Microsoft Works to Strengthen Diversity of its Supplier Pipeline

REDMOND, Wash., Oct. 27, 2009 — What connects President Lyndon Johnson’s 40-year-old Great Society program with Microsoft Surface multi-touch computer technology, a next-generation technology that turns an ordinary tabletop into an interactive computing platform?

Three words: supplier diversity programs.

Fernando Hernandez, Director of Supplier Diversity at Microsoft.

Recently, Microsoft’s supplier diversity team was instrumental in recruiting a minority-owned business to become an authorized reseller of its pathbreaking Surface technology, making the New York-based company Microsoft’s first minority partner in the United States in the cutting-edge surface computing realm.

Like many major corporations, Microsoft has been active in supplier diversity for more than 20 years. It has a robust outreach program dedicated to identifying business opportunities with certified Minority and Women Business Enterprises (MWBE) and veteran-owned businesses, Small Disadvantaged Businesses, and HUBZone business concerns. The company’s supplier diversity program seeks to give back to diverse communities by providing woman- and minority-owned business enterprises with an opportunity to compete.

Fernando Hernandez, director of Supplier Diversity at Microsoft, says that Microsoft believes strongly in diversity as a standard practice that strengthens its business model. Though supplier diversity has been a business reality at Microsoft for a while, the company decided to aggressively pursue diversity initiatives about five years ago. “Today, we’ve grown this initiative to the point where we have spent more than $1 billion annually, last year and this year, working with more than 1,200 diverse vendors and partners,” Hernandez says. “Exceeding the $1 billion mark is a big milestone for us, as it catapults us into an elite league of top 15 corporations worldwide that rack up such huge amounts in diversity spending.”

Success Stories: Supplier Diversity as a Driver for Business Growth

Besides consistently increasing its diversity spending, recent success stories for Microsoft’s supplier diversity program include driving a $3 million contribution to the Business Consortium Fund of the National Minority Supplier Development Council, and managing a treasury initiative to increase deposits in 20 local, minority-owned banks.

Earlier this year, the Supplier Diversity team was instrumental in forging a groundbreaking alliance with an MWBE firm that specializes in building custom applications for Health and Human Services case management. The business relationship is founded on using Microsoft Dynamics software to create highly replicable case-coordination solutions for health organizations in and outside New York. This represents a new market opportunity for both firms and an opportunity for organizations looking to upgrade to more modern, efficient systems.

According to Michael Jones-Bey, executive director of Empire State Development’s (ESD) Division of Minority and Women-Owned Business Development, Microsoft applies the same innovative corporate culture that has vaulted it to the forefront of global technology solutions to its approach to supplier diversity.

“Microsoft has consistently found creative ways to build capacity and expand market opportunities for MWBEs,” says Jones-Bey. “We are excited about the synergy we have found between qualified MWBE companies and Microsoft and believe that this kind of relationship will potentially serve as a national model for supplier diversity.”

The alliance is the latest in a spectrum of fruitful relationships between Microsoft’s supplier diversity team and New York-based MWBE firms. Over the past few years, this relationship has created new opportunities for both the MWBE community and the State of New York to modernize existing technologies. Microsoft currently serves on the New York & New Jersey Minority Supplier Development Council, which promotes business opportunities between minority firms and other private-sector businesses.

Everybody Wins: Relationships of Mutual Benefit

When larger corporations partner with smaller MWBE companies, they are frequently able to harness the potential of the MWBE partners and tap their potential to run more innovative and streamlined operations. In many cases, the relationship not only fuels business growth, but also opens up new possibilities for innovation. At the same time, successful relationships with MWBE partners often lead to new business opportunities for the partner company, beyond its existing relationship with Microsoft.

For instance, Microsoft’s recent success with its New Jersey-based surface technology partner Logistic Solutions set new standards within the health information exchange (HIE) space, streamlining the mobilization of healthcare information electronically across organizations, regions or hospital systems. By using surface computing technology to create applications that offer greater access and transparency to government data, this relationship is likely to catalyze further breakthroughs in areas ranging from health record management to geospatial renderings of homeland security initiatives.

Ragu Tundra, Logistic Solutions (left); Al Limaye, President and CEO, Logistic Solutions; and Michael Jones-Bey, Executive Director, Minority and Women Business Development Division, Empire State Development.

