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Interoperability, interoperability, interoperability, says Microsoft
Under attack from all sides, the Redmond giant is looking for ways to reinvent itself. In this exclusive interview with S Raghotham, Simon Witts, Corporate VP of Microsoft’s Enterprise and Partners Group, dwells at length on some of the new thinking.
On the changing business needs of Enterprise IT
If you look historically, people have been essentially spending money in one of two areas: one, if you ask business people, they will tell you they have been spending money doing process automation or we have been spending money on making people more productive personally at work. It seems these two worlds have drifted apart where you have got situations where core systems actually aren’t used that much, or even worse data is held in people’s personal spreadsheets or email and not shared as knowledge or insight across the company. Most of what we see business people wanting right now is a fundamental bringing together of these two worlds – where applications actually work in a way that brings personal productivity and enterprise productivity, personal workflow and enterprise workflow together in systems so that they don’t seem to be two ends of a spectrum.
What I am talking could apply to employees on the intranet, it could apply to the value chain across the Extranet and it could apply to customers on the internet and whenever I describe the enterprise now, I never think one of those, it could be anywhere…most companies we talk to now think of their customer systems as more important than their employee systems, but let me just make it explicit because some people think I am talking about employee systems when I say things around the IT investment. The IT investments are less about employee systems in that sense…
You know the core of what we are seeing is…let’s pick the application platform as a good example…historically, people would have picked the application platform based on what IT needed or said was important…how to manage data, how fast development can be done, you know even now they say how well you can build service orientation.
In reality, the smarter companies are saying, if we really worry about the reach and richness of the application that we are trying to develop or how it is being used, things like the user experience from the application platform or things like BI from the application platform are far more important considerations that the business would actually refer to. We call it people-ready business but it is ultimately software that allows a business-led application transformation, and not just things that satisfies IT. In many ways, you want IT to create a standard platform and standard infrastructure…you don’t want IT involved should someone want to do something in the business or evolve how the application can actually be used…
When we say business is getting involved in IT, it is an end-to-end statement. They are getting involved because they are demanding applications that work just the way they do. And not just on the process side, they are getting involved because it is a way to automate the value chain or even reach customers. And this whole concept is about business people running IT.
The call to action to IT ultimately is to provide a richer platform, a richer infrastructure. We hardly see a customer who talks anymore about best-of-breed or point solutions. All the customers we talk to want interoperability, but ultimately they want integration as well. So, standardising on fewer technologies and fewer vendors is just basically what’s going on right now. I would hate to be a niche provider. I am being very blunt. I don’t think anybody has the apetite for buying niche things anymore. This is just not the time.
We talk about optimisation of the platform and infrastructure, but ultimately it is people standardising and really taking a substantial amount of the cost out of the IT budget, that could be operationally or in terms of replacing older individual software.
On the changing technology landscape of Enterprise IT
When people were doing personal productivity, what did infrastructure mean? It meant giving everyone spreadsheets, word processors and email. But when you talk about -- let’s call it role-based productivity, it is a pretty good description of where things are going – people are looking at how people actually work in a role against specific business processes. The ultimate in our view is to create role-based productivity for people at work and not just personal productivity, assuming all the processes are automated. The call to action to IT is to create some capabilities – just like spreadsheets, word processors, email, we see hardly anyone saying they are going to segment the service level for these capabilities.
Let me give an example, if you really care about how applications are used, you deliver maybe content management, maybe user experience, maybe collaboration, maybe BI. We think these are fairly universal capabilities that should be offered in a consistent way to everyone regardless of the applications that you are trying to get used. This problem of building applications that don’t get used is not new. Up until now, either the app vendors were delivering BI or process integration or portals or whatever it was, and there was some kind of top-tier management that got the capabilities that allowed them to actually use those apps. Now, we think these things are going pretty universal. Then you are going to drive standardisation in a way that’s phenomenal.
