Microsoft DynamicsCustomer Solution Case Study

Microsoft Advances Successful, Two-Tier ERP Strategy with Powerful, New ERP Solution

OverviewCountry or Region: United StatesIndustry: Manufacturing—Software publishing

Customer ProfileThe world’s largest software company, Microsoft employs roughly 90,000 people across the world and operates 110 country subsidiaries.

Business SituationFragmented and inefficient expense-reporting systems required employees to spend an inordinate amount of time inputting and categorizing expenses and placed a heavy burden on IT operations.

SolutionThe finance team and the Microsoft Dynamics AX product group collaboratively enhanced functionality in Microsoft Dynamics AX 2012 that helps companies improve self-service functions such as expense reporting.

Benefits Automated processes and new

efficiencies Improved manageability Faster innovation

“Our implementation of Microsoft Dynamics AX 2012 for the Finance Operations team proves that a two-tier ERP strategy can deliver a standardized solution that helps companies generate valuable process efficiencies and enable rapid innovation.”

Hal Howard, Corporate Vice President of Microsoft Dynamics ERP Research and Development, Microsoft

With nearly 90,000 employees and 110 subsidiaries worldwide, Microsoft needed to replace its diverse expense-reporting systems with a single, centrally managed solution that was easier to use and yielded more consistent, detailed information. This was an opportunity to extend the company’s two-tier ERP strategy, standardizing on Microsoft Dynamics AX for operational units and integrating with the SAP system for corporate financial accounting. The Finance Operations team and Microsoft IT collaborated with the product group to implement Microsoft Dynamics AX 2012 as the standard solution. In doing so, Microsoft performed a repeatable deployment scenario that can be of value for many enterprises. What’s more, Microsoft uses the solution as an “innovation layer” to complement the company’s SAP system, enabling faster rollout of timesaving functions to employees throughout the organization.

SituationWith nearly 90,000 employees worldwide, Microsoft must accommodate extremely challenging expense-reporting requirements. The software giant relied on two separate systems to reimburse employees for expenses and collect receipts: an advanced custom-built, web-based system for U.S. employees called MS Expense Bill Presentment and a more rudimentary system called MS Expense Classic based on Microsoft Excel spreadsheet templates for international employees working in 110 subsidiaries. Both systems feed into the SAP administrative ERP system that Microsoft uses for corporate financial accounting, which itself was too inflexible and cumbersome to meet the company’s expense-reporting needs.

“At employee meetings outside the United States, the number one issue that people brought up was the manual expense reimbursement process,” says Jodi Ford, GPO Director, Global Accounts Payable at Microsoft. “Having people manually enter and categorize each receipt was a painful process that could sometimes take hours at the end of each month.”

Requiring employees to enter data into the Excel templates often resulted in inconsistent or incomplete records. Because of this, the Global Procurement Travel Group lacked the information it needed to negotiate better deals with travel vendors or know what areas to focus on when educating employees about company policies. The templates were difficult to maintain, as well. Maintenance took place at the level of individual templates, and more than 100 templates required

maintenance. The IT team at Microsoft spent significant resources updating these templates every quarter to account for changes in tax codes and other routine aspects of international business.

Aiming to replace the inefficient, bifurcated system, the Finance Operations team at Microsoft laid out several goals for a new employee self-service solution: Greater employee satisfaction, reflected

by an NSAT score of 115 or higher in a post-deployment survey and 60 percent of survey respondents reporting timesavings with the new process.

Streamlined audits, including a reduction in false positives to 15 percent and a 30 percent reduction in overall expense claims requiring an audit.

Microsoft had already articulated and repeatedly executed on a two-tier strategy for ERP systems with success within the organization. While the company uses SAP as the companywide ERP system, several business groups rely on Microsoft Dynamics AX, in integration with SAP, to address specific business needs powerfully and in a highly flexible manner. Such business groups include the Microsoft Store organization, Microsoft Studios, the Xbox group, Microsoft Puerto Rico, and others. The industry foundation functionality in Microsoft Dynamics AX 2012 is the basis for the two-tier strategy and makes it possible to implement at all the different sites.

