Microsoft 3.0: A meaner, leaner devices and services machine?

Microsoft 3.0: A meaner, leaner devices and services machine?

Summary: Microsoft announced its latest expected cross-company reorg designed to better deliver on its new devices and services charter. Here's who ended up where.


On July 11, Microsoft officials announced details of the latest company-wide reorg, designed to help the company make itself into a leaner, meaner devices and services machine.


First order of business: Steve Ballmer stays on as CEO. There's no change in leadership at the very top. And basically all the other new "winners" in the reorg are already household names at the company.

The new Microsoft is not going to be cleaved cleanly along devices and services lines, as some had thought and heard. The new org is a little more complicated than that.

Gone are the current five Microsoft business units — Windows, Server and Tools, Microsoft Business Division, Entertainment and Devices and Online Services — each with its own President and Chief Financial Officer.

Going forward, all three of Microsoft's operating systems will be lumped together into a single division, so as to share more technologies and components. And marketing and business strategy for all of Microsoft's product lines is moving out of the individual business units and into centralized, cross-company groups. 

These changes will be phased in over the next several months, though some of Microsoft's roughly 100,000 employees will begin working almost immediately with their new groups. (From what I am hearing, there are no layoffs today as part of this changing of the guard.)

Who's In, Who's Out

In the new org, reporting to Ballmer are heads of four new engineering groups, along with a handful of executives in charge of new centralized functional groups. Most of the new leaders are familiar names to those who know the company. The four new engineering chiefs:

Terry Myerson, current head of Windows Phone engineering, is now the head of the new Operating Systems Group at the company. Myerson is going to run engineering for the Windows, Windows Phone and Xbox operating systems. Anything that attaches directly to these OSes, such as Xbox Live, also reports into this new OS division. All of these OSes are currently running on a common "core" based on Windows NT. Update: SkyDrive also seems to be part of this division.

Qi Lu, current head of Microsoft's Online Services Division, is now the head of the new Applications and Services group. Lu is in charge of engineering for Bing, MSN, Office 365, Office servers (Exchange, SharePoint, Lync) and clients, Dynamics CRM and ERP, Skype and Yammer.

Satya Nadella, current head of Microsoft's Server & Tools business (STB), becomes the head of the new Cloud and Enterprise group. Nadella remains head of engineering of all of Windows Server, System Center, SQL Server, Visual Studio and all other current STB products (including Windows Azure), plus the Global Foundation Services unit at the company. Windows Embeded also stays in this group, rather than going with the OS one.

Julie Larson-Green, the current head of Windows and Surface engineering, becomes the head of engineering for the new Devices and Studios group. In her new role, Larson-Green will run engineering for Surface, Xbox, mice, keyboards, games and entertainment.

Kurt Delbene, who has been the President of the Microsoft Business Division up until now, is retiring from the company, officials said today. Don Mattrick, the President of Microsoft's Interactive Entertainment Business recently accepted a CEO spot at ZyngaCraig Mundie is "stepping off" the Senior Leadership team to work on an unspecified "special project" for Ballmer through the end of calendar 2013. He will remain a consultant through the end of calendar 2014.

The new, centralized supporting divisions formed in the reorg include the following:

A new cross-company marketing group will be headed by Tami Reller, who is currently the Chief of Marketing and Chief Financial Officer of Windows client and Surface.

A new cross-company evangelism and business development group will be headed by Tony Bates, who is currently president of Skype. Microsoft's current Development and Platform Evangelism (DPE) team moves over to Bates' new organization and out of Nadella's as part of this change, as do the business strategy teams that are currently part of individual product groups. Bates is also overseeing key partnerships with Microsoft partners like Yahoo and Nokia.

A new finance group will be headed by Microsoft's current Chief Financial Officer, Amy Hood.

The legal affairs group continues to be headed by Brad Smith, and the human resources group by Lisa Brummel.

For now, there are no changes as to how Microsoft's sales/partnering divisions are organized, though that may change in time.

Kevin Turner, the current Chief Operating Officer, remains COO. But Turner loses responsibility for centralized marketing in the reorg. (Chris Capossela, who currently is acting chief marketing officer, will remain in charge of Microsoft's consumer/retail marketing and work for/with Turner.) And the OEM division at Microsoft now reports, via a dotted line, to Bates, rather than entirely to Turner.

The Whys Behind the Reorg

As I noted recently, the "whys" behind Microsoft's reorg are as interesting as the "whos."

Microsoft's goal with this reorg is to try to make itself into a more agile and responsive tech company. While Microsoft execs have been talking internally about a "One Microsoft" for months, if not years, this reorg is supposedly going to help the company move from a bunch of siloed Microsofts into more of a cohesive, collaborative entity.

The new structure is supposedly going to help Microsoft deliver new hardware, software and services more quickly by aligning teams working on common programming interfaces, common stores, common apps and common services across a family of devices from Microsoft, its partners, and, in an increasing number of cases, even from its competitors.

As expected, there's no separation along consumer/business lines with this new reorg. Microsoft execs are intent on blurring even further the lines between consumer and enterprise with its products and services.

Topics: Microsoft, Cloud, Collaboration, Mobility, Smartphones, Tablets, PCs


Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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  • still a mess

    Why keep entertainment and games under devices?
    • Windows

      To give Julie a bone after taking away Windows?
      • :)

        Seems she is punished for not very successful performance of Windows 8.
        • Julie Larsen

          I believe that Don Mattrick was original going to head this div but he left so JLG was asked to take over.