So these capabilities we just think will be available to everyone at work. Unified Communications is a great example. It will just be there. People have gotten used to think email and internet access, but in the next few years, with the rich, rich platform and rich, rich infrastructure, all kinds of UC, BI, process integration, content management, collaboration, even things like portals, CRM will be universally available to everyone regardless of their role. Therein lies a massive transition.
Microsoft’s is an interesting example, and maybe we are a little leading edge, but it is a good indicator of where we think things are going. We have an IT budget, about half of it goes on the infrastructure, half goes on the applications. And, every year, our infrastructure budget – it’s about a billion dollars – doesn’t really go up, but every year we talk about what new capability we have made available to everyone on the Microsoft network – like rights management, or conferencing, or mobile messaging.
And if you look at the business applications, about 60% of our business unit application budget has come inhouse, it is not because we are suddenly developing our own applications. It really means we are spending it on portals, dashboards, scorecards, connectors, and frankly the Office servers…they are configuring them based on the people, the processes they work against in their roles.
We do think of the Office servers – Exchange, Communication Server and SharePoint – being as broadly used as Office is on the client. Or, maybe a bit like the Office on the client, you won’t use all the capabilities on that middle tier but we do see them being fairly universal and those capabilities coming together in different configurations, this time based not just on individuals but people in their roles. That’s a massive transition, a massive transition.
All of that assumes web-based technologies, but I am not pinpointing whether you are on the internet, the extranet or the intranet. SharePoint to us, everyone’s website will be built out of Sharepoint as we well as everyone’s enterprise portal. The technology is the same on both sides of the firewall. IT will have to have an architecture that works, that is identical on both sides of the firewall. We are going to get past the internet-facing technologies--intranet-facing technologies. We are going to get past that blip in the IT architecture.
On Enterprise Partners
We have two types of partners that we work with. Either alliances, where we have a relationship directly at the corporate level, and we basically invest at the corporate level to make things happen on a larger scale. And then we have partners that we select locally, companies that are managed locally or from the national software ecosystems.
The main shift at the minute is: how do you take capability-based partnerships for IT, you mentioned UC, BI, security, and so on. Basically, our partnerships have to come down to that level in terms of being specialists, in terms of not just what our partners can do and what they offer, but ultimately of their approach. Let’s take UC, for example. How we work with people that not just understand our unified messaging, mobile messaging, conferencing on the web and video and even understand voice. So, how do you build out a UC channel that takes the assets Microsoft has around Active Directory and our networking and then brings in the other capabilities that we need to ultimately compete with Cisco or whoever it is.
That’s a very very important thing. So, I would say the most important thing we are doing is making sure we know which capability we are creating partnerships around and what kind of solution plan we have with the partner that goes all the way through to what we are going to invest together in sales and marketing, how we are going to fund the return beyond the resale.
So, that’s the IT partners on the platform and the infrastructure. The other thing we are doing is setting out to creating partnerships around solution areas that are either industry-specific or cross-industry that very much help us sell to the business, and here you are into a different class of partner that ultimately is centred on business selling with the help of IT. Defining the solution areas and thinking some industry priority ones, at this point you can get some unique partnerships. We are going to work with Infosys around insurance value chain or something all the way down to where we have our own solutions, our own dynamics.
So, you are seeing very much partnerships that form for business selling and partnerships that form for IT selling, but in both cases being very clear on what the solution area is or what the capability is, very clear on the commitments we are making in terms of the engagement, and ultimately trying to drive that 60% of our business that is led by our partner at the solution level. At the transaction level, it is 100% partner-led because the licensing is all sold through the partners, but at the solution provisioning level, systems integration, it is mainly a partner-led business for Microsoft.
We have been able to scale the partnership approach to the company and make it relevant to the enterprise. Most of our enterprise competitors like to compete with their partners at the big customers and they have big service practices or solutions practices. We stay pretty focussed on just the platform and infrastructure software, which ultimately allows people with domain or vertical knowledge to come in and add value or people with service practice selling to IT to add value. I personally think our partnership model has never been healthier than it is right now.