SolutionThe project team considered extending the MS Expense Bill Presentment system that Microsoft used in the United States to international subsidiaries. However, when

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“… [A]lthough our primary goal is to improve employee satisfaction, MS Expense 2.0 can potentially recover millions of dollars in labor costs each year.”Jodi Ford, GPO Director, Global Accounts

Payable, Microsoft

team members learned about the self-service employee portal planned for Microsoft Dynamics AX 2012, they decided to work with the Microsoft Dynamics AX product team to craft a solution that would meet their expense-reporting needs. The portal is based on Microsoft SharePoint Server 2010, a technology that employees are universally familiar and comfortable with. The project team provided important input during the product development process, resulting in advanced expense reporting capabilities designed for optimal efficiency and manageability. This type of two-tier enterprise-resource planning (ERP) scenario tackles line-of-business functions that SAP is too inflexible to accommodate, but in a way that integrates with the corporate SAP ERP system.

“Instead of building and maintaining our own solution or trying to customize and extend SAP, we could realize a stronger, more cost-effective solution by building on top of Microsoft Dynamics AX,” says Jasper Haarloev, Principal Solution Manager in Finance Solution Delivery at Microsoft. “The intellectual property will ship with Microsoft Dynamics AX 2012 for other organizations that face similar challenges to use.”

The new MS Expense 2.0 solution helps employees enter their travel-and-expense details faster and in a way that fits with company policy. The web-based solution automatically inserts expense details from authorized credit card feeds, including details from vendors that provide that information, such as popular hotel chains. The solution also provides drop-down menus so that employees can quickly categorize their expenses in a way that is consistent with expense-reporting

requirements. Upon submission, the expense reports automatically route to the appropriate approver.

Although the Microsoft IT team customized the solution slightly to accommodate unique expense approval processes, it was still able to meet approximately 90 percent of the solution requirements with out-of-the-box functionality. The team especially benefited from the built-in multilanguage, multicurrency capabilities of Microsoft Dynamics AX and the local tax code updates.

To configure the integration between MS Expense 2.0 and the corporate SAP system, the team referenced integration patterns maintained by the Microsoft IT group–facilitated Microsoft Dynamics AX Center of Excellence, which develops and maintains best practices to support internal implementations of Microsoft Dynamics AX. These implementations include manufacturing, retail, and professional services scenarios—all of which serve as a second-tier ERP solution that integrates with SAP.

“How organizations go about integrating Microsoft Dynamics AX and SAP will depend on their specific requirements,” says Kevin Scott, Senior Group Program Manager at the Microsoft Dynamics Center of Excellence at Microsoft. “We are building a set of reusable components that groups within Microsoft and our customers can use to speed up and reliably implement their two-tier ERP projects.” In the case of MS Expense 2.0, the solution exchanges data with SAP and other internal and external systems by using the Application Integration Framework, a web services

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framework within Microsoft Dynamics AX. Base data from SAP is automatically updated to MS Expense 2.0 daily and expense information is automatically uploaded in batches to SAP every 15 minutes.

The Finance Operations team at Microsoft plans to roll out MS Expense 2.0 incrementally. Today, close to 100 employees at Microsoft Australia and approximately 900 employees in the Microsoft Business Solutions group at the company’s corporate headquarters are already using the solution. The goal is to complete the rollout to all 90,000 employees worldwide within 15 months. “We’re taking a measured approach to ensure that people who use the new solution are well supported; we need employee buy-in for the project to work,” explains Ford.

BenefitsBy standardizing expense reporting on Microsoft Dynamics AX 2012, the finance team at Microsoft is on track to realizing its goals for the project. MS Expense 2.0 will dramatically reduce the burden placed on employees. At the same time, the Finance Operations team will simplify audits, and the IT team can retire old, inefficient solutions and take advantage of product innovation in Microsoft Dynamics AX 2012. Other companies can use this two-tier ERP solution to similarly improve their own line-of-business processes requiring employee self-service and benefit from the simple integration with SAP and other corporate systems. Hal Howard, Corporate Vice President of Microsoft Dynamics ERP Research and Development, says, “Our implementation of Microsoft Dynamics AX

2012 for the finance group proves that a two-tier ERP strategy can deliver a standardized solution that helps companies generate valuable process efficiencies and enable rapid innovation.”