          She is weak but somehow Ballmer loves her.
          • JLG

            She's more than weak -- she's the source [with Sinofsky] of so much which is wrong with the GUIs of Office, Win 7 & 8.

            Windows no longer supports windows since Win7. There's no easy way gobally to remove or prune the Ribbon. Outlook's a nightmare.

            Office is no longer, since 2003, a "Productivity Tool" but an "Obstacle Course".

            As a writer who has, perforce, composed books in Word, I've found every version of the app incapable of handling the outline function in a commonsense fashion. [One should be able to expand an outline, move sections or pages among its branches, and render it entirely invisible, for seamless structural editing. Word was devised by people who do not write and apparently cannot read.]

            She continues to stuff rainbows down the throats of the user-base, trashing models that historically **work**.

            JJ Brannon
          • If people valued carefully structured writing...

            ...they'd be using Adobe FrameMaker. The Word team hasn't put a lot of work into outlining, because too few users have insisted on the improving of it.
          • Julie Larsen Green sidetrack

            Thank you for the software recommendation, but the subject was MS and JLG's obstinate wrongheadness [not to be confused with incompetence, a charge which I am not assigning her].

            I attend two or three writing conference a year and not one of the scores of commercially published and academic writers I know use Framemaker and all have complained about Word's dysfunctionality as a word-processing program.

            The problem is word was design by functional "aliterates", those that can read but choose not to do so; Microsoft's core problem in a nutshell.

            Part of Sinofsky and JLG's problem is that the mass of telemetry data is largely derive from idiots. Enterprise professionals largely prohibit telemetry reporting and uninformed users generally don't know enough not to deactivate the sharing.

            Jobs famously commented that Apple decided what people needed because people didn't know what they needed until they saw it. MS ineptly designs its OS and apps from clues left by the ignorant, thus catering to the clueless.

            Most people cannot customize and pare menus? Replace menus with an All-One-Can-Eat buffet of Ribbon-ization.

            Majority of private users clutter the Desktop with thousands of icons because they do not understand filing? Create the Search model in Win7 and remove the Desktop in Win8 -- without regard to all the professionally competent and power users.

            MS hands us Rainbow crayons with which to scrawl and Fisher-Price interfaces.

            And they can't understand why their market continues to erode.

            JJ Brannon
          • catering to the clueless

            Couldn't of said it better! Idiocracy is happening
            Owen King
    • Those have a strong connection

      to the Xbox first and are different than apps in most regards.
      • "A meaner, leaner devices and services machine?"

        So does this mean Ballmer will appropriate the Linux kernel and claim he invented it?
        • Hah

          I am sure your 6 fellow Linux users, including Torvalds and SJVN, would agree with you full heartedly.
          • No there's only one Linux user and that's myself

            Comes with being immortal ya know. I'm the greatest 1% threat known to marketshare mankind of all time.
  • Dynamics Dotted Line Reporting

    Are they staging Dynamics to be dumped? Or does this dotted line reporting indicate Dynamics is little but a way to "sell the stack". Full disclosure: Not independent since I consult with a competing ERP system -- but still curious about the wording/treatment in today's reorg.
  • Reorg meaning

    Most highly touted reorganizations translate to we have no clue what is going on but need to do something shortly before the company goes into bankruptcy. Whether this is true with MS time will tell.

    One problem with sweeping reorganizations is that many important internal and external (customer) relationships are destroyed as people and responsibilities are shuffled around.

    I am wary of the reorganization based on the prior history of other companies.
    • imminent

      Right, since MS is on the brink of unprofitability... /s
      • Profits

        MS current profits are their saving grace but what is their profitability after the reorganization? The bankroll will only last so long and there are significant costs associated with a major reorganization that will hit the balance sheet in the next few quarters.

        I am not specifically looking at this reorganzation but what historical companies have done afterwards wihen annoucing massive reorganizations. It is not pretty. The issue is whether this is a classic clueless "we must do something" reorganization or is it well planned and thought out reorganization. History says it is likely the clueless variety because the latter is uncommon. Also, Ballmer's reputation makes the clueless variety more likely.
        • I think this reorg is based on the

          shifting of the business. The 2 biggest things pushing the reorg is the total shift from local computing to cloud computing and Microsoft finally getting into computer hardware. The business has definitely shift and the reorg reflected that shift in business.
          • For real

            I am looking at history. When companies make a big splash about a reorganization and it is very sweeping often it masks very serious underlying problems. Is this true in this case? The only "proof" will occur in about 3 - 5 years. I have been through a couple of these "grand" reorganizations and saw first hand how disruptive it was to the company's sales.

            Companies reorganize all the time but most are low keyed and these are often much less sweeping. These reorganizations often codify what it is actually being done and are not very disruptive to customers or vendors.
          • @Linux_Lurker

            Looking into the history, I didn't find a then successful company gone with a reorg. May be MS is making a history? ;-P
        • Are you for real?

          Please note, having interacted with Microsoft for twenty years, this is not the first, nor will it be the last reorg. It is just another reorg as times change and the company reacts to what it sees are changes in the industries that that are focusing on. If you want to focus on corporations with challenges, I suggest you look at Apple. For example, unlike Apple, Microsoft profits from enterprise solutions has never waned. Apple has never penetrated that market. Apple is challenged on all fronts in the consumer market by Android solutions and cannot offer the application and device integration that Microsoft continues to build.