Why Microsoft is your best strategic partner for the future

In March 2000, Avanade was created as a joint venture of Microsoft and Accenture to help companies build the client-server architectures that have powered IT for years. While the Seattle-based company still handles bread-and-butter infrastructure integration, today it is squarely focused on helping clients move to the cloud and engineer their digital transformation initiatives.

In this installment of the IDG CEO Interview Series, Avanade CEO Adam Warby – along with North America President Mick Slattery – spoke with Chief Content Officer John Gallant about the keys to digital transformation and how Avanade and customers are benefitting from Microsoft’s own remarkable transitions – or, why Microsoft is the most important strategic partner for CIOs for the future. Warby discussed the changing role of the CIO and talked about the growing role of line-of-business executives in driving innovation.

[ Related: Tech Titans Talk: The IDG Enterprise Interview Series ]

CIO.com: I want to start off with a little bit of history for readers who may not know Avanade. Tell me why the company was formed. What was the rationale behind the joint venture and what did you set out to do?

Avanade CEO Adam Warby

Adam Warby: It’s fun to look back because it was created right in the heart of the dotcom boom in the year 2000 and at a time when both Microsoft and Anderson Consulting were looking at what their respective opportunities were in the market. The fundamental reason [we were formed] was that Microsoft saw, and was pursuing, the opportunity to be a full-scale enterprise player.

We’re talking back in the age of Windows NT. Then, what partners could help Microsoft get there? Accenture had always done a good job of looking at the technology ecosystem — fairly recently before that they had done a very productive agreement with Siebel that people might remember — and I think they recognized that Microsoft was at the beginning of what was going to be significant growth in the enterprise.

Two enlightened people — Joe Forehand on the Accenture side and John Connors on the Microsoft side — had the idea that we could create something with more permanent value than just an alliance and had the idea of creating the joint venture that Avanade became.

CIO.com: What were you setting out to solve for customers?

Warby: At that time there were two problem sets. One was how do we take this distributed PC environment and scale it up in a secure and reliable way in the enterprise. Interestingly, 15 years on, I think the cloud really delivers that dividend and Microsoft is doing a super job of delivering on that. It’s been a journey. But that was what people were looking for. They could see the flexibility and the cost effectiveness of having this distributed PC environment but how could you do that in an enterprise class way?

Then, referring to the dotcom environment, people were building applications to take advantage of the new online world. We were at a time then where Wi-Fi networks were only just really broadly available and mobility was a twinkling in our eye. The idea that you could write and get access to information in a more usable, intuitive, flexible way was really the beginning of that part of the journey.

Those two things and two fundamental technologies. My last job at Microsoft was launching Windows 2000 and Microsoft.NET which was just the foundation of that ability to do Web-capable and scalable enterprise applications in a distributed way.

CIO.com: How has the company evolved since then? How is the mission and the goal today different than it was back then?

Warby: It’s been a fascinating journey. We were a self-described technology integrator. That was the heart of what we did and that passion for technology still burns bright. At the heart of what we’ve done is create a culture that is blending the best of both of our founding parents: the passion and focus on technology from Microsoft and the focus on the client and delivery and outcomes and business benefits from the Accenture side. As we progressed through that journey we’ve gone from technology to solutions and then from solutions to business value.

That’s where you see us now. In this digital world we’ve just recreated our vision for the third time in our history to be the leading digital innovator. That’s the first part of our vision. There’s a bunch more around how we do that but innovation in the digital world is where we are now. That is a different place to be than being just a technology integrator because technology is not the problem now. The challenge is how you use it to innovate and innovate at our clients. That’s a big shift.

[ Related: How CIOs will refine digital transformation in 2016 ]

CIO.com: Let’s talk about that because that’s one of the phrases that we hear a lot, digital transformation. What does that actually mean when you engage with a customer? How does the engagement start and where do you take it?

Warby: Most customers are talking about transforming something. Is it customer experience? Is it the employee experience? Is it their operations? There has to be a focus around the digital conversation because it is a broad term and it can mean a lot of things to people.

