As a world leader in consumer and enterprise technology, Microsoft has played a pivotal role in the digital transformation of multinational companies from every industry. In China, such transformation presents particular challenges when operating in such a specific business and regulatory environment. For decades, Mingqiang Xu, CTO of One Commercial Partner, Microsoft Greater China, has been tackling these challenges head on, leveraging one of the most fundamental drivers in the success of technology adoption – understanding. Dr. Xu recently sat down with AmCham China to illustrate how over the years, the biggest impediment to transforming multinationals towards the Internet has been providing the architecture for business leaders to understand and embrace the economic upsides of emerging technologies, rather than fear their disruption.
Your time as General Manager of Microsoft Azure Group was focused on providing solutions for local multinational enterprises to transform towards the Internet. What difficulties did those enterprises face?
Initially, many enterprises had resistance towards going to the Cloud. Their number one reason was, “Hey, data is safer in my own datacenter.” But, that is actually not true – in the Cloud is the safest place. To put things into perspective, in Asia, think about an enterprise being hacked and losing information. On average, it takes over 500 days for such a hack to be discovered while it’s just a matter of minutes after being targeted that information is successfully stolen. With a Cloud service provider like Microsoft, we are the frontier of internet security. So primarily, we were fighting a mentality issue and misconception. This is akin to a few centuries ago when there was a debate whether it was safer to put money in banks or put it under your mattress.
Enterprises also thought that if they went to the Cloud, then job security would be threatened. But, with Coca-Cola, for example, that was not the case. What they found was that instead, their IT professionals became more visible in the enterprise. Before it was just a cost center and now, because of the Cloud, their scope actually increased. Coca-Cola’s IT professionals were able to support a lot of the digital marketing activities. With Cloud in the past, they used their own datacenter that was not able to handle those activities, especially in China with the massive amount of traffic. In many cases, their own infrastructure would just crumble. But, with public Cloud, this suddenly became possible. And, from the early success they had in marketing campaigns, the IT department became more visible, and unlike before, they get to participate in the planning of future campaigns.
Those are a few of the common challenges that I saw, and still see from the MNCs and local companies.
How have you addressed these issues?
We have been addressing the mentality issue through education, and we also have a transparent computing initiative. This is a center we have here where we’ve opened up our technology to allow people to learn and understand first-hand. That’s what our transparency center is for, inviting the key technology executives and showing them how we actually protect their applications and data – from the very physical, the datacenter itself, to the actual machine and networking.
Change is also happening organically, as I’ve been hearing from our Azure CTO, Mark Russinovich. He recently told us how many Fortune 100 companies have decided they don’t want to be in the datacenter business anymore. After seeing the rapid innovation that all the Cloud vendors are doing, they’ve basically said, “There’s no way we can catch up,” in terms of the variety of computing resources, the advanced computing architecture, networking architecture, and also how we’re tackling security. So, the realizations necessary for this digital transformation are happening naturally, as well.
Today, of every four servers that are shipped in the world, three of them go to a public Cloud center. With better understanding of the security and how rapid the innovation is in datacenter technology, these companies decided it is no longer feasible that they stay in the datacenter business. That has a lot of impact on MNCs in China. Especially, for example, in the retail industry where a few customers in China have already decided, “We’re all-in.”
There’s a lot of advantage with Cloud where you can build it as an infinite supplier of resource and networking bandwidth. With Coca-Cola putting those digital marketing campaign applications in the Cloud, they found the Cloud offers lots of business intelligence tools, like Power BI. This shows them dynamic conditions in real time across the geography of China, and how their customer participated in a digital campaign.
Within the enterprises you have worked with either now or with Azure, did you find any executives were more resistant to transforming towards the internet?
I think all of the C-suite officers that I have talked to have been pretty open to new technologies. In the past, before the Cloud transformation or when it just started, it was actually the CIOs that were more resistant for data safety and possibly job security reasons. But now, I think they’ve become very open to Cloud technology.
It seems there is a trend of the advancement of technology advancing people at the same time.
Definitely. At Microsoft we always say that we’ve never seen that technology replaces people, it’s always the people who know how to use the technology that replace those who don’t. So, I think that’s what we’re seeing – those who actively embraced Cloud technology, they got ahead.
Along with Cloud, are there are other disruptions that are going to be more difficult for enterprises in the future?
I think one thing is that China has the Cybersecurity Law, and so what we are seeing among our customers is that there are two gaps – knowledge and experience. There are other challenges because of the Cybersecurity Law, like that it requires all applications to be deployed locally, leading to copies of data, issues of how to sync the data, increasing maintenance operation costs, and requiring trainings of two different eco-structures. Microsoft fully understands the challenge as we’ve worked with multinationals, and so we make sure whatever application is developed, it’s the same architecture if deployed locally.
As well, we are fully complying with the Cybersecurity Law and therefore, all the services that you run, the infrastructure will be automatically compliant. We actually provide tools to help you understand and guide you on how to be compliant with the Cybersecurity Law. For example, Office 365 Suite, we provide security tools for you to analyze your application services.
In a recent TedX talk, you spoke about Blockchain in a very favorable way, whereas in many circles there is a lot of doubt and trepidation. Why do you think that is and why do you seem quick to embrace Blockchain? Do you have a guess as to where industrial adoption will really start?
