EDGE: In your role, you do strategic planning. How is that undertaken?
Palmaro: In Canada, it’s about finding where the opportunities are. Let’s look way out and set out a 10-year trajectory, which is what we did. We went through a whole process called BHAG, which means Big Hairy
Audacious Goal. If we think that’s what we can do 10 years out, then how do we get there? Then you work back. We started to look at a three-year window and that drove a lot of change in the subsidiary to verticalization, like having a public sector group, and so on. It’s not just strategic planning. My expanded role includes finance and operations, business analysis, procurement and internal services.
EDGE: Is there a connection between the financial operations and the strategic planning?
Palmaro: Absolutely. The finance group is still going to be the experts in understanding Microsoft’s performance historically. We have a team of 10 analysts and all they really do, day in and day out, is a very internal view. The strategic planning group takes a very external view, looking at things like the gross domestic product and the impact of foreign exchange rates. What we are now able to do is cross-pollinate those things. Now when we look at internal performance, we’re able to look at it from that very analytic finance view, as well as be able to look at from an external market view, in terms of why things are going well when they are, and why things aren’t going well when they aren’t.
EDGE: When you say you look out as far as 10 years, in this industry, how is that possible?
Palmaro: We looked at a couple of things. How big could the IT industry realistically get? There is a certain ceiling in terms of IT as a percentage of company costs, after which it becomes highly unrealistic that it could grow more than that. The interesting thing that we have seen is that, for seven or eight years, IT probably grew faster than the GDP. You start to say, “”This is going to have to stop eventually, because what percentage of overall operating costs can you realistically expect to spend on IT?”” In the last couple of years, we’ve actually seen GDP overtake IT spend. If GDP is four per cent, IT is less than that.
EDGE: Is that a short-term trend or a long-term trend?
Palmaro: I think it’s a long-term trend.
EDGE: Does that mean we’ve reached the saturation point and it’s strictly an upgrade market?
Palmaro: It’s a critical mass issue. Let’s say that IT is 10 per cent of GDP. It’s not so much the market will flatten out, it should grow with GDP. It might grow a little bit faster. There could be an event that causes an IT spike like Y2K. But for the most part, I would see those two things becoming much more aligned.
EDGE: So where is the computer industry at this point?
Palmaro: You could say it’s mature, but I wouldn’t say it’s saturated. (It’s) not that we are running out of new users. I think there will be new companies and new customers every day, so I don’t worry about saturation.
EDGE: Knowing all this, how does this change Microsoft’s tactics?
Palmaro: No. 1, you need to take a longer term view. When revenues grow 20 per cent year over year, it’s great to ride the wave and you don’t have to look out to the future. You are not worried. All companies are now saying, “”I need to take a longer term view about what we are going to do, I need to be more critical of the investments I’m going to make, because we are going to be making fewer of them.”” We need to do a better job of evaluating where the priorities are.
EDGE: Are there any new markets left?
Palmaro: There is a big huge potential market around wireless, for example. It’s interesting, all these pocket devices are getting dumped on the market. In actual fact, the value of those tools is going to be for very niche-based, specialized applications: insurance industry adjusters, doctors and nurses in hospitals and building inspectors.
EDGE: It sounds like you’re becoming more vertically oriented.
Palmaro: More vertically oriented and more solution-oriented. At the end of the day, the CEO only wants to hear about two things: How are you going to cut costs, or how are you going to bring new business? New for the sake of new doesn’t fly anymore.
EDGE: How about the corporate world’s perception of Microsoft?
Palmaro: We hit rock bottom a couple of years ago in terms of customer satisfaction, especially in the enterprise, because we were trying to sell enterprise solutions in the way we sold desktops in the past. I think our licensing policy, our support model and our lack of understanding of business processes all came back in terms of very poor customer satisfaction scores. And so that’s been a huge focus for the last couple of years. But you don’t turn around perceptions overnight. We’re just going to have to keep chopping away at it.
EDGE: So what will need to be done to get the industry going again?
Palmaro: I think it’s about the industry stepping up and taking more responsibility. The industy has served up a lot of amazing technology over the last 20 years, but has not taken the responsibility for what happens when it is installed.
EDGE: Where do you see the next big thing coming from?
Palmaro: I get excited when I see really small software companies build on top of our platform. I was talking to a guy from Navantis and he had just come back from Sudbury, where they are putting together a portal solution for a school board that will allow teachers to send homework or report cards home online, or students to sign up for clubs online. It’s amazing in terms of the interaction it creates. That’s when I go ‘Wow that’s really exciting.””