Microsoft's culture under siege - Part 2

But many people at Microsoft are indeed worried about the trial and what a court setback might mean.

Plans are now afoot for a wide-ranging reorganisation, expected imminently. Some observers have suggested that Microsoft's reorganisation plan is a pre-emptive move ahead of the possibility of a court-ordered breakup. Microsoft officials insist that the pending reorganisation has next-to-nothing to do with heading off the DoJ. (And indeed, according to recent published reports, the 19 states, who are co-plaintiffs with the DoJ in the Microsoft antitrust case, now favour remedies other than breaking up the company.)

But, reading the tea leaves, analysts say Microsoft's senior management is scrambling to turn more attention to customer issues. "By reorganising along customer lines, they can get people focused by affinity groups, rather than by technology," said Rob Enderle, an analyst at Giga Information Group. "That's the textbook approach to a reorganisation." At the same time, it must come as a bitter pill for management to reorganise that it's again taken its eye off the ball. In late 1995, Gates announced that Microsoft planned to get hard core about the Internet in a frantic bid to catch up to Netscape Communications Corp. "They realised that the reason they missed the wave is that they lost track of their customer base," Enderle said.

That's where Ballmer, recently elevated to the role of president, is stamping his presence. The fiery executive has a reputation for obsessing about customer satisfaction. With Gates playing the role of Mr. Technology, analysts say Ballmer believes the reorganisation will enable Microsoft to tackle other thorny issues related to retaining customer loyalty and buffing the company's image in the aftermath of the trial. "He is far more customer-oriented than product-oriented," said Jeffrey Tarter, a Watertown, Mass.- based software analyst. "It's a clear sign that Ballmer is in charge of the reorganisation. He's flexing some muscle here."

Under Ballmer, who has yet to pass the one-year mark in his presidency, Microsoft is likely to become a lot more customer-focused than any time in its history. At a managers' meeting in late Dec. -- the first chaired by Ballmer, rather than Gates -- Ballmer repeatedly beat the customer drum in his remarks to the approximately 50 senior Microsoft executives in attendance, according to documentation of the meeting.

At the meeting, Ballmer harped on Microsoft's need to make sure the right people are in the right jobs, especially in terms of Microsoft's top-level management. "We don't really need a company of 29,000 leaders," Ballmer told the company's top brass. "That may be what we've got, but it doesn't work very well if we're going to achieve any of the kinds of goals we've talked about." Ballmer told Microsoft's management he was frustrated that "more of our sales investment is in cultivating partners, frankly, than it is actually in calling on any kind of end customers. We're in a new world, where selling things to consumers is one of the hot things."

Ballmer noted that Microsoft continues to face challenges as the Internet morphs Microsoft, its partners' and its customers' business models forward. "A lot of our partners trust us absolutely, like our Solution Providers. Some don't trust us because of the reputation that we have. Others because of the uncertainties of the Internet. They think the Internet will remake them and we'll be part of their unmaking ... Unfortunately, all the DoJ crap makes the suspicion higher, frankly." But, he assured the top brass that all of Microsoft's dealings with Apple, Intel and other competitors and partners has been nothing but "lawful, appropriate business discussions."

If Microsoft does reorganise along the four more customer-focused units that are predicted to comprise the "new" Microsoft, namely, developer, enterprise, knowledge worker and consumer, it will be interesting to see the impact on current divisions and managers. For example, what will happen to the powerful OEM business headed by senior vice president Joachim Kempin, or its primary reseller organisation, currently led by Sam Jadallah?

Reactions to the reorganisation suggest that, like the blind men and the elephant, change at an organisation as big as Microsoft depend on your perspective. Tarter, for instance, was sceptical. "My concern is that for Microsoft to organise around customer types doesn't make any sense," he said. "They are a product company."

Meanwhile, another member of the analyst community wasn't sure that it would change anything at all. "It sounds sanctimonious," said Richard Shaffer, a principal at New York-based Technologic Partners. "It's the very kind of PR pulp that hundreds of companies put out about themselves being customer-centric. The truth of the matter is that Microsoft already pays a lot of attention to customers."