Microsoft CIO Tony Scott on IT Strategy in 2009

By Brian P. Watson

Microsoft CIO Tony Scott on IT Strategy in 2009

Maybe it's not that bad out there for CIOs.

With budgets under the CFO's microscope, projects in jeopardy and the role of the CIO itself in question, IT leaders are certainly feeling some pain. But fear not, says Microsoft CIO Tony Scott.

His contrarian message: CIOs, burdened for years with tight budgets and forced to improve productivity in their shops and across their companies, may be better suited to handle the recession than their C-suite colleagues.

But for CIOs to truly succeed in 2009, they will need sharp business skills, a laser focus on innovation and customer needs, and a comprehensive strategic mind-set.

Scott himself may be better suited for the CIO role than many of his peers, given his experience as an IT and business leader with Disney, General Motors and Bristol-Myers Squibb. He met with CIO Insight Editor in Chief Brian P. Watson during a recent trip to New York. What follows is an edited, condensed version of their conversation.

CIO Insight: A lot of CIOs didn't really seem nervous when we started asking them about the downturn.

Tony Scott: They're saying, "So? What's new about that?"

Why is that?

Scott: Many CIOs are probably better positioned than most of their colleagues in business to understand how to manage in this environment. Most CIOs have been dealing with flat or declining budgets for at least seven or eight years, and have learned how to get more productivity, and to expand the capability and functionality of what they have with the same or fewer dollars.

That's a discipline that takes awhile to develop. It's a way of thinking about how you approach a problem. Most CIOs have had at least some experience with this, given the trends in the industry.

The downturn extends the need for even more of that kind of thinking. Most CIOs will find the same kinds of opportunities I find at Microsoft.

They may have had shadow IT organizations that now, in the face of a tougher economic climate, say, "Hmm--should I really be doing this stuff, or can our IT guys do a better job of this?" I think we can, in most cases.

I think we also have a unique opportunity: We have a chance to rebuild some infrastructure at a much lower cost than we would have a few years ago. In IT, you see waves of investment. The good news about waves of investment is the same as the bad news: Eventually, the investment needs to be replaced.

Many companies are at a point where a wave of investment in the 2001 to 2003 time frame is now reaching the end of life, and the scale, simplicity and even the cost are a fraction of what it cost when it was first put in. That's a huge opportunity where we can take cost out and deliver better functionality.

CIOs say the downturn presents a good opportunity to re-evaluate their strategy. Do you feel the same way?

Scott: Historically we've done a good job of that. There weren't a lot of sharp left or right turns in our strategy. What we have seen in this climate is more creative thinking about how things could be done, and changes to some of our underlying business processes that were happening anyway but now get accelerated in the face of a challenging environment. Initiatives to take cost out suddenly became a lot more interesting. Or maybe you had a little less enthusiasm around it, whereas this environment shows people that we need to get moving.

All organizations of any scale realize that this is a time to take market share. No matter what business you're in, the strong survive--those who can do a good job, be there for customers and provide the kind of support they're expecting. If customers know you're there for the long haul, there's a different type of conversation that takes place.

Inside the company, the same thing holds true. That's why any of the shadow IT stuff that may have been attractive before isn't so attractive anymore. People will turn to the organization they expect will be there for the long haul, delivering the benefits that they expect. For most CIOs, that's a big opportunity.

Executing IT Strategy - MSFT CIO Tony Scott

What key things do CIOs need to keep in mind in executing their strategy through the recession?

Scott: Collaboration skills are vitally important. Most enterprises are enormously complex these days. It's not just the employees, the organization, the complexity of the business process or the collaboration we need to have with business partners--it's all of those things. In most companies, there's no job--especially the CIO job--that can be done well if you're not a collaborative individual and don't have a collaborative organization. From a style perspective, that's an unbelievably necessary skill, and it will become even more important as time goes on.

The second thing is strategy. I compare that to when you first learn to drive a car. If you only look a few feet in front of the car, you wobble all over the road and steer around every little bump in the road. If you look down the road a bit, the car goes straighter, it's a more enjoyable ride and you become a better driver.

Strategy in an IT organization serves that same sort of purpose. Our businesses are looking for insight from a CIO who's looking down the road.

So resist getting stuck in the short term?

Scott: An example of this: There's a strong temptation to cut spending on infrastructure and to delay things another year. Then it becomes easy to delay it another year. Pretty soon, you have a crumbling infrastructure. It may be your successor who has to deal with that, but it's certainly not healthy for the company. Having a strategy that can survive strong times as well as weaker times is vitally important.