Often, it starts with an innovation conversation. A well-told story on our part was the work we did with Delta Airlines. It’s a particularly interesting case study because it started with an innovation discussion around how we could use Windows 8, at the time, to improve the cabin experience for flight attendants. They liked what they saw when we did the pilot. They said: ‘What else could this do?’ To fast-forward the story, it turned out to be something that really changed the way they worked as flight attendants. Suddenly they’re connected to the back-end system through Wi-Fi. It means you could reduce credit card fraud. You could introduce new ways of doing business. One idea that they were experimenting with was seat upgrades on the plane. There’s a space there in Economy Plus, could I have that seat? Well, yeah, $50.

It’s helped them transform what was a loss-making business into a profit-making business and the client experience is better. There it was about cabin experience so the customer gets a better experience. The buyer was head of care and services, not the IT department so that’s a huge change for us as a business and it’s been a fun journey.

Mick Slattery: Maybe I’ll take a slightly different direction. We’re doing a fair amount of work right now around Office 365. You can address that as a technology problem or you

Avanade North America President Mick Slattery

can address that more holistically and say: Let’s talk about the nature of what work should look like. How can you enrich the employee experience and employee productivity and keep your employees engaged? That’s a big topic of conversation that we’re having as well.

A lot of times it will start with what we call an iDay where we help clients envision the art of the possible. We’ve had a number of great conversations. A couple that come to mind are with some of the life sciences companies that have joined us in our New York Innovation Center. We’ll start with the art of the possible. It’s not just about how do I deploy a particular service, but how do I transform an employee experience? This is the type of conversation we love engaging in with our clients.

CIO.com: What are the major solutions you bring to bear for customers today?

Warby: There are four things that we do for our clients. I start with our core business — historical business if you want to think of it but still extremely important — which is raw technology services. Just make this technology work and perform, reduce cost, increase performance, whether it’s application or infrastructure. That still remains very important and, of course, with the amount of change that’s going on in technology, there’s lots to do there still.

The easiest bridge from there, if you like, is cloud and we have a market unit focused exclusively on cloud. Of course you can look at cloud in two different ways. One is it enables the digital business but it also brings a set of agility, cost benefits and all of that. That’s where the work that we might do with Office 365 would come out.

[Related: 5 cloud computing predictions for 2016 ]

CIO.com: Just to be clear, when you talk about cloud are you reselling Microsoft cloud services or are there additional cloud capabilities you bring to bear?

Warby: We don’t necessarily just see it as Microsoft reselling. Of course we do that but it’s the broader ecosystem of things around that. We work with other providers that will help make the cloud work and we add value to it in different ways. It’s more about the outcome for the cloud project than it is just the technology.

CIO.com: So, in essence, helping somebody to shape an entire cloud strategy, not just the Microsoft piece.

Slattery: We have some service offerings we provide that are more what I call private cloud services. So, how can organizations consume those as well as [make them a] part of an overall portfolio? But, really, it all starts with what’s the right answer for the client.

An example I’m thinking of is our UCCMS service [Unified Communications and Collaboration Managed Services]. Office 365 is where we start but there are some clients who, for a variety of reasons or a particular set of users, have different needs. So we’ll figure out how we blend and take full advantage of the public cloud capabilities, add in some additional private cloud capabilities for specific business services and put that together as an end-to-end solution for a client.

CIO.com: So that’s essentially a managed private cloud.

Slattery: Public and private, so more of a hybrid environment.

Warby: An example is Freeport-McMoRan. We developed a hybrid cloud solution for them that started off as a combination of performance and operation improvement but then got extended to a digital mining solution to help them track and manage their vehicles — these massive mining vehicles lying in the mines. That’s a good example of the two sides of the cloud journey. One is operational improvement and the other is enabling digital business.

CIO.com: That’s two of the four things you do for customers.

Warby: Yes. Digital is the next and we break that down into these different journeys that we talked about, whether it’s the digital customer, digital employee, digital operations and indeed, digital culture as we call it, which is the broad change that you get by a lot of these things coming together. One of the key points is that the buyer of those projects is the business buyer, the head of HR, customer service, operations, sales, marketing.

Maybe another good example in that case is the work that we’ve done with one of Microsoft’s partners called Sitecore, who is a very successful vendor of digital content management and the set of services around that to help you build websites and run websites effectively. We have built out a solution sitting on the cloud, sitting on Microsoft Azure, that we can put into different environments — actually for one international chip manufacturer — charging them by the page view, not as a project. That’s true as-a-service flex-up, flex-down economics.

