Microsoft’s Biggest Reorganization in Years: What Does It Mean for the Company’s Future?

Jul 12, 2013  •  Post A Comment

With Microsoft CEO Steve Ballmer announcing a major restructuring Thursday, industry watchers are focused on what it means for the company’s direction.

CNET reports that Ballmer "has launched a restructuring of teams along functional, rather than product, lines, stressing that Microsoft has to focus on a single strategy and to work together with more collaboration and agility around common goals."

The idea is to speed the pace of innovation at the tech firm.

The CNET report adds: "Maybe the new organizational structure will better the odds of achieving breakthroughs, but it will take all the CEO’s willpower, tenacity, smarts and positive energy to keep the ship steaming ahead."

USA Today notes: "The reorganization, outlined in a memo by CEO Steve Ballmer to employees, underscores a Microsoft refocusing on collaboration around disciplines and engineering areas to move faster."

On a conference call, Ballmer said: "The time frame for product releases, customer interactions and competitive responses [is] dramatically shorter than ever before."

USA Today adds: "The move comes as the company faces a worldwide downturn in PC buyers. Microsoft is also struggling to gain traction in mobile devices and services that keep pace with the likes of Apple and Google."

The USA Today report notes: "Ballmer in effect jettisoned the longstanding divisional hierarchy that took shape under his mentor, company co-founder Bill Gates. Certain business functions, including finance, marketing and business development, will move out of separate divisions and into their own company-wide groups with overarching senior executives."

USA Today cites Forrester analyst Frank Gillett, noting the shift from a structure based on products to a strategy aimed at how the company’s devices function. Says Gillett: "You have a substantially different Microsoft than what we had yesterday."

Among the executive moves, "Terry Myerson, who now heads up Windows Phone, will be the executive vice president for operating system engineering, overseeing Windows, Windows Phone and the Xbox operating system," USA Today reports. "Satya Nadella, chief of Microsoft’s server and tools group, has been named executive vice president for cloud and enterprise engineering, adding oversight of the company’s data center network, known as Global Foundation Services, to his responsibilities."

Additionally, USA Today notes: "Julie Larson-Green, head of Windows engineering, will rise to executive vice president of devices and studio engineering, including the Microsoft Surface tablet, the Xbox hardware and mice and keyboards. And Qi Lu, chief of Bing and online services, will become executive vice president of apps and services engineering, adding most of Microsoft Office plus Skype, the Lync communications service and the Yammer business social network."

Don Mattrick, who has overseen Xbox, announced last week that he was leaving the company to become CEO of game company Zynga, as expected.

"Notably, Kurt DelBene, president of the Microsoft Office Division, will be retiring, and Rick Rashid, the longtime Microsoft Research chief, will ‘move into a new role driving core OS innovation in our operating systems group,’ according to Ballmer’s memo," USA Today adds.

CNET notes: "The question that will remain unanswered for many months is whether the reorganization, even one that reduces energy-sapping internal turf battles, catalyzes any major, disruptive innovations, increased product velocity or newfound customer love to the company."

Innovation is clearly at the forefront of the company’s agenda, CNET notes, with Chief Operating Officer Kevin Turner saying this week during a keynote presentation at Microsoft’s Worldwide Partner Conference: "If you bet on Microsoft, you are not going to ask anymore, ‘Hey, where is the innovation?’ The challenge going forward is how do we keep up with it."

"The COO also said that Microsoft is delivering innovation faster than anyone can embrace it, and that the company’s new fiscal year, which began July 1, will be the biggest year of innovation in its 38-year history," CNET adds.

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