What's behind Microsoft's pending reorg?

What's behind Microsoft's pending reorg?

Summary: The whys behind Microsoft's coming reorg are clearer than the hows, at this point.


It's no secret at this point that Microsoft is poised to unveil a sweeping cross-company reorg.


The elements that are unknown about the reorg are still numerous, however. There are conflicting rumors as to when it will be announced and which execs will move into which new roles. Unsurprisingly, Microsoft officials are not commenting at all on what's coming down the pike.

I've held off on blogging about the reorg, hoping for more concrete and substantial tips. In their absence, I'll share a few things I have heard.

I'm hearing details of the reorg likely will be public before Microsoft announces its Q4 FY 2013 earnings, which is July 18. Microsoft's annual sales conference, Microsoft Global Exchange (MGX), is July 16-19 this year, so perhaps the Softies will go public with details during that time. I'm hearing Microsoft is unlikely to announce the reorg details next week during its Worldwide Partner Conference in Houston.

Weeks ago, I received a few tips that Microsoft was planning to split the company along devices and services lines. This isn't too surprising, given Microsoft's work to make itself over from a software company to a devices and services one -- a mission CEO Steve Ballmer announced last year. But the devices/services split seems a bit too simplistic, as Microsoft still is delivering on-premises software, too. So I'm wondering if the new business units will be more along the lines of devices/services/software. As I've blogged before, I'm curious if Microsoft plans to do away with its structure, instituted in 2003, of pairing a Chief Financial Officer (CFO) with each of its more product-focused divisional chiefs.

According to one of my tipsters, Microsoft is/was considering appointing a consumer- and a business-focused leader of each of its new divisions. In other words, there would be a consumer devices chief, as well as an enterprise devices chief. Given Microsoft execs' insistence that lines between consumer and enterprise are blurring, I'm not sure whether this tip seems believable, however. Like other Microsoft watchers, I've heard the Windows and Windows Phone teams would likely become part of the new devices division at Microsoft, if the company ends up cleaving along those lines.

Recent executive sabbaticals and departures are most likely a factor of the power struggles that typically lead up to any big Microsoft reorg. Once word trickles down that a high-ranking official is unlikely to get his/her job of choice in the new org, those people tend to leave the company.

Why is Microsoft reorganizing -- aside from the fact that it typically does so once or twice a year?

Think this through: Microsoft is in make-over mode. The company needs to make sure it can create services running across a family of devices -- not just its own, but non-Windows-based ones, too -- at a quicker pace. It needs to make sure its own platforms, like Windows PCs/tablets, Windows Phones and Xbox consoles, share a common interface, common code repository, common check-in process and common stores (when and if this commonality makes sense).

Under the current siloed structure, products which have increasing interdependencies and commonalities (like Windows and Windows Phone, for example) are not in the same business units. They should be for greater speed and efficiencies.

From all I hear, the coming reorg is going to try to realign teams to enable faster updates. Does this mean Microsoft's biggest services, like Xbox Live, Bing, Office 365 and Azure end up in the same business unit? That Xbox, Surface and Windows Phone become one? I don't know at this point. However Microsoft's top brass end up re-slicing things, the overarching goal seems to be to bring the various flavors of Windows closer together, while simultaneously delivering services for Windows and non-Windows devices, both.

That sounds like Microsoft 3.0, to me. And no, I'm not writing a new book about that. 

Topics: Microsoft, Cloud, Enterprise Software, 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).

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
  • Here's a tip!

    Ballmer is fired and goes Hollywood in the remake of "Young Frankenstein".
    • Yea, I can see that!

      His one line would be "FireD BAD!!!"

    • or

      Freddy Krueger.
    • alright

      what's with all the flags on dcowsky's comment. No sense of humor, or...working for ballmer?!
      • Some guy

        named Steve!
      • Computer program

        That automatically flags any anti-Microsoft comment.
    • He's the one leading the "reorg", and you think he's going to fire himself?

      Try to think of a smarter comment.
      • Sigh....

        I guess you're right but it sure is a funny idea. But it's way too late for MS to regain their dominance in the market..
        • MS is still dominant...

          ...just not as dominant as before. MS is definitely easier to avoid than it was 13 years ago, but still overbearing enough that a lot of us still feel motivated to avoid it.
          John L. Ries
        • What!?!?!?

          Nice FAIL buddy.

          But it's way too late for MS to regain their dominance in the market?

          You be kidding. Seriously.

          Lets be really really serious for a second here.

          Microsoft was and still is the by far most dominant in the very market they were ever dominant in. The PC OS and Office productivity software.

          Cut and dried, end of story.

          Now Microsoft is out to break into new markets they are way behind in. Sorry if that makes you some how feel bad, its just the way it is.
          • "Lets be really really serious for a second here"

            If you insist then so shall it be!

