At 10 a.m. PST, Ron Markezich arrives at a small conference room in a building on the sprawling Redmond, Wash., campus -- headquarters of Microsoft Corp., the world's largest software company.

Adjacent to his seat is a video monitor. At the same time, back east, just outside Boston, another monitor flickers on in a similar conference room to prepare for the video conference that's about to start. Whether his position as CIO has anything to do with it, the video technology works fine, and Markezich begins another virtual meeting.

With 61,000 employees scattered around the globe, Microsoft executives are more likely to hold meetings online rather than face-to-face these days. But that's not the only unique aspect to Markezich's job of delivering IT services to Microsoft. He's also the company's chief beta tester and security guru, making sure Microsoft's crown jewels of intellectual property are well protected while simultaneously evangelizing the importance of the Internet as a way to connect with customers and partners.

Right now, Markezich's hands are quite full. Microsoft is preparing to launch a broad range of new products -- one of the firm's largest and most comprehensive offerings in years. These products will have a major impact on the public sector, a market in which the software giant has decided to substantially expand its presence (see Microsoft's New Vista on Government).

Microsoft's new products and its bullish attitude toward government IT reflect what Markezich says is the company's relentless appetite for driving business value, changing processes and meeting new customer demand. Satisfying those needs isn't easy, however. "My biggest challenge is making sure we invest our IT money in the places where we are going to get the best return on investment," he said. There's no lack of ideas on how and where to spend money, according to Markezich. "I could spend 10 times what I spend on IT right now."

Like government CIOs, Markezich is also challenged by the opportunities and threats presented by the Internet. "We have a huge opportunity to leverage the Internet to connect with customers and partners, which creates an opportunity to add value. But there are also huge implications in terms of security: threats from the outside, threats from the inside. We need to keep abreast of those threats."

Building, Sustaining, Securing

Markezich has been Microsoft's CIO since May 2004. Before that, he ran the company's IT infrastructure and line-of-business application organizations, and has been with the firm since 1998.

Because Microsoft is so large, it has three presidents -- one each for its business division, operations division, and sales and marketing division. IT governance is divided across these segments, and it's from these division leaders that Markezich gets the direction and feedback on where to spend IT money in the company. "It works fairly effectively," he said.

Investments in Microsoft's IT services are divided between what Markezich calls "sustainer costs" and "builder investments." Sustainer spending is the cost of "keeping the trains running," he said. "It's the cost of just maintaining and supporting our line of business applications to support our infrastructure without adding any new capabilities."

The goal is to reduce sustainer costs. "If you look at the last three years, we've taken $100 million out of the cost of running our infrastructure," Markezich explained. "We took [sustainer spending] down about 25 percent while we increased the number of employees, added new services and increased our service level agreements with our customers."

By reducing the company's infrastructure costs, Markezich has freed up builder investments for Microsoft's new business ventures and new ways to use technology to connect with customers. Overall, Markezich estimates that Microsoft spends approximately 3 percent of its revenue on IT.

As part of his job helping Microsoft's core business of developing and selling software, Markezich is the company's chief beta tester, running the latest products on his IT environment, testing and retesting their functions and features. Right now, product testing is in high gear. "On any given day, we have at least two products we are running in beta in our environment," he said.

And the testing will only get more intensive as Microsoft gears up for the largest release of new technology in the company's history. Markezich's IT group is currently running various beta versions of Windows Vista (the new client operating system), Longhorn Server, Office 12, Exchange 12 and Operations Manager.

As grueling as that may sound, the payback is tremendous, Markezich said. "When we release those products, I will already have them fully deployed throughout my environment, and will be standardized on the latest technology getting value out of them." The value translates into reduced costs, improved security and better worker productivity early in the products' life cycle.

Not surprisingly, security has been an area of critical focus for all of Microsoft's new software products and tools, and what Markezich sees as the biggest benefit from the "next wave" of products. "You will be able to do things like eliminate passwords," he said, "which in the public sector is a big concern."

Markezich pointed out that Microsoft is seeing many of its global government customers move toward a two-factor authentication process across their IT environment, something the company is already doing. "The new products give CIOs a lot more options in how they secure their environment, both from hackers on the outside and as far as securing your environment internally," he said.

Microsoft's own IT security policies are comprehensive and multilayered. Having already deployed Vista and Longhorn operating systems, network security is achieved by using smart cards regardless of the worker's location. Meanwhile, passwords have been eliminated.

At the next level, Microsoft quarantines all computers before allowing them access to the company's network. "We do that to make sure the machine meets all our security and corporate policies," he said.

Microsoft also uses digital certificates, without which, you can't get on to Microsoft's wireless networks, he said. "We age the certificates and expire them every so often."

In other areas of security, Microsoft uses Active Directory for identity management, and Rights Management Server to protect e-mail and office documents that are part of the company's intellectual property. The company also segments its network for critical assets, such as its source code, keeping them completely inaccessible to the outside.

Finally IT staff monitor and audit the company's network. "One thing we've learned is that any security policy we don't enforce won't be followed," Markezich said. "To enforce policies we care about, we scan the environment for certain content or security policy [breaches]. We take hard measures if we see a machine or document we think is not meeting policy," he said, adding that the company isolates suspicious elements until they have proven to conform to security policy.

Talking Strategy With Bill

The CIO's job is not just maintaining, securing and testing. Like any organization that thrives on innovation and creativity, Microsoft's CIO plays a critical change agent role because of his IT knowledge and unique view of the entire enterprise. More importantly, Markezich's IT services department is Microsoft's incubator for new products and services, not only testing core products, but also hosting them for customers.

A huge part of Markezich's job is to evaluate and help decide how the company's products should be designed and how they should work, especially in a hosted environment. "I sit down with Bill Gates every two months, along with other key business leaders, and we talk about how our products can better serve our customers."

Having that access and influence changes Markezich's IT organization from one that serves and supports Microsoft, to one that drives its product strategy. "I'll admit it's easier to do at Microsoft, because our product strategy is around technology, but one of my roles is making sure our products serve the needs of the customers, both with the products we ship today and the products now in production."

Like other CIOs who have become change agents, Markezich has seen his role shift dramatically from keeping the trains running on time, to driving strategic value and finding ways IT can contribute to the business process central to any organization. "CIOs have to do that, otherwise they'll become obsolete," Markezich commented. "CIOs can no longer solely focus on keeping the network up and driving down the costs. That function will not be worthy of the CIO's title in the future. You have to figure out how you, as a CIO, can drive your organization's business growth, otherwise you will be relegated to a back-office function, buried within the organization."

Tod Newcombe  |  Senior Editor

With more than 20 years of experience covering state and local government, Tod previously was the editor of Public CIO, e.Republic’s award-winning publication for information technology executives in the public sector. He is now a senior editor for Government Technology and a columnist at Governing magazine.