Enterprise Risk Management at Microsoft
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Case Details:
Case Code : ERMT-019
Case Length : 17 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : Microsoft
Industry : Information Technology
Countries : Global
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
Overview of Risks
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The software business was inherently risky, as it was subject to rapid
technological change. Microsoft anticipated more intense competition as it moved
from its traditional core businesses to the new .NET architecture. Microsoft
also faced a shift from PC-based applications to server-based applications or
Web-based application hosting services, from proprietary software to open source
software such as the Linux operating system, and from PCs to Internet-based
devices. Some of Microsoft's powerful rivals, including IBM, Sun Microsystems,
Oracle, and AOL-Time Warner, were collaborating with one another on various
initiatives, aimed at moving software from individual PCs to centrally managed
servers...
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Technology Risks
Technology management was a critical activity for Microsoft. During fiscal years
2000, 2001, and 2002, Microsoft spent $3.77 billion (16.4% of revenues), $4.38
billion (17.3%), and $4.31 billion (15.2%) respectively on R&D. Most of
Microsoft's software products were developed internally. Microsoft believed
internal development allowed it to maintain closer technical control over its
products and gave it the freedom to designate which modifications and
enhancements were most important and when they should be implemented...
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Operational Risks
There was little manufacturing or logistics involved in the software business.
Software could be easily copied on to a medium such as Compact Disc or moved
electronically to customers across the world without problems.
Maintaining quality was a strategic challenge for Microsoft. Indeed, the
presence of bugs in its products was a major risk faced by Microsoft. If a
product had a fatal bug that destroyed user data or prevented some critical
feature from working, then Microsoft had to send out a product update release to
correct the problem... |
Marketing Risks
Challenges to Microsoft's Business Model
Since its inception, Microsoft's business model had been based on customers
agreeing to pay a fee to license software, the company developed and
distributed. Under this commercial software development ("CSD") model, software
developers developed new products through investments in research and
development. They offset these costs with the revenues received from the
distribution of their products. In recent years, there had been a growing
challenge to the CSD model, from the Open Source movement...
Excerpts Contd...>>
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