Jeff Raikes: 'Failure is not an option'
"Sun and Oracle are companies that make good products," acknowledged Microsoft Productivity and Business Services Group Vice President Jeff Raikes midway through our interview. Complimentary comments about a competitor aren't what I'm accustomed to hearing from most tech executives. But Raikes chose to focus on what gives Microsoft unique differentiation: cost. Indeed, he was well prepared to respond to the long standing "you get what you pay for" rhetoric of Microsoft critics.
Microsoft often delivers a mea culpa for not making its platform easy enough for mere mortals to use. In recent Comdex keynotes, Chairman Bill Gates has labeled computers "too hard to set up" and "laborious" and opined that "it's got to be easier." Meanwhile, citing Moore's Law, Gates extols the improvements in price/performance. When I read between the lines, there is a bit of admission that Intel has done its job while the software has lagged.
Raikes emphasized that any IT strategy starts with a stable and secure foundation of everything from servers and desktops to networks. For Microsoft to be considered as a legitimate foundation provider, Raikes said, the company must deliver the sort of reliability, security and quality associated with more expensive solutions, but at a substantially lower total cost of ownership.
To address the issue, Microsoft is sinking more resources into research and development. By the end of 2002, Microsoft's annual R&D budget will approach $5 billion, with the largest slice dedicated to its Trustworthy Computing initiative. Noting that "failure is not an option," Raikes made it clear that security will be an ongoing investment. "You shouldn't think of trustworthy computing as an end destination," Raikes said. "It's actually a journey."
Microsoft is also investing R&D into delivering more functionality and utility for less cost than competitors like Sun, Oracle, and IBM. According to Raikes, "Microsoft has grown substantially in terms of its ability to meet the needs and surpass what our competitors can do in terms of supporting enterprises, and in addition, we do it at a value proposition that allows that CIO to be able to do more with less."
If Microsoft expects to make good on its promise to double the productivity of end users by the end of this decade, my guess is that it will have to double it's R&D budget as well.
Drawing attention to Microsoft's potential cost advantage over bigger iron is both an honest pitch and a good challenge to IT managers. If and when Microsoft's R&D efforts close the utility gap, IT managers should have no trouble assessing whether Raikes'claims hold up. It's a lot easier to compare dollars and cents than it is to compare rhetoric and trash talk.
Tech Update: What's your role in the grand scheme of things at Microsoft?
Raikes: I have three main responsibilities: First, I am responsible for the Information Work business. This includes our Office family (Office, SharePoint, Project, Visio as well our two new products - X-docs and OneNote). I also have a role with Microsoft Business Solutions, which is run by Doug Burgum. Finally, I am a member of the Senior Leadership Team with Bill Gates, Steve Ballmer, Craig Mundie, Jim Allchin and David Vaskevitch. This team is responsible for Microsoft's core direction. As part of this team I take on broader company roles such as overseeing licensing, the incubation and launch of the Tablet PC, and our marketing efforts to small and medium businesses.
Tech Update:If you woke up tomorrow and you weren't Jeff Raikes, Microsoft group vice president of productivity and business services, but rather the CIO at one of the companies that follows ZDNet, and you were asked to communicate your strategic plan to your CEO, what would be your top priorities?
Raikes: As a CIO speaking with the CEO, one of the most important things I'd want to do is to help frame for the CEO how to think about the investment in information technology and how that fits in with the overall business initiatives. For example, the CEO should be thinking about the overall information utility within the organization; Elements of the information utility include up-to-date computing tools, personal computers, laptops, desktops, broadband networking to connect our sites etc. Those are things to which the CEO needs to make a commitment because they provide the foundation for the other IT investments that we will make. The CEO needs to think first about having the right information utility in place and the investment that will be required to keep that utility robust, reliable, and up-to-date. That includes a commitment to security.
Tech Update: Once the foundation is in place, what would be your next priority?
Raikes: I would explain to the CEO the relationship of our IT investments to key business initiatives. This will depend a lot on the type of company. Let's say I'm a services organization like a McKinsey or a bank, and I'm making the investments in software to support the business processes that further the key business initiatives of the organization. In a services-based company, that will be different than in a manufacturing-based company. So, the second part of the framework is to think about what are the core business initiatives, and what are the IT investments that we're going to making in order to support those initiatives. A very important part of that dialogue is the way in which the company positions itself. If you're a company that focuses on operational excellence, your business unit IT investment should be oriented towards furthering that fundamental position. Or, if you're an organization, like State Farm, which prides itself on customer service to its policy holders, you want to think about how your IT investment can help your agents better connect with those policy holders.
So, first you begin with the health of the information utility and the ongoing investment to maintain that health. Second, you look at the core business initiatives of the organization to make sure your investments tie to the return that people would expect from those business processes that you're supporting.
Tech Update: In other words, an alignment.
Raikes: That's correct.
Tech Update:Of all the alternatives that people have and the companies they can turn to as a strategic partner in providing technologies for the alignment of IT with business initiatives, why Microsoft? Also, what is it about Microsoft that makes its technologies the ones to invest in for that healthy, secure foundation?
Raikes: As the CIO, the way I'd be looking at Microsoft as an optimal partner is a combination of dimensions. First, is Microsoft's customer focus -- not only in supporting my IT organization, but also in Microsoft's roots in understanding the user side of computing. A lot of the value of today's IT investments will be in the way we can more effectively connect the users to the business systems of the organization. So, the focus of Microsoft and its growth is in being able to support the enterprise as well as our historical roots in being able to understand the user and invest in user computing; that is the foundation.
A second thing that is very compelling to a CIO making that determination is the significant investment that Microsoft makes in research and development. The proposition that Microsoft has historically brought to customers is the ability to do more with less. That's particularly important in the current economic environment. Microsoft has continued to apply its R&D investment in conjunction with the scale economics of the PC industry to a broader set of the IT infrastructure. That has provided a very strong value proposition.
