Avanade, the Seattle-based systems integrator formed in 2000 by Accenture and Microsoft — which still own a majority of the company — has 3,000 consultants that work exclusively in Microsoft technologies. Nearly three quarters of Avanade’s revenue is derived from enterprise IT work done on behalf of Accenture or Microsoft — and that revenue has grown steadily over the past six years.
Privately held Avanade, which files SEC reports because of its large number of employee shareholders, is on track this year to report US$500 million (NZ$804 million) in revenue and its third profitable year. With that backdrop, Computerworld recently spoke with Avanade’s co-founder and CEO, Mitch Hill, on a variety of IT topics.
What’s on the minds of the CIOs you talk to today?
A lot of the discussions I have [are] around predictability of delivery. Our industry has evolved from the late 1990s so that providers like Avanade are really expected to deliver on projects. From a Microsoft point of view, there’s a lot coming. We help them sort out what they should really think about this year, what they should push out until 2007 [and] what they should push out ‘til 2008.
So, when do you think companies should be moving to Windows Vista or Office 2007?
I think Vista is immensely impressive, regardless of how the scope has changed over the years. There hasn’t been a platform like this introduced since the AS/400 minicomputer from IBM 20 years ago. I’m most impressed by the Windows Workflow Foundation framework. People used to spend a lot of money on things like Tibco. Look at what it means to have this functionality built into the server. It will allow us to do workflow very pervasively. It’s a big deal. I also like the SharePoint part of Office. Things like wikis will be embedded into the platform. You’ll have tools to manage what is on the internet and unmanaged today.
My view is, don’t get too excited about them. In other words, should you rush to get some mission-critical app onto Vista by the middle of next year?
No, I don’t think so.
Gartner says that CIOs need to think like biz-dev folks and generate ideas that make money for the company. Do you agree?
Every company ultimately wants to be more profitable, whether it be from raising productivity, driving costs out or offering new services. For anyone in technology, it’s more fun to talk about raising top-line revenue. Southwest Airline’s Ding [a web-based service built by Avanade that notifies customers of last-minute deals] is a great example of that. Southwest expects to make US$30 million in revenue this year from it. If I’m a CIO who comes up with those kinds of ideas the business is going to value me more.
Speaking to some Microsoft partners before the Worldwide Partner Conference, some said the delays in Office and Vista were hurting their bottom line. Do you feel the same way?
No, because our business is different. We don’t sell Microsoft products. By the time we get involved with a customer, they already have a licensing agreement. Upgrade cycles do generate demand for us. But mostly we are about solving business problems.
How would a Microsoft shift toward a software-as-a-service (SaaS) model affect you?
It wouldn’t cut us out. Most software companies will build applications that companies can host as a web service. Others will build solutions that they will sell directly, à la Salesforce.com. The case against that scenario is that you have big corporations with a lot of complexity and proprietary knowledge inside their systems who prefer to keep that inside the firewall.
I understand why the resellers are worried. Their distribution channel won’t go away, but it will get small. SaaS is a migration the industry will go through. These things are always trends. Demand for information always outstrips supply. It’s the business corollary to Moore’s Law. No client has ever had enough money to do all the things they wanted. If SaaS makes some things simpler, users will still discover they have other needs.
Since most of your clients are big Microsoft users, how much Linux do you see?
Linux is mostly about replacing Unix. Sometimes you see a customer want to use Linux for real foundation services, like directory or file and print. But not often. And if you look at the licensing models of Red Hat and Microsoft, there’s not much difference. If I was a CIO, I wouldn’t sweat [about] what ends up to be a few hundred bucks more for a Microsoft server.
How much open source do you see running on top of Windows?
In the developer space, there is tons. People are not going to buy Red Hat simply to run JBoss. If they have Windows, they are going to use it. But in general, unless you’re a very young company with very limited resources, people have better things to do, better ways to spend their time, than to build software that may not be tested or supported.
Do you see any interest by companies in adopting the OpenDocument standard?
I haven’t seen any interest. Anything that’s government-sponsored, ask yourself, is it still around? I remember working in aerospace in the 1980s. There was a programming language called Ada. The Defence Department and ARPA both wanted it to be the standard language of the world. Today, you can’t find it anywhere but in embedded fighter systems. If you look at our industry over time, stuff like that will get legs for certain reasons, but [mindshare] wins.
But, don’t some companies find the cost of Microsoft Office pricey and want a cheaper option?
We just haven’t seen tons of people sweating that stuff. Though I don’t know if Microsoft’s share, which is amazing, is defensible. It is fair to ask, though, whether most corporations take advantage of all of the features in Microsoft Office. We hear customers say, “We got Office five years ago; it’s pretty cool. Now that there’s another one, what in there do I really need?” I think Microsoft has to do a better job telling that story if they want customers to continue to refresh. It’s not our job to tell that story, no.
Is Avanade planning to go public?
No, we’re not thinking of it. Being head of a public company is not super-fun these days. It’s expensive and, in general, it makes companies become short-term focused. Our structure allows us to think about next year, or three years. And, if we need capital, we can go to our parent companies.