Microsoft Corporation: The Design of Microsoft Support Network 1.

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1. What factors suggest that Microsoft's PSS Division needs a more
comprehensive and flexible approach for its service offerings?
There was an upward spike in customer service costs in periodic review of the
division's Profit and Loss statement. It was projected that service expenditures
would become an acute problem in three years. At the same time, a PSS market
research survey discovered that customers, particularly those that used several
Microsoft products, were very confused and frustrated with Microsoft's technical
support services. Beside this, Microsoft's support services were not as good as those
offered by some competitors. Several factors contributed to the nondescript nature
of Microsoft services. Previous support service policy had been determined at the
product level. Annually, each product manager negotiated with PSS over the type,
extent, and pricing of services to be offered to customers along with their products.
Because Microsoft had 150 products, the result was a hodgepodge of service
offerings. Some products had no support services, some offered unlimited "free"
service that was accessed by phone via a "toll" number, and still others provided
extensive telephone service "for fee". For customers, particularly those that owned
and used several Microsoft products, the service offerings were confusing because it
was difficult to know which service came with which product. Moreover, expert
users felt that they were paying for services they didn't need on basic applications.
At the same time, they could not get sophisticated support services on some of
Microsoft's newly introduced line of highly technical advanced systems, even if they
were willing to pay extra. Because of all this factors it was clear that Microsoft s PSS
Division needed a comprehensive and flexible support service. Bill Gates advocated
that new approach was needed and that company was ready to invest in the
development of its support services. He expected innovative solution about this
problem.
2. Based upon the guidelines that senior management has provided to
Trish May, what product support strategy has Microsoft envisioned?
At first development of an overall strategy for support services were needed, that
would be simple enough to understand, communicate, and execute. Second, they
had to address several tactical concerns such as when and how to charge for these
services. Early on in their analyses, the task force hit upon the idea of using a
matrix to summarize the various service offerings. Members referred to it as the
Microsoft Support Network 1.0. This was an innovative approach to the customer
support problem that Microsoft faced. The concept of a service-offering matrix
received enthusiastic and universal approval among Microsoft managers, but there
was widespread disagreement over the make-up of the rows, columns, and
elements, because there were some different ways available for its construction.
3. How should the Microsoft Support Network 1.0 matrix be structured in
terms of rows and columns?
The rows of the matrix would consist of major service groupings, while the columns
would capture the differences in those services across product or customer segment

categories. In turn, each element in the matrix would describe a specific service
offering and include a fee structure. To avoid customer confusion, the group
concluded that 4 rows and 4 columns should be the largest size of the matrix;
however, no research had been done to confirm this.

As was mentioned above there was disagreement about how to construct the rows
and columns of the matrix. There were some different approaches: Problem-Based
Service Rows, Responsiveness-Based Service Rows, Product Category Columns and
Customer Segment Columns. Alternatives:
#1: Problem-Based Services x Product Categories

#2: Problem-Based Services x Customer Segments

#3: Responsiveness-Based Services x

Product Categories
#4: Responsiveness-Based Services x
Customer Segments

Reason why #3 is best:

1. The only disadvantage is with product
managers internal all other alternatives
have external disadvantages which are out
of the reach of the companys
management
2. Internal survey results:

Over 80% of all service calls came within 90-days of software acquisition.
About 71% of all customers never called. Of those that did, most called only 1 or 2 times.
About 15% of all customers generated more than 80% of all calls. Frequent callers needed
highly customized and personalized support.
Less than 15% of all callers required extended hours of service availability (i.e., more than 8hours per day). About 5% of all callers needed 24-hour service availability.
The cost for all support services averaged about 9% of retail dollar sales. Costs for all 150
products clustered tightly around the categories given in Exhibit 2: Office Family of Products
(5% of retail sales), Advanced Applications (5.5%), PC Operating Systems (7.5%), Hardware
(8%), Developer Products (10%), Advanced Operating Systems (12%), and Servers (12.5%).
Table 1 provides more detailed forecasts of costs for 1993.

4. What implementation problems should PSS managers anticipate? How

can PSS managers successfully overcome them?
Industry pundits speculated that it would be impossible to eliminate "free"
Installation & Start-Up service on application, PC operating systems, and developer
products. Customers would interpret "fees" for this period as an unethical way for
software vendors to "pad" their profits. Many would wonder if suppliers deliberately
made their software difficult to use so that customers would have no choice but to
buy service. Managers would have a more difficult time designing Usage &
Productivity assistance. While service engineers could address most problems
associated with application software at a relatively low cost, they would incur

significant costs for PC operating systems, development products, and hardware

problems. In addition, problems that occurred after the first 90-days of ownership
were particularly costly. Systems Integration and Customized support services
would be quite expensive to deliver. There are two solutions about this issue first is
to include systems integration and customized support as standard and cover their
costs via a hefty price premium on software or sell it as an option at a significant
fee. If services were offered as a function of responsiveness, managers would have
an easier time making fee decisions. They could offer Standard Support for free on
an unlimited basis for desktop applications. At the same time, they would probably
have to charge personal operating systems, hardware, and development products
owners a fee after 90-days because such usage and productivity problems w ere
often quite costly. They would also charge a significant fee for Priority and Premier
Support due to staffing requirements. The task force had to make a series of
intriguing decisions concerning what services "not to offer". Given that most
applications and PC operating systems software was being "pre-installed" by original
equipment manufacturers (e.g., IBM , Compaq, Dell), some managers argued that
installation and start-up problems should be handled by those firms. At the same
time, some task force members argued that local computer dealers should be asked
to handle basic usage problems, particularly those that occurred within 90-days of
purchase. As for the high-end services, the firm would have to make some difficult
choices. The task force would also have to determine how to charge customers for
support services, particularly those provided over the phone. Competitors were
relying upon a variety of approaches. Some sent an invoice following the call.
Others charged via 900# or had service engineers take credit card numbers.
Alternatively, some competitors either included in software packages or sold
separately "incident coupons" that entitled the bearer to make a number of prespecified technical support calls. Adobe Corporation took a different approach. It
provided customers with "service credits" as a function of the dollar value of Adobe
software that they purchased. The more software purchased the more credits
receive d. When needed, the customer could redeem service credits for technical
support.

Given the large size of many developers and corporate accounts, PSS managers
would have to decide how many individuals within a customer firm would be eligible
to receive service under a technical support contract. Furthermore, managers would
have to designate specific developer programmers and corporate MIS personnel as
points of contact for service initiatives. For international companies, access from
specific geographic regions would also have to be specified. Communicating the
details of the Microsoft Support Network 1.0 would be another challenge for
Microsoft. Company wanted it s customers to be delighted in their ability to choose
from a variety of high-end services while concluding, " I don't have to pay for what I
don't need!" It was not at all clear how these communications goals would be
achieved.