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Ballmer details Microsoft re-org plan

Ballmer details Microsoft re-org plan

Steve Ballmer has confirmed plans to reorganise Microsoft, giving himself more direct control over the company's direction.

The rumoured reorganisation of computing giant Microsoft has come to pass, with incumbent chief executive officer Steve Ballmer releasing an internal memo to all employees detailing how the company is moving away from software and towards 'devices and services.'

The reorganisation hasn't been a very well-kept secret, but that's not to say there are no surprises: Xbox head Don Mattrick had been previously tipped for an expanded role at the company, but actually left to work for social gaming giant Zynga before the changes were announced. Described by Ballmer in the internal memo as a 'far-reaching realignment of the company,' there's one thing that becomes very clear upon reading the message: Ballmer is ensuring that he remains at the head of the company he has ruled over for the past 13 years.

'Our strategy will focus on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most,' Ballmer's missive tells staff. 'The form of delivery shifts to a broader set of devices and services versus packaged software. The frontier of high-value scenarios we enable will march outward, but we have strengths and proven capabilities on which we will draw.'

That Microsoft is attempting to transition into a devices and services outfit should come as no surprise. Its launch of Office 365, a web-based version of its productivity suite, and Azure cloud platform combined with the company's aggressive entry into the previously all-but ignored tablet market with the Surface RT and Surface Pro line heralded all that. But Ballmer's comments make it clear that there will be no return to the company's roots as a software specialist under his auspice.

One Company
'We are rallying behind a single strategy as one company — not a collection of divisional strategies,' Ballmer claims in the memo, under the heading 'One Strategy, One Microsoft. 'Although we will deliver multiple devices and services to execute and monetise the strategy, the single core strategy will drive us to set shared goals for everything we do. We will see our product line holistically, not as a set of islands. All parts of the company will share and contribute to the success of core offerings, like Windows, Windows Phone, Xbox, Surface, Office 365 and our EA offer, Bing, Skype, Dynamics, Azure and our servers.'

It's a vision that Ballmer hopes will end a tradition of infighting detailed in the 2012 Vanity Fair exposé Microsoft's Lost Decade, which put the blame for Microsoft's slow start in rapidly-growing sectors like tablet computing firmly upon Ballmer's shoulders with claims that the removal of employee stock benefits and a bizarre employee ranking system - where a set percentage of employees would always be found as underachieving, regardless of their actual performance - were actively harmful.

With Vanity Fair, and industry analysts, pointing the finger at Ballmer, however, the new vision for the company will do little to settle investors' stomachs. Under Ballmer's vision, all company divisions will report directly to the office of the chief executive as the grand master of the central strategy - giving Ballmer increased control over the company, at a time when some analysts expected him to be announcing a plan of succession for his eventual departure from the role of CEO.

Expanded Roles
The new organisation plan sees selected employees granted a larger role, as had been predicted. In Mattrick's absence, the Xbox and Microsoft Studios divisions are being centralised as the Devices and Studios Engineering Group under former Windows lead Julie Larson-Green. The Operating Systems Engineering Group, which includes everything from Windows Phone to supercomputing and embedded version of Windows as well as core cloud services, will be led by Terry Myerson. An Application and Services Engineering Group is to be led by Qi Lu, while a separate Cloud and Enterprise Engineering Group will be led by Satya Nadella.

Other, less explicable, changes include Kirill Tatarinov having his underlings in the Dynamics group report to several separate 'dotted-line' managers: the product leaders will need to report to both Tatarinov and Qi Lu, the marketing leader will report to Tatarinov and Tami Reller in the Marketing group, and the sales leader will report to Tatarinov and Kevin Turner in the Chief Operating Officer's group.

While Ballmer has claimed that the reorganisation will not include major layoffs, at least one familiar face will be leaving the company. 'As part of these changes, Kurt DelBene will be retiring from Microsoft,' Ballmer announces in the memo. 'Kurt has been a huge part of our success in evolving Office to be a great cloud service, and is a key member of my leadership team. I can’t express enough gratitude for the work he’s done for the company, and I will truly miss him.'

