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Microsoft: Looking at How Companies Do Business—and Writing Software for the Processes

Microsoft, whose fortune has been built around the Windows operating system, is gaining influenceon how things get done in an operating room.For the past few years, the software company has been hiringdoctors, nurses, and other health-care professionals in an ef-fort to establish internal expertise about the medical indus-try’s IT needs. The strategy is paying off in new accountsand an expanding footprint within the sector. Already, Matt Maynard, CIO of Pathology Associates Medical Laboratories, credits Microsoft with understandinghis business “better than lots of health-care vendors.” Yetothers see risk in Microsoft stretching too far. “The less Mi-crosoft knows about health care, the better it is for all of us,”says Craig Feied, director of the Institute for Medical Infor-matics at MedStar Health. “The last thing we want is anover-engineered set of solutions built around yesterday’s ortoday’s problems.” What Microsoft is doing in health care is a sign of a ma- jor strategic shift, one that raises questions in other indus-tries as well. From the time it was founded 28 years ago, Microsoft’s focus has been on the software that goes insidecomputers. Increasingly, however, the company is assessingthe business processes of specific industries—and writingsoftware products to support them.Now Microsoft is expanding the number of industries ittargets, injecting industry-specific code directly into its coresoftware platforms and hiring business-technology profes-sionals steeped in the sectors at which it’s aiming. Earlier thismonth, it hired Stuart McKee, the CIO of Washington state,to be U.S. national technology officer of its public-sectorand education practice, joining a two-star general and for-mer Coast Guard and Department of Homeland Security officials on that team.CEO Steve Ballmer describes a two-pronged strategy ofselling customizable applications directly to small andmedium companies via Microsoft’s Business Solutions division, while serving larger companies through partnerships withother technology companies. In both cases, Microsoft engagesits wide network of independent software vendors to buildapps (applications) that run on top of its own software. Whatthey haven’t done in the past is provide business solutions tospecific industry (often referred to as vertical

) segments.But that’s changing. Microsoft engineers are creating soft- ware add-ons, called accelerators,
aimed at business processescommon to companies in a given industry. For financial-services companies, Microsoft has an accelerator to help withthe trend toward straight-through processing, an automatedmeans of moving a transaction through multiple stages. Forhealth-care companies, they have an accelerator to facilitateinformation sharing. And Microsoft Business Solutions has begun inserting what it calls “industry-enabling layers”—software that servesthe needs of a broad base of companies in a particular sector—into its enterprise applications. Its latest addition, acquired in April from Encore Business Solutions Inc., is bookkeepingsoftware to deal with the idiosyncrasies of not-for-profits,schools, and other public-sector organizations. The new func-tionality will be added to the next release of Microsoft’s GreatPlains applications suite and is the first time Microsoft will in-tegrate technology for the public sector into its software. Ithas created similar software layers for manufacturing, whole-sale distribution, retail, and professional services. The Microsoft unit that works with independent soft- ware vendors has reoriented around vertical industries, too.Until 18 months ago, Microsoft determined its relationships with those vendors by the type of horizontal applicationsthey developed—say, business intelligence or enterprise re-source planning. Now Microsoft identifies needs in a partic-ular sector, recruits partners that can fill the need, and jointly...
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