I think the challenge for Blockchain, like with Cloud originally, is mentality. There’s almost a misunderstanding. When people think of Blockchain, they think of ICOs (initial coin offerings). But rather, like I said in my TED Talk, there are two advantages. Throughout history, human beings have been trying to find ways to reduce the cost of doing business. There’s a lack of trust, and so we are always inventing all kinds of institutions as a third-party to make sure that cost goes down. Whereas this is the first time we have a technology – Blockchain – that can enable counterparties with virtually no trust to transact, and reduce that cost.
I’m a firm believer that productivity will change how people build institutions and how people interact within those institutions. It seems to me, just by reducing the transaction cost and increasing trading within the country, or among countries, that adoption will happen. I’m a firm believer of this. And, I believe it’s going to start from the financial industry.
If you just look at the interesting scenarios, one of the promises of Blockchain is to build a new credit system. So I’ve been looking at that. Even within China, the enterprise and banking scenarios, and for example, accounts receivable, you’re seeing what two companies with their own banking and with Blockchain are able to achieve – enterprise A paying enterprise B, paying enterprise C. And with Blockchain, you’re able to trace the whole process and that information is immutable. As well, the information is transparent to whoever is involved in the transaction. That just reduces the cost for verification and minimizes the risk for fraudulent actions.
So, I’m a firm believer that productivity will lead the way and the rest will follow. It’s just a matter of time.
Do you see Blockchain becoming a widely adopted solution for a majority of multinational corporations in the near future?
I think in at least five years.
You’ve discussed the 15-year curse, and the rapidly shrinking lifespan of large, successful companies. Is there anything about emerging technologies that you think has played into this? Is this a bad thing?
I think it’s a good thing. I think one of the key reasons for the 15-year curse is just the metabolism of technologies is so fast today. So, we believe the way enterprises will resolve this is that in the future every enterprise will be a software company. They all need to be able to use digital technology to succeed in what we call the, “Four Pillars of Digital Transformation”. They should be able to engage customers better, be able to empower their own employees, be able to optimize their operation, as well as transform their products and services. Of course, when you see these four pillars, every single company has been doing this since the very beginning of industry.
I think in the digital economy you need to do things differently. Engaging constantly in a digital economy means being able to use data to create a profile of your customer. A 360-degree view of your customer and being able to serve them in a very personal fashion. To empower your employees in these mobile days, you need to be able to securely and easily allow them to access information wherever they are and enable them to make decisions based on the data.
In the past the world was dumb. Now, with IoT, the world is actually speaking to you. How you take advantage of that information is with predictive technology. The key thing with AI is that in the past prediction was very expensive. Now, with AI and machine learning, prediction has become very cheap and reliable, so you can actually leverage that information to optimize your decision making. Moreover, it is about being able to transform your product and services. Let’s use manufacturing as an example. In the past, it’s always been the quality of your goods that you ship. Now, it’s about how we deliver the final outcome.
How are enterprises transforming their products and delivering the final outcome today?
I will use Rolls Royce as an example. In the past, they supplied these engines to the Boeings of the world, but that’s not the final outcome that Boeing’s customers need. Boeing’s customers need uninterrupted flying hours with the engine. That’s the final outcome. Now they’ve said, “Hey, with IoT technology, I’m able to deliver that. So, I’m not selling you engines anymore, I’m basically selling you the insurance for continuous flight, and you pay me by the hour.”
Now, with every flight they’re able to collect 30 terabytes of data from 1,000 sensors in an engine. By analyzing the data, they can predict when the engine needs servicing. In the past, it was very costly for Rolls Royce. Every three to six months they would arbitrarily send a maintenance team to the field based on no data. And if there was no service needed, they just lost a lot of money in the time the engines were out of use. With this, what we call predictive maintenance, they’re able to time this really well, and if a breakdown is about to happen they will send the people over. The end result is their engine is never down, and so they save their cost and also maximize their profit margin. That’s how making use of predictive technology helped them increase customer satisfaction at a lower cost.
They were able to transform their product and deliver the final outcome. That’s just more proof that every company needs to be a software company. Every company needs to do this data collecting and analyzing really, really well. And, that’s the tool I think that also motivates Microsoft to transform.
30 terabytes every flight – when are we going to run out of space?
I think the beauty of IT technology is Moore’s Law. Literally every 18 months your capacity can double. Within a single unit of time, within a single square inch you’ll be able to store twice as much data and the processing power doubles. So, I think we’re riding this curve and it has served us well. But further down the line, quantum computing is going to take us to a new level.
What industries do you think are going to face the most difficulty adopting? Whether it be because of mentality, their current business models, etc.
I think it’s going to be government and healthcare. At least, that’s the two industries we have the most challenges in convincing to adopt Cloud computing. For healthcare, once again, it’s the data compliance issue. The next one would be financial services, I think.
One thing I’ve observed of China is that over the long term, from a technology point of view, they will adopt what’s seen as most mature and functional. I just think they have been cautious and for the right reasons, because data for government, healthcare, and finance is critical to the wellbeing of the people.
This article was originally published in the pilot of the upcoming AmCham China Quarterly, an executive-targeted periodical focused on policy, business, and technology, driven by C-suite perspectives and insights. The AmCham China Quarterly is set to launch early 2019 – to subscribe or contribute to the Quarterly, contact our editor: firstname.lastname@example.org
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