ActiveWin.com (Bob Stein): Being a software company, Microsoft is always in the spotlight for its products. As CIO, how do you leverage Microsoft's own products for the company's internal IT? Do you have access to all the latest and greatest?

Tony Scott: We eat our own “dogfood” long before our enterprise customers taste it. Internally, the program is called “Microsoft’s First & Best Customer” because Microsoft IT is the first customer of Microsoft’s enterprise products. We run alpha and beta versions of products and services in production environments to help improve product quality and test enterprise scenarios for the product teams. Then we later publish our experiences with the products and services in the form of white papers and videos as part of Microsoft IT Showcase. Your readers can BING it – Microsoft IT Showcase.

As an example, we run a very large SAP ERP system, a single instance that has been running on Beta software of SQL Server 2012 since November 2011. To give another example, we have over 23,000 systems and 19,000 employees using Windows 8, testing new features and new hardware. We recently completed a couple of Big Data demonstrations, using Hadoop running on Windows Server. This demonstration was the proving ground for investment in this area, to start generating business insight from user behavior data on a much larger scale than we have been able to do before.

ActiveWin.com (Bob Stein): Do you think in some ways, Microsoft's internal IT is their own biggest/best customer?

Tony Scott: We’re big and the first customer, but we may not be the biggest. For example, we have about 130,000 seats using Microsoft Dynamics for CRM, and we manage more than 140,000 virtual machines using System Center. That’s big, but there are bigger customers out there.

ActiveWin.com (Bob Stein): In the little over four years you have been CIO, how have things changed at Microsoft? Did you see a move to the cloud like many of your customers?

Tony Scott: Things never stand still at Microsoft, which is why I love it here. The trends of cloud computing, consumerization of IT, natural interaction and information intelligence, have all changed the way enterprise IT departments deliver services. In my mind the two biggest things that changed were the move from analog to digital and the expansion of our sales channels.

While I was at Disney we made the move from analog to digital. It’s the shift from editing film to editing pixels. At Microsoft, we still ship fully-packaged product to retail shelves, but more of our products are delivered as online services. I’m talking about Windows Azure, XBox Live, trial downloads, Office365 and more. That requires us, as an IT department, to change so we can be faster and better at delighting customers through online engagement.

Second, and I’ve already alluded to this, we’ve increased our retail presence and our ability to engage with our consumers, businesses and public sector customers online. In digital business, consumers, customers and business partners expect higher touch, more personal service and on demand access to our product and services. Increasing our presence is giving us the ability to meet this demand.

ActiveWin.com (Bob Stein): You have a lot of experience as a technology leader in many different companies. What one thing is unique or differentiates Microsoft from the others?

Tony Scott: From the CIO’s point of view, there are many similarities between Microsoft, Disney and General Motors. The difference is the software and technology aptitude and passion for technology of employees from all levels at Microsoft. As a result, Microsoft IT has to draw boundaries for how employees utilize and manage technology. For example, every Microsoft employee has admin rights to their computer, which isn’t the case at most enterprise companies. But at Microsoft, that’s the right choice to balance employee empowerment and IT control.

ActiveWin.com (Bob Stein): What direction do you see IT moving to in the future? More services to the cloud?

Tony Scott: It has become clear in the last several years that IT is mission critical to business. Nowhere is this more evident than around data collection and analysis. Today, data is being collected at an amazing rate, whether that’s telemetry from a car, sensor data from a machine, or modeling online and offline customer behaviors. Business leaders are anxious to interpret this data in order to find new trends and gain new insights so their businesses can compete better.

The reality is, most data that is collected will be ignored or thrown away. IT has a unique opportunity to provide new tools for helping business leaders make sense of this information overload by providing a clear, rational approach to analysis.

Cloud computing plays an important role. Many are familiar with the platform as a service model, however, less are familiar with the data as a service model. We use a data as a service model for our internal BI architecture so we can seamlessly expose data from the cloud and from other data sources, in a single, unified catalog of databases. Terabytes of on-premises and cloud data can be exposed from a single unified data catalog using a single URL, and then consumed by line of business applications, mobile apps, Excel and more.