There’s a very exciting set of work that goes on around those digital journeys. We talked about both sides of this, the employee experience, the customer experience. When those two come together magic happens. Microsoft is in a unique position to help the coming together of those two experiences and the overlap. For every good customer experience there should be a good employee experience. If you can get that to light up then really good things happen.

CIO.com: The fourth area is?

Warby: Business applications. That’s really thinking about the core transformation of those. Those can be digital projects as well in the sense that people try to think through how their core processes work differently. That’s working in a Microsoft context, particularly with the Dynamics Suite. Again, that’s a unique combination Microsoft has with a cloud-based offering for both ERP and CRM. You can rethink the way business gets done.

I can’t name the particular client but we’re working with a global electronics retailer based in Europe that is completely re-envisioning their customer journey. Like many retailers they’re thinking about why we’ve got a store, what is it that draws a customer into that store? How do they have a good experience? We know they checked out prices on the Web and done the comparative site shopping but they still want to touch and feel products. These are large electronic goods. We’ve been working with them on a green field reinvention of this store outward, the so-called Omni-channel experience. Can I do click and collect? Can I order something online and collect it in the store? That’s that model. That is entirely powered by the Microsoft platform, customer experience driven by Dynamics CRM, the logistics and back-end processes driven by the ERP suites and then the marketing bit with Sitecore. It’s very rich when you put that together in how flexible that is. It’s a pretty rich set of tools.

CIO.com: When you look across these four areas, where are you seeing your fastest growth?

Warby: The fast growth is in digital. It’s a smaller base. There is a lot of experimentation in digital and there aren’t as many clients who are going full scale on that at the moment. Our cloud business is growing extremely fast off the back of Office 365 and Azure’s growth. We measure that change and we use the same phrase Accenture does, our rotation towards the new business.

Our goal is to get 30 percent of our business this year to be in that cloud and digital arena and we think that will continue to scale. By 2020 we expect 60 percent of our business to be in that new area.

CIO.com: That makes sense. When you are engaging with customers around these digital transformations, what are the things that customers are struggling with? One of the things it seems to me they are struggling with is how do we make this beyond a one-off kind of thing? We can think of one thing we can do. How you make it a cultural thing seems to be an issue.

Warby: I always start with business case. In any of these things it’s easy in some ways to envision how things could be better, but to then put that into dollars and cents and to understand are you going to increase revenue, what’s the value of customer satisfaction going up, what’s the value of employee satisfaction going up?

There’s a fun example, another airline example actually, where we were working with the IT department on collaboration and whether they should move to Office 365 in the cloud. It was going to cost several million dollars to make the entire change and they were struggling with the business case and the pace at which they could do it. So we started to ask more questions about where is this collaboration happening. Lo and behold, one of the big business problems for an airline is on-time departure of their planes. I think we all recognize that.

There were major incentives and a major budget in the system to improve the way planes could get away on time. Of course, it’s a collaboration problem but it’s more than just a collaboration problem, you have to have other things work. But once we started that conversation, were able to talk to the team that was focused on that issue, the budget opened up because we could actually affect the business goal that they were focused on.

I think everybody struggles with it at some level and for us it means we need new types of skills as well. We have more advisory services now in helping think through business case, change management, all of those things. You’re right; it’s a cultural change too. Now instead of working in my little silo, I am collaborating across 15 different things to get this plane off on time.

Slattery: The other area I would add is experimentation to execution. How do you get from proof of concept to actually running as a digital business or having a particular digital process or work stream? You can create some ideas, you can get up some pilots and some proof of concepts, but when you actually have to integrate it into your core operations, make sure that it’s robust and looked after properly, that raises the scope of the engagement and the challenge.

I think that’s one of the places we do quite well at helping our clients. That’s what we were formed for back 15 years ago. Arguably, Microsoft is cool again.

CIO.com: Adam, you had mentioned in several instances the line of business role in this in addition to – I won’t say vs. IT. How are you seeing this ownership of innovation changing? Are you seeing IT shops taking the bimodal IT strategy that Gartner has discussed?

Warby: Maybe before we go there I’ll just comment on two other problems I see that are really important and I think they play into what’s the role of IT vs. the business and what’s happening, which is speed and skills. Once you’ve got the business case and once you’ve got through the experimentation, it’s let’s hurry up and get the business benefits. If you don’t do it your competition is doing it.

