Inside MicrosoftHelming IT at Software’s Ground Zero

CIO Canada

As Chief Information Officer of Microsoft, John Connors is in the spotlight as few other CIOs are. Answering ultimately to the big man himself, Connors, who turned a mere 40 in February, must not only run his complex and demanding IT operations in a highly efficient and cost-effective manner, he must do it while providing a testing and nurturing ground for a great many products under development. More than this, his IT shop must be a showcase for business solutions based on the company’s and its business partners’ products. You’d think that might be enough to fray anyone’s nerves, but during this recent interview with CIO Canada, Connors gave every impression of being relaxed, confident and a man who enjoys his job.

CIO CANADA: How is the position of CIO at Microsoft different from that of CIO in any other large multinational?

CONNORS: Many things are very similar: supporting a diverse number of geographies and product lines; managing your end-user environment, your networks, your application environment; building and architecting your data centres. I think there are two things somewhat unique for Microsoft, although there are other companies, like Compaq and Cisco, that do similar things. First is the fact that we have a responsibility beyond running our IT organization that we call eating our own dog food. We use our IT infrastructure and our users around the world as a large laboratory for testing either alpha or beta products before we release them to customers. Secondly, the IT organization is asked to create a showcase of our technology and our partners’ technology, so that our sales organization can use us as examples of how we’ve deployed technology to solve business issues.

CIO CANADA: How do you organize to allow for these product improvement activities?

CONNORS: We ask each of the managers underneath the global networking and systems line manager to organize their area in a way that gives them adequate management and staff resources to address these product issues. We’ve made it a core part of their objectives. It takes some pretty tough managers to do both the core IT job and deal with our product development organizations simultaneously. The people who can do both effectively often get recruited pretty heavily to go join the product groups. I think it’s great for the company even though it may cause some additional recruiting and organizational churn in IT.

CIO CANADA: How big is your internal IS function?

CONNORS: Today we’ve got about 1200 people in functional IT areas globally. We outsource a fair number of things – for example, our help desk environment, our network break/fix in the field, a significant part of our Internet data centre operations. Out of those 1200 people, more than half are involved in application development and support. What we’ve really tried to do is drive down what it’s costing us to support the help desk, run the network and run our data centres, and focus as much of our IT resource as we can on the line-of-business technology solutions.

CIO CANADA: How do you manage IT in your foreign subsidiaries?

CONNORS: The evolution we’re taking with IT is to centralize our data centres, network operations and application development and support. What most local subsidiaries have are a limited number of IT staff mostly focussed on the help desk environment. For data centre, servers, network and telecom, we either fly people in or we have third-party contracts with companies like Nortel or NCR who will dispatch their field technicians to address any issues.

CIO CANADA: Do you have a mission statement or vision that provides direction or impetus to IT?

CONNORS: The bottom line is to create an IT showcase. What that means is that in every area of our people, processes and technology, we want our product people, our sales people, and the people who rely on IT – the us-ers – to see that we’ve got as good a set of IT processes, infrastructure and applications as any company in the world and that they’ve been deployed either on our technology or our partners’ technology.

CIO CANADA: What are the most significant projects or IT initiatives that you’re now undertaking?

CONNORS: The overarching thing is recruiting and retaining talent – that’s job one for everybody. Beyond that we have five major projects. First is the completion of our network upgrade, which will be finished in about four months. We’re upgrading our entire data network everywhere in the world, and that includes re-architecting our routing as well as installing a new physical layer of switches and routers, etc. Second is our Operations Service Model project, in which we’re consolidating all of our data centres and server farms into a couple of large geographic hubs and then automating that environment. Third is the completion of installing SAP as our enterprise resource planning system. We’ve done SAP Procurement, Finance, and HR worldwide, and we’re now in the process of integrating our sales and marketing. Fourth is the deployment of a common sales system and a common support system around the world. And fifth is building the infrastructure and the billing environment for our Internet properties. That one is about 50 percent complete.

CIO CANADA: How do you do strategic planning at Microsoft from an internal IT perspective?

CONNORS: Each June, prior to the start of our fiscal year (July 1), every major group including IT prepares an annual business plan that gets reviewed by Bill and the executive committee. You go in for four hours with your strategic plan as well as your financial plan and those guys tear holes in it, provide direction and input, and ultimately approve it. In addition, every major group has a mid-year review – a lengthy session where you sit down with the executive committee and go through in great detail the financial results year-to-date, as well as your spend outlook for the rest of the year and also your progress against strategic objectives and operational goals. What insider input do you need from them, or have you come up with, to readjust course? Our IT organization had its review Monday – an eight hour session where we went through, in pretty great detail, every single topic in IT that mattered. Out of that annual plan process and mid-year review process, which executives from around the company are encouraged to attend, we coalesce on the most important issues in each area and in an informal way – through e-mail, really – we ratify what the top issues are and what we’re doing about them.

CIO CANADA: Is Bill Gates very hands-on when it comes to the internal IS stuff?

