, how work gets done. Transaction between a business and its suppliers, its distributors, its retailers, to increase cycle times, speed and efficiency. And the very important transactions and interactions between governments and citizens, educators and students, health-care providers and patients. It is a very exciting stuff. And the greatest changes and challenges are not in the technology. In fact, connecting to the Net is relatively easy. The big challenges are in the fundamental transformation of the way things get done in the world. That is because networks are great levelers. They dissolve barriers to entry the neutralized traditional assets like physical stores and branches. Networks dissolved the boundaries within and between companies, countries, continents and time-zones. It is not hyperbole to say that the network is quickly emerging as the largest, most dynamic, restless, sleepless marketplace of good services and ideas the world has ever seen. And naturally this comes with very profound applications. For one thing, they are all ready, time-honored processes that govern the way things work in the world, the way we buy and sell, the way we distribute things, the way we teach, and the way we interact with each other. That I will tell you that nearly every one of those conventions is being challenged by the network world.
Let me cite a few examples drawing on what we and IBM have learned from helping thousands of customers in the last year come to the Net. New competitors can come out of nowhere, overnight, and not just from within your industry. One of the most contentious, fast moving, and bare knocle battles waged today is, believe it or not, in book selling. The leader in this online race is "amazon.com". If you have not heard of them, do not feel bad. Three years ago, nobody heard of them. They did not exist. Their customers do not aware they exist physically, and they do not care. Amazon.com exists only in cyberspace. But with 2.5 million titles, it is nearly 15 times larger than the world's largest physical bookstore. It is open 24 hours a day, every day of the year. And they recently serve their one million of customer in Japan, one of 160 countries in which amazon ships books. Until recently they had the market to themselves. Now the traditional book sellers like Barns&Noble in the US, and medium firms like Burtlesman in Europe are jumping in. Can virtual companies like "amazon.com" battle against and beat these entrenched brands? Stay tuned. We do not know yet. The same kind of transformation is happening in retail banking, in car sales, in music entertainment, in insurance. And it is not just limited to the commercial world. Public sector institutions are being buffeted by the same powerful forces. In higher education, there is a university in Canada, Atherbasca University, that delivers 100 percent of its courses by what is called distant learning. No students on campus, no campus. All instruction is delivered online. And they have captured nearly 30 percent of all MBA students in Canada. Governments are using networks to transform every thing, from the way they buy goods and services, to the delivery of services to citizens. Singapore is putting 10 thousand suppliers online, reducing costs and increasing efficiency, and by the way is compared with the advantage in Asia. When the government of Verlancia in southern France, starts wiring entire villages, allowing citizens to conduct online transactions with local businesses, schedule a doctor's appointment, get information from their kids' school -- you know something interesting is starting to happen. And believe me in America, when in certain stage you can register your car on the Internet and not have to go a way in line. I can assure you something important is happening. Trust me on this one. Now all of us must realize this is not a spectator's sport, when I was just sitting here watching "amazon.com". Every institution and every entity must grab with this issue at the highest level as management. S&Base, Cacherdeck is one of the largest department stores in Europe. But they are making their first foreway into online sales. That is not an easy decision for an enterprise with huge investments and retail space, not to mention their economic model, their coop culture, rooted and traditional retail sales. Who made the decision for Cacherdeck to jump into online sales? I can assure you it was not their Web master. Increasingly, CEOs of companies, university presidents, government officials are stepping up to these issues. They are testing pilot sites, they are setting strategy, and they are answering questions like "How will this network world affect my organization?" "How are we threatened?" but more importantly, "How can I leverage this new medium for competitive advantage?" The toughest, most jocular decisions that need to be made are which browser or which server their core management and policy issues. This only escalates all these issues, only escalates as the network world marches on.