The example I gave of the European retailer, you’ve got to get this in time for the particular season, the end of the year season or whatever it may be, and I’ve got to go roll this out across multiple countries. There are big changes when you start to fundamentally change the way people do business, change the way people work. Then, whose got the skills? Do we have the multidisciplinary skills to take something like this on? I just wanted to mention those two because I see them as key.

Your question of where are we in the shared roles and responsibilities? I think the Gartner model is broadly true, in that there is a somewhat bifurcated role that the core IT needs to drive out the business benefits to pay for the change. Exactly how that lands in a particular industry and a particular structure does vary as far as what I see in with clients. I think on the innovation side it almost exclusively does lie with the business. What we try and do with these iDays is make sure that there is IT and business in the room at the same time so that we’re having a collaborative dialog.

Slattery: I think that’s exactly right. We see great results when we have both at the table and when we can show the art of the possible. They can then set it in the context of — here’s my particular problem. We can iterate on that idea, which is the whole purpose of the iDay, and a focused discussion will come out of that with a list of some great opportunities.

Then we can go back to the business case, the experimentation and how do we drive those into reality. But that combined thinking from the people who execute on the business every day with the people who have to support the operations of it from a technology perspective is critical.

Warby: I think one of the interesting things about that also is the ability to bring cross-industry experiences into the discussion and the willingness of a banking client to listen to a story of Omni-channel retail or a mining company hear the experiences of an airline business or a manufacturing business — to get people’s minds out of their normal way of thinking.  

Retail is one of our focus industries and we have a very strong presence there. There we were telling a very industry-specific story around the digitally enabled fitting room or whatever it might be. But I would say in the early stages, in the experimentation phase of that across industries, it surprised me how interested people are in what’s going on outside their industry right now.

CIO.com: Who do you consider to be your competitors?

Warby: I think it gets broader with the digital world. We have our traditional systems integration competitors from the Indian pure-plays to IBM or Capgemini, through to the broader Microsoft sets of partners. Sometimes it’s competition with categories like the agencies. We’re working in a couple of clients very closely with major agencies now.

CIO.com: By agencies you mean…

Warby: Marketing agencies in digital marketing projects. As their business tends to look more at technology as well, we’re at least bumping into them more. One of the big things in our strategy as we look over the next five years is rethinking the ecosystems around what we do, how different they look and who do we have to partner with.

To be honest, I worry less about competition. We tend to focus more on what it is we need to do to deliver benefits to our clients and what skills do we need and where can we get those skills because they are, on the whole, going to take a while to regenerate. What might have been a competitor yesterday could be a partner tomorrow because we need to pull together these quite diverse sets of capabilities.

CIO.com: You’re working on opportunities and problems that are not vendor-specific within these organizations. Does the close tie to Microsoft sometimes become a set of handcuffs, if even from a perception aspect?

Warby: Yeah, we thought about that quite deliberately in our vision and we did include Microsoft in our new vision. I still feel that being focused around an ecosystem like Microsoft on the whole is a benefit for our customers. We start being non-technology specific in the way we talk about helping our clients realize results through digital innovation.

It could be some sort of constraint, but right now we don’t see it as such. We think that there’s a sufficient marketplace out there where companies have Microsoft technology, Microsoft is doing a nice job in re-expressing itself in the mobile-first, cloud-first world that we’re finding plenty of opportunity to go after. We’ve grown. We were $2.4 billion in sales last year and growing at double digits still so we think that that positioning is about right at the moment.

CIO.com: In terms of who you’re selling to today, is it more line of business today than it was IT in the past or is it a blend?

Warby: Definitely more line of business and business. IT is present, still spending plenty of time with the CIO. I talk to my CIO about what his role is and we have this idea of three things that I want him to do. One is to be a services broker. You don’t have to build everything. You need to figure out what services need to get delivered.

The second is being innovative and helping us think through our innovation. Third, for us certainly, is employee productivity. We have 28,000 professionals around the world. We’re waking up thinking about how can we make them all productive, can they get to the right information, can they get on Skype for business seamlessly? I think that has been helpful for me as a CEO to have a CIO that I’ve gone through this journey with as a business leader and to be able to think through how that looks from other people’s perspective.

CIO.com: You kind of live in a couple of different worlds — the integration world and the consulting world. What’s your one-line explanation of Avanade?

Warby: The world’s leading digital innovator. That’s our aspiration and on our best day we can be. Then somebody says — What’s a digital innovator?

