Regime change at Microsoft

Regime change at Microsoft

Summary: Less than 48 hours after announcing that Windows Vista is delayed - again - Microsoft has split the Windows division into eight groups and brought in a new top dog. One Microsoft employee asked the other day, "Where's the freakin' accountability?" This might be the answer.

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TOPICS: Windows
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Various news outlets, including The Wall Street Journal (subscribers-only link) and News.com, are reporting that Microsoft is about to split its Windows division into eight groups and bring in a replacement for the retiring Jim Allchin, who is currently in charge of all things Windows. The most important of the eight divisions is the new Windows and Windows Live group. According to the Journal, Steven Sinofsky, senior vice president of the Office group, will be in charge of that division and will take over planning for the version of Windows that will follow Windows Vista. (The Journal refers to it by its old code name, Blackcomb, but Microsoft has already confirmed that the new code name is Vienna.)

I spent two full days last week in Redmond meeting with managers from the Vista development team. This announcement came as a surprise to most of them, I’m sure. (Either that, or I never, ever want to play poker with anyone in this company.) There's no doubt in my mind that this reorg is a direct response to this week's slip in the Windows Vista schedule.

It’s gotta be a pretty dispiriting feeling to know that the project you thought was almost ready to wrap is instead going to go on for three months more. A few hours after the announcement, the anonymous Microsoft employee who throws brickbats (and occasional bouquets) under the nom de blog Mini-Microsoft delivered a fulmination that was pitch-perfect:

Vista 2007. Fire the leadership now!

In my afternoon daydream, after Allchin's email went out, I imagined all the L68+ partners from the Windows division gathered together and told, "You are our leadership. When we succeed, it is directly because of how you lead and manage your teams. When we fail, it is directly because of how you lead and manage your teams. We've had enough of failure and we've had enough of you. Drop off your badge on the way out. Your personal belongings will be dropped off at your house. Now get out of my sight."

Sigh. Well, I'd settle for the version: "... When we fail, it is directly because of how you lead and manage your teams. We reward success. We do not reward failure, especially sustained failure that has directly affected this company, its future, and its stock price. You will not receive any incentives this year. You will not receive a bonus. You will not get a raise. You will not be awarded stock."

People need to be fired and moved out of Microsoft today. Where's the freakin' accountability?

Indeed. The timing of this reorg, less than 48 hours after the official announcement of the schedule slip, says Allchin’s performance rating just slipped, maybe even to 2.5. It’s hard to see it as anything other than a slap in the face. And maybe an invitation to get a head start on those retirement plans while Sinofsky takes over the last stages of Windows Vista and Office 2007. A story in yesterday’s Journal previewed the change and added these details:

Tapping Mr. Sinofsky, 40 years old, adds an executive from Microsoft's Office group to the Windows division, Microsoft's largest contributor of revenue and profit. Mr. Sinofsky, who joined Microsoft in 1989 and served as a technical assistant to Chairman Bill Gates, has earned a reputation in his current role as head of the Office product group as a no-nonsense manager willing to push back against engineers, according to people familiar with the executive.

Microsoft's expected reorganization partly reflects an effort by Chief Executive Steve Ballmer to instill management rigor at the company, which has been marked by slower growth, an increasingly diverse product line and a new array of competitive threats.

“A no-nonsense manager willing to push back against engineers”? An effort to “instill management rigor”? Ouch. Those are damning indictments of current management.

This looks like an actual accountability moment in Redmond. A little more honesty, internally and externally, would help, too. For starters, someone should recall Tuesday’s breathtakingly dishonest press release. I’ve put the most bald-faced assertions in bold face below:

Microsoft Corp. today confirmed that Windows Vista, the next generation of the Windows client operating system, is on target to go into broad consumer beta to approximately 2 million users in the second quarter of 2006. Microsoft is on track to complete the product this year, with business availability in November 2006 and broad consumer availability in January 2007. …

“Product quality and a great out-of-box experience have been two of our key drivers for Windows Vista, and we are on track to deliver on both,” said Jim Allchin, co-president for the Platforms & Services Division at Microsoft. “But the industry requires greater lead time to deliver Windows Vista on new PCs during holiday. We must optimize for the industry, so we’ve decided to separate business and consumer availability.”