We have already talked about the first milestone that is the Net connecting, say a billion people to perhaps a million E-businesses. The next milestone is what we and IBM call pervasive computing. Fifty years ago where did you find electric motors? Big factories, power plants, and they were big and expensive. Today you might find a hundred electric motors in the typical home - they are in the appliances, heating, ventilation systems, CD player, the VCR, and, if you are so fortunate, the electric tooth-brush. We do not buy electric motors any more. They come inside of all the things we use and do every day. The same thing is going to happen with computing devices. Chips are getting so small and so inexpensive, (that) they are being embedded in every thing - cars, appliances, tools, doorknobs, clothes. Most significantly all of these tiny intelligent devices will be interwoven in the fabric of the computing and communications network. And what will this mean for consumers and enterprises? A quick example, think about driving down the autobahn.Your intelligent car develops an engine problem. But instead of flashing you a warning light, it sends a message directly to the manufacturer over a wireless connection to the Net. The manufacturer systems diagnose the problem, and they transmit a fix back to the electronic complex in your car. In fact, that electronic fix is transmitted to all models of that car anywhere in the world without having to notify the owners. And that is good for the driver, so also better for the car maker. Instant performance information captured and sent immediately into product development and manufacturing, continuous feedback loop, continuous improvement, resulting in better cars, good for the consumer and competitive advantage for the businesses to get there first. How can any company with tens of millions of vending machines scattered all around the world know at any point what is selling, what is not selling, how much of an item is left, or when to send a rood driver to empty the coin box. A little chip in each machine could check and report on all of those items with ease, and even better. Why could not that machine include a thermal stack that told it, it is freezing today, drop the price by 10 pfennigs. It is 35 degrees, raise the price by 15 pfennigs. Soon we will see this hyper standard network world made up of a trillion interconnected intersecting devices. And this will intersect with the data capability I spoke of early -- pervasive computing meets deep computing. Companies and institutions will amass more data, more information than ever in history. And for the first time they will be able to do something productive with the turn raw data into knowledge and move that knowledge to the right people instantaneously. Personally I believe that future leadership companies and by the way future leadership institutions of all kinds will be those who know how to compete and win on the basis of knowledge -- learning, adapting and improving the vital asset we know as information.
Now I have covered a lot of ground here very quickly. I want to show you a brief video that illustrates some of these ideas that I have talked about.


The brilliant computer technology, which has enabled this biggest explosion in the last 20 years, is that they are getting increasingly more powerful without getting more expensive.
Make a chip run over one giga-hertz was someone like breaking the sound barrier on land. We really found that we can work at it. There is anything that you cannot build. And we have solved the problem and now we are  continue to increase frequency for the next 10 years.
Our ability to manipulate information and our ability to do video and multimedia are critically dependent upon having larger and larger storage devices. Recently we demonstrate a laboratory world recogdencive 11.6 billion bits per square inch for a hard disk drive. We want to be having a continued advance at storage capabilities when the physical limitations prevent us from extending current devices. That is why we are investigating using hologramed information, even manipulating individual items.
In the information age, up till now, the oriental culture has a disadvantage, because of the difficulty in input. To do Chinese speech recognition, we need to improve recognition algorithm. Also we need fast computers. Now both conditions are there.
I am painfully slow in typing.
It takes so long to master the skill of typing Chinese.
“我带来我公司的最新产品。请在明天上午召开联席会议 - ‘It is just fast!' - 讨论销售合作的问题。”
Only in the last few years have computers become powerful enough to do on-the-fly translation of languages.
You will be able to go into the World Wide Web, go to any site, anywhere in the world, and whatever language that particular site is written, and quickly browse and understand that information in your native language. It is about the same amount of time it takes for you to receive the Web page over the network. We intersect in the server. We do the translation, and we present the new page back to you.
International travel is growing at between 7 and 10 percent a year. And we see the pressure is on world control authorities, and the hastle on passengers continue into grow. We try to create fast ...so it appears very much like an Automatic Teller Machine. A traveler we take a credit card and put it in the kiosk, place their hand on the biometric reader, and those two things in a real time are compared with information that has been stored in a database when they enroll, and then this is what is in it.
How can I make computers more fun to use, easier to use, more like interacting with humans? We have given the computer the ability to see us, and sense where we are. And now we are trying to give it ability to understand what we are trying to say. In fact, all I need to do is to talk to it and move my hands. So for example, now I am moving this object around, just by moving my hand. "Leave it there." The computer hears me and does what I ask.
Some of the really hard problems are their power, a lot of computing power. That is the deep computing.