On Competition
Who your competition is depends on where you are. For Microsoft, if you think on the applications and business solution areas, the primary competitors are Oracle and SAP. If you look at the platform level, the primary competitors are still Oracle and SAP (Fusion and NetWeaver), but also clearly IBM. And if you look at the infrastructure side, on the business productivity, the main competition would be Cisco and IBM, along the core infrastructure, it would be the various Linux, EMC and the broad set of security and management vendors.
On Microsoft’s new thinking on Linux
The Linux interoperability agreement with Novell is a straightforward thing. Most servers, if not all, will be either Windows or Linux not too far away. And as a company, understanding what interoperability means at all levels is absolutely critical for us to continue the strong enterprise growth we have. Sometimes people don’t quite realise that some 40% of our revenues come from the large accounts and that that business is growing north of 15%. And as we move in to take much more share in the platform and application areas beyond the infrastructure, we are looking to build out a business that can yield very good results.
Ironically, interoperating is a very powerful way for us to take more share as people consolidate. Remember the discussion we had a while ago that people are fine to standardise on us so long as we prove we can interoperate. So, it is an irony that the more you prove you interoperate, the less you have to. But it is important too. And that’s all the way through the stack. At the base level, having interop with Linux is important.
We did that with Novell, we have to do it with other Linux distributions. And ultimately there is value and potential to us to indemnify customers with potential patent infringements above and beyond what those distributions can do themselves, there is a commercial aspect to what we do with Novell. I think people have responded very very well to that.
I can tell you Microsoft initiated the agreement with Novell, and I can tell you we have approached all the other Linux distributions. I think interoperability is an absolutely critical credibility factor and reality factor in the enterprise.
The irony is that as we have entered markets, interoperating with what’s there, and ultimately taking the share and becoming the standard, it is our approach. Even now, interop between SQL and Oracle, all those things are in place. We needed a tighter relationship with the Linux distributions to take that to the same level. If you look at the interop between Unix and Windows, that’s first class. But that comes with some formality investments and understanding from us. If you look at our services for Unix that ship within Windows -- we had to create that set of results, we needed to work on a common set of engineering and outcomes with the Linux distributions just like it was HP-UX, or AIX or some strain of Unix which we have done in the past. We led that.
On Unified Communications Strategy
Interoperability with Cisco that we announced last week is very important. We compete head-to-head with Cisco on UC…
There are two reasons why we will win UC. One is, if you really want to go the whole way, so I can communicate with you in a way that is not network-dependent or device-dependent. That’s our vision here. Then I need to know who you are, what your preferences are. In technical terms, I need to know your identity, your access and your rights and whether you are present. That’s where we are with Active Directory and most of the capabilities in the core network where Windows is pretty pervasive. We will be building on that asset, and building on our messaging asset, and as you know moving through to unified messaging, mobile messaging but also integrating through the OCS, conferencing, IM and so on. We think there is a realistic justification for IT to move enterprises into UC. They will actually save substantial sums of money as well as bring in control and audit. We are confident how to do that.
Do we need to bring in new capability on voice? Yes, beyond the voice work we are doing in call handling, call management, partnership with Nortel. Frankly, we would like partnerships with all network equipment providers, although we don’t think we can get one with Cisco, there are a lot of other companies we could have, and we want to have beyond Nortel as well…We mean real partnerships though. If you look at what we are doing with Nortel, they are ultimately going to OEM the OCS, we will be working on the soft PBX, to be frank, we are doing the R&D to enable Nortel to rely on that, so there is a deep, deep R&D relationship to make that a reality. Then, we will keep doing acquisitions, like the Palarno one. We will keep putting the components in there to make voice just a natural part of the communication spectrum. The key point is when customers have made their choice, maybe they are using Cisco’s CallManager, and some parts from Microsoft, the interoperability between them is terribly important. So, we are going to have all those bases covered. And then frankly, the market doesn’t stall, the market explodes, and we will win each customer for these capabilities. But that will be a pretty head-to-head thing.
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