The digital evolution of Microsoft mirrors the broader personal computing revolution, spanning from the early days of DOS and Windows desktops to the Azure cloud and the modern engineering era, which showcases the rise of AI. Today, the company is a global organization with over 220,000 employees. They all depend on Microsoft Digital—the company’s IT organization—to provide the tools, technologies, and solutions that enable them to accomplish more every day.
The Need for Digital Transformation
Information technology has always been evolving, and the pace of change has never felt more rapid. The AI capabilities and other innovations unveiled in recent years show the potential to radically transform our world and change IT services. The COVID-19 pandemic, which caused a shift to remote online work and collaboration, is a prime example of how digital transformation doesn’t always follow a predictable schedule. Microsoft has a history of adapting its IT organization to meet the challenges faced by its employees and partners, marked by strategic shifts that reflect our dynamic world.
Mapping Our IT Journey
The digital transformation of IT at Microsoft has unfolded through four eras: On-Premises IT, Cloud and Culture, Modern Engineering, and AI. Microsoft Digital currently powers, protects, and transforms the digital employee experience across all devices, applications, and hybrid infrastructure at the company. Using deep knowledge of enterprise IT, Microsoft is helping lead the company’s AI transformation while enabling its customers to take advantage of this opportunity to reshape their businesses and IT operations.
To understand where we’re going, it helps to look back. This article examines the major eras of Microsoft’s IT history, highlighting the trends and innovations that shape Microsoft Digital today.
On-Premises IT (Founding to 2009)
Breaking down the history of IT operations into different eras provides a clearer picture. For almost three decades after its founding in 1975, Microsoft relied on on-premises IT systems. This era was characterized by the setup, operation, and maintenance of local physical technology, including servers, datacenters, and other hardware infrastructure. IT roles were narrowly defined, with team members mainly functioning as “order-takers,” with limited influence over strategic decisions.
Because funding was inconsistent, growth opportunities were limited, and Microsoft relied on vendors for development. Gaps were filled with “shadow IT,” where internal teams procured their own hardware independently. Security became an early priority. Co-founder Bill Gates launched the Trustworthy Computing initiative more than two decades ago, emphasizing security, privacy, and reliability across Microsoft products and services.
This era established the foundation for future digital transformations.
All in on the Cloud: The Cloud and Culture Era (2010-2018)
Former Microsoft CEO, Steve Ballmer, spearheaded the shift to the cloud in the early 2010s. Cloud computing was the next significant shift in Microsoft’s digital transformation history. This transition marked a major break with the previous era of physical IT infrastructure, which led to today’s distributed-computing world. The launch of what was then known as Windows Azure ushered in this new era. Microsoft moved away from a Windows desktop client-focused IT philosophy toward a more platform-agnostic view.
Cloud computing offered extensive advantages for customers and Microsoft’s own IT networks. (Azure was one of the earliest examples of the Customer Zero philosophy, a key concept that drives innovation at Microsoft Digital.) Microsoft began by moving productivity workloads (Exchange and SharePoint) to the cloud and then shifted new development to Azure, optimizing modern applications to run in the cloud. Existing applications were also moved for migration to virtual machines. Today, 98.5% of Microsoft’s IT systems supporting employees run on Azure.
Cultural Transformation
Another important shift during this era was the cultural transformation led by Microsoft CEO Satya Nadella, who took the top job in 2014. (Nadella previously ran the Microsoft cloud computing and enterprise group, so he was already steeped in the idea of transformational change at the company.) Before Nadella’s ascension, Microsoft had long been known for its competitive, “know-it-all” culture. Employees succeeded by showcasing their achievements and exceeding their peers. Nadella changed this by championing a growth mindset, encouraging employees to be “learn-it-alls” instead of “know-it-alls.”
The shift included placing new importance on how employees contributed to the success of others, a value incorporated into individual performance reviews. Nadella made this transformation his personal mission and directed leadership to propagate the new philosophy across the organization. “Achieving our mission requires us to evolve our culture,” Nadella said. “It all starts with a growth mindset—a passion to learn and bring our best every day to make a bigger difference in the world.” Some of the key principles that made up this new culture impacted the ongoing digital transformation journey:
- Being willing to try new things and being unafraid to fail fast
- Focusing on what matters to customers
- Seeking collaboration across teams rather than working in silos
- Making a difference in the world
The cloud computing infrastructure shift and the culture overhaul helped set the stage for technological innovations.
A New Vision: The Modern Engineering Era (2018-2023)
For many years, IT at Microsoft was about taking orders, with limited strategic impact. This changed when the team shifted to become a modern engineering organization. IT was elevated to a primary engineering function at Microsoft, with support from executive leadership.