You report to Microsoft COO Kevin Turner, the former CIO at Wal-Mart. What advantages does that bring to your job?

Scott: The CIO at Microsoft works for all the employees at Microsoft. Everybody believes they have something to say or do about IT.

But yes, it's been a unique experience with Kevin. He brings a wealth of experience and a framework of thinking about IT that maybe a CFO or some other executive might not have. But he also knows that IT is a rapidly changing business, a very dynamic business. Kevin was CIO at Wal-Mart a long time ago; there's been yet another generation of technology and challenges. He's very careful to take the time to understand, listen and share his perspective.

We have a lot of opportunities to leverage our own technology in new and exciting ways and demonstrate for customers what can be done. That's one of the things I really like about this job. It's an opportunity to work with our customer groups in a very influential way. There's the mainline role you would expect the CIO to have. There's the customer interaction. I spend a fair amount of time with our large institutional customers. That trio of activities is a fun place to be for a CIO.

There's a bit of a CTO role involved in your job. Does it distract from your CIO duties?

Scott: Any manager of a large organization has to figure out an organizational scheme that works for him or her and the company. Our organization was already very well-established; I did not have to do any large reorganization.

Microsoft's IT organization has long had a role within the company of being what we call the "first and best" customers of Microsoft products. So it was a well-established routine for taking in various waves of technologies that get introduced, rolling them out in scale and so on. We build most of our applications using Microsoft products, and we have a well-established application development organization. And our IT operations group has had a long history of supporting Microsoft IT at scale. It's a pretty mature organization in that sense. It helps me do what I need to do.

In the past, I was CTO for information systems at General Motors. In that role I was always trying to spark a new generation of technologies. At Microsoft I don't have to play that role, which is nice.

Bill Gates' Legacy - MSFT CIO Tony Scott

Many CIOs move among companies in the same sector or in ones with similar business models. How has that experience helped you plot your strategy through the recession?

Scott: People don't often see a thread between pharma, automotive, etc. The common thread is that each of those industries went through its own wave of huge reform of the business model and digitization of the business processes that underlie the core of the business.

It's ironic that the tech industry is one of the later ones to digitize, as was media and entertainment. Just before I came to Microsoft, everything was going from analog to digital in the media and entertainment business. Whether it was in television or film--even in the theme park business--many of the experiences were relying more and more on digital technologies, from the way you plan a vacation to some of the experiences in the park.

Oddly, we're going through that same wave at Microsoft. There may be a day where everything is a digital download; you may not buy a product in stores anymore. But the way we make products, test them, review them and share them with partners--that business process is digitizing at a very rapid rate.

For me, it feels like a continuum on the journey: I can take all of the lessons I learned in all those other industries and begin to apply them in Microsoft's terms.

When you're trying to communicate your strategy, how do you find it when there's a tech-heavy executive team?

Scott: Overall, it's a big advantage. It's not something I'd ever complain about--considering the alternative, it's a strong benefit.

An experienced CIO adds to the discussion more around enterprise strategy for IT. Where you may have people who are very strong from a technology perspective, where the pieces link together into coherent enterprise strategy isn't something that's covered in most software engineering programs or the classic backgrounds that some of our folks might come from. We have a balance of strong tech focus, but I can bring an understanding of how to manage a large IT organization supporting all of Microsoft. We're in a bunch of different businesses, but they have a lot of things in common. An enterprise strategy for IT has to knit all those things together.

Was there any sort of cultural shift when Bill Gates left his day-to-day duties in August 2008?

Scott: There was a tremendous sense of gratitude and recognition of the role he played in the company, and that was amazing to watch. There's a lot of folklore built up around the founder, and you sometimes don't know whether it's true or untrue, especially coming from outside the company.

One of the most interesting questions Bill was asked was how big he thought the company would ever be, from when it was very small to when it was very big. He said that at any given point, he thought the biggest we would ever become is two times what we were at that time, and that was in his wildest imagination. Of course, Microsoft did "two times" any number of times. It showed you a lot about the way Bill thought about the company: When he was contemplating the next organization, set of products, etc., he thought ahead, asking, "What if we doubled? How would we manage things?"

As a management paradigm, that seemed to be an interesting model. When you run a large organization, you have to ask yourself not only, "What would we do if we had to double?" but "What would we do if we were half the size we are now?"

If you work within those boundaries and frame your thinking that way, you can do some interesting things. And Bill did.

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This article was originally published on 04-13-2009