No wonder they delivered the news on a conference call. Even Bagdad Bob would have had a hard time keeping a straight face while reading the line “We must optimize for the industry.” I’m not even sure what that last phrase means. It sounds to me like someone’s trying to deflect the blame for this whole mess. Looks like they didn’t succeed.

Update 23-Mar 6:00PM EST: The press release announcing the reorg is here.

Topic: Windows

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16 comments
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  • You want honesty?? From Microsoft???

    Bwahahahahahahahah. You're kidding right?

    They're so full of crap everyone in the executive suite has brown eyes.
    shawkins
  • What mess?

    [i]I?m not even sure what that last phrase means. It sounds to me like someone?s trying to deflect the blame for this whole mess. Looks like they didn?t succeed.[/i]

    It's not as if the exact timing matters. Microsoft's cash flow has almost nothing to do with their release schedule, since the OEMs pay pretty much the same per-CPU rate no matter what they load [1]. Likewise, Enterprise customers pay per-seat regardless of what they run (including Linux, for that matter.)

    Bottom line: no impact on the bottom line. There's a small PR impact, but MS was getting ready to drop a billion or two on promotion -- delaying that will likely be a net plus.

    [1] Yeah, they get stiffed a bit on any leftover licenses of the prior edition, but MS lets them convert without too much of a charge. The net benefit to MS is chump change.
    Yagotta B. Kidding
    • What's the lost opportunity cost?

      Revenue may be net neutral, but the costs of all those developers working for an extra quarter is far from trivial. Allchin publicly committed to wide availability of Vista in time for the 2006 holiday season. It should have been done in August for retail availability in October. Instead, developers are going to be working on the project for three months after it should have been finished. What could they have been building during those three months if they had managed to hit their dates? How many support issues could have been resolved early? How many new revenue streams could have been generated? How many hooks to paid and unpaid Windows Live Services could have been built.

      Money isn't everything. Some resources are even scarcer.
      Ed Bott
      • Lost opportunities

        [i]What could they have been building during those three months if they had managed to hit their dates?[/i]

        A full 3D holographic, audio-syncronized version of Clippy?

        They produce what they produce. This year it's tail fins, next year it's dummy hood scoops, the year after that it's non-functional spoilers.

        It's all revenue-neutral, so if you're worrying about costs Microsoft could just as readily cut staff and save all the way 'round. For whatever reason, they don't -- in which case the payroll is what it is.

        Opportunity cost is meaningless in this case since you're comparing a fantasy (the schedule) to reality, not some hypothetical alternative decisions (which is where "opportunity cost" has meaning.)
        Yagotta B. Kidding
        • By that logic, management is completely irrelevant

          >> They produce what they produce.

          It's industrial output. If the factory (in this case the collected development resources) can produce essentially the same product in 12 months under one set of managers and 24 months under another set of managers, you don't think there's an opportunity cost to measure?

          Effective management can make a big difference.
          Ed Bott
          • Effective management can make a big difference.

            Of course it can. In Microsoft's case, it can recognize where the actual profit opportunities lie (reduced costs) vs. historical nostalgia (people standing in line at midnight.)

            The current management mixes a sound grasp of what Microsoft's real business is (rents on computer sale and use) with completely missing the implication: money spent on chasing blockbuster releases will never be recovered.

            Either sack the majority of the Windows developers or give them something useful to do, such as working on new products where Microsoft doesn't already have a lock on the market with no particular chance to increase the TAM, the penetration, or the unit price.
            Yagotta B. Kidding
          • So the ultimate software already exists?

            Don't confuse selling Windows to the public with the role of Windows in the software industry.

            Every program that runs on Windows needs to sell new versions. Office isn't the only application that benefits from increased capabilities.

            That's why a lot of Vista's new capabilities are - supposedly - being prpared for install on XP. Microsoft may well be sacrificing Vista sales to help developers get a bigger market with the new capabilities as quickly as possible.

