Case Analysis: Microsoft Corporation: The Design of Microsoft Support

Network

Submitted By:

1. Kiran Kishore Karumanchi (EPGP-04A-046): Organization Name: Wipro:

Designation: Project Manager
2. Siya Vincent (EPGP-04A-092): Organization Name: Four Soft Ltd:
Designation: Manager (Projects)
Background of case study:

Microsoft was the leader in microcomputer, software industry. In fiscal year 1992, net revenues worth
$2.7 billion and net income in excess of $708 million. It operated in 41 countries and over 55% of its
revenues came from outside the US. It was a true global leader.

Microsoft products portfolio had around 150 products in different categories as shown below:

Application Software
PC Operating System Software
Advanced Systems
Development Products
Hardware
Competitors under various segments:

Application Software: Lotus, WordPerfect, Borland and Claris etc.

Operating System: IBM
Server Market: IBM, Apple, Sun and HP

Customer Segments that were targeted by Microsoft included the following:

End-Users
Developers
Corporate Accounts
The product support and services division provided all the required technical support services to
customers.

Issues faced by the company:

Microsoft’s services were poorer compared to those provided by their competitors. Product support levels
were determined at the product level and so there were many confusing support offerings available, some
free and a few paid. Customers that purchased a number of software applications from Microsoft were
confused about which service was applicable for which product. Moreover the sales field professionals
were having difficulty in explaining the service offering to prospective customers. The quality of end user
support was declining with large wait times on phone support.

1. What factors suggest that Microsoft’s PSS Division needs a more comprehensive and flexible
approach for its service offerings?
The Activity based cost accounting proved that, customer service costs have raised to more than
10% of revenue in most product groups, with an average of 9%.
Customers were confused and frustrated with the service offerings as different products had
different service options.
There were operational factors such as 60% of callers getting a busy tone when accessing phone
support. Corporate customers using paid support had to wait behind novice users which simple
 problems. High end services were not available for products even when the customers were
willing to pay for it.
2. Based upon the guidelines that senior management has provided Trish May what product
support strategy has Microsoft envisioned?
The product support strategy envisioned by Trish May is the formulation of a matrix based approach,
which either maps customer service categories with product categories or service categories with
customer segments. The service categories could be of two types:
Problem Based
Responsiveness Based
The objective of the strategy was to simplify and consolidate the customer service offerings. They
also wanted to make the service offerings simple enough to understand, communicate, and execute. It
also sought to address concerns such as when and how to charge for these services. At all times the
strategy was to ensure that customers should not feel that they are being charged for previously free
services.
3. How should the Microsoft Support Network 1.0 matrix be structured in terms of rows and
columns?
There were four alternatives in which the matrix could be structured (Row x Column):
Problem-Based Services x Product Categories
Problem-Based Services x Customer Segments
Responsiveness-Based Services x Product Categories
Responsiveness-Based Services x Customer Segments
Problem Based Services Rows:
Advantages:
o Microsoft’s service monitoring system could track the frequency of incidents by problem
category
o The Activity Based Costing system could measure related costs
o Simplified management and measure of profitability
o Easy for customers to understand
Responsiveness Based Services Rows:
Advantages:
o Allowed Microsoft to sell the service offering as an insurance policy.
o Allowed Microsoft to offer different kinds of service support to different response segments
Product Segments Columns:
Advantages:
 o Supported by the ABC based cost accounting system
o The cost and complexity of services changed dramatically as one moved across the product
categories
Disadvantages:
o There was a possibility that small, niche products like Hardware will not be adequately
represented in product categories.
Customer Segments Columns:
Advantages:
o Having customer segments as columns provided the advantage that it covered those
customers that had purchased multiple products.
o Microsoft managers had considerable information about service preferences of each of this
existing principal customer segments
4. Which services should Microsoft offer; a) offer as free or “standard”, b) sell as an option for an
additional fee, and c) not offered (but have a 3rd party service provider partner offer)?
Microsoft can offer basic services like installation and start up support free. It can see advanced
support offering like engineering support at customer site, troubleshooting on customer’s
environment etc., as optional at extra price. For issues that concern integration with other platforms
like UNIX etc., Microsoft can have a 3rd party service partner.
5. What implementation problems should PSS managers anticipate? How can PSS manages
successfully overcome them?
The following were the implementation problems for matrix based the service offering:
Very difficult to completely stop providing free “Installation & Start-Up service on
application, PC operating systems, and developer products”.
Also while service engineers could address most problems associated with application
software at a relatively low cost, they would incur significant costs for PC operating systems,
development products, and hardware problems.
Problems that occurred after the first 90-days of ownership were particularly costly. Systems
Integration and Customized support services would be quite expensive to deliver.

Solutions for the issues faced by PSS managers:

There are two solutions about this issue first is to include systems integration and customized support as
standard and cover their costs via a hefty price premium on software or sell it as an option at a significant
fee.

If services were offered as a function of responsiveness, managers would have an easier time making fee
decisions. They could offer Standard Support for free on an unlimited basis for desktop applications. At
the same time, they would have to charge personal operating systems, hardware, and development
products owners a fee after 90-days because such usage and productivity problems were often costly.
They would also charge a significant fee for Priority and Premier Support due to staffing requirements.

Given the large size of many developers and corporate accounts, PSS managers would have to decide
how many individuals within a customer firm would be eligible to receive service under a technical
support contract. Furthermore, managers would have to designate specific development programmers and
corporate MIS personnel as points of contact for service initiatives. For international companies, access
from specific geographic regions would also have to be specified.