How can a Microsoft reorganization impact your organization?

Frequent reorganizations can be very disruptive for the employees. Organizational changes are often a result of changing business needs, but sometimes they are made in response to emerging technical or market opportunities.

Organizational changes are common for many companies, but Microsoft has a well-deserved reputation for orchestrating reorganizations more frequently than most.  The software giant was founded in 1975, so they are a young company by some standards, but during the past four decades, they have grown to approximately 100,000 employees. This growth has often been cause for reorgs, but evolving business models and changes in technology often play a role as well. 

It’s worth noting that Microsoft was the first technology company of their kind, and they didn’t have the benefit of similar organizations they could emulate. Another factor to consider is that the company started out as exclusively a software company and the employees were either technical or administrative. As the company grew, many of the more senior employees were promoted to management positions, regardless of their management abilities. As the company began to mature, they made a conscious effort to recruit people with management, organizational and operational skills. This resulted in many organizational changes within the company, but since there was still no other software company to emulate, they often implemented changes, only to modify or fine tune them later.

Frequent reorgs can be very disruptive for the employees. Organizational changes are often a result of changing business needs, but sometimes they are made in response to emerging technical or market opportunities, such as cloud computing or an increased emphasis on selling services in addition to products. Regardless of the reasons to reorganize, employees are often distracted by the potential changes. In some cases, the deliverables and goals on which they are measured (and compensated) will change after a reorg, or perhaps they will now report to different management, which may have different priorities than before. Reorgs can be even more disruptive if there are expectations of layoffs or elimination of certain roles, as some employees simply slow down or stop producing while they wait to see what will happen and how they will be impacted.

Unfortunately, the disruption isn’t unique to Microsoft employees. Customers, channel partners, suppliers and other third parties are often impacted as well, particularly if their contacts within Microsoft become slow to respond or completely unresponsive. 

After the reorg, Microsoft’s strategy or goals may have changed, and those changes may have an impact on customers or other third parties. The impact may be as simple as having new contacts within Microsoft, which can be relatively trivial, but at a minimum, it will require the new contact to learn about the customer and build new relationships. Of course, the changes may be positive, particularly if the customer or third party didn’t have the best relationship with the predecessor.

Organizational changes aren’t solely about employees and org charts. They are often accompanied by policy changes or new strategic initiatives. For example, let’s say a customer was in the process of renewing their enterprise agreement (EA), and their plan was to purchase or renew additional licenses for their data centers. After the reorg, Microsoft elected to compensate their sales force primarily on their success with moving customers to the cloud, and they become even more reluctant to discount or negotiate perpetual licenses. This isn’t likely to make the customer abandon their data centers and change their entire IT infrastructure and move to the cloud, but the cost implications may be significant.

Microsoft’s July, 2017 reorganization of their sales team resulted in two sales organizations. One will focus on enterprise customers, and the other will focus on everyone else. The latter includes small, medium and corporate (SMC) customers.  The enterprise team is organized around the following six verticals: education, financial services, government, healthcare, manufacturing and retail. 

The new SMC model will increase the reliance on channel partners selling to and servicing SMC customers. This may benefit the partners as they deepen their relationship and sales opportunities with the customers, but customers may resist losing the direct relationship they had with Microsoft in the past.

Enterprise customers are promised an increase in technical pre-sales and support, specifically with transitions to the cloud and security services. This has been a common request from many customers, but it will undoubtedly be accompanied by increased pressure to purchase SPE E5 and Azure licenses.

In addition to the organizational changes, Microsoft claims to be shifting from their traditional strategy of selling specific products to one of multi-product solutions and digital transformations. As part of this effort, they created a “Digital Win Room,” which will focus exclusively on large opportunities around the world. It’s too soon to determine exactly what a digital transformation or multi-product sales strategy will entail, but it will almost certainly result in increased pressure to move customers to the cloud and most likely, product bundles that may contain components many organizations may not have otherwise purchased.

Copyright © 2017 IDG Communications, Inc.

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