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2nd Annual Leaders Conference Microsoft Corporation
Remarks as Delivered by Deputy Secretary of Defense John J. Hamre , Seattle, Washington, Thursday, April 15, 1999

[The Department of Defense] is, as Bob [Herbold, Executive Vice President and Chief Operating Officer, Microsoft] said, a large and very complex organization. As he mentioned, we have a fairly large work force. Every year, we recruit more than 200,000 new employees to the work force, and we separate another 250,000. So approximately a third of our personnel is coming or going at any one time during the year. We process 800,000 travel vouchers a month. We have around 200,000 people stationed overseas – more, right now obviously, with what’s going on in the Balkans. We have approximately 140,000 additional individuals who are deployed at any one time.


We operate a large physical establishment. We have around 250 major installations with a real property value of slightly over a trillion dollars. We operate the fourth largest school system in the United States, with 126 high schools. We have a similar number of grade schools [and] operate seven universities. We are the world’s largest provider of daycare services. We have over 200,000 kids in daycare. That’s because we are now a married military, and you can’t get quality people to come into the armed forces if they may have to go off to war tomorrow and don’t know who’s going to take care of their kids. So we have a very large daycare operation. We operate around 100,000 vehicles, everything from sedans to street sweepers to armored bulldozers.

I used to be the chief financial officer for the Department. We process around five million paychecks every two weeks. I used to have a finance center out at Columbus, Ohio where we made most of our contract payments. We disburse about $45 million dollars an hour, make about 10 million contract actions a year, and, at any one point in time, administer about 400,000 contracts. It takes 15 linear miles of shelf space just to hold the contracts. So we’re a large and very complex organization.

I wanted to talk with you tonight about the opportunities and, frankly, the dangers of cyberspace. This is a medium of enormous importance to us in the Defense Department. I will give you several examples, but this Department could not function without the sorts of technical opportunities that are now being presented by modern information technology, and I’m going to use the shorthand [term] "cyberspace," for that. But I’ve also got to tell you that it is also a very dangerous place to be, and we’ll go through some of these things.


First, let me talk about some of the opportunities of cyberspace. I’m going to give you a number of examples of things that we are doing that reflect the introduction of this dynamic and remarkable technology into the Department of Defense. We are, I believe -- and forgive me for sounding boastful -- the most capable military force in the world today. And we’re getting dramatically better because of our adaptation and use of computer technology.


Let me go back to give you an example. In the American Civil War, which started in 1860, we had an enormous number of casualties. That was because the technology of firepower had advanced so much greater than had the technology of communication. All warfare in its purest sense boils down to a very simple process of trying to bring together your resources and your equipment and your energy to a single point where you can at that point overwhelm your opponent, and, in the process, present to your opponent the smallest amount of target opportunities for him to kill you.

During our Civil War, the technology of firepower had far outstripped the technology of communication so that in order for an officer to communicate with his enlisted personnel, they had to be close enough so he could shout orders to them or close enough for them to hear a drum beat or a bugle call. And, of course, when troops were that close together and your opponent had modern fire power, there were just astounding casualties. We suffered enormous losses in the Civil War.

Now, this computer-based technology, this Internet-based technology, if you will, we are applying to warfare today in a very revolutionary way. American forces will never even have to see one another to be able to concentrate their fire and bring it on an opponent who they don’t even see. For example, the Army is installing what is the equivalent of a local area network in our armored combat vehicles. I don’t know how many of you have ever been in a tank. It is one of the most confusing places in the world to be. The vehicle is closed. You can only see the outside through a small portal. The vehicle might be going in this direction and the turret is pointed that direction. You might and most likely are wearing chemical gear so that you’re trying to look through small eyeglasses. And, of course, with normal conventional weaponry, there are lots of mistakes that are made. Very frequently, you’ll engage what you think is an opponent vehicle and only to find out that you’ve hit your own. This technology lets us put a terminal in every one of [our] vehicles, so that we will have an instantaneous electronic battlespace picture that is shared among every one of the tanks in the battalion. Every one of them will not only know where they are and where their fellow tankers are, but where the opponents are. So they don’t even have to come close to each other in order to simultaneously engage an enemy tank. It is that sort of revolutionary technology that we’re using. Again, it’s local area network[ing] that we’re bringing to warfare [and] that is going to far outstrip any opponent who we will confront in coming years.

Let me give you another example. We are developing a system where every soldier will be wearing a device about the size of a wristwatch, which will monitor the essential functions of a person’s body -- heart rate, pulse, blood pressure, temperature, things of this nature. This will become enormously important in combat when a squad is dug in at night. One of the things that today your average first sergeant has to do is go around to make sure people haven’t fallen asleep in their foxhole. Now you’ll be able to find that out remotely, [find out] who has fallen asleep. Conversely, if you get into a firefight and someone is shot, you’ll be able to tell remotely whether or not they’re still alive [and] whether you should risk other people to go out and try to get them. It’s remarkable -- what we’re going to be able to do in the next several years.

