A controversial Microsoft services engagement for Energizer Holdings, revealed in spring 2005, set many partners on edge, but Microsoft executives told attendees at the company's annual partner conference in July 2005 that the engagement will be used to develop new services that both Microsoft and partners can offer. Microsoft CEO Steve Ballmer and Worldwide Services Vice President Rick Devenuti said the company wants to respond to customer concerns about the manageability and performance of Microsoft products and has no intention of launching a major services business.

The Microsoft Way

The Energizer engagement, in which Energizer Holdings outsourced management of many of its computer systems to Microsoft, came as a surprise to some of Microsoft's best and largest partners, who perform such services for many of their own clients. The engagement was not announced publicly, but was revealed by stories in the media, and Microsoft's subsequent explanations did not dispel all the partners' concerns. Microsoft said it planned to provide similar services to several other customers, without setting clear limits on how many customers it would seek or why it would pursue a services business with only a few customers.

At the Worldwide Partner Conference in July 2005, Ballmer and Devenuti explained that the initiative, officially known as the "Managed Solutions incubation project," was a response to customers who were asking for Microsoft's help with their systems, which were not performing up to expectations or hopes.

Microsoft's IT group, which is part of Devenuti's Worldwide Services organization, prides itself on internal IT improvements, such as an Exchange consolidation project that consolidated about 200 Exchange servers in 70 sites to 74 servers at four sites, even though Microsoft has offices in 89 countries and its e-mail system handles more than 3 million e-mails a day. Microsoft's own systems must also cope with desktops running prerelease software, which the company usually "dogfoods" with internal users before releasing to outside beta testers.

Microsoft is also concerned about a crisis in confidence in the PC: media stories are frequently focusing on a tide of increasingly sophisticated spam, spyware, and phishing attacks, many of them masterminded or funded by criminal or terrorist organizations, and far more advanced than those written by the amateur hackers of the past. As the dominant player in the desktop market, with software that is frequently attacked and patched, Microsoft catches much of the blame.

From Laboratory to SKU

To respond to such threats, the Managed Solutions incubation project will make widely available the processes and practices that Microsoft uses itself, and that have been further tested and refined at selected customers' sites. For example, the company has created an Exchange Center of Excellence designed to codify the measures that Microsoft has employed with its own Exchange servers. Partners and customers with large investments in Exchange can receive training from Microsoft that will help them achieve the same results with Exchange that Microsoft has achieved.

"There are things we know that can be productive for customers. We want to take things that are predictable and that can be productized and deliver our experience to our customers," says Devenuti. But Microsoft partners will handle most of the delivery, Devenuti emphasized: the company cannot manage hundreds of millions of desktops itself.

In general, Devenuti said, Microsoft will use its incubator clients to develop desktop management capabilities and designs that can predictably and repeatably deliver secure and reliable desktops for a wide range of customers.

According to Devenuti, Microsoft will create services delivery solutions (SDS) designed to eliminate customer pain points or solve customers' problems related to Microsoft technology. Each SDS is a comprehensive end-to-end solution (running Exchange at 99.99% availability, for example) made up of multiple SKUs, productized services that employ guidance and training developed by Microsoft and that have predictable and repeatable outcomes. SKUs will be delivered by trained professionals—initially Microsoft personnel, but later trained partners who are certified by Microsoft as being capable of delivering the solution to customers.

Uncertainties Remain

Details about the contents and availability date for these SKUs are still up in the air, but Devenuti said an SDS will be a horizontal solution, aimed at delivering basic services applicable to most customers; Microsoft does not intend to deliver specialized solutions for vertical markets, but will rely on partners to build vertical solutions on Microsoft's horizontal platforms.

In his conference keynote address, Ballmer expressed uncertainty about exactly how these managed services would be designed and brought to market, but suggested that customers want them sooner rather than in 10 years, when the managed desktop, which today requires a great deal of specific customization, will probably be a widespread IT practice.

"I told our team we're not learning fast enough what it will take for us to engineer the technology that lets managed services evolve from a world of infinite customization to a world of much more standardization."

Because managed desktop standards for deployment to real-world customers cannot be developed in a laboratory, Ballmer said Microsoft looked for a small number of customers who could incubate "design and learning experiences" from which repeatable standards for managed desktop services could emerge.

The project is far from over, but Ballmer speculated that the end result might be Microsoft-hosted services that complement partner management services delivered at customer sites around the world.

A transcript of Steve Ballmer's keynote address at the Worldwide Partner Conference is at www.microsoft.com/presspass/exec/steve/2005/07-10WWPC.mspx.

The Energizer Holdings engagement was described in "Energizer to Use Microsoft IT" on page 31 of the Apr. 2005 Update.