This is the full transcript of his speech.

"Well, thank you. It's very exciting to be here at Convergence and talk about business applications. In many ways, all the Microsoft R&D goes towards having that final application that allows a business to do a better job. Recently, I got a reminder that I should always use digital technology wherever I go. I was at the World Economic Forum and I'd gone to a press conference and not taken my Tablet PC. And so I just grabbed a piece of paper and doodled some notes, and this is actually exactly what I put down.

Consequently, I left those notes behind and the press captured them and mistakenly thought that Tony Blair, the prime minister of the UK, who sat next to me, that these were his notes. And so the British tabloids had a heyday with this because handwriting experts determined that only a weak leader would write things like this. (Laughter.) And clearly, he was confused about the press conference or something strange was going on.

Eventually we did get that straightened out, and now I can actually show you a little magnification of some of the key pieces here: Record '24.' (Laughter.) That could not have been Tony. Why does Bono wear sunglasses? (Laughter.) And finally -- oh. (Laughter, applause.) Oh, here we go, yeah. (Laughter, applause.)

So that's how we determined it wasn't the prime minister, it must have been me. (Laughter.) So next time I'll have my Tablet and won't have that problem at all.

We're in a very exciting period in terms of the advance in information technology. The Moore's Law exponential improvement continues to really change the framework that all software is developed in. We see this in many areas. We see the processor moving up to 64-bit, and 64-bit servers will be very, very inexpensive. In fact, they'll carry no premium over the 32-bit servers, but in terms of being able to have huge memory size, wonderful performance out of that, they'll just be a lot, lot better.

The speed of the network we're connecting up to, whether it's the backbone or inside the business, is going up massively and now many businesses are putting in Wi-Fi networks so you can be connected up even as you carry a portable or a Tablet machine around.

The disk capacity, letting us now think about things like video storage and data mining, click mining things that wouldn't have been feasible -- or at least cost-wise, practical -- in the past, are all now becoming very, very reasonable.

And so the hardware industry is delivering us these capabilities, big screens with great graphics capabilities, smaller portable devices. The premium cost for Tablet over a portable PC will come down from about US$150 to about, oh, say $60 over the next years; mobile phones with more capability, GPS location, Internet browsing, the ability to connect up to applications, the ability to notify you of things.

So it's in that framework that we say the opportunity for software is greater than it's ever been, whether it's for work activity, which we call the digital work style that is emerging, or whether it's at home, which we call the digital lifestyle. All of these things set us up so that software is really the only limiting factor in terms of the ease of use, the security, the willingness to dive in and take advantage of that.

Now, we see when it comes to new software things are moving fairly rapidly, a little bit differently in the consumer space than in the business space. In the consumer space, it's not as many issues about compatibility and aligning all those upgrades together, and so typically consumer type software is being updated on yearly or even sometimes a six-month basis, things like Instant Messaging and cloud-based capabilities. In the business space, it's more a stair-step where you'll get, say, a new version of Office and use that for two or three years and then get a major step up as opposed to that continual upgrade.

Now, making it so that these compatibility issues, the difficulty of getting things installed, making that very, very straightforward is important so that in the business space as well, those improvements are flowing through.

For applications, this has always raised the tough issue of, 'Can the customizations that are done by a firm be done in such a way that when you get upgrades to those applications they don't have to be reintegrated in?' The way the user interface, the data model, the logic comes together is orthogonal in a way that lets you get the best of both worlds there. A lot of innovation is taking place in that to make sure that we can finally get that so you don't have this big version tail, that we make it easy for you to always have the latest and greatest. And, of course, for us that's good because the pieces work together that much better and we get feedback on exactly the things that are out there. It's a very competitive space, but also a space with lots of opportunity.

We have many ways to measure the innovation that goes on. One that I've talked about in the past is the size of the R&D budget. It's now the biggest R&D budget of any company in the world. I was never sure if that was the right metric to use, so here I've got one that's just another slice of it, which is looking at the number of patents. It's an imperfect measure, but you can just see the general slope there that shows in the fiscal year we're in that ends the middle of this calendar year we'll apply for over 3,000 patents. That's up a factor of ten over about a six-year period, so a pretty steep climb there. And that's across so many different areas: the business applications, platform security, voice recognition, ink recognition, computers that can look at things and find patterns in a much richer way, data mining type things. And so software platforms are getting much more effective.

Now, all of that R&D typically goes into products that are available at exactly the same type of pricing they had before, and so the leverage for us is more volume but just a better and better software value because of the billions that go into those new capabilities.

People in some senses have more awareness of the changes in digital lifestyle -- photos, music, scheduling, Instant Messaging, communications -- than they do over in the work domain. And that's unfortunate because in terms of improving the economy, making things far more productive in terms of untapped opportunity, the work space is actually as rich an area as the home space.

If we think today about how people navigate to the information they care about, how they get notified whether something has changed, how they share information and collaborate, which has been e-mail for so long. SharePoint is now coming in and starting to change that, all the different mail addresses and modalities that they have to work across in communications -- the phone, the mobile phone, the mail -- trying to see things organized in the way that they'd be interested in, in either a work or home context, that's been very tough. We haven't been able to model things out. We hadn't had great business intelligence; meetings, you can't have digital participants at a distance in the way that we think that you ought to be able to do that.

And so, every business activity can be made better by advanced software and we talk about that as a new world of work. Of course, one of the main vehicles we have for delivering that is constantly improving Office, but then getting applications to connect up, and I'll talk about a lot of very specific things in terms of our applications where we're going to connect up in new ways.