2 February 2010

Joe Pagano took over as Microsoft’s new managing director of Banking and Capital Markets in its Worldwide Financial Services Industry Group in December. OnWindows caught up with him to talk about the new role as well as product developments, aggressive targets and the future of the industry. Karen McCandless reports.

Can you give me some information on your background?
I have been working at Microsoft for 15 years and I have 22 years of experience across the IT and financial services industry in a worldwide business leadership role. Most recently, I ran the Support and Services business for Microsoft where I managed the sales teams for many global strategic financial services accounts such as Barclays Bank, Credit Suisse, Deutsche Bank, The Bank of New York, Merrill Lynch, Citicorp, JPMC, and The NYSE. I have a wealth of experience in aligning Microsoft solutions with the needs of the industry and developing strong IT and business management relationships.

What are your main responsibilities in your new role?
I am responsible for overseeing the industry strategy, marketing, solution and partner development and thought leadership as well as executive relations and ensuring that the full extent of the Microsoft vision is realised. Our mission is to enable the success of our banking and capital markets customers by working with our partners to deliver industry solutions that dramatically reduce costs, attract and retain customers and help accelerate business growth. We can do this by fuelling innovation and new products and services. I feel that I can bring a wealth of excitement, energy and innovation as the true voice of the customers and as the chief listening officer.

My first priority is to make sure Microsoft Financial Services customers are getting the most out of the investments we are making in the technology roadmap and to unlock its full potential. Secondly, I will be running the rhythm of the business worldwide to ensure we are landing relevant solutions in the right places with the right partners. Thirdly, I will be making sure we are building for the future. We need to listen to what are customers are saying and engineer those ideas into the roadmap. We spend $9.5 billion a year in R&D and a great deal of that directly impacts the banking and capital markets industry. There has never been a better time for Microsoft and its worldwide partner network to help financial services firms reduce costs and attract and retain customers by bringing new and innovative products and services to the market.

Industry solutions for the banking and capital marketing industries based on the Microsoft platform can dramatically reduce costs and improve our customers’ ability to attract and retain customers

Joe Pagano , Microsoft What will be your main focus in the coming year?
My main focus will be taking the solution development that we have made significant investment in over the last two years and continuing to engage with our partners in the marketplace. We have organised our solutions into functional areas mainly around customer experience, operational excellence, governance risk and compliance and financial services online. For example, in the area of operational excellence we have core baking and payments solutions, and our partnership with Temenos around their Insight and T24 offerings is a good example of our commitment to this. Governance, risk and compliance (GRC) is something we will be focusing on even more as the industry is anticipating the next wave of regulations. With our partners we are delivering risk analytics and reporting solutions as well as documents and records compliance solutions. Another GRC investment example is in our System Center management software line where we have built in capabilities that automate a lot of the instrumentation needed to map regulatory requirements through to companies’ business policies around GRC. Another area we are focused on is corporate performance management. We are integrating our PerformancePoint technology into our SharePoint technology and integrating that with our business intelligence stack, all will be accessible with next version of Microsoft Office. This helps financial services companies provide a 360-degree view of the customer and improves the ability to monetise data. And I have left the most important focus to last; that is customer experience, customer retention and acquisition. It’s not only about improving our customers’ experience but the customer of our customers’ experience. And as we expand our financial services online solutions, our customers will have more choice in implementing on premises, for example in a hybrid model as they deploy their own next generation products and services.

What do you think will be the challenges you and the industry will face?
We are very sensitive to the difficulties the industry is going through at the moment but that said we have an enormous capability to help banks and capital markets companies survive and thrive. We think the focus should be on what change we can impact. Industry solutions for the banking and capital marketing industries based on the Microsoft platform can dramatically reduce costs and improve our customers’ ability to attract and retain customers, but we do believe that cost-cutting remains a top priority. It is important to look at how our customers can make the operating model more efficient and to redirect those savings into innovation. We hope to give companies confidence through promoting our successes and showing that maybe now is a good time to modernise architecture. Some banking architectures are 15 to 20 years old but we live in a real-time world and the consumer has different expectations. New consumers are demanding seamless experiences and real time access to data. In order to do that, banks have got to change from a transaction-centric to a customer-centric computing model. We need to help companies with planning and applying solutions in a non-disruptive way so they can cut costs. By breaking down data silos and modernising with straight-through-processing solutions, banks are in the best position to monetise their data and to satisfy customers.

