Will Microsoft's restructuring be Ballmer's last stand?

Steve Ballmer is said to be close to unveiling a major shakeup in Microsoft's organizational structure, to more closely align it with his goal of turning Microsoft into a services and devices company. It's a very big reorganization, the biggest the company has seen in some time. Will it work, or will this be Ballmer's last stand?

Bloomberg reports that Ballmer's plans for the reorganization are close to complete and could be made public as early as next week.

Given Microsoft's size, the reorganization is a complex one. Under the plan, hardware engineering for all devices, ranging from Surface tablets to the Xbox gaming systems, and anything else the company cooks up, would be consolidated in a single division, overseen by current Windows chief Julie Larson-Green. That clearly puts a much greater focus on devices.

All Windows products, including Windows Phone as well as the desktop and tablet OSes would be combined in a single division, under current Windows Phone software chief Terry Myerson. This makes sense given Microsoft's vision of essentially a single operating system spanning traditional PCs, tablets, hybrid devices, and phones.

Another division would be made up of online "applications and services engineering" an exceedingly vague term. It would include Skype, Bing and Office, and be overseen by Qi Lu, president of Microsoft's Online Services Division. However, the Bloomberg report didn't make clear whether just Office's online products such as Office Web apps would fit here, or whether it's the entire Office line. My guess is that it will include all of Office, given that Microsoft is turning Office into a subscription services that automatically updates itself via the cloud. However, it also might fit into another new division, which would consist of cloud computing and corporate products and services, to be run by Satya Nadella, current head of Microsoft's server business.

Overall, according to Bloomberg, the restructuring will "separate product engineering from business functions like marketing and finance, which will get their own groups."

Finally, Skype President Tony Bates will be "in charge of acquisitions and relationships with software developers," according to Bloomberg. His job would also include relationships with hardware partners, and strategy and business development for software.

Bloomberg reports that the plans aren't yet finalized, so all this may change, and what is actually announced may differ from this.

A single hardware engineering chief clearly signals that more Microsoft-created hardware is on the way. Consolidating Windows Phone with Windows will make for more closely aligned mobile and traditional computer operating systems. And the other changes should cut down on the turf wars that have hurt Microsoft for years. The only missing piece at this point is what happens with Office.

On paper, this makes plenty of sense. But business isn't conducted on paper. It's conducted in the real world. And only that will tell whether the reorganization can work. Will turf wars really be reduced? Will people in Microsoft be able to focus on building the best products possible, even if that means stepping on the toes of another division?

And above all, will this let Microsoft create compelling products that people simply have to have? That's why Apple and Google have succeeded so well, because of their product vision, not because of well-designed corporate structures.

Ultimately, it all comes down to Ballmer. If this reorganization will let him harness the collective creativity inside Microsoft and build great new products, it will be a big success. But if not, I expect it to be Ballmer's last stand.

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