This is a guest post by Danielle Fox de Aguilar, director of supplier management in Microsoft IT. Danielle and team manage the worldwide supplier program for Microsoft’s internal IT department, which includes thousands of resources from 300 supplier agencies.

 

In September 2011, my colleague and Microsoft IT Chief Architect Barry Briggs blogged about how changes in technology are impacting the relationship between IT and its suppliers. This post will take a different look at sourcing, namely the change we’re taking around supplier management strategy during a time of IT transformation.

As a colleague discussed earlier this year [here], Microsoft’s internal IT transformation is focused on increasing the speed we operate as a business and improve the experience we deliver to customers. To accomplish this outcome, we’re mapping IT people and resources to our business processes so that we deliver them faster and enable customers to have a better experience with Microsoft.

Suppliers play an important role in this transformation, and to have successful relationships with these suppliers requires us as an IT organization to change some of our traditional sourcing and supplier management approaches. Let me explain what that looks like.

First, we look for suppliers who provide end-to-end capabilities and service ownership and suppliers who can share both their business process and IT knowledge with us.  These capabilities are more important than ever for Microsoft IT because we’re now organized around end-to-end business processes. Internal IT employees are expanding our view across the company and we want suppliers who can do the same. This transition means suppliers have greater accountability for our success and managing their resources, and it brings combined business process outsourcing (BPO) and IT outsourcing (ITO) opportunities. For Microsoft IT, it means greater value.

Second, we look for suppliers who can provide unique value to Microsoft IT. This value can take many forms. For example, suppliers often have access to talent and technology in markets where we do not. While we deliver IT to a global business and about 40% of our IT employees are outside North America, the global breadth of many of our partners is providing us unique value through speed, agility and access to markets and technologies in many critical areas. A great example of this is the expansion of IT talent in countries like China where we see significant opportunities. 

Third, we’ve developed a Supplier Relationship Management program to help us develop mutually beneficial relationships with critical suppliers. Overall we’re looking to leverage suppliers to drive value and
efficiency, minimize supplier engagement risk and jointly develop capabilities toward delivery excellence and value creation.

A foundational element of the program is our quarterly Performance and Relationship scorecards, which evaluate not only quality and delivery, but also value, risk and the relationship. The scorecards enable rich
conversations with suppliers about trends and comparative rankings. Other critical elements of our Supplier Relationship Management approach include an executive sponsorship program, development of joint processes and strategies, executive business reviews and strategic summits and rewards and recognition.

We tailor our Supplier Relationship Management program to each of our three segments of suppliers; Strategic, Core and Specialty. Suppliers across all three segments are important and are needed for us to be successful.

  • Strategic suppliers offer a combination of depth and breadth across business processes, have high business impact and with whom we strive to have longer term and strategic relationships.
  • Core suppliers provide critical and foundational services and products, have high impact and have the ability to support deeper relationships.
  • Specialty suppliers offer unique skills and capabilities, whether that’s an analyst firm consulting on a project, an analytics firm to help with a big data processing project, or a supplier who knows the ins-and-outs of SAP.

 We’re also looking for ways to increase our partnership beyond the traditional supplier relationship, including joint investment, go-to-market strategies and sharing of best practices. This can range from sharing best practices for IT and business processes to sharing approaches for promote diversity,  employee development, and other topics critical to our leaders. With some of our key suppliers we have taken this partnership to the next level and have engaged in IT executive exchange and job shadowing programs, which allow for longer term opportunities to share deep expertise with each other. 

This approach has helped us with our transition to real-time enterprise. So far we have achieved efficiencies in how we operate, resulting in more than $20 million in cost savings year-to-date and significant supplier-driven process efficiencies. More importantly, we are seeing a great improvement in how we interact with our suppliers, which is positioning us for strong and innovative long-term partnerships which will be critical to future success.

I’m interested to hear your perspectives on supplier strategies and, if appropriate, have an offline discussion. Thank you for your time.

Danielle Fox de Aguilar