Microsoft is moving its IT into the public and private cloud to help make its supply chain agile and adaptable.

Brian Tobey, corporate vice-president of manufacturing, supply chain, information and services at Microsoft, told Gartner’s Supply Chain Executive Conference in London that the company was moving its IT structure into the cloud to eliminate the traditional approach of dealing with partners in a supply chain via “one-to-one telephone connections”.

Microsoft uses Microsoft's Windows Azure platform, the public cloud, for its partner-facing applications in the digital supply chain, for example, for its Xbox 3PP Account Management. Meanwhile, for back office applications and sensitive data, the company uses the private cloud, Windows Hyper-V.

Other cloud products Microsoft uses include Microsoft BizTalk Server and Microsoft Sharepoint.

“Part of the agility and adaptability [of a supply chain] is overcoming the paradigm of how you connect with partners,” said Tobey.

“The cloud helps us manage the scale and requirements of services. [Azure and BizTalk] allows you to use server capacity as you need it.”

According to Tobey, Microsoft has the “most outsourced supply chain in the world, definitely in our industry”.

Microsoft has six primary operation centres in five countries. Its supply chain comprises 10 Tier 1 manufacturing and 15 supply chain partners and more than 640 suppliers, delivering to 50,000 retail outlets and 300 retail partners in over 60 countries.

Although he said that outsourcing had clear financial benefits, Tobey said that outsourcing was a “natural” option to enable the company to scale rapidly, and its use by Microsoft was  more about agility and adaptability than a cost saving.

“Our supply chain has grown tremendously over the last several years,” said Tobey.

He explained: “As early as three years ago, we managed about 25GB a day of data coming into the organisation. Now we manage 350GB a day, all coming in from different companies. That is one of the challenges of our supply chain, which affects are agility and adaptability.”

In an effort to manage the data, Microsoft decided to take the supply chain IT team out of the corporate IT team and put it directly into the supply chain.

“Supply chain is IT,” said Tobey. “The IT people have to understand supply chain. We put the IT group in [the supply chain] and then we told them that they have to be supply chain people, which took about four years. It was one of the harder experiments we ran.”

“[But] it was fortuitous because when we ramped up our digital supply chain [from a traditional supply chain], our IT people understood it immediately.”

He added: “My best supply chain person is one of the heads of IT.”

Microsoft has noted a number of trends affecting supply chain, ranging from increasing globalisation, which has led to varying market and customer requirements, to increased scale of business, resulting in more data being available, to increasingly complex supplier, partner and customer networks.

Furthermore, it refers to its supply chain model as the AAA Supply Chain, which stands for Alignment, Agile and Adaptable. In terms of alignment, Microsoft aims to align interests across the supply chain by freely exchanging information, clarifying roles and sharing risks, costs and gains.

Tobey was keen to emphasise that Microsoft does not align with its supply chain partners’ goals, but that the partners have to align their goals with those of Microsoft.

“Alignment is not consensus. When they [partners] work with us, it’s our strategy they have to align to, because we’re not going to align to your strategy. They have to learn how to be successful in their strategy within our strategy,” he said.