CFO Gears His Start-Up for Microsoft .NET

Avanade, a joint venture between Microsoft and Andersen Consulting, has lined up 90 customers in its first year of business.
Joseph RadiganMarch 20, 2001

Richard Mahoney wasn’t exactly looking to leave the hotel business, but after 20 years, he wasn’t opposed to a change of pace, either. So early last year, when an executive recruiter called the former CFO for Wyndham Hotels, he was more than willing to go on the interview.

After meeting with Mitch Hill, CEO of Avanade Inc., a joint venture between Microsoft and Andersen Consulting, Mahoney became the company’s CFO and its second employee. Andersen recently changed its name to Accenture.

“This is kind of a mid-career change for me, to move to a company that has no debt from a business that runs entirely on debt,” says Mahoney. “This is a rare chance to build something new.”

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In the year since, he’s watched the organization grow to 1,100 employees with $1 billion in backing from its two parents. Microsoft has made a cash commitment of $385 million, and Accenture has permitted Avanade to raid it for 45 percent of its staff. Another 6 percent or so has come from Microsoft, and the remainder has been hired from the outside world.

“Accenture really let us dig into their depth chart,” Mahoney says.

Mahoney contends the two companies opted to create a joint venture because, although they were committed to working closely together, they felt the joint-venture structure made the most sense.

“We wanted a global rollout, and we wanted to form a slightly different culture,” he says.

The company’s goal is to sell systems and services based upon Microsoft’s .NET Internet strategy into the high-end, global corporate market. Accenture is supplying much of the vertical market expertise, while Microsoft is supplying the support for specific technologies.

While Mahoney came out of the hotel industry and is not an engineer by training, the move to a technology consulting firm was not completely new to him. A few years ago, he temporarily assumed the top technology job at Westin Hotels after it had been bought by Starwood.

Now, even though he’s CFO, Mahoney has gone back to being primarily an end user and less of a hands-on manager of the IT department. The chief technology officer, Ashish Kumar, handles that. But he’s well aware that the company, in Microsoft parlance, “eats its own dog food.” It’s running its own operations on the .NET architecture.

Last year, Avanade started out with a Navision 2.5 accounting system, but it is in the process of upgrading to PeopleSoft 8.0. The company will migrate its U.S. operations to PeopleSoft before its fiscal year ends in October. It will then switch Europe over. The Asian business will make the transition after the first of the year.

Mahoney says the company is making the switch to PeopleSoft because “we just believe that we need something that’s more robust and has deeper project accounting capabilities.”

In addition, he’s quickly become a believer in Microsoft’s .NET strategy.

“This is the first time I’ve ever been in a place where we are virtually paperless,” Mahoney says. “All of our reporting, all of our time reimbursement with our project accounting goes through the system. But it goes deeper than just our accounting systems.”

Mahoney says, “When someone joins us, the system decides the training courses.”

The company is also making use of .NET in its management reporting. Mahoney says, “It’s at the heart of how we use information, distribute it, our policies and procedures, and our financial reporting. Everything is off of a digital dashboard.”

Mahoney continues, “It’s funny. When we walk into our monthly meetings, everyone just walks in with their laptops instead of these huge binders. It’s very effective and efficient.”

The management structure of the company includes representatives from both Microsoft and Accenture. In addition to CEO Hill, the board includes Microsoft CFO John Connors and Paul Flessner, who runs the company’s .NET business. The Accenture representatives include Jack Wilson, who runs the company’s venture group, Dave Hill, who heads solutions technology, and Joellin Comerford, a managing partner.

Of the 90 customer projects currently underway, three of the largest are with retailers. Adam Warby, a 10-year veteran of Microsoft, and Avanade’s vice president of sales and marketing, says the projects are at too-early a stage to discuss in detail.

For Mahoney, life is slightly different at a private company, but not entirely.

“We don’t have the reporting requirements of a public company,” he says. “We can keep our heads down and focus on building our business without distractions. At the same time we’re trying to run our company as if it were public.”

Every quarter, the firm holds an earnings conference with its employees, led by CEO Hill and Mahoney. At various times, the conferences will include other senior executives such as the chief technology officer. Employees from the company’s offices overseas are conferenced in and can ask questions of management.

While no initial public offering is in the immediate future, Mahoney says, “We want to operate like a public company in the private space.”