In addition, Craig Mundie - who is due to leave the company at the end of 2014 - is being removed from his current role to a mysterious mission for Ballmer himself. 'Craig Mundie will be stepping off the SLT to devote 100% of his time to a special project for me through the end of this calendar year. Beginning in 2014, Craig will continue as a consultant through his previously agreed upon departure date at the end of calendar 2014.'

The final major shift is in Rick Rashid stepping down from Microsoft Research, a division he founded, to become part of the Operating Systems division under Myerson.

Looking Forward
While nobody could accuse Microsoft of struggling - since Ballmer took control, the Office and Windows divisions have by and large grown, and the company's cloud efforts are paying dividends - there's no question that the company has missed out on some major market opportunities. Back in 2001 the company announced the Microsoft Tablet PC Specification, beating rival Apple to the punch by nine years - only to squander its lead and allow others to corner the market. While it has recently attempted to make up for that mistake with the Surface devices, sales are slow with the company reportedly due to drop the price of the Surface RT by up to $150 in the US this weekend.

With analysts and selected investors still calling for Ballmer to step down, it remains to be seen if the reorganisation - which gives the notoriously bombastic businessman more direct control over the company, rather than less - will be what the company needs to stay afloat in a market which is rapidly shifting to non-traditional computing devices.

Ballmer's memo has been published in full on the Microsoft website.

17 Comments

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Corky42 12th July 2013, 11:56 Quote
Do i have this right ? Ballmer is moving the company away from what it knows and made it money to devices and services that so far have lost them money and failed to impress customers.

When is someone going to slap him with a wet fish ?
Griffter 12th July 2013, 13:32 Quote
cheap tactics from a cheap company IMHO
impar 12th July 2013, 13:47 Quote
Greetings!

I read:
Ballmer derails Microsoft re-org plan
Woodspoon 12th July 2013, 14:31 Quote
How to wreck a company, step no 1.
RedFlames 12th July 2013, 14:53 Quote
Quote:
Originally Posted by Corky42
Do i have this right ? Ballmer is moving the company away from what it knows and made it money to devices and services that so far have lost them money and failed to impress customers.

I see it more as like an oil company slowly coming to the realistation oil won't be around forever... they know they should be looking into/doing other things, but they still haven't got to grips with what that should be...
supermonkey 12th July 2013, 15:28 Quote
I see it more as Ballmer trying to Apple-fy Microsoft. Microsoft has grown so large and fractured, and I posit the reason some products haven't done well is because the product cycle at Microsoft has become an exercise in design by committee.

By attempting to streamline things and reduce the tribal nature of the fractured company, Ballmer is taking a page from Steve Jobs' management book. Whether or not Ballmer (or his successor) has the necessary vision to pull it off is another question.
Corky42 12th July 2013, 15:41 Quote
Quote:
Originally Posted by RedFlames
I see it more as like an oil company slowly coming to the realistation oil won't be around forever... they know they should be looking into/doing other things, but they still haven't got to grips with what that should be...

The problem is you don't just stop producing oil because you know it wont be around forever, especially when the world hasn't agree on what to replace it with.
I cant think of one Microsoft devices or services that has both made them money and been widely accepted by their consumers, yet they are choosing to move away from what founded the company to things like Bing, Office365, Outlook.com, tablets, Xbox, etc, etc.
RedFlames 12th July 2013, 16:22 Quote
Sticking with the car/oil analogy...

Windows [7 and earlier]/Office are your petrol cars... Traditional PC sales are Declining [The Oil is running out] as more people are moving over to Tablets/Smartphones/Cloud Services [Alternative fuels]... Windows 8/Office 365 are, in this analogy, a Toyota Prius, they are a hybrid. And kinda like most hybrids they're ridiculed by the die hard petrol heads ['power users'], and some others argue they don't go far enough...

And companies are allowed to move on... otherwise Ford would still be making the Model T and Nintendo would still be making Playing Cards...
Corky42 12th July 2013, 17:05 Quote
Yea well the analogy you used isn't exactly comparable as oil is a finite resources and software, services, and devices are not.