Leading with a strong vision for the future of IT became the hallmark of the Modern Engineering era. The IT organization needed a clear view of its goals and the resources needed to achieve them. Aligning goals with the larger company vision enables the team to deliver high-value work for the company. Every group within Microsoft Digital has its own targeted vision founded on customer needs and overall goals.
Role Transformation
When the transition to cloud computing was complete, the next challenge was adapting IT roles to this new paradigm. Operating an engineering organization in a cloud environment meant new roles, skills, and a new mindset. The modern IT professionals often worked more closely with business groups, which required higher-level strategic skills. There was also an increased emphasis on DevOps skills, Agile program management, and user-centric design principles.
With the company’s emphasis on continuous learning and a growth mindset, employees gained the skills to work in the new environment. At the same time, the organization looked for new hires with these newer network-engineering skills to work alongside team members, helping them adapt to their new roles.
User-Centric, Coherent Design
This design philosophy puts the user—an employee or guest—at the heart of every decision at Microsoft Digital. This helps align all facility services with the needs of the people and company culture. The goal is to make tasks that previously caused friction simpler and easier. Instead of disconnected systems, user-centric design introduces a consistent and logical flow between services, which makes it easier for people to access and use them.
Microsoft also embraces coherent design across all its products. A similar look and feel and familiar usage patterns accelerate employee adoption.
Embracing Work-From-Anywhere Capability
When the pandemic began and the workforce was fully remote, Microsoft was already anticipating what the new hybrid workplace would look like when people returned to the office. Three key dimensions of the employee experience were identified:
- Physical spaces: Partnering with Global Workplace Services to create spaces that support an inclusive approach to hybrid productivity.
- Digital capabilities: Keeping employees productive and the environment safe and secure no matter where they are located and how they connect.
- Culture: Partnering with HR to ensure the digital employee experience connects with and embodies the company culture.
Customer Zero at Microsoft
“Customer Zero” means continuously working to improve the employee experience at work. Microsoft Digital is the first customer for many Microsoft products and services, focusing on the employee experience to create products that allow every person to be more productive. It means a deep partnership between the IT organization and product engineering groups to envision the right experiences, co-develop innovative solutions, and listen to and act on employee insights.
Managing Shadow IT with a Culture of Trust
Shadow IT is the unknown and unmanaged applications, services, and infrastructure that exist outside standard IT policies. It arises when engineering teams cannot support the needs of non-engineering partners. While earlier eras focused on preventing shadow IT, Microsoft now concentrates on managing it. They are using Azure best practices to optimize it and Microsoft 365 governance policies to ensure corporate security, privacy, and accessibility standards are met.
The AI Era (2023 to Present)
The latest chapter in the digital transformation is defined by integrating AI into all operations. AI is revolutionizing how Microsoft approaches IT and business processes, driving efficiency and innovation. Investments in AI provide innovations.
“The potential for transformation through AI is nearly limitless,” says Nathalie D’Hers, corporate vice president of Microsoft Digital. “We’re evaluating every service in our portfolio to consider how AI can improve outcomes, lower costs, and create a sustained competitive advantage for Microsoft and for our customers.” According to D’Hers, Microsoft is preparing for the future by using the AI technology to focus on: security, service fundamentals, and corporate functions growth.
Securing Our Future
Security is the highest priority at Microsoft Digital. The Secure Future Initiative, spearheaded by Nadella, brings together every part of Microsoft to ensure the highest level of cybersecurity protection. Brian Fielder, vice president, stresses how vital the initiative is to Microsoft Digital and the company’s overall success.
“Prioritizing security above all else is critical to our company’s future,” Nadella said. “Every task we take on—from a line of code to a customer or partner process—is an opportunity to help bolster our own security and that of our entire ecosystem. If you’re faced with a tradeoff between security and another priority, your answer is clear: Do security.”
The Secure Future Initiative is based on three core principles: Secure by design, secure by default, and secure operations. As the company’s IT organization, Microsoft works relentlessly to fulfill the key pillars of the Secure Future initiative across all systems, including:
- Safeguarding identities and secrets
- Protecting tenants and isolating production systems
- Securing networks and engineering systems
- Enhancing threat detection
- Expediting response and remediation
“Our mission is to power and protect Microsoft, and that starts with an unwavering commitment to the Secure Future Initiative,” says Brian Fielder.
Transforming and Securing Our Network and Infrastructure
Microsoft is focused on using AI to infuse data-driven intelligence into all infrastructure and network operations. This improves security and optimizes network operations. Examples include:
- Network observability and governance: Ensuring data accuracy, eliminating non-compliant hardware and software, and real-time updates.