The third dimension is related to the strong R&D commitment over a long period of time. As a CIO, I don't think of myself as licensing a piece of software today. I think of myself as investing in a partnership with a strategic technology provider to help support my organization well into the future. I need to know that I'm investing in a company that has an ongoing commitment to advance the capabilities [of its technologies]. If I make a decision to buy into office tools when I don't know if that company is going to continue to invest in the future, that's a very dangerous decision-- one that could come back to haunt me and the CEO. We may not be competitive in the future because we lack certain capabilities that we should be providing to our employee base or that facilitate the way in which we interact with our suppliers and our partners. I don't want to take risks like that. I want to invest in a company that is serious about ongoing investment in R&D, a company that shows the benefits of innovation, such as the ability to use tablet computing in ways that will enhance my organization.
For example OneNote helps the people within our organization have one place to access all of their notes and helps them to repurpose those notes more rapidly into action. Another example: XDocs will use XML as a way to facilitate paperless workflow. That's the kind of innovation that will also help my organization. I want to bet on a company that I know is committed to innovation.
So, those are probably the three most important dimensions that I would think of in recommending to our CEO that we consider Microsoft as a strategic supplier and partner.
Tech Update:You said that you have this really fundamental understanding of end-user computing and that this understanding is an important asset that you bring to the table. But what about on the backoffice side? Why was that not included in your justification?
Raikes: Our roots obviously started in the 80s with end-user computing. But, beginning in the 1990s, Microsoft made a huge commitment to backoffice computing. We began the investment in Windows NT in the 1988-89 timeframe and you'll notice that, over a period of years, Microsoft continued to invest, invest, invest. The company grew its consulting services and its advanced product support and premier product support services. The company invested in business relationships with enterprises through licensing programs. The company invested in a strong field organization that provided partner account management. In other words, ours was an ongoing commitment. It wasn't only the fact that Microsoft was able to produce software technology like Windows NT, Windows 2000, Windows XP, SQL Server, and Exchange Server. It was also the ongoing commitment to the support and the services that are necessary, not only from Microsoft, but from Microsoft's partners.
This ongoing commitment makes me confident that Microsoft not only thinks about end user computing, but also thinks about the importance of the enterprise IT infrastructure. Then, there are the sorts of projects that involve Exchange, serving e-mail to hundreds or thousands of users within a single organization, or SQL Server being able to scale up to the biggest database tasks. That shows an ongoing commitment to not only the technology, but to working with IT experts and personnel to make sure that people can get the most out of what we have to offer
Tech Update:When I listen to some of the recent announcements from Microsoft, particularly in the area of licensing and five-year product lifecycles, it sounds like a product lifecycle that's geared closer towards a PC device. What about on the backend? You might consider offering a longer lifecycle on the server side, because that infrastructure is less likely to be swapped in and out, or replaced, on such a frequent basis. I'm thinking about f enterprise operating systems like OpenVMS or IBM Mainframes, where IT departments left them in for decades at a time. Are you thinking about that at all?
Raikes: Absolutely. If you study what we're doing and compare it to what other companies like IBM do, we provide the commitment to that support not only for five years, but we'll work with our enterprise customers that want to extend that for another two years, and then we go ahead and continue that support on a case-by-case basis. Companies like IBM charge a lot of money for that ongoing support, whereas we're making the commitment to the next five to seven years as a fundamental part of our lower-cost product support programs. I think you'll find that in terms of our server infrastructure products and the rest of our product line, we're quite committed to working with customers within our value proposition of very cost effective computing.
Tech Update:When I talk to ZDNet's audience, the buzz is about savings-based IT versus speculative IT. In other words, a lot of IT expenditures in the late 90s were like gold speculation. They were about building new systems that were supposed to create new channels of revenue. But, more recently, the ROI expectation has more to do with tangible savings. For example, I deploy Z in order to save $X in telecommunications costs. What's your sense of Microsoft's value to the savings-based ROI mindset? How do you answer a customer who is looking for ways to save and doesn't want to create new things right now.
Raikes: This is one of the reasons that our business has continued to be pretty healthy. We tend to provide more software capability at a lower price than many of our competitors. The companies that were at the heart of that speculative computing phase included the companies that were well known for their focus on the dot com boom. These companies, like Sun Microsystems and Oracle, have good products but at a higher price point. They were able to convince customers that it was worth paying a premium. Now, Microsoft has grown substantially in its ability to meet the needs --and surpass what our competitors can do-- of enterprises, and we do it at a value proposition that allows that CIO to be able to do more with less. Frankly, we welcome the opportunity of more return-based computing because we have a return advantage. That's a significant part of the reason why our server business has been quite healthy, whereas the business of some of our competitors has been tapering off or shrinking.
Tech Update: What tools do you provide CIOs to help them to recognize the cost differential between a solution they have in place and a Microsoft-based solution that might replace it? How easy do you make it easy for that "return advantage" you speak of?
Raikes: That has to be done on a case-by-case basis. Any business decision like that is specific to the requirements or the context of the given customer. But we do provide to our own people a set of tools that can help them go in an evaluate the return on a deployment of an upgraded Exchange system or an upgraded PC environment or the use of SQL Server as compared to other alternatives. So, one of the priorities of our field organization is to have those kinds of tools that can help them in that dialogue with the customer.
Tech Update:So, ZDNet's readers can reach out to Microsoft and say "come in and show me how, with your products, I can save money?"
Raikes: That's exactly right. For example, one of the key areas is server consolidation. We can sit down with customers and help them identify where they'll get a return on how they manage their server environment.