            You wrote:

            The current management mixes a sound grasp of what Microsoft's real business is (rents on computer sale and use) with completely missing the implication: money spent on chasing blockbuster releases will never be recovered.

            I'd call it monopoly maintenace if that weren't a sensitive term legally. Microsoft need not be the product used on nearly all computers if it didn't provide value to the people who want to sell software and hardware.

            A better machine sounds even newer with better software.

            If you were right, computing would be a dead industry.
            Anton Philidor
          • Different model

            Have a look at the EDA industry (http://www.edac.org)

            These people have [b]extremely[/b] demanding customers who [b]need[/b], not just "want," major improvements in function and they need it in a timely fashion. Miss a release and your competition will have your customers.

            They don't do blockbuster releases. They make money -- plenty of it. Every release (and there tend to be dozens per year) has some valuable improvement. Customers pay to stay on support so they can get those incremental releases.

            If Microsoft could wean themselves of their desire to recapture the "rush" from long ago, they'd have a healthier business.
            Yagotta B. Kidding
          • Different markets.

            Very few CEOs or CIOs will have their drivers waiting in line for them at midnight on the day Vista becomes available.

            Having a consumer market anxious for a new version of Windows would boost morale at the company, make money, and assure that the new capabilities are becoming known and valued.

            Though Microsoft probably makes more money from the enterprise than the home market, there are a lot of positive results from paying attention to home users.
            Anton Philidor
          • Marketing expenses

            ---money spent on chasing blockbuster releases will never be recovered---

            Thinking further along these lines, why spend billions of dollars on advertising for a monopoly product?
            tic swayback
          • tic?

            You asked, "... why spend billions of dollars on advertising for a monopoly product?"

            Why does Apple ever change the hardware they sell? Why does OS X ever change?

            The answer seems pretty clear.
            Anton Philidor
          • Anton: wrong question

            [i](tic) asked, "... why spend billions of dollars on advertising for a monopoly product?"

            Why does Apple ever change the hardware they sell? Why does OS X ever change?[/i]

            Tic qualified his question with "monopoly product." Which question manifestly doesn't apply to Apple.

            The point of advertising is to recover the expense of advertising in increased profits. Increased profits come from:
            * Increased TAM (total available market)
            * Increased market share
            * Increased sale price

            Microsoft's TAM is, basically, the whole computer industry. Nothing about Vista is likely to grow the computer industry.

            Microsoft's market share is, for all practical purposes, 100%. No way are they going to recover $10 billion by squeezing out the last few percent, and Vista is frankly unlikely to do that anyway.

            Microsoft's prices are set at the level where any increase will result in reducing the TAM (classic monopoly pricing model). Again, Vista isn't going to change that.

            Conclusion: Microsoft isn't going to get its money back from advertising Vista, except in the hand-waving "brand recognition" sense.
            Yagotta B. Kidding
          • Apple has a monopoly on Macs.

            Apple releases new products with the expectation that the current customer base and some people who are not current Mac owners are going to buy the products.

            Microsoft also can expect repeat and new business for Windows, though admittedly the non-Windows market is smaller than the non-Mac/OS X market.

            I think you may have meant the company will spend $10 million advertising Vista, but even so I'm uncertain what you mean by this comment:

            Microsoft's market share is, for all practical purposes, 100%. No way are they going to recover $10 billion by squeezing out the last few percent, and Vista is frankly unlikely to do that anyway.
            EoQ

            At an estimated OEM price of $50, recovering $10 billion would require 200 million additional sales, which would be unlikely, but obtaining $10 million worth of additional upgrades would be a very reasonable expectation.

            Think of the target market as owners of XP, primarily. Getting them to want to upgrade will take some effort, but significant success is likely.
            Anton Philidor
      • As an example...

        ... what was the cost of working on XP SP 2?
        Anton Philidor
    • Face?

      Could the issue here be more to save face, and effects on the stock
      price, rather than effects on revenue?
      tic swayback
      • Good point

        We all see a lot of denial about schedule slips (most often self-denial) every day, and that's among people who have mortgages on the line.

        When you're dealing with people who are doing for other reasons than the paycheck, you're obviously dealing with other motivations too.
        Yagotta B. Kidding