Automated Processes and New EfficienciesEase-of-use was a primary design consideration for MS Expense 2.0. The project team worked with the Microsoft Dynamics AX product group to automate as much functionality as possible, including expense details on authorized credit cards and approval workflows, by making use of SharePoint Server technology. Instead of entering details in free-form fields, employees now can choose categories from convenient drop-down menus. These improvements should result in the anticipated NSAT score of more than 115.

“People complained of having to spend hours filing reports each month, and we have tens of thousands of employees around the world who travel often,” says Ford. “So, although our primary goal is to improve employee satisfaction, MS Expense 2.0 can potentially recover millions of dollars in labor costs each year.”

Improved ManageabilityAlthough many of the benefits of MS Expense 2.0 will apply directly to employees, the Finance Operations team at Microsoft will also gain significant advantages in consistent and detailed expense-reporting information. “We can enforce our existing company expense-reporting policies much more effectively with MS Expense 2.0,” explains Haarloev. “Because everyone inputs expenses in a standardized manner, we expect to reduce

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“We envision companies to use Microsoft Dynamics AX as an ‘innovation layer’ that builds on a corporate ERP system that is more difficult to change, for example.”

Hal Howard, Corporate Vice President of Microsoft Dynamics ERP Research and

Development, Microsoft

the number of false positives during the audit process by 15 percent. More people will take the time to report their expenses because it will be easier to do so, but we still expect the number of reports that get audited to decrease by 30 percent because of the standardization.”

Besides streamlining audits, more detailed expense-reporting data will help Microsoft negotiate better deals with hotels and other vendors and provide executives with the information that they need to make better spending decisions.

Faster InnovationFor Microsoft, much like other leading enterprises, rapid innovation is a critical element of doing business competitively. Says Kyle Young, Lead Program Manager for Microsoft Dynamics AX at Microsoft, “By implementing MS Expense 2.0, Microsoft has successfully transitioned from a custom-built set of tools to a standardized, repeatable solution. That also means we can innovate far more efficiently and rapidly on the basis of this solution than a custom system.”

With MS Expense 2.0, Microsoft has consolidated its expense-reporting systems into a single, centrally managed solution that is flexible enough to accommodate local requirements. The solution benefits from product improvements in Microsoft Dynamics AX, such as automatic tax code updates, which will tremendously lessen the burden on the Finance Operations team. Some product improvements that will benefit MS Expense 2.0 are more imaginative, including a planned Windows Phone application that will let employees

submit receipts by taking photos and entering details with their phone.

“We envision companies to use Microsoft Dynamics AX as an ‘innovation layer’ that builds on a corporate ERP system that is more difficult to change, for example,” says Howard. “By adopting a two-tier ERP strategy, companies will be able to exercise greater control over line-of-business processes. What Microsoft has done with expense reporting is just an example of what is possible.”

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Additional Resources Two-tier ERP strategies using Microsoft

Dynamics. Integration options with the Application

Integration Framework in Microsoft Dynamics AX.

Microsoft DynamicsMicrosoft Dynamics is a line of integrated, adaptable business management solutions that enables you and your people to make business decisions with greater confidence. Microsoft Dynamics works like familiar Microsoft software such as Microsoft Office, which means less of a learning curve for your people, so they can get up and running quickly and focus on what’s most important. And because it is from Microsoft, it easily works with the systems that your company already has implemented. By automating and streamlining financial, customer relationship, and supply chain processes, Microsoft Dynamics brings together people, processes, and technologies, increasing the productivity and effectiveness of your business, and helping you drive business success.  For more information about Microsoft Dynamics, go to:www.microsoft.com/dynamics

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For More InformationFor more information about Microsoft products and services, call the Microsoft Sales Information Center at (800) 426-9400. In Canada, call the Microsoft Canada Information Centre at (877) 568-2495. Customers in the United States and Canada who are deaf or hard-of-hearing can reach Microsoft text telephone (TTY/TDD) services at (800) 892-5234. Outside the 50 United States and Canada, please contact your local Microsoft subsidiary. To access information using the World Wide Web, go to:www.microsoft.com

For more information about Microsoft products and services, call (425) 882-8080 or visit the website at: www.microsoft.com

This case study is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY.

Document published August 2011

Software and Services Microsoft Dynamics− Microsoft Dynamics AX 2012

Microsoft Server Product Portfolio− Microsoft SharePoint Server 2010