TOWERGROUP EXAMINES MICROSOFT'S USE OF SWIFTNET TO CONNECT ITS GLOBAL BANKING NETWORK

AFP Conference, Las Vegas, NV - 16 October 2006

New Research Examines Drivers Behind Decision and Lessons for Global Companies Facing Similar Challenges

Microsoft's decision to use SWIFTNet (SWIFT's secure IP-based network) to standardize connectivity between its internal treasury and accounting systems and its global banking network has been one of the year's most discussed initiatives in the global treasury arena. New research from TowerGroup examines some of the lessons learned to date by Microsoft, which went into production on SWIFTNet earlier this month with six pilot banks - as well as implications of this project on the larger issue of SWIFT's role in connecting banks and their corporate clients.

Microsoft currently has approximately 1,000 bank accounts held at almost 100 different banks globally, with net cash generated from operations during the last fiscal year of over US$14 billion.
Given the scale of these numbers, Microsoft's corporate treasury department faces myriad daily challenges as it looks to efficiently and securely manage the company's assets around the globe.

"Microsoft's dual role as a consumer of corporate banking solutions and a provider of technology to corporations and financial institutions makes its situation somewhat unique," said Susan Feinberg, research director of the Wholesale Banking research service at TowerGroup and author of the research. "Yet the drivers that led the company to search for a standardized platform for business-to-bank communications - which TowerGroup calls B2Bank - are no different from those affecting many other large corporations across all industries. These factors include: the need for increased control and oversight as a result of Sarbanes-Oxley regulation; improved visibility; and enhanced efficiency for the treasury department in its role as steward of the company's assets."

TowerGroup believes this project is significant for the following reasons:

- In tapping SWIFTNet, Microsoft is seeking a standardized process for communicating with all of its banks in a secure, highly reliable manner, while supported the automation of multiple business processes in corporate treasury as well as accounts payable and receivable. Yet the vision for SWIFTNet at Microsoft extends beyond cash operations to become the financial messaging platform across the enterprise, including for communications with capital markets counterparties.

- The support of a highly recognizable company such as Microsoft will help to generate global interest, raising the overall visibility of SWIFTNet within the corporate treasury community just as SWIFT is removing some of the barriers to corporate participation with its new SCORE model. Microsoft has the leverage in the global banking community to encourage this movement by a large number of banks otherwise not ready, willing, or able to support SWIFTNet as a corporate access channel.

- Microsoft's willingness to share lessons learned from adoption of SWIFTNet for its own internal use across the enterprise should be considered a positive development for companies of all sizes that are interested in using a standardized, secure banking interface.

Feinberg continued, "While some may attribute self-serving motives to Microsoft's vocal support of SWIFT solutions for corporations, the company is no doubt taking an active role in advancing an important agenda for the entire corporate treasury space. In its efforts to educate the corporate community about SWIFT - and to educate SWIFT about the needs of corporate clients - Microsoft is exerting influence on all stakeholders in the service of moving the needle on standards and automation."

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