The challenge:

China is an extremely important market for Microsoft. With 1.35bn potential consumers and hundreds of thousands of SMEs, it is critical that the company establishes the infrastructure necessary to service this market. This long-term priority for Microsoft is particularly important due to the recent launch of their cloud offerings (Office 365, Azure, SharePoint, CRM and InTune) for SMEs, large enterprises and individual users in China.

When Microsoft started planning to launch cloud offerings in China, treasury quickly realised that this would not be business as usual. Chinese law required that data be hosted onshore and Microsoft had no data centres in China.

The model treasury created involves selling online products (Office 365 and Azure) to Chinese businesses and consumers through a third-party operating entity, a Chinese reseller named 21V. This services-based sales channel will allow Microsoft to increase the market opportunity by being able to provide enterprise-quality services onshore. Customers will subscribe through 21V in local currency, and have their data hosted locally in 21V’s data centres.

Launching any new product, let alone through a third-party operating entity, creates a lot of complexity. Microsoft teams in China had largely not dealt with online business transactions before, nor did 21V have the infrastructure to support the treasury operations WOCS runs. In addition, both products were to be sold in two ways, via Web Direct and via traditional sales led by Microsoft.

The solution:

This meant multiple sets of policies and processes, tools and systems, and controls and compliance issues. “WOCS team in Asia had work cut out for them,” says Jose Luis Marti, Group Credit Manager. The unique business model required a huge amount of effort and collaboration across various Microsoft teams globally. The process of building end-to-end processes and systems to support this model was highly complicated and required cross-group collaboration for many months. Teams from across Microsoft, including treasury, came together to overcome financial, tax, legal and system issues within tight timelines.

Challenged with this, the treasury team worked with various stakeholders and operation entities in the creation of ‘Lead-2-Order’ and ‘Order-2-Cash’ processes. Since 21V had no infrastructure to support these processes, treasury teamed up with Cloud Business Operations Readiness and 21V’s finance team to create processes like credit check, collections, cash application, bank account reconciliation and so on. Alongside this, treasury also worked with 21V’s finance team in the creation of treasury policies to manage the business and scale. Some of the major process changes brought in were treasury policy, escrow account reconciliation, credit risk ownership and universally accepted definitions.

Best practice and innovation:

With China being a key online growth market, the solutions that Microsoft created were unique, supported by scalable business processes that enabled a higher revenue growth, minimised risk and higher cash collection. In addition, Microsoft’s WOCS Asia team worked with 21V to develop the profile of their new treasury team. Microsoft treasury has embraced the challenges of doing business in China. By thinking creatively, and working with the local Chinese operating entity, 21V, to create entirely new business capabilities and operations in sales, finance and treasury operations, they have established the credit, collections and treasury function for the cloud business for the entire Chinese market going forward.