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

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.
Written by Mary Jo Foley, Senior Contributing Editor

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.

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