Given these challenges, how do you plan on meeting the aggressive targets you have been set?
We plan on exceeding, not just meeting these targets! To do this we need to continue to differentiate in the market and work with our ISV and SI partners to build relevant industry solutions for our financial services industry customers. We are going to add continuous improvement and value in a way that will reduce costs in both the short and long term. We will see changes in the branch office of the future with next generation collaboration, CRM, and unified communications with the ability to reduce travel by 20 per cent or more. We aim to deliver virtualisation not only in the data centre but also on the desktop via our Microsoft Desktop Optimization Pack offering for Software Assurance customers. It enables enterprises to accelerate deployments and remove millions of dollars of cost. If we continue to focus on this, our solution set is going to grow further in terms of customer adoption. By focusing on these areas we enable our customers to redirect cost savings into innovation.

How do you see things progressing globally next year?
I am an optimist and I think we are seeing stabilisation and increased levels of confidence, which is creating some movement and less fear in the market. We are also seeing quite a healthy spending around building new products. Risk Metrics is a good example of this as the company recently unveiled a platform at the Microsoft Professional Developers Conference to carry out risk modelling using Windows Azure.

How do you think the new product launches in 2010 are going to impact on the Financial Services division?
I think they will have a really positive impact. The current product pipeline is unprecedented in terms of value for the financial services enterprise. We are now seeing a complete refresh on all areas on the client side, for example with Windows 7 and Office 2010 collaboration ability, with the next generation of SharePoint and SQL Server and even on the mid-tier with the .NET development framework. This new version of .NET includes something we are calling parallel extensions that makes it much easier for developers to take advantage of highly parallel computing paths and multi-core hardware. We are also building compliance and risk management capabilities into the system centre offering. The Compliance and Risk Process Management Pack and IT Compliance Management Library, which just went to beta in December, help substantially with automation. These capabilities help IT workers and business managers to address specific GRC requirements.

With SharePoint and Office 2010, one of the most powerful capabilities we are including is called PowerPivot. It is an add-on within Excel that works in conjunction with SQL Server 2008 R2 and it empowers the end user to access business intelligence and analytics right down to the desktop. The current solution using Excel today can only handle one million rows of data but this new solution can handle several hundred million rows. We are also integrating social networking including activity feeds that enable workers to track colleagues’ recent activities and offer ad-hoc tagging and rating of sites. We think this is going to take collaboration and productivity to new levels.

It is also not just about product features; it is about packaging all of those capabilities up into specific industry solutions aligned with the skills our partners can offer. We are deeply engaged with solution delivery with our partner channel and with Microsoft Services. We continue to see strong interest in our customer experience offerings around branch office and advisory services. We are seeing increased interest in our payments and core banking solutions, in GRC, and in financial services online solutions.

Is there anything specifically going on in the EMEA and AsiaPac region?
As a member we have been working closely with the Efma banking advisory council and the Banking Industry Architecture Network, which involves organisations such as Credit Suisse, ING and Deutsche Bank. We are also focused on the partnerships in the EMEA region in terms of the ISV channel. We are very focused on the Financial Messaging Service Bus solution, which is a financial services industry payments integration solution built upon BizTalk Server. FMSB is seeing interest across the industry including in Europe and the Middle East. This has also been an extremely important market for us.

Barclays Bank in the UK is a great example of success in the region. The company recently implemented a new CRM system and it used Dynamics CRM. Customer complaints were processed manually so some fell through the cracks. There was also no structured process to handle sales leads, each sales person had to maintain their own spreadsheet and switch between five different screens. The results have incredible, so successful that the solution won out over its own in-house CRM model. The bank cut customer complaints by 25 per cent, reduced escalations from complaints by 80 per cent, increased customer satisfaction by 15 per cent and cut cost-per-incident reduced by 22 per cent. These results are a great validation of our solution approach with partners as the bank is really leading the way and innovating in the branch.

What is your vision for the future of the division?
We want to continue to enable the success of our banking and capital markets customers by working with partners to deliver industry solutions that dramatically reduce costs, attract and retain customers, and accelerate business growth. By investing in industry solutions with our partners we unlock the full potential of the Microsoft roadmap and R&D investment at a critical time for the industry.

Is there anything else you would like to add?
I would just like to add that we are very excited to see the continued investments and innovations that are taking place in the industry, especially in modernising the branch around collaboration and the unified communications platform in a way that drives measured results for our customers. Credite Agricole, for example, deployed Microsoft Office Communications Server 2007 R2 and they expect to reduce travel by up to 20 per cent and significantly reduce audio conferencing costs. We are seeing this transformation and modernisation, not in a way where the pay back will be years in the future, but we are seeing an immediate, short-term ability to reduce costs. We are continuously striving to provide new levels of customer experience and delivering new products into the market

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