While Microsoft has long been a key provider for financial services companies, it has only recently shifted its strategy to take more of a leadership role in that community.

“We have come to understand how important our enterprise customer is to us,” says financial services GM Tracy Issel. “We are moving from being a provider in this industry to being a true partner to being a real player, helping to define the future of the financial services industry.”

Financial services GM Tracy Issel meets with partner ISVs at last years’ Microsoft developer’s conference. Tightening its relationship with partners is a key part of her group’s strategy to help define the future of the financial services industry.

Microsoft’s financial services group has grown from six to 600 people in the last five years. The group comprises industry veterans who come from leading banks, brokerages, and insurance companies, providing both industry and technical expertise to companies. They frequently provide customer feedback to Microsoft’s product teams to ensure solutions truly fit the needs of its financial services customers. Its extensive partner network also helps it stay on top of key trends.

Shortly after Issel assumed her role, the group announced a major realignment of its management team to bring its industry expertise in banking, brokerage, and insurance directly in line with the sales organization, creating three vertical units geared toward driving industry-specific revenue. (See “Microsoft’s Financial Services Group Has a New Structure and Larger Staff, WFS Fall 05.) As Issel explained at the time, the new enterprise selling model, with a focus on consistent customer relationship teams, deeper industry expertise, and deeper technical specialization, would enable Microsoft “to get the right resource to the right customer at the right time.”

The reorganization also reached its partner program making it more clear to the ISVs, for example, who the Microsoft contact was for a particular customer. It hired a significant number of partner managers to further tighten the relationship.

And recently, the relationship with its partner community has been further defined, with more stringent selecting criteria for companies wishing to join the Microsoft community. The company is putting more emphasis on annual planning to identify the partners who are the best match for the companies Microsoft wants to target. An ISV selected by that exercise is assigned an account manager who helps the partner develop not only a Partner Business Plan but also one or more Partner Solution Plans that outline specific areas where Microsoft and the partner will work together. The plans help Microsoft determine which partner products and services it will endorse.

It is simply “a natural progression” to formalize the relationship with those ISVs directly managed by her team, says Issel. “It helps us to align our strategies.”

"Consumers expect personalized, high-quality service from their financial institutions. If that institution doesn’t deliver, they will find another bank up the street that does."

While hard to define the perfect partner, Issel says partners must offer something valuable while being respected in the marketplace; they must leverage the Microsoft platform; they must be a key innovator; and they must have a proven focus on financial services customers’ success. While size is not a significant factor, Issel notes that ISVs are getting bigger as strategic acquisitions help firms jockey for position.

It comes down to “those partners that best meet the needs of our growth,” Issel says. Microsoft wants a team that represents “where the industry is going in the next five years.”

For banking, despite the ever-widening financial crisis, there are increasing opportunities for cost savings and differentiation, according to Issel.

In a briefing on the banking industry, Issel explains that the subprime mortgage crisis has led financial institutions to beef up their middle-office infrastructures and resources to deal with risk management. “There is a need to price complex financial instruments, gauge overall exposure, and build models to predict future cash flows,” she notes. That is where Microsoft’s high-performance computing platform comes in. “By employing high-performance computing and BI, firms can make smarter, faster trade and risk management decisions, reduce investment and operational risk, and improve overall profitability.”

Unlike in years past when growing market share was a priority, says Issel, banks are primarily concerned now with attracting new customers, retaining existing ones, and extending those relationships. “Consumers expect personalized, high-quality service from their financial institutions. If that institution doesn’t deliver, they will find another bank up the street that does.”

According to Issel, Microsoft’s software is well positioned to help banks achieve this differentiation, whether through its online banking interface with Microsoft Silverlight, extending functionality to new customers via Windows Mobile, or by providing a complete view of their accounts with Microsoft Dynamics CRM and Microsoft Office SharePoint Server.

“I would say where banks are spending today is putting the customer at the center. For this they have to have really great BI,” she says.

Microsoft’s BI offering includes a BI Platform (SQL Server), the end-user tools and performance management applications (Excel and Excel Services, PerformancePoint Server 2007), and the information delivery layer (SharePoint Server 2007). SQL Server 2008 includes capabilities for more analytics as well as more value-added integration functionality.

And if the “significant double digit growth” Microsoft has seen in the BI space is any indication, banks are getting the message. 

By Nadine Kjellberg