Executive Briefing, Enhanced Vendor Programs Foster Better Collaboration Between Microsoft and Top Suppliers

REDMOND, Wash., Jan. 8, 2003 — Senior Microsoft executives are meeting today with the company’s Premier suppliers to brief them on many of Microsoft’s key initiatives and to hear from the vendors how they may be able to help the company achieve its goals.

The first annual Microsoft Vendor Program (MSVP) Executive Briefing is designed to strengthen Microsoft’s strategic relationships with the companies that supply the goods and services it depends on for its continued success. The event is part of Microsoft’s enhanced vendor program. Announced last March and rolled out in July, the program standardized the way the company does business with its vendors, offered vendors opportunities to engage with new Microsoft clients through vendor expos, introduced software discounts and an annual awards program for vendors, and enhanced Microsoft’s relationship with businesses owned by women and minorities.

Companies involved in the new program are applauding Microsoft’s efforts to develop stronger, more collaborative relationships with its vendors.

We work with Microsoft on a global scale, and we believe that the Microsoft Vendor Program clearly demonstrates the company’s commitment to develop true partnerships with its
outsourced service providers,”
says Thomas Wilkinson, global account manager for the Microsoft account at Jones Lang LaSalle, a Premier Microsoft vendor and a leading provider of real-estate and investment-management services worldwide.

MSVP offers the opportunity for us, as

vendors, to provide feedback about obstacles we may be encountering in service delivery, and to know that Microsoft will listen to

our concerns and
help us find mutually acceptable solutions,”
Wilkinson says.

The program also encourages us

to bring new ideas to the table, offering us the opportunity to expand our business relationship with Microsoft and to build an even stronger partnership.
It’s definitely a win-win program.”

To learn more about today’s MSVP Executive Briefing and the first six months of the enhanced Microsoft Vendor Program, PressPass spoke to Tim McBride , director of vendor programs at Microsoft.

PressPass: What is the purpose of today’s MSVP Executive Briefing?

McBride : We’re really excited about this event because it’s for our Premier vendors, the companies that we have determined are most important to our future. This briefing is really an opportunity for them to hear from some of our most senior executives about our key strategies, where we plan to go as a company, and the role they may play in helping us achieve our vision.

We have learned that when we explain to vendors where we want to go, they’re very good at telling us how they may participate at a greater level than they have in the past, and what things they might do differently that could help us get there. That kind of interaction and collaboration is part of what we’re trying to develop with MSVP. We want to work more closely with our top vendors to identify future opportunities that are mutually beneficial.

PressPass: How does MSVP, including events like the one today, demonstrate the importance of Microsoft’s relationships with its vendors?

McBride : Nurturing these vendor relationships is a strategic move for Microsoft. It’s a step that we have not taken before, and it’s important. We want to make sure we have tight alignment with our key suppliers.

For what we do and the amount of revenue we bring in, Microsoft has remained a relatively lean company. Historically, we’ve relied on our suppliers to help us – from supplying food in our cafeterias to testing our products. So vendor relationships have always been critical to the company. As the company matures, we’re formalizing a program that allows us to identify these firms in a very systematic way and to address them in a much more consistent manner.

This is just the first step in what is going to be a deeper, long-term effort by Microsoft to work more closely with these top firms and to integrate them more seamlessly into the company. These are companies that we spend billions of dollars with every year. It’s important that we formalize our relationships, and understand what more we can do to mutually benefit from those relationships.

PressPass: What will vendors learn at today’s event? What’s on the agenda?

McBride : We have a great lineup of Microsoft executives. John Connors, chief financial officer and senior vice president of Finance and Administration, will provide an overview of where Microsoft is headed overall and a view to our financials. People like Brian Valentine, senior vice president of the Windows Division, and Robbie Bach, senior vice president of the Home and Entertainment Division and chief Xbox officer, will give vendors an inside look at our core businesses, plus some of the newer businesses we’re involved in. We’ve also scheduled a presentation by Richard Purcell, corporate privacy officer, who will speak about the importance of privacy and how vendors can play a role in that.