ActiveWin.com (Bob Stein): What are some of the biggest challenges you have experienced as Microsoft CIO?

Tony Scott: When I hear the word challenges, I always think of opportunities. I think all CIOs are wired that way.

We’re in the midst of a big opportunity within Microsoft IT. It’s tied to the move from analog to digital, and the complexities that come with that. More so, it’s tied to Microsoft’s vision to create seamless customer experiences that combine software with the power of the Internet across a world of devices. That’s a bold vision, one that my team needs to enable. Microsoft IT will help Microsoft achieve its full potential by transforming it into a real-time enterprise.

Think about it this way. As Microsoft faces competitors across business and consumer segments, the company needs to be able to respond to rapidly evolving market conditions. This leads to new business strategies, new models, and executing them with more agility than in the past. Speed is critical.

Microsoft IT is in the midst of transforming the way it operates. I view it as a journey to next-generation IT, which is characterized by being more strategic, innovative and competitive. We’ll get there by aligning IT to business processes, helping the business speed up those process, and focus on delighting the customer.

ActiveWin.com (Bob Stein): It is easy to get caught up in the hype of new products and technologies. What are some items you have to consider when aligning your technology roadmap with the overall business strategy?

Tony Scott: As Microsoft CIO, my top priority is to transform our IT organization to meet the company’s ever-evolving business and technical needs.  At the heart of this is an IT operating model that integrates processes, governance, services, and organization blueprint. This integration provides a view of the components of Microsoft IT and how we will work together with Microsoft’s lines of business.

We want an operating model that is transparent to the capabilities we have, the structures and performance targets we own, along with how those pieces enable our operations to serve our customers. As we move to real-time enterprise, we need to ensure that we have a holistic view of everything we do.

ActiveWin.com (Bob Stein): A lot of the customers who use Microsoft's products are small businesses (less than 500 employees). What advice can you give to IT directors/CIO's of these businesses to take their technology to the next level?

Tony Scott: As more and more businesses become digital and move away from analog, IT leaders need to organize around business processes as opposed to organizational boundaries, or the P&L structure of the company. This approach helps remove friction from the delivery of products and services to customers, and will allow IT leaders to delight their customers with better and faster services.

ActiveWin.com (Bob Stein): When Microsoft releases new enterprise or business-grade products, how long after release does Microsoft usually deploy for their own use or do you deploy before the products are released commercially?

Tony Scott: As Microsoft’s First and Best Customer, we deploy our products and services internally before commercial release. We run alpha and beta versions of products and services in our enterprise and give feedback to the product teams to help improve product quality and test enterprise scenarios.  As an example, we’re an early test environment for both Office365 and Windows Azure. We’ve had a good experience deploying cloud computing at the company. I’ll share a few results from a year-long pilot program within IT commerce, which is the heart of how we monetize products and services for Microsoft. The pilot was a model for our move to a real-time enterprise. Results showed that application build-time duration was reduced by 25% while the cycle time for a product launch was reduced by 60%. In the meantime, business partner satisfaction increased 44 points and channel partner satisfaction increased 83 points. This successful pilot validated much of the strategic change we are driving today within Microsoft IT.

ActiveWin.com (Bob Stein): What is the best part of your job?

Tony Scott: I love being surrounded by smart, diverse, motivated people. What sets this job apart for me is that I get to spend about one-third of my time meeting and speaking with CIOs and IT leaders from across industries and regions of the world. This past week I was in Detroit to meet with IT leaders at auto manufacturers. After that I visit Pittsburgh to meet with IT leaders at some local forums and one-to-one. Then I was off to Miami to attend a Microsoft-hosted summit of our large, global customers. These engagements are valuable exchanges for me, to both listen and advise.

ActiveWin.com (Bob Stein): What are you doing to measure, control and to enhance the quality of the products at Microsoft?