CONNORS(Laughing): Yeah, he’s pretty interested and he’s got some very strong views. What he’s mostly interested in is what can he learn from IT that can be translated into better products. So that’s really his focus, besides pounding you about how much money you’re spending and how you could do things smarter. If he does get an opportunity to tell you how you can do something smarter or how you could save money or be more efficient, he never misses the opportunity.

CIO CANADA: What are the most important issues that you now face as CIO?

CONNORS: First and foremost, getting the right kind of managerial talent that allows you to keep up with the rapid advances that a multinational like Microsoft has to make. We’ve never had a problem with the technical talent but getting people that can bridge the business and technical side – that’s been the biggest challenge and it’s probably the area that I spend the most time on.

The second big challenge is our systems and processes that touch customers or partners. We’ve probably done a world-class job on internal processes and systems. And we probably aren’t as good as we need to be with those customer-facing systems and processes. There are still too many issues being pointed out that technology could help solve.

Finally, there is the whole area of moving to an extranet or an Internet environment where everything is connected, or can be connected if you so choose – the security implications of that, the volume transaction implications of that. The 24 by 7 implications of people around the world being connected are quite different from the old IT paradigm of supporting people 8 to 5, and a huge amount of what they transacted was by phone or in meetings or with hard-copy. That’s changing dramatically, which means the importance of IT to a company is light-years different than it was several years ago. But the perception of importance of an IT organization to a company has probably moved even faster than the reality.

CIO CANADA: Apart from Microsoft’s own products, what IT capabilities or new technologies coming to the market in the next two to three years interest or excite you the most?

CONNORS: The whole area of communications – of voice, of video – being done in a live way with the voice and meeting notes being automatically captured in digital format for sharing – that’s going to be pretty profound. The second thing that’s really profound is all of the small form-factor IP addressable devices – whether it’s a handheld device, a sub-notebook, something in a vehicle, or on a plant floor – that can be used in business, sales, and customer support processes. They are really going to change the notion of what IT does and what IT supports – going much beyond the desktop.

A third area is what happens with communication pipes. How soon will data networks be as reliable as voice networks and how soon will bandwidth be reasonably priced everywhere in the world? That’s really an interesting question. We study our telecommunication costs really closely because we spend in excess of $100 million a year on voice, video and data bandwidth – just bandwidth alone – and when I look at the prices per megabit per month that we pay in the U.S. versus such places as Europe, Asia, and Latin America, the multiplier, while coming down, is still dramatic. In Latin America, for example, the cost per month per megabit is almost thirty times that of the U.S. Asia is coming down – it’s about 12 times; 18 months ago it was 27 times. Europe is still six to seven times more expensive in aggregate, and some countries, particularly Eastern Europe, are higher than that. So how do you get everybody on the same playing field if communications bandwidth is so disproportionately priced, and when data networks, which just don’t work as well as voice networks, generally get less reliable the farther you move away from North America?

CIO CANADA: Looking out over the next two to three years, what will be the most important projects that your department will be undertaking?

CONNORS: Probably it’s the whole area of directories – getting to a common directory where we can profile things across the board effectively. If you think about four of the things with IT that you have to, in a connected world, get very good at, it’s really people, place, time and security. And getting to a common directory that allows you to profile people and address those four attributes is one of the key challenges we’ve got and one of the really interesting things we’re going to try to solve. We recently formed an architecture group, and its first and foremost project is our directory strategy; that is, how do we get all of these disparate directories that are all over the company – whether it’s an e-mail system, whether it’s currently in NT, whether it’s in our SAP directory, a human resource system, etc. – how do we converge a directory strategy towards our Windows 2000 active directory and beyond that?

The second area internally that we have to get much better at is measurement. We’ll deploy technology and make a process more efficient but we’re still not nearly close to what we need to be on measuring the value to the business. We’ll reduce headcount in an area, but those heads will get redeployed to something different, so often when an executive looks at an area the costs are the same, and he’ll say, “What the hell am I spending all this money on IT for if the cost of your area isn’t dropping?” In reality, if you activity-base costed the processes there, IT probably has added a lot of value and provided a good return, but you just don’t see it because you don’t have discreet enough accounting of what it provided. That’s one of the hard organizational management challenges we’re looking at executing on over the next 12 to 24 months.

CIO CANADA: How is Microsoft doing on Year 2000 compliance?

CONNORS: I feel pretty good that for our mission-critical and business-critical systems we’ll have those inventoried and addressed over the next four to six months almost universally. We’ve got one or two systems that we’re probably going to come down to the wire with and then there’ll be a few things that we just miss. But I feel good about our internal systems. In our product groups, they’ve got a dedicated team addressing Year 2000 compliance of our products and I think we’ve made pretty good progress there. And thirdly we’ve got a dedicated legal and mitigation team, because for any company the Year 2000, and particularly in the U.S. with the number of lawyers that have got to eat, you’re just going to get sued. And we’re a company with deep pockets that has lots of products out there. It’s a shame, but that’s just the reality.

David Carey is a veteran journalist specializing in information technology and IT management. Based in Toronto, he is managing editor of CIO Canada.

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