For a company to turn away from successful money making products and to embrace unsuccessful loss making product just seems like idiocy to me, any CEO with half a brain would grow a burgeoning market before turning their back on their existing revenue stream.

If i was a stock holder in Microsoft i would be very worried about the company changing focus to what has so far been loss making markets for them.
Gradius 12th July 2013, 17:36 Quote
Balmer and EVERYBODY there at high command should be FIRED! There is NO EXCUSE for those spying stuff ! Down with all them!
rollo 12th July 2013, 20:12 Quote
Microsoft needs to make decisions to stay profitable. There search engine is a disaster net loss around 4billion. Xbox entertainment is at break even.

Windows and office its 2 lead products are both very profitable and have made microsoft rich but both are struggling to gain sales of there newer products.

Windows phone has 2% of the smartphone market Nokia is not good enough to push it along. Microsoft should buy out Nokia and be done with it.
Corky42 13th July 2013, 07:42 Quote
Quote:
Originally Posted by rollo
Windows and office its 2 lead products are both very profitable and have made microsoft rich but both are struggling to gain sales of there newer products.

Maybe because the new version of Office and Windows are so slanted towards this "services" approach Ballmer seem so intent on pushing down everyone throats.

Office 2013 has out sold Office 365 three to one. While 8 with its login to Windows using a Microsoft account, SkyDrive, Windows Store, and Xbox LIVE services hasn't exactly set the world a blaze.

What with all the fuss over Snowden and if any back-door access has been given to the spy's im not sure people trust TPTB to keep our personal information safe, as they say "trust no one but yourself"
fluxtatic 13th July 2013, 09:41 Quote
Quote:
Originally Posted by Gradius
Balmer and EVERYBODY there at high command should be FIRED! There is NO EXCUSE for those spying stuff ! Down with all them!

Not at all that I disagree, but what's MS going to do? Tell the NSA no? If you want to learn the wide variety of ways people can die in "car accidents" and "suicides" and the even wider variety of ways a gigantic corporation can be squeezed out of existence, you (well, Ballmer) can learn it by trying to tell the spooks "no".

On-topic, this seems...stupid. And pointless. It was bad enough when there were all the little fiefdoms within MS, standing in a circle pissing on each others' legs. Is anyone so easily fooled into thinking the people will so easily give up their old loyalties? That there won't be a lot of pissed off former senior employees that feel like they've been busted back to lower levels under different leadership (said leadership still maintaining their loyalties to 'their people' in favor of the 'outsiders')?

MS has essentially admitted their going down the Adobe road and Office at least will be subscription-only within a decade. Like RedFlames has it - MS is flailing a bit, recognizing that what they've done for the past 30 years is shifting, but they can't quite figure out what to do. This re-org is only going to confuse things.

I can sympathize - I hear several times a week from the president of the company I work for talking about the industry we're in and how it's on the decline. The company's plowing ahead in 6 different directions to move into complementary lines...but no one knows them that well and nothing's being executed effectively. Other than hiring more managers - good-bye proper raises and enough working staff, hello more clueless, overpaid delegators that act like 5-year-olds - they want it, but they have no idea what it takes to get it done. They just know they want it. Like, yesterday.
Nexxo 13th July 2013, 10:20 Quote
Microsoft is having a wake-up call. Internal competition is bad (just look at the NHS). Design by committee is bad (and again...). Focusing exclusively on maximising value-extraction of two static products which depend on a platform and user model that is rapidly becoming out of date is bad.

So as Supermonkey says, Ballmer is trying to Apple-fy Microsoft. One king, one country, one faith: One leader, one Microsoft, one cohesive vision. Eliminate competition for cohesion, design by committee for creativity and flexibility. I'm sure there will be execs pissed-off at losing their fiefdoms, but expect a lot of them to be quietly ushered out over the next months.

