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.
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.
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