• Sidebar: Outsourcing IT at Microsoft
• Sidebar: IT-Sponsored Programs for Field and Customers
• Chart: Microsoft IT Facts

The IT organization at Microsoft, which in many ways is similar to IT organizations in other large companies, could prove a useful benchmark for IT managers. In addition, after making changes that brought Microsoft’s IT, consulting services, and product support groups into the same organization, the company is developing programs that will provide Microsoft consultants and some select customers with direct access to expertise in the Microsoft IT group. Such access could help customers run their Windows-based IT infrastructures better and help Microsoft showcase the business benefits derived from Microsoft products, which could drive adoption of those products.

Microsoft’s IT organization supports the technology needs of the company’s approximately 89,000 full-time employees, vendors, and contractors and runs its global technology infrastructure and business applications. Adding to these responsibilities, the group (formerly known as the Operations and Technology Group and recently renamed Microsoft IT) also plays a pivotal role in the product research and development process, funneling requirements and technical issues into product development teams and gating product release via a quality assurance process that company employees refer to as "eating our own dog food."

Running the Machine, Controlling Costs

Like most other IT shops, the Microsoft IT organization provides the following services:

• End-user and infrastructure services, such as network access, file and print services, data storage, and e-mail; this includes running the server and network infrastructure that supports those services
• Technical support for end users: for example, a help desk function records and tracks employee questions and problems with IT services and a client support organization addresses problems and issues with employees’ devices, such as a failed disk drive on a laptop
• Support for the company’s many business applications, such as SAP, which Microsoft uses to track and report budgets and expenditures, and Siebel, which the company uses for customer relationship management.

As many IT organizations have done over the past five years, Microsoft IT has focused its attention on reducing the per-employee cost of these services. For example, the group has reduced both the number of servers running infrastructure services (by 30%) and the number of physical sites under its purview, which in turn has helped reduce headcount in remote locations. On tap for fiscal year 2005 (which started July 1, 2004) are plans to reduce the number of servers that run the company’s business applications. These efforts, started in mid-2003, are part of a three-year consolidation project that will result in savings of more than US$100 million according to Chief Information Officer (CIO) Ron Markezich.

Microsoft’s IT organization and infrastructure are significant. The company has more than 3,500 IT employees as of mid-2004. Roughly half of these employees are full-time Microsoft employees (or "blue-badge" employees in Microsoft lingo) and half are contract or vendor employees. (For more about the functions Microsoft IT entrusts to vendor or contract employees, see the sidebar "Outsourcing IT at Microsoft".)

Microsoft's IT infrastructure services run on about 1,400 servers in eight regional data centers and users connect about 300,000 devices, such as desktop computers and laptops, to this infrastructure. Microsoft IT manages and maintains about 1,000 distinct business applications. (For a chart of Microsoft IT statistics, see "Microsoft IT Facts".)

Helping Microsoft Improve Products

In addition to standard IT services, Microsoft IT plays a key role in the prerelease testing of the company’s products. All enterprise products released by the company must run stably on Microsoft’s corporate network and the IT group must sign off, signaling their agreement that the products are production-ready, before they are released to manufacturing.

This testing (which Microsoft calls dogfood testing) has evolved from a relatively ad-hoc process focused mainly on server products such as Windows and Exchange to a highly formalized process covering a broad range of Microsoft products. For instance, an IT group reporting to the CIO ensures that there are deployment plans, project schedules, and well-defined testing scenarios and success criteria for all dogfood projects. The goals and success criteria are aggressive: for example, before Windows 2003 shipped, most file and print servers, remote access servers, domain controllers, and Exchange servers on Microsoft’s corporate network were running the product. Dogfood projects are regularly reviewed by a steering committee made up of product team members, the CIO, and his staff.

Making IT a Strategic Asset

A reorganization in late 2003 brought Microsoft Consulting Services (MCS) and Customer Support Services (CSS) together with the IT group under former CIO Rick Devenuti. With that reorganization and promotion of Markezich to CIO, the IT group has added an objective that Markezich refers to as "making IT a strategic asset."

This objective involves the following efforts in fiscal year 2005:

Pushing IT learning to the field. The IT group is building several programs to share operational knowledge with MCS and CSS personnel. These programs will involve written training material, formal training curricula and coursework provided by IT personnel, and hands-on training in Microsoft IT data centers. The IT group is also developing programs that could give select customers direct access to training material and IT personnel for consultation and troubleshooting of difficult problems. (See the sidebar "IT-Sponsored Programs for Field and Customers".)

Increasing investment in business applications. Over the past several years, the IT group has reduced spending in areas that Markezich refers to as "sustainer activities," the standard IT services (such as file and print services) the group provides to Microsoft employees and the management of the infrastructure that supports those services. These cost savings have allowed the group to increase the percentage of budget it allocates to new technology deployment and application development. (Microsoft’s IT budget is held relatively flat year-over-year. About 65% of the group’s budget was allocated to application development and support in 2004; 35% went to supporting the IT infrastructure.)

By increasing spending on new technology rollouts and application development, Markezich hopes both to improve Microsoft’s effectiveness as a company and to demonstrate to customers the productivity gains and cost efficiencies that can be realized through judicious application of technology, particularly recently released Microsoft products. For example, in 2005 the group will roll out integration capabilities that allow Microsoft account representatives to use Outlook to access and update information in Siebel. These capabilities could make account representatives more efficient by letting them perform common tasks with a familiar tool, such as updating customer information, and also support Microsoft’s drive to position Office as a "smart client" for accessing business applications.

Atypical in Some Respects

Along with its rapid adoption of new Microsoft technology via the dogfood process, Microsoft IT differs from its peers in several important ways:

• As a general rule, Microsoft IT will not deploy technology that directly competes with a Microsoft product; consequently, Microsoft’s IT environment is likely more homogenous than the IT environments of many of its peers
• Microsoft’s IT organization does not license Microsoft technology; the group estimates that its operating budget would increase by about 5% if it licensed Microsoft products
• Because it is a relatively young company and an aggressive consumer of new technology, Microsoft is not saddled with the burden of legacy applications. For instance, Microsoft’s remaining AS/400 applications were eliminated almost 10 years ago.

Finally, Microsoft’s IT budgeting process may differ from that of its peers. Although many Microsoft IT projects live or die by their ability to demonstrate either cost savings or user productivity gains, these criteria are relaxed for the introduction of new Microsoft technology. For example, where most IT organizations would be required to justify the rollout of technology such as Windows SharePoint Services on such grounds, its standing as a strategic Microsoft product release makes its introduction on Microsoft’s corporate network a given.

Resources

The Microsoft IT showcase site, which details Microsoft IT’s practices, is at www.microsoft.com/itshowcase.

Business application development and management in Microsoft IT is explored at www.microsoft.com/technet/itsolutions/msit/default.mspx.

Microsoft IT server and data center consolidation is discussed at www.microsoft.com/technet/itsolutions/msit/consolidation/svrdatactrconsoltsb.mspx.

The reorganization of Microsoft IT, MCS, and PSS is described in "Enterprise Sales, Consulting Get New Leaders" on page 25 of the Jan. 2004 Update.

How Microsoft responds to security threats and vulnerabilities is explained in "Client Patching at Microsoft" on page 20 of the Jan. 2004 Update.