PressPass: MSVP classifies all vendors as “Premier” or “Preferred.” What’s the difference, and how does Microsoft determine and apply those designations?

McBride : Premier vendors are the ones we go to first for goods and services, because we have already determined that they can meet our requirements, accommodate our needs, and provide the best terms and services available. Preferred vendors are the firms we go to when Premier vendors are unavailable or unsuitable for a given procurement.

There is no absolute checklist for qualifying as a Premier vendor. Microsoft makes an evaluation that considers several factors, including the volume of business we do with the vendor, the strategic nature of our relationship with that company, and the quality of the work the vendor does for us. We work closely with Microsoft business units to identify the vendors that they deem most important in helping them keep their businesses running. Those are the vendors we’ve been focusing on during these first months of the enhanced program. If a company is a key supplier for us, then they may become a Premier vendor in that category.

We’re still in our transition year, so our list of Premier and Preferred vendors isn’t final. We’re still reviewing vendor records and negotiating with various vendors to bring them into MSVP.

PressPass: How have vendors responded to the changes that Microsoft implemented in 2002 as part of its enhanced vendor program?

McBride : Vendors in the program are enthusiastic. They believe this is a significant step forward. It’s a way for many companies to get a lot more exposure to Microsoft and a much better understanding of how to work with us.

We haven’t always been an easy company to work for in the past because we have so many different business units with such different requirements. For most of its history, Microsoft had a highly distributed procurement model, in which employees with authority to make regular purchases could receive solicitations from several different vendors each month and have to spend time meeting and negotiating with each of them to understand the relative value of their products and services. Meanwhile, each vendor had to make a separate solicitation to each potential Microsoft customer. The result was a lot of time and money being spent unnecessarily on both sides.

Companies that have worked with Microsoft for a number of years say that they see the benefits of this new approach. Overall, the program has been very well-received by the companies that have been selected to participate. One goal of MSVP is to identify our top vendors, and to give them access to information that will enable them to better support and supply Microsoft with their goods and services. Standardizing and streamlining the way Microsoft does business with vendors benefits everyone involved.

PressPass: What else is Microsoft doing to make its relationships with vendors more efficient and cost-effective?

McBride : MSVP is part of a broader restructuring of Microsoft procurement. We are driving several cost-saving initiatives across the company. There are 10 fairly large ones that will create significant savings and affect our revenue and net earnings over the course of the next 12 months. Much of that is being funneled through the program, so that our spending with those vendors is being managed within the MSVP terms and conditions. MSVP is functioning as a company-wide framework to enable greater savings.

For example, one of these cost-saving initiatives is around printing. After a comprehensive procurement and sourcing review, including an RFP [request for proposal], we will select our Premier and Preferred print vendors. It’s the framework of the program itself and our ability to regulate print buys across the company, and to limit them to the program vendors, that will enable us to achieve maximum cost savings.

PressPass: Is Microsoft planning other vendor events in the future?

McBride : Absolutely. Today’s executive briefing is the first of our annual events for Premier vendors, but we’ll also be holding annual events for all of our other MSVP vendors. Like this one, those events will be a time for vendors to come together, hear from Microsoft, and share with us their concerns and insights on a variety of topics. We also have a password-protected extranet exclusively for program vendors, which allows them to log on and get program information and updates about Microsoft strategies and initiatives.

Microsoft has invested a lot of resources in improving the way it does business with vendors. The corporate procurement group has more than doubled in size over the past year. Obviously, we think there are great cost savings to be achieved by being smarter about procurement, but this is also a commitment to the vendor community to get smarter about what they’re doing for us. When you add in things like our vendor business development work and what we’re doing with supplier diversity, we’ve significantly enhanced the organization and the programs we’ve put in place to support vendors.

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