Microsoft Finance and the Journey to Digital Transformation

As part of a multi-year transformation effort, Microsoft is streamlining and expanding the finance function’s role to have greater impact on the company, its customers and its partners.


With the continuing evolution of the role of finance function’s contributions, many financial leaders are now tasked with balancing the traditional job requirements of accurate and timely financial reporting with new necessities, including setting the company’s strategic technology direction, discovering insights in a deluge of data, and driving corporate performance through the use of technology. This evolution from balance sheet manager to strategic leader is underscored in the recent Gartner Financial Executives International (FEI) CFO Technology Study, which found that 39 percent of IT organizations currently report to the CFO. Clearly, as enterprises transform to embrace digital technology, it is often the CFO and finance leaders who must take a proactive approach to partnering with the business to drive this change.

An Evolutionary Example

Microsoft Finance experienced this transformation to digital as it evolved over the company’s last 40 years. The first two decades of Microsoft Finance were defined by a centralized system focusing primarily on controllership and the fundamentals, an appropriate approach for a fast-growing and relatively small company. As the company’s business became more complex from a product and geographic standpoint, the finance function was decentralized, moving finance roles into growing business groups and appointing new divisional CFOs.
Advancing into the second half of the 2000s, the complexity of the business increased exponentially. In addition to big product families such as Windows and Microsoft Office, there were new growth areas in products like Xbox, Bing, and Windows devices. Each product presented different business models and challenges for Microsoft Finance, which were complicated further by geographic expansion into new, emerging markets.

To address these new business realities, Microsoft Finance embarked on a journey. The finance department performed a self-assessment that exposed several areas for potential internal improvements. Like so many enterprises that experience rapid growth, Microsoft faced an abundance of data in multiple, disparate environments, and found that 75 percent of its analysts’ time was spent simply collecting and compiling data. Reporting on this data was also complicated by inconsistent definitions, hierarchies, metrics and key performance indicators (KPIs), combined with hundreds of decentralized finance tools and systems. The result was that the teams often performed financial reporting in offline, siloed environments, and unnecessarily invested in a variety of redundant financial systems and applications.

Transformational Steps

As a company that prides itself on its long history of developing technology to help people maximize productivity and “realize their full potential,” a change was clearly required. Microsoft Finance decided to address these challenges head-on by embarking on a digital transformation.

“At Microsoft, Finance is very focused on driving impact so we can maximize shareholder value,” says Marc Reguera, Microsoft Director of Finance. “There are two big steps in that process. The first step is examining our data, systems and standards to make sure we have the right discipline at the core to efficiently convert data into insights and gain a unified view of our business. The second step is using that intelligence to influence decision-makers and empower our employees with the flexible technology tools and applications they need to drive impact.”
When it came to establishing discipline at the core and flexibility at the edge, the mission focused on discovering business insights and driving impact. This process meant outsourcing and centralizing transactional activities to address the following key objectives:

Reducing Complexity

To start, the team focused on improving operational efficiency within the Microsoft Finance organization as part of the “One Finance” initiative. The company began to outsource repetitive, non-strategic finance activities, including some accounting, accounts payable and procurement functions, to trusted partners to maximize the productivity of its own employees. The use of outsourcing focused internal teams on the strategic tasks central to the future success of the business. Microsoft Finance also implemented efficient compliance processes that improved the control environment to ease financial reporting.

Process Standardization & Controls

The next step in this transformation was called “Core Finance,” and involved placing the Microsoft Information Technology team in control of the data and standards used across the company. IT first focused on infrastructure, implementing key financial tools on a reliable, cloud-based platform that balanced strong user-level security and agility. Next, IT examined the architecture of the Microsoft Finance systems and worked with internal leaders to establish a reliable data source and consistent taxonomies that formed the basis for a corporate standard for business intelligence. By implementing business rules and establishing data and hierarchy element definitions, Microsoft created a single master data source from which all financial reports could be generated. Then by using Microsoft SQL Server to apply role-based security and business rules to a common data warehouse, Microsoft democratized corporate data and created a one-stop-shop experience for all users. To maintain the quality of the data, Microsoft set up a regular data governance program and established very strict rigor for core company-wide financial metrics.

Empowering Teams

Recognizing that an intuitive user experience would be critical to the adoption of a new financial strategy, Microsoft Finance next focused on promoting a culture of self-service where finance professionals within the company could access a single business insight portal as an access point for standard reports and scorecards. This experience leveraged a custom web-based interface along with familiar Microsoft business intelligence tools, like Excel with Power BI, to enable centralization and standardization. With standard scorecards, reports and analytics at the core, and added flexibility to drill down and apply analytics for self-service, Microsoft Finance created alignment and a culture of shared accountability. This enabled greater business agility and transparency across Microsoft and empowered intelligent decision-making.

Digital Transformation Results

The results of this digital financial transformation were dramatic and felt almost immediately. In terms of sheer numbers, Microsoft Finance was able to reduce redundant financial systems to deliver $30 million in lifetime contract savings to the business. Starting in Fiscal Year 2010, the company has saved $4 million in finance efficiencies annually, and over $14 million in discount capture through improved oversight and financial operational management. Most impactful, the consistent data standards and reporting resulted in a $1 billion dollar cleanup of the balance sheet, and enabled better utilization of Microsoft’s over 650 business process operations professionals to expand their financial services to 110+ countries.
The qualitative impact of the transformation was substantial as well. Before the financial infrastructure update, the company was consistently producing reports and information in silos, and storing critical information on local servers that prevented cross-department sharing. After the cloud transition, the centralized, flexible platform provided controls and access that people in Microsoft Finance, and across the organization, needed to transform data into insights and impact.