“Success breeds success; our relationship with Microsoft can testify to that,” says Al Limaye, CEO of Logistic Solutions. “Our milestone relationship with Microsoft in the surface technology space was noticed by other leading corporations and even in this dwindling economy, we could cast a wider net and establish new relationships with marquee clients. Getting the stamp of approval from Microsoft has been crucial to our growth.”

In several cases, MWBE firms have the advantage of skipping lengthy bidding processes and partnering with Microsoft, owing to new laws that support minority-owned businesses. According to Jonathan McKinney, president at Facts and Measures, an MWBE that has partnered with Microsoft to help customers manage data, his company’s status as an MWBE not only spared it a month-long bidding process, but also helped avoid competition with larger corporations in a bidding war. At the same time, the business relationship with Microsoft has opened doors in terms of acquiring new clients in the future.

“Our relationship with Microsoft has been crucial to driving new business,” says McKinney. “When I go into pitch meetings and use Microsoft as an example while demonstrating workflows or cost-savings options, it invariably scores points in our favor. Having Microsoft validate our work has consistently helped us win jobs.”

The Supplier Diversity team also maintains a keen focus on empowering MWBE firms with the right tools to expand their skills. Aziz Ahmad, CEO of UTC Associates, a minority-owned technology consulting and system integrations company that has partnered with Microsoft to provide services and solutions for customers, says that Microsoft invests heavily in its MWBE partners to ensure that they have the right tools to drive success for their customers. Earlier this year, Hernandez’ group sent executives from 10 MWBEs, including UTC Associates, to the Tuck School of Business at Dartmouth for executive training.

“Microsoft’s continual investments in its partners is not only a morale booster for all the beneficiaries but also fosters a healthy environment for shared success,” says Ahmad. “By supporting its MWBE business partners and helping them build their skill sets, Microsoft is championing a ‘growing together’ model that helps companies like ours move forward.”

Marking a Shift: From Doing Good to Doing Well

Historically, the first supplier diversity program can be traced back to President Johnson’s administration when supplier diversity programs were championed as a key to social reform. Today, in boardrooms across the world, supplier diversity programs are considered a business imperative.

Although the concept of supplier diversity has been around for several years, the drivers for developing better supplier diversity programs have rapidly evolved in boardrooms across the globe. Previously, supplier diversity initiatives were considered a necessary element of corporate citizenship and social responsibility. While that’s still relevant, companies today increasingly believe that a more diverse supply base actually creates a competitive advantage and a more robust supply chain.

“The mantra has shifted from ‘it is the right thing to do’ to ‘it makes good business sense,’” says Hernandez. “From our end, we recognize that Microsoft is a truly global company and actively seek to have our vendor pool reflect the diversity of our customers. But in many cases, it’s also a key request from the client’s side. For nearly 60 enterprise customers, we are contractually required to provide a diverse supplier component. In all instances, this leads to better productivity and stronger supply chains.”

Looking Ahead

The expected growth of minority populations in the United States over the next few decades is a widely documented fact. According to the U.S. Census Bureau, minorities are expected to grow from 33 percent of the U.S. population in 2010 to nearly 50 percent of the population by 2050. What is perhaps less well-known is that the number of minority- and women-owned businesses is growing at a faster rate than the national average.

To keep pace with the significant growth rate, Microsoft’s supplier diversity team is staying focused on increasing the company’s annual diverse supplier expenditure as well as defining more strategic ways to recruit new MWBE partners. In the immediate pipeline, Hernandez says Microsoft plans to be a founding sponsor for an organization that will identify and certify people with disabilities who own businesses across the nation, streamlining the process to proactively engage potential partners.

“Through innovative sourcing strategies, we intend to find creative ways to plant new seeds and involve new minority-owned enterprises in our business ventures, while also expanding existing relationships,” says Hernandez. “The recent milestone in New York has opened new doors and we are looking to replicate this success through pilots in key hospitals. Our goal is to drive the supplier diversity program by aligning our strategies to that of our MWBE partners, enabling strong revenue channels for our customers, while effectively absorbing stimulus dollars that are available to us. We want to ensure that it’s a win-win situation for everyone.”

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