When Microsoft customers want to make a purchase on paymentterms outside the standard net-30 or net-60 days, the WorldwidePayment Solutions (WPS) group steps in. “We craft payment solutionsthat let them pay in a different rhythm,” explains Tom Czerwinski,the director of technology for Microsoft's Worldwide PaymentSolutions team. “Our customers may have an unusual consumptionpattern, or perhaps large seasonal swings in business. We help thempay in non-standard ways.”

The group's most popular solution is the extended payment terms,or XPT, program. XPT enables Microsoft to extend longer terms toprospective customers without resorting to independently negotiatedloan agreements. Thus, it helps the company seamlessly integrateflexible payment terms into eligible licensing enrollments orservices agreements for credit-qualified customers.

XPT has always been a boon to Microsoft's U.S.-based salesforce, but a couple of years ago, the program's scope was limited.The Microsoft WPS team handled origination of XPT contracts,including credit decisioning, pricing, documentation, and internalapprovals. Meanwhile, an external service provider handledcollections for the program, operating its own subledger for thebooking, billing, and cash application of XPT transactions. Thecollections outsourcer did not operate outside the United States.“We aspired to expand globally, and our service provider couldn'tdo that,” Czerwinski says.

The legacy XPT processes also faced an array of efficiencychallenges. One problem was that WPS staff had to log into multiplesoftware systems and perform manual activities at each step of theorigination process. They obtained approvals through email or chatapplications, and they often needed to find necessary documentationin Word or Excel documents, PDF files, and emails. At the sametime, data from the subledger of the collections outsourcer cameback into Microsoft's books only through manual journalentries.

The siloed processes limited visibility into both individualtransactions and the program as a whole. And all the manual workopened the company to risk of human error, while creatingcompliance and audit challenges, as well.

“We needed to shift our technology to support a straight-throughprocess that could better scale with our growth plans,” Czerwinskisays. “We also needed a business process outsourcing vendor thatcould expand with us globally. So, we needed to entirely revamp theXPT program—to throw away the existing toolsets and create a newset of tools to support the program's future.”

WPS launched this project by benchmarking the XPT program'slegacy processes against those of similar functions withinMicrosoft. This benchmarking revealed that the customer experiencewas very different for purchases with extended payment terms thanfor purchases with standard terms.

“Some of our customers had some transactions on standard paymentterms and other deals on XPT, and the two programs had completelydifferent customer service experiences,” recounts Dennis Crispin, asenior manager for technology in the Worldwide Payment Solutionsgroup. “Our benchmarking evaluated how we could improve customerservice, and we realized that we needed to standardize ourprocesses to provide a consistent and reliable credit andcollections experience regardless of payment terms.”

WPS pulled together a project team to select and on-board a newcollections service provider with a broader geographic perspective.They also planned to develop a new XPT origination application thatwould serve as a single version of the truth throughout thelifecycle of an XPT transaction. The tool needed to providestraight-through processing with Microsoft's SAP enterpriseresource planning (ERP) system, as well as consistency with theprocesses and technologies supporting Microsoft'sstandard-payment-terms financing. It would be called Single Pointof Contract, or SPOC.

The core project team workedclosely with staff from Microsoft's global financing desk, productsand pricing, operations, treasury, compliance, accounting, and IT.As the initiative got under way, team-building was crucial. “Wededicated significant effort up front to building trust andcollaboration,” Czerwinski says. “I had just started with WPS.Other people had just experienced a reorganization and missionchange. And we were asking them to support this project that woulddisrupt their business processes and system landscape. Building acohesive team from the very beginning was a big factor in ourability to build out the application quickly.”

Another factor was the project's clearly defined vision.Czerwinski says that early on, during informal conversationsoutside of team meetings, he and another project leader articulateda shared vision for what they were trying to accomplish with theproject. “Our shared vision was a tipping point,” he says. “We wereable to show others the value in the change and what the solutioncould do for their teams. Within about two weeks, we had everyoneon the core team aligned. At that point, they were not onlysupporting the project goals, but also championing the vision toexternal stakeholders.”

“We quickly gained full alignment around the project vision withour VP and the stakeholders in all the departments that would beimpacted,” Crispin adds. “Defining that vision at a high level, andsubsequently using it to drive decisions, helped us stay focused onour primary goals and not get sidetracked around less importantitems.”

Additional factors driving the initiative's success were theteam's adoption of an Agile project management methodology andfocus on providing a “minimum viable product” first, to be enhancedonce the basics are functional. “With the MVP approach, you'rebuilding the shell of what's required,” Czerwinski explains. “Thenyou can expand that shell in your subsequent releases, to build outthe broader set of capabilities that you envision.”

The first version of SPOC was delivered within four months ofthe project's kickoff.  The next quarter was focused onenhancing SPOC, on-boarding a new service provider with thecapability to expand XPT globally, and configuring an SAP module tosupport the program's specific servicing requirements. Four monthsafter that, the entire multibillion-dollar XPT accounts receivable(A/R) portfolio had been migrated to the new processes. “Wecontinue to build out SPOC and add new capabilities,” Czerwinskisays, “but we had the first version up and running veryquickly.”

Today, when a Microsoft salesperson identifies extended-termsfinancing as a potential need in a sales negotiation, a creditrequest is created in SPOC. The system attempts to calculate a debtrating. “The goal is to automate determinations of creditworthinesswhenever possible,” Czerwinski says. When the system can'tautomatically pull all the information needed for the scoringalgorithm, the credit request heads to a manual process entailing aWPS employee's review of customer financials.

After the debt rating is established, SPOC continues to monitorfactors that would affect the customer's creditworthiness. It alsoperforms validations to make sure the transaction is fullycompliant with Microsoft policies. “We have been able to usetechnology to help ensure compliance since the beginning of theapplication,” says Dave O'Hara, corporate vice president ofWorldwide Commercial Finance at Microsoft. “This fits into theculture within our organization and helps ensure we are makingsound business decisions.”

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As a purchase is finalized, SPOC then tracks the booking andfunding of the transaction. “Although the movement of the moneyhappens elsewhere, SPOC is communicating back and forth with ourERP system so that people can track the status of every XPTtransaction in one location,” Czerwinski adds.

The new collections outsourcer does not maintain an externalsubledger for XPT transaction servicing; instead, its subledgerresides in the SAP module that the WPS team implemented. Accountpostings are automated, processes are standardized, and redundantactivities have been eliminated.

To effectively and efficiently respond to user questions aboutXPT, the project team customized a Microsoft Azure-based chatbot.The tool uses active learning, an artificial intelligencecomponent, to better understand questions asked in naturallanguage. This helps ensure that answers better meet thequestioner's needs. To streamline Q&A deployment, the WPS teamconnected their chatbot with a similar tool developed byMicrosoft's Worldwide Credit Services (WWCS), the group thatmanages credit and collections for transactions with standardpayment terms. Questions and answers already in the WWCS chatbotflow automatically into the WPS tool.

All in all, the project has greatly enhanced efficiency of theXPT program. “We didn't just change how people interact with thesystem,” Czerwinski says. “We streamlined business processes aswell. Now, every credit request goes through the same sequence ofStep A before Step B before Step C. Previously, Steps A, B, and Cmight all have been running in parallel and happening in a veryunnatural way.

“At the same time,” he continues, “automating so many steps hasreduced the time to approval for an XPT credit decision by about 80percent. Our staff spends a lot less time on routine manual tasks,and the process is working a lot better for our customers.”