The changes in information architecture also changed the day-to-day work of Microsoft Finance. Before the transition, meetings were often spent debating the validity of financial numbers. After establishing consistent classifications and hierarchies and setting up a recurring data quality program with ongoing reviews and oversight, the discussion was streamlined toward establishing a single, centralized version of the truth based on the agreed-upon taxonomies.

Perhaps the most noticeable improvement was that financial reporting became simpler and more standardized across the organization following the transformation. The single portal provided consistent access to reliable data. Standardized scorecards and reports displayed tabular and graphical views of KPIs and metrics with drill-down capabilities, and freed up employees to spend less time on data collection and more time on analysis. As a result, the leaders in Microsoft Finance quickly transitioned to become trusted business partners within the company.

Continuous Innovation

Microsoft’s financial transformation efforts didn’t stop once its initial objectives were met. The company continues to increase focus on using next-generation business intelligence tools to influence business strategy and operations. The pillars of this approach revolve around the values of partnership, prioritization, and people:

  • Partnership encourages effective communications, and a level of engagement where Microsoft Finance teams can go beyond responding to partners’ needs and requests to providing what partners need before they know they need it.
  • Prioritization focuses on simplified and effective business processes, a more efficient cost structure, and risk management. It requires Microsoft to implement process excellence and frameworks that guide consistent decision making.
  • People speaks to the company’s renewed focus on teamwork, management excellence and opportunity. The company aims to welcome not only people of diverse backgrounds but also diverse approaches and ways of thinking, to help the company achieve future success.

Through the focus on these core values, Microsoft plans to continue to grow the role of Finance to have greater impact on the company and its customers and partners. The Microsoft Finance organization of 2015 aims to drive corporate strategy, be effective and efficient without wasted effort, and continue to move beyond simply being trusted advisors to becoming trusted leaders.

Digital Journey Lessons

This evolution of the Microsoft Finance journey on the path to digital transformation didn’t happen overnight. It was the result of recognizing that a better approach was possible, as well as a concerted effort by the entire company to create the infrastructure, architecture, user interface and tools necessary to achieve the company’s goals. Microsoft Finance continues to enjoy the qualitative and quantitative results of this transformation but other outside enterprises can also glean key insights from Microsoft’s internal experience, including:

Ensure you have the right platforms to rapidly convert data into insights. One of the first issues Microsoft addressed internally was creating a centralized hybrid cloud infrastructure that would shift the team’s focus away from just collecting data toward analyzing data to discover deeper insights. This allowed finance professionals from around the world to collaborate from virtually anywhere, at any time — allowing them to recognize and solve business challenges faster and more effectively. By combining these flexible cloud technologies with familiar data visualization tools, any enterprise can empower its financial decision-makers to dive into insights, make faster decisions with secure, instant access to visual data on any device, and collaborate to drive business impact.

Create a single, integrated view into your organization to assess and control risk. The massive amounts of corporate and customer data available to finance executives delivers great opportunity if it can be collected and securely accessed digitally from across the organization. Microsoft transformed its data architecture to make it quick, easy, and secure for finance teams to migrate their data into the cloud to create a single, integrated view into the organization. By creating one standardized source for data and combining it with self-service tools, Microsoft and other enterprises can anticipate issues, and react to them in real-time to control risk.

Drive corporate performance through greater business agility and efficiency. To keep up with the rapid speed of innovation, finance executives at Microsoft recognized they needed tools and user interfaces that make it easy to connect and collaborate. These same Web, mobile, and social technologies are becoming critical components for today’s modern enterprise, providing the tools necessary to stay current on the issues affecting the business. By providing the right individuals in the organization with the right access to critical business information, enterprises can improve productivity and help everyone transform data into insights.

Accelerate a culture of innovation and collaboration. Change is hard for any business, and Microsoft recognized early on it would face some cultural resistance to transitioning from the traditionally accepted finance practices to a new approach. By prioritizing simple, intuitive user experiences and empowering the workforce with secure self-service productivity tools, they gave their employees the freedom to tackle anything from anywhere, while protecting what matters most to their business. This focus on establishing clear and consistent standards, communications and tools can help enterprises set their own digital initiatives into motion and encourage teams to suggest new and innovative solutions that deliver real impact.

Financial reporting and responsibilities are not easy in today’s increasingly complex world. With Gartner predicting that in the next two years, one in five organizations will use cloud for analytics and transactions, finance executives are quickly transforming into technology and operational leaders who can capitalize on today’s technology tools to address business challenges and stay ahead of the competition. By incorporating new digital efficiencies into the organization and standardizing data and reporting across the enterprise, Microsoft Finance addressed many of the financial challenges enterprises face every day. Through transparently sharing some of the challenges they faced and describing the key approaches the company took to address them, Microsoft Finance hopes to offer some insight to finance leaders into techniques for navigating today’s rapidly evolving digital landscape.

“We recognize that we are in the early stages of digital innovation in Microsoft Finance and this process is something we plan to continually evaluate and refine,” adds Reguera. “Finance leaders are often the drivers of corporate performance within today’s modern enterprises and they need the insights necessary to deliver real change. We want to take the results we have achieved internally and use them to inspire finance professionals at our customers and partners with new ideas they can use – now and into the future.”

Laura Kramer works with Enterprise Accounts at Microsoft.

This article first appeared in Financial Executive magazine.