May 31, 2004 (04:05 PM EDT)
Strategy Shift

Read the Original Article at InformationWeek

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Microsoft, whose fortune has been built around a computer operating system, is gaining influence on how things get done in an operating room. For the past few years, the software company has been hiring doctors, nurses, and other health-care professionals in an effort to establish internal expertise about the medical industry's IT needs. The strategy is paying off in new accounts and an expanding footprint within the sector.

"We really want to have a dramatic impact on this industry," says David Lubinski, managing director of Microsoft's business unit that sells to health-care and life-sciences companies. "We think we've got a contribution to make."

The less Microsoft knows about health care, better it is for all off us, says Craig Feied, director of Institute Medical Informatics at MedStar Health.

"The less Microsoft knows about health care, the better it is for all off us," MedStar's Feied says.
Already, Matt Maynard, CIO of Pathology Associates Medical Laboratories, credits Microsoft with understanding his business "better than lots of health-care vendors." Yet others see risk in Microsoft stretching too far. "The less Microsoft knows about health care, the better it is for all of us," says Craig Feied, director of the Institute for Medical Informatics at MedStar Health. "The last thing we want is an overengineered set of solutions built around yesterday's or today's problems."

What Microsoft is doing in health care is a sign of a major strategic shift, one that raises questions in other industries, as well. From the time it was founded 28 years ago, Microsoft's focus has been on the software that goes inside computers. Increasingly, however, the company is assessing the business processes of specific industries--and writing software products to support them.

Microsoft has customized sales and support teams for industry segments in the past, starting with a team to serve federal agencies nearly 14 years ago. But it wasn't until five years ago that the company really began to divvy up its customer base, forming teams for financial services, communications, and government and education, followed more recently by automotive, retail and hospitality, health care, manufacturing, and media.

Now Microsoft is expanding the number of industries it targets, injecting industry-specific code directly into its core software platforms and hiring business-technology professionals steeped in the sectors at which it's aiming. Earlier this month, it hired Stuart McKee, the CIO of Washington state, to be U.S. national technology officer of its public-sector and education practice, joining a two-star general and former Coast Guard and Department of Homeland Security officials on that team.


Microsoft uses different approaches for small and large companies, Microsoft CEO Steve Ballmer says. Photo courtesy of Bloomberg News.

Microsoft uses different approaches for small and large companies, Ballmer says.

Photo courtesy of Bloomberg News
CEO Steve Ballmer describes a two-pronged strategy of selling customizable applications directly to small and medium-sized companies via Microsoft's Business Solutions division, while serving larger companies through partnerships with other technology companies. In both cases, Microsoft engages its wide network of independent software vendors to build apps that run on top of its own software stack. "At the end of the day, we don't provide the vertical capabilities," Ballmer says.

But that's changing. Microsoft engineers are creating software add-ons, called accelerators, aimed at business processes common to companies in a given industry. For financial-services companies, there's an accelerator to help with the trend toward straight-through processing, an automated means of moving a transaction through multiple stages. For health-care companies, there's an accelerator to facilitate information sharing using the Health Level 7 messaging standard.

And Microsoft Business Solutions has begun inserting what it calls "industry-enabling layers"--software that serves the needs of a broad base of companies in a particular sector--into its enterprise applications. Its latest addition is bookkeeping software to deal with the idiosyncrasies of not-for-profits, schools, and other public-sector organizations, acquired in April from Encore Business Solutions Inc. The new functionality will be added to the next release of Microsoft's Great Plains applications suite and is the first time Microsoft will integrate technology for the public sector into its software. It has created similar software layers for manufacturing, wholesale distribution, retail, and professional services.