With Reorg, Microsoft Aims to Make Itself More Nimble

Corporate IT shops could eventually see the effects of the internal reorganization that Microsoft Corp. announced last week in the form of a new Web-oriented, software-based service platform, according to analysts.

Microsoft disclosed plans to realign into three newly formed divisions. The one that holds the most importance for IT managers is the platform products and services division, which combines the software vendor's Windows client, server and tools operations with the Microsoft Network (MSN).

Kevin Johnson, Microsoft's former sales chief, and Jim Allchin, who had been group vice president of platforms, will serve as co-presidents of the expanded platform division until the end of next year. At that point, Allchin plans to retire, following the scheduled release of the Windows Vista client operating system.

In a memo to employees, Microsoft CEO Steve Ballmer said the goal of the reorganization is to make the company more agile for executing its "software-based services strategy." As part of the announcement, Ballmer noted that Microsoft's operations are being aligned "in a way that will enhance decision-making and speed of execution."

David Smith, an analyst at Gartner Inc., said the reorganization signals Microsoft's focus on a "software-as-a-service view of the world." Initially, such offerings likely will be consumer-focused, Smith said. "But as with almost all consumer technologies, eventually they [will] have an impact on what enterprises do," he added. "That doesn't mean that everyone will be running out using MSN for everything. But bits and pieces will be of increasing relevance and potential use for the enterprise."

Microsoft is gearing up to better position itself against Google Inc. and Yahoo Inc., which the company sees as its long-term competitors, said IDC analyst Al Gillen.

Ballmer said responsibility for driving the software-based services strategy across the three new divisions will fall to Ray Ozzie, who created Notes and founded Groove Networks Inc. before becoming one of Microsoft's chief technical officers in April, when the company bought Groove.

Rob Enderle, principal analyst at Enderle Group in San Jose, said many corporate users are frustrated by Microsoft's inability to respond effectively to all of their needs. The vendor had become "dysfunctional of late" as a result of its inability to foster internal cooperation, Enderle said. But, he added, the new streamlined business divisions should help Microsoft become more responsive to users.

The changes should address complexities in Microsoft's sales organization and product development groups, said Forrester Research Inc. analyst Ted Schadler.

Microsoft's previous structure consisted of seven business units organized around products. That approach "is fine if the products don't have the same customer," Schadler said. "When the products have the same customer, it creates problems."

Microsoft's New Look

The software vendor is realigning its operations into three divisions:


Combines the Windows client, server and tools units, plus MSN

CO-PRESIDENTS: Kevin Johnson and Jim Allchin (retiring at the end of 2006)


Combines the information worker unit and Microsoft Business Solutions

PRESIDENT: Jeff Raikes


Combines the home and entertainment division and the mobile and embedded devices division

PRESIDENT: Robbie Bach

Kevin Johnson
Kevin Johnson
Jim Allchin
Jim Allchin

Copyright © 2005 IDG Communications, Inc.

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