- Securing endpoints: Device management, asset management, and patching.
- Zero Trust networking: Isolating device classes and limiting attacker’s movements across the network.
- Network access: Azure VPN, identity management, and Secure Access Workstation (SAW) infrastructure security
Device Management
Microsoft manages a vast network of interconnected employee devices, including over 264,000 Windows devices, requiring significant time and resources. To manage this, Microsoft is investing in AI-powered device capabilities that span the entire device lifecycle. These include:
- Integrated employee device procurement
- AI-powered predictive maintenance and intelligent troubleshooting
- Advanced insights and data-driven device administration
- Device security and vulnerability management
- Remote worker device experience
- Meeting rooms and calling
Foundations: Service Fundamentals
The second pillar of the major Microsoft Digital priorities is to maintain the highest standards of service fundamentals, essential capabilities and practices that enable the delivery of reliable, secure, and compliant services. Adhering to these standards ensures Microsoft plays a critical role in running the company’s business, enabling innovation, agility, and resilience.
Microsoft Digital service fundamentals are broken down into six areas:
- Privacy
- Tenant management
- Service resilience
- Accessibility
- Engineering fundamentals
- Compliance
Microsoft will focus on the following areas:
- Compliance: Aligning with global jurisdiction requirements and improving the security posture by deploying all patches and new releases.
- Privacy: Maintaining privacy controls per company policies.
- Accessibility: Continuing to make services accessible to all users.
- Resilience: Ensuring the resilience of services through sound service excellence practices.
- Engineering fundamentals: Following best practices for securing code repositories, software supply chains, build and release pipelines, and dev and test environments.
- Tenant management: Building a coherent asset management solution with AI across Microsoft 365 and Power Platform to serve both admins and users.
Defragmenting Our Employee Experience
Microsoft’s vision is to deliver a unified, connected, and personalized experience where users can access employee data, tools, and insights from one place. One key way is with Microsoft 365 Copilot, which functions as a “UI for AI” across employee services and tools. An example is the Employee Self-Service Agent in Microsoft 365 Copilot.
“We see AI as the key to unlocking the full potential of our employees, delivering personalized experiences that empower us to work smarter, faster and happier—unleashing the innovation and collaboration necessary for our success,” MacDonald says.
To achieve this vision, Microsoft is building a workplace where AI defragments the employee experience by:
- Providing contextual support in the flow of work.
- Reducing the number of sites and apps an employee must remember.
- Using Microsoft 365 Copilot as the “UI for AI,” making it simple for employees to find information.
Transforming Our Support Experience
Microsoft is using generative AI to transform how employees interact with support services. IT issues will be resolved remotely and instantly through conversational, personalized, and contextualized solutions, often without agent intervention. It will be done with a focus on:
- User experience: Self-help will use Copilot for Helpdesk to provide accurate and cost-effective issue resolution.
- Agent experience: Operational efficiency and automation powered by Copilot for Service will be integrated into the Service Operations Workspace.
Corporate Functions Growth
The third major priority is to improve how Microsoft supports corporate functions organizations. AI will play a fundamental role in transforming the business workflows. It will revolve around automation and improved efficiency.
“With AI, we have so many new ways to innovate,” says Patrice Pelland, a partner engineering manager for Microsoft Digital. “From saving valuable time for our legal professionals, to optimizing building occupancy, to helping our HR professionals support employees in the hybrid workplace, we have incredible potential to make our corporate functions more efficient and impactful.”
Some areas that are hoped to grow by taking advantage of AI capabilities include:
- Human Resources: Using AI-driven workflow scenarios, such as enhanced communications support and intelligent recruiting.
- Legal: Integrating AI into Corporate, External, and Legal Affairs (CELA) includes more discoverable legal findings.
- Global Workplace Services: Using AI to implement cost savings in workspace management.
- Travel and expense: Near-elimination of the traditional expense reporting process through AI-based and touchless experiences.
Microsoft’s digital transformation is a story of change, resilience, and adaptation across many eras of information technology. From traditional IT organization to a modern engineering organization, Microsoft Digital is a catalyst for change. With insights from employees and customers, Microsoft is committed to streamlining IT, prioritizing security, revolutionizing user services, and facilitating corporate functions growth. The goal is making Microsoft employees more productive.
“We’ve been through many eras of IT at Microsoft, and I’m so excited to lead Microsoft Digital during this era of AI,” D’Hers said. “The future of IT has never been so exciting!”
Lessons for organizations undergoing their own IT journeys:
- Be vision-led
- Foster a growth mindset
- Invest in people
- Insist on security
- Focus on collaboration and partnership
- Seek continuous improvement
- Embrace AI