That is one example of how we’re bringing the modern computer-based technologies, Internet-based technologies, frankly, into the art of warfare. Forgive me, I know this is a rather grim subject, but it is just to give you an example of what we’re doing [and] why we are already such a powerful force and will be dramatically better in several years.


Let me give you an example from the business side. We are, as I said, a large and complex organization. We operate finance centers. We have around 200 locations that write checks, around 400 locations that write contracts. All of these organizations have over the years developed their own unique systems for generating contracts. We’re using an Internet-based technology in a very simple way to get an enterprise-wide solution so that we can go paper-free. So, hopefully by the end of this year, we will largely be no longer undertaking our business operations within a paper economy. It will all be done in an electronic environment. We have found that it’s possible to do this without substantially stripping out the old computer systems and putting in new ones, but by simply putting in an overlay based largely on Internet technology across the entire network. So we’ll have 400 contract-writing centers and 200 finance centers that will be able to communicate with each other using a very standard communications protocol, again, developed through Internet technology.

Let me give you another example. This afternoon, I was down at one of our locations, Lawrence Livermore [National] Laboratory, that does a lot of our advanced research and development work on nuclear weapons and nuclear systems. One of their responsibilities is to provide a warning system in case any nuclear reactor in the United States has a problem that might involve an accident that would disperse radioactive particulate into the environment. We’ve developed a technology to be able, within five minutes of an accident, to predict exactly the location that the wind would take any pollution that would come from the accident. We will adapt that for use in the event that we have a chemical or biological terrorist incident in the United States, so that any place in the United States we would be able within five minutes to be able to get the wind patterns and the predicted fallout locations around any metropolitan area. And [users will be able to] download [those forecasts] using Internet based technology.

These are just three examples out of the literally hundreds that I could give you of how we’re using this technology to try to modernize and update the Department of Defense. It is a technology of enormous opportunity for us, making us dramatically more efficient. But I must also say that cyberspace is also a threatening place, a place of genuine security risk in the United States.

Over the last ten years, most of America’s infrastructure -- and by this I mean everything from power utilities to water systems to natural gas pipelines to telephone networks -- has been converted so that control is largely run through distributed processors. It’s one of the reasons why the Year 2000 problem is somewhat threatening to us. We’ll be okay. I’m very confident we’ll be all right. Nonetheless, America’s infrastructure is largely controlled through remote computer-based technologies. Increasingly, these technologies are being linked up and actually operated over this very porous and inherently vulnerable technology called the Internet. Even in the Defense Department, 95 percent of our communications systems now ride over commercial lines.


We found through a series of exercises over the last several years that we were significantly vulnerable to computer attack. Two years ago we had the first cyber-attack in the United States. It was amateurish and ineffective, but it was a bona fide terrorist incident through cyberspace. Since that time, the pace and the intensity of [cyber-attacks] has stepped up significantly. While I can’t go into all of the details, there is very definitely an effort at this time for forces outside of the United States to try to disrupt our operating systems because of the things that are going on in the Balkans.


A year ago, had we in the Defense Department been attacked, we would not even have known it because we did not have at that time the network controls, the network intrusion-monitoring devices, [and] the watch centers to have even known we were under attack. Today, we do. Many of you, I’m sure, have heard about the Melissa virus. Had that occurred a year ago, it would have tied us in knots for weeks. When it happened about two weeks ago, it affected us for about 20 hours. But I think [the Department of Defense] is the exception in the United States. We have invested enormous sums over the last two years in developing security systems for our operating environment, but the rest of America’s infrastructure has not. It has not because it’s in the hands of the private sector and the private sector, frankly, has not yet seen the need to do that. That is going to be a genuine security problem that we’re going to confront. And I must say to all of you, those of you especially who are with the government, you must start thinking about security in cyberspace. You’re going to be enormously vulnerable if you do not. It is not an impossible problem, but it is a problem that will never go away. You will only be able to stay ahead of the problem. You will never be able to solve it.

As I said to many of my colleagues, however, that while your first reaction when confronted by a cyber-attack is to try to unplug yourself from the network, what you’ll find is that you cannot do that. This is now a technology that’s so pervasive and important in the way we do business that you cannot decouple yourself from it, so you must learn how to operate inside of this environment. It means that you have to engineer in security at the outset. So, those of you from government, from other countries, must use this as a unique time to design security in advance, [it is the time] when you’re trying to bring these technologies in to modernize and bring efficiency to your operations. You cannot afford not to do that.

Let me conclude by saying to all of you, welcome to the United States and especially to the state of Washington. I think the Microsoft Corporation is doing a great service to you and to the United States to bring you here together with us. I’m told this afternoon that a question was asked of Bill Gates: [What is] the degree to which this technology could become a democratizing force across the world? There is no question in my mind that it could be probably the most revolutionary democratizing force that any of us could unleash in this world. But as responsible agents on behalf of our societies, we also have the obligation to make sure that a secure and safe technology is introduced. That requires your very studied leadership over the years that come.

I thank you very much, especially for your attention this evening after such a long day. Thank you. (Applause)