Tony Scott: You may remember Bill Gates Trust Worthy computing memo (http://www.microsoft.com/en-us/news/features/2012/jan12/GatesMemo.aspx), and it had a galvanizing effect on everyone at Microsoft, even though it was before my time at the company. In essence, a number of things changed the way software was developed not only at Microsoft, but at many companies. Everyone realized at that point there was tremendous risk if we continued on the path that was in place before. The trustworthy computing initiative came a whole set of changes, among them: architecture changes, peer reviews, quality index, and a relentless march on the belief moving the quality of the software forward.

Another big thing that changed during this time frame – there had been a practice of having one developer going to another developer working out some way of their particular parts of the code to interoperate. As part of the initiative, now we require through all interfaces to be open and published not only between Microsoft developers but also the community of developers across the world that work on Microsoft products. This open publishing interface standard is also used to benefit the quality of the products. In that period of time we saw some dramatic change.

One other thing on the IT front that relates to the cloud, one of the things we measure is called “severity one defects in production”. These are cases where business applications at has a service interruption that causes revenue loss, or reputation damage, some of a bunch of measures, etc..but these are the most significant kinds of interruptions that could occur. All of our teams are measured on this, and the goal is zero, but it is software so there are always things that could happen. When I started four years ago, we were heavily on our way to virtualizing our applications – today more than 70% are virtualized (those that are not in the cloud), and we saw a dramatic reduction in sev 1 defects in production just by standardizing on the virtualization technologies. That took a lot of configuration decisions away from operations people or developers and we saw an immediate 50% drop on those sev 1 defects just from that standardization. By moving apps to the cloud, we saw another 50% drop. Again, just because of normalizing and standardizing the software environment.

I am really super please with the progress the company has made but also our IT organization through the adoption of a real solid set of principles and also leveraging technology.

ActiveWin.com (Bob Stein): How has IT governance changed at Microsoft? Could you use a standard governance model or did you have to invent something new?

Tony Scott: I will use a simple example. Because we were organized the way our organizational chart looked nice we created governance the same way. For finance applications, there was a governance counsel that only finance people could vote on what was in the portfolio, similar for HR, sales, marketing, etc. and they would prioritize their portfolio then it would go up to a uber-governance counsel and they would decide how much to spend. That was the old structure, it was very simple. If you were a line of business owner it was very clear that you sit on a particular counsel and only vote on stuff that is in your space. When we looked at it from a process perspective, now all of a sudden you may find yourself on more than one counsel or some got combined. Now we look at processes, for example the human capital management process with people from finance and HR who sit on that.

Here is a simple example for outcome from that. I used to get a headcount report from finance, and one from HR, and they would never match. You just wonder why, since we are counting people that are real tangible things. How hard could this be?

Now we have one process for counting heads shared by finance and HR. This month for the first time, I got a headcount report where finance and HR actually agree how many people work at Microsoft. It is a simple example, but we eliminated about 12 different reports and a whole bunch of applications. The decision was made at the governance counsel in terms of what we were going to fund in terms of a business process or systems change. Similar things are going on across the company. The change is really around what we fund and the scope of what people get to comment on. It has been more challenging for the business units since they sit on more than one counsel from a governance perspective. But it also gives them a much better idea where their dependencies are across the organization. It has gone from a “heads down, only worry about my space” to a “look up and look around model”. Now we can ask the question much more easily “What is the best thing for Microsoft and its customers?” rather than “what is the best thing for the business area?”

ActiveWin.com (Bob Stein): Do you have anything to add?

Tony Scott: The role of the CIO is changing rapidly in this digital evolution. No longer are we relegated to the datacenter. We are at the table with the chief marketing officer as brand stewards, responsible for delivering a great customer experience. There’s increasing collaboration and dependence between IT and marketing here at Microsoft, which is reflected in other companies and industries as well. In order for a company to get the most out of its marketing investments, the marketing team needs IT to be a strategic partner.

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