What's behind Microsoft's pending reorg?

The whys behind Microsoft's coming reorg are clearer than the hows, at this point.
Written by Mary Jo Foley, Senior Contributing Editor

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. 

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