CIO.com: How do you measure ‘leading’ in that description?

Warby: We would come back to our share in Microsoft’s marketplace, given that’s our world. We recently were recognized by IDC in their MarketScape as being the leading player in the Microsoft solutions provider area. It was a nice milestone – a really nice milestone after 15 years to have some public recognition of what we believe was a capability we built.

I think it’s time to step out and be clear about where people have got to go. We are going to have to change the way we do business because doing it the same way we do today, it’s the old definition of insanity, isn’t it?

CIO.com: We write a lot about Microsoft products, the company’s shortcomings and strengths, whether Microsoft is cool or not these days. Tell our readers what it is that perhaps they don’t see about the transformation Microsoft is going through. What would help them understand what Microsoft is doing, maybe a little differently than they see from their own dealings with Microsoft or listening to people like us?

Warby: Maybe I’ll just start with one really interesting example that I test our own people with, which is asking them, because they work around this ecosystem every day, what is Microsoft’s ambition for their cloud revenue? Actually it’s been very public about this — $20 billion of run rate of cloud revenue by 2018 is a huge ambition.

I think at any level for your readers, for anybody who’s dealing with this company to underestimate the extent of seriousness and ambition that Satya [Nadella, Microsoft CEO] and the leadership team have in transforming this to be a cloud-driven, cloud-first business would be a mistake. I still ask that question today at leadership meetings, employee roundtables, whatever it is. That is a phenomenal ambition and it’s going fast.

Slattery: The part I think sometimes people miss and I think Satya has done an amazing job with this under his leadership, is that Microsoft can be an incredible catalyst for this digital transformation and rotation that enterprises need to go through. They can be an incredible catalyst, especially with their ecosystem partners, to help on the digital rotation.

I think sometimes that doesn’t come through because people focus on a particular subset, but when you step back and you look at the power of all these things that are coming together, which is another key thing for Microsoft, I think that is a really energizing conversation

CIO.com: Which is exactly to the point of the next question that I want to ask: Big enterprises have had a number of strategic partners in IT, whether it’s an Oracle or an EMC or a Cisco or an IBM, a whole collection of companies. What makes Microsoft their best strategic partner moving forward?

Warby: I think two things. One is the absolute, wholesale commitment to taking the product, the technology suite, into the cloud and the benefits that that will bring in terms of agility, flexibility, security and reliability, all of those things.

For most companies to contemplate building that sort of Web-scale capabilities themselves is pretty daunting. In our assessment, there are only three cloud companies in the world at that scale. It’s Google, Amazon and Microsoft. There are two that are serious in the enterprise, which is Amazon and Microsoft and there’s one that has true hybrid capabilities and a suite of applications that sit on top of it. That’s a pretty compelling proposition.

CIO.com: As you work with Microsoft though I think you have to realize there are a couple of areas where they haven’t been as strong, for example in a mobile environment or even with how challenging it can be to integrate their collaboration tools. How do you work around those kinds of shortcomings? They can’t be perfect in every area but those are a couple of critical ones where they haven’t been as strong.

Warby: Having been in and around the Microsoft Suite for 15 years at Avanade and 10 years at Microsoft before that, no technology company is ever going to get it all right. I think there’s a better understanding of that now than there ever has been at Microsoft. I have two ways to describe how we work with Microsoft in the real world. It has to exist and coexist with other technologies and then we have to have a point of view about when and how to make those things work and those get quite specific around the particular technology.

Without drilling into whether it’s a particular cloud orchestration feature or a lack of collaboration or whatever, I think you have to always look at these things as a balance. Do I get, on the whole, a better integrated, higher performing, more reliable [system] – all the things that I’m looking for – while I may not have the best of breed? That’s the other choice that we’ve always compared with. And the work that it takes to truly stitch together best of breed and does that best of breed move at the same pace? That’s the tradeoff. It’s our job to help clients make those tradeoffs.

CIO.com: I think I’m very close to time so I’ll just leave you with one question, going forward, what would our readers expect from Avanade in the next year or so?

Warby: I’ll go back to where I started, which is that we want to help our clients with their digital innovation and digital change in a secure way in the cloud. What people should expect from us is the leading Microsoft capabilities in the world and, more and more, the ability to help them think through that business transformation. That’s new for us and we’re excited to be in a position to do it and we’re looking forward to the journey.