What we have learned in Deep Blue is that not only you need fast computers, deep computing power, but you need to capture human experts knowledge, and express that in terms of algorithms.
The more power you have, the smarter things you can do. And that is what is starting to happen now because the computers have enough processing power to solve some really interesting and difficult problems.
With such a computer you can actually simulate the physical process of what happened in the physical world.
I think we will tell our kids 10 years ... now, "You may not believe it, but computers used to be things that set of big boxes on top of desks. And look at ...
As things get smaller, faster and smarter, we are about to forget about the computer inside devices, focus on the function of the device.
Computers will be everywhere, performing everyday tasks for people.
We will not think them as computers any more.


Now I started out this evening saying I hope to represent the voice of the customer. And as we project the benefit of this network world, the hundreds of millions of people may be even a billion. It is clear that the Information Technology industry has a lot of work to do. We have got to make this technology easier to use, and more natural. And that video you saw some of the things we and others are doing and working on ease of use today. We have got our rich agreement on standards, standards for communications, for security, for software development. And I am asking you as customers to keep the heat on this industry. The demand that we deliver open standards, everybody's software running on everybody's hardware over everybody's network.
There is another set of issues that extend beyond the Information Technology industry - there are public policy issues. Some have been around for ever, like privacy. Some we recognize as old issues in new dimensions, like security and taxation in the global market place of the Internet. Resolving these issues is going to require a new level of international cooperation. And I think the nations of the European Union have set a real leadership example, in preparing for the common currency, perhaps the most important change since European integration and the treaty of your own. IBM has been pleased, being involved in helping a number of you prepare for this, which will fundamentally alter the economic landscape and make it easier for all our companies to grow in Europe. But because the nature of the network world is just global - it has to be global, agreements to these critical policy issues are going to take this issue of cooperation to a new level. We are going to have to have a global public policy.
First, people must have inexpensive access to the telecommunication services they need to participate, meaning governments have to encourage competition, and end monopoly structures. And the news from Europe is very encouraging recently here. It is also clear that the discriminatory tax policies can stifle this very nascent, early forming economic engine. We have to insure that electronic business is taxed the same way as the physical business world, no more, no less. And the OECD has taken on this work, and we hardly support their efforts. We also support the move to keep the Internet a tariff free zone. This will be a big fight, but that is one we have to win together.
Next, security. The domains of customers for strong encryption, and governments legitimate concerns about their ability to provide public safety and enforced laws do not have to be neutrally exclusive. IBM is working with the US government, with the European Union, and governments around the world to support an unrestricted market for encryption products that can inter-operate globally. We are not anywhere near for along on this we need to be, but I am confident we will get there. We have to get there, there is too much of stake.
Finally, privacy. How can we continue to strike the balance, the right balance between respect for the individuals privacy and the benefits on the other hand of information flow in a connected world. The solution here must start with the private sector, not government. And a reinformation of a few proven principles by all businesses that consumers get fare notice about information that is used, that is theirs, and the opportunity control, and confirm its use. And a number of companies are moving in this direction. IBM has recently adopted a global privacy policy for managing information online and it is posted on all of our web sites around the world. With global agreement and cooperation and understanding, the Information Technology industry, government and our customers will go forward. I believe and insure that this global market place grows boldly, safely, and delivers on a real promise. That is important to every one.
As we look ahead to the next millennium, I do not think there is any question any longer about the profound power of this technology. In an incredibly short span of time, it is developed to the point where it can, we can talk about it in the same context as any of the other great technologies had transformed our world. We are watching, we are participating in the emergence of something much bigger than the new computing model, much different than just a new channel for human interaction. Information Technology, and specifically network technology, represents the most powerful tool we have ever had for change. It is a new engine for economic growth, a new medium that will redefine the nature of relationships among governments and institutions and businesses of all kinds, and the people they serve now, and they might serve tomorrow. This powerful tool is here for all of us today. Each of us will have to decide how will it exploited, and how soon. But in any case, the nations, the government agencies, the public sector and commercial institutions, that do theirs most effectively will create enormous competitive advantage into the 21 century.
Thank you very much, and I hope you have the most successful CeBIT ever.

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