2024 GLOBAL SRM RESEARCH REPORT
CASE STUDY: DISCOVER FINANCIAL SERVICES CASE STUDY: MICROSOFT - HARNESSING SIZE AND SCALE
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In September last year it announced Microsoft Copilot, an “everyday AI companion’ that it hopes users will utilise to do all kinds of activities including to shop, code, analyse, learn, and create. Organisations are already using AI on Microsoft’s cloud computing system, Azure, to help them with a variety of tasks, including helping children to learn English (Ministry of Taiwan) and improving in-car driver assistance (Mercedes-Benz). Procurement’s role is to support Microsoft’s overall mission by ‘empowering enterprise growth and value driven, trusted procurement solutions at scale’. It is tasked with five strategic outcomes: to drive AI adoption; to drive operating leverage; secure the cyber foundation of its source-to-pay ecosystem; accelerate time to value; and deliver on its ESG (environmental, social and governance) commitments - the last of which State of Flux has contributed to by engaging with some of its diverse suppliers, as well as other providers about levels of access to a programme to support diversity. For each of these five key areas for procurement, supplier relationship management (SRM) has a critical role to play, says d’Orgee. Here he tells State of Flux how it operates and what Microsoft’s procurement function is divided into indirect and direct spend (data centres and device supply chains). SRM spans both indirect and direct programmes, ensuring comprehensive management of supplier relationships across all areas of the business. Specifically, SRM for indirect spend sits within finance and spans across enterprise supplier relationships. Within indirect procurement, the company has a couple of hundred employees across 30 global locations, supporting over 115,000 internal customers in 100+ locations. “Across Microsoft we have over 24,000 suppliers with more than $120 billion in spend. Broken down, that is 470,000 POs a year and 1.5 million invoices to be processed.” enhancements are planned for the future. Procurement and SRM arrangements
SRM at Microsoft was reimagined just seven years ago. It began with d’Orgee himself and the company’s two major enterprise outsourcing suppliers who manage its order-to-cash, source-to-pay, record-to-report and supply chain fulfilment. That work helped it to land some early wins, such as building a performance measurement system. It then scaled up to include its global systems integrators, global software providers, consulting and advisory partners. More recently it expanded to include various industry verticals including financial services, manufacturing, global workplace solutions and marketing. Today, the SRM programme covers around 40% of Microsoft’s total supplier spend and a significant number of “managed” suppliers. A dedicated team of several supply chain professionals focus on the verticals it supports. “As you can imagine there are many complexities of working at Microsoft,” says d’Orgee. “With its breadth and scale it is critical that we effectively prioritise the suppliers we need to manage. To do this we run a repeatable and reproducible supplier segmentation When segmenting suppliers, a particular challenge is that many of its supplier relationships are multifaceted. “It could be a buy-from, a sell-to and a go-to-market relationship - it’s a true 360 wheel,” says d’Orgee. The segmentation model identifies the business impact and spend of each of these suppliers - the significance of the go-to-market relationship and whether they are a strategic customer. Those sitting at the centre of this Venn diagram are the core focus for SRM. Once the annual segmentation exercise is complete, the SRM team evaluates the assignments of its Supplier Account Managers (SAMs) and make changes as needed, both in line with career development plans and business requirements. Some SAMs may manage a handful of suppliers, others may manage one, depending on the size and scale of what’s needed. process at the start of each fiscal year.” Segmenting suppliers and SRM basics
Photos supplied by Microsoft
Harnessing size and scale
Tech giant Microsoft has multifaceted relationships with some of its most strategic suppliers – and SRM is critical to maximising them
For many the name Microsoft is synonymous with M365 (Excel, PowerPoint Word) and Teams; for others it means leisure time spent playing games like Call of Duty or Minecraft on Xbox. The business, which was set up in the 1970s by Bill Gates and Paul Allen, has adapted to several major technological changes including PC/server, to web/Internet, to cloud/ mobile and grown to become the world’s largest software company. It recorded $211 billion in revenue and more than $88 billion in operating income in its 2023 annual report where CEO Satya Nadella said the
world had entered “a new age of AI” that would “fundamentally transform productivity for every individual, organisation, and industry on earth”. Microsoft intends to be at the forefront of this latest paradigm shift as part of its mission to ‘empower every person and every organisation on the planet to achieve more’. “We do this by expanding opportunity, earning trust, protecting fundamental rights and advancing sustainability,” says Jonathan d’Orgee, Senior Director of Supplier Programmes.
“With the breadth and scale of Microsoft it is critical that we effectively prioritise the suppliers we need to manage.”
Jonathan d’Orgee , Senior Director of Supplier Programmes, Microsoft
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