            I am the only one in my entire family that still uses Microsoft products. As far as most consumers are concerned, MS is totally irrelevant. MS is not trying to break into new markets. They are trying, rather desperately, to stay in an ever changing and advancing market. The "market" you mention and that they once monopolized and controlled is now in the margins as is their revenue stream. Maybe moving boxes around in their org chart will help, but I doubt it.

            Sorry if that makes you some how feel bad, it's just the way it is.
          • Ah yes!

            Just you, and hundreds of millions others around the globe, are left using MS OS and Office... really sad!
  • Good points...

    ...across the board, and I appreciate the reminder to the doom-and-gloomers who conveniently forget Microsoft does this often.

    IF they really do split simplistically across devices and services, I can see a pretty simple setup... all of Windows-- from server to client to phone to embedded-- and Xbox ending up in the Devices group. After all, what should power a device? Windows OS, of course! This keeps in mind the spirit of common cores.

    I can see the rest of Microsoft's world-- including on-premise software-- falling under a general Services division. Exchange, Lync, SharePoint, Office 365 are all introducing new features to cloud-customers first before rolling out to on-premise customers, so I can see that working out well to keep that structure. CRM apps like the Great Plains platform would fit nicely as well. Obviously, Bing Services would fall in this world, and I'm particularly interested in what could happen if they work with the Office platforms.

    Likewise, it would be good to have developer-centric platforms working with those same Services groups-- Visual Studio, primarily-- it's a service to develop for the Windows Device platforms, after all. Plus, one core OS device division can have a unified development platform in the future.

    Of course, we all know that Microsoft is way bigger than just two divisions-- there's still internal corporate, R&D, and such.
    • Why Reorg

      The company has been making great numbers.

      Customer delivery, which seems to be your focus, overlooks the unpublicized problem—identified 24-48 months ago—which provided the spark to this costly change. Even if one takes the view that it is a consequence of being a device company, one has to ask what issue catalyzed that evolution in identity.

      I know nothing beyond what Ms Foley reports, of course, but if there were divisions who used their power five to seven years ago to kill or undercut new ideas, thus putting Microsoft behind in emergent market sectors, then the reorganization might be aimed at diluting that power. Look at it this way, if collaborative foos mean the Bar managers lose revenue to the Bat managers, and rewards and power accrue from the numbers, well, who would not expect the Foo managers to dig in? Let's be a tad more concrete. The user base for mobile devices is growing fast and within months, will begin to outsell traditional computers. This suggests boom times for services, but Microsoft has no control over the os that 90% plus of the mobile market uses. Cross-platform would seem to be the way to maximize service consumers and revenues, which may come from users, carriers, or OEMs. But, wouldn't the device side if the business argue that if non-Microsoft device users get full benefits of Microsoft services, doesn't that leave their division on a ship that will never sail? On the other hand, the lesson from search is that missing an important change in the computing market is costly. That happened with mobile. Should Microsoft risk future services supremacy so as to, maybe, allow devices to catch up with successful rivals Apple and Samsung?

      Conflicting strategies and goals within a company of such diverse offerings, many of which are consumed internally as a basis for other revenue centers, are bound to happen and have happened. Some probably argue that a bit of rivalry makes everyone better. (I'm not so sure, but who am I?) It's the CEO, in the same manner as the feudal prince with contentious dukes, who has to govern and say for the benefit of the whole you lose and you win. The obvious question, does rearranging the org boxes make the CEO better or even orthogonal when it comes to better preparing the company for the future?
      • Re: if non-Microsoft device users get full benefits of Microsoft services

        To answer that question, you just have to rephrase it: is the job of Microsoft's different divisions to exploit business opportunities and maximize profit, or to reinforce the hegemony of other divisions?

        And yes, the two are mutually exclusive.
      • Why re-org? Because...

        That's what Microsoft regularly does. Microsoft generally has a significant re-org at least once every year or two. It's part of the culture of the company, along with free sodas and cheesy team t-shirts.
    • If reorganization has to be done often...

      ...then it's probably not being done right (stability is a positive good).

      I've seen any number of Dilbert cartoons related to reorganizations and they're generally on target.
      John L. Ries
      • When a company evolves from being a software provider, to also being a

        hardware provider, then, something is obviously in need of change, and the old structure does have to change to accommodate the evolved corporation.

        Going from a provider of OS and applications to a company that is also a huge hardware company, does necessitate change in the corporate structure in order to maximize the advantages that the additional missions provide.

        Not changing to accommodate the changing structure would point to a bigger problem with management, and that would be the inability to recognize and optimize for the evolved company.
        • hw is commodity, online services matters

          its far more about superb online services and shortened development cycles than about hardware; hw is in fact commodity today, made in china anyway almost everything down to toilet paper...
      • Disagree...

        A dynamic company is one that can change to reflect where the industry is taking the business.

        A company "not doing it right" is going to fail miserably under its mismanagement, and that doesn't describe Microsoft no matter how any doom-and-gloomers suggest otherwise.