Microsoft really has no other choice. To continue the same old vampiric value extraction model of Windows and Office is what caused Microsoft to miss out on the tablet (Courier), fail to follow through on the potential iPod killer Zune, and caused Windows Phone to lose its massive head start to the iPhone. Microsoft missed tons of high profit opportunities, and now the traditional Office and Windows platform, the PC, is in steady decline. It's Darwin time: adapt or die. The worst thing it can do is follow the Moses leadership principle --wait for a sign from above to tell them when the time is "right" to change. There is no "right" time. Things will only get less right as time goes on; it needs to act NOW.

Office 365 is selling extremely well. It is killer value. Where before you'd pony up £400,-- for Office with two licences, which would be out of date 5 years down the road, you pony up £80,-- a year for five licences, and have the latest version all the time. No brainer, really.
Corky42 13th July 2013, 11:25 Quote
Quote:
Originally Posted by Nexxo
Microsoft really has no other choice. To continue the same old vampiric value extraction model of Windows and Office is what caused Microsoft to miss out on the tablet (Courier), fail to follow through on the potential iPod killer Zune, and caused Windows Phone to lose its massive head start to the iPhone. Microsoft missed tons of high profit opportunities, and now the traditional Office and Windows platform, the PC, is in steady decline. It's Darwin time: adapt or die.

I would disagree that Windows or Office caused them to miss out on all those opportunities, it was bad management decisions IMHO.
And yes while the PC is in steady decline its not like it going to go the way of the dodo, consumers have more choice than they did a few years ago and they are exercising that choice.

In the past if people want to use E-mail, internet, games, software, etc the only choice was a PC so they made up %100 of the potential mark. Now consumers have more choice the market will no longer be %100, it may end up being a 50/50 split, or a 30/70 split, until the market finds its own level who knows ?
Quote:
Originally Posted by Nexxo
Office 365 is selling extremely well. It is killer value. Where before you'd pony up £400,-- for Office with two licences, which would be out of date 5 years down the road, you pony up £80,-- a year for five licences, and have the latest version all the time. No brainer, really.

Compared to its non subscription equivalent Office 2013 it isn't doing well at all, Office 2013 is out selling Office 365 by three to one.
http://thevarguy.com/big-data-technology-solutions-and-information/office-365-vs-office-2013-retail-sales-results
Nexxo 13th July 2013, 11:44 Quote
Quote:
Originally Posted by Corky42
I would disagree that Windows or Office caused them to miss out on all those opportunities, it was bad management decisions IMHO.

That's not what I am saying. I am saying that focusing purely on extracting the maximum profitability possible from Windows and Office caused them to ignore and miss out on other products and opportunities. Those were the bad management decisions (which are well documented).
Quote:
Originally Posted by Corky42
And yes while the PC is in steady decline its not like it going to go the way of the dodo, consumers have more choice than they did a few years ago and they are exercising that choice.

In the past if people want to use E-mail, internet, games, software, etc the only choice was a PC so they made up %100 of the potential mark. Now consumers have more choice the market will no longer be %100, it may end up being a 50/50 split, or a 30/70 split, until the market finds its own level who knows ?
Basically they are buying devices to replace the PC, not supplement it. If the market splits 50/50, that's a 50% loss of income for Windows. If it splits 30/70, that's A 70% loss. That is bad. So Microsoft has to move into that new market.
Quote:
Originally Posted by Corky42
Compared to its non subscription equivalent Office 2013 it isn't doing well at all, Office 2013 is out selling Office 365 by three to one.
http://thevarguy.com/big-data-technology-solutions-and-information/office-365-vs-office-2013-retail-sales-results
The total sales of both versions combined is comparable to the total sales of Office over the same period in 2012. If anything, Microsoft is breaking even. And Office 365 offers the added incentive of a low entry cost to try it for a year and see if it suits, which proves attractive to small businesses. Basically, it is more choice, and if you are in the habit of updating Office every 5 years anyway, it is cheaper.
Corky42 13th July 2013, 14:12 Quote
Sorry just the way it sounded at first was that you where blaming Windows and Office for Microsoft failed projects, when it was more likely short sited managers that cause them to fail.

It still sound like Ballmer is turning his back on what made the company (software) what it is, and instead reorganizing the company into what has so far lost them money (devices, services)
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