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Microsoft Reorgs

CEO Steve Ballmer released two memos about the expected reorganization Thursday morning

Microsoft is reorganizing, a business it’s likely to be at for at least the next year before it or anyone else knows if it’s working although the scheme has immediately garnered a Doubting Thomas or two dubious that the restructuring will help Microsoft create more popular, saleable products any faster.

And it’s utterly unclear how Microsoft’s old-line OEMs will react in the face of possible new hardware competition from their old supplier.

Microsoft’s CEO Steve Ballmer released two memos about the expected reorganization Thursday morning and is evidently shooting for a flatter, more integrated, more collaborative company along the lines of Apple so that his old divisional silos don’t constantly fight internally for the same resources in the name of their own greater glory.

Ballmer wants the company to operate as a unified single unit – “not as a set of islands” – so he’s dumping the eight relatively independent divisions he created 10 years ago in favor of organizing the joint by function rather than product, to wit, engineering (including supply chain and data centers), marketing, business development and evangelism, advanced strategy and research, finance, HR, legal and the COO’s slot (which includes field, support, commercial operations and IT).

Marketing and finance, which used to be each division’s business, will now be centralized.

There will be four engineering areas: OS, apps, cloud and devices into which everything Microsoft’s got will be consolidated except Dynamics, which will be separate since, because according to Ballmer, “It continues to need special focus and represents significant opportunity.”

“Some of these changes,” he said, “will involve putting things together and others will involve repartitioning the work, but in all instances we will be more coherent for our users and developers. We have resolved many details of this org, but we will still have more work to do. Undoubtedly, as we involve more people there will be new issues and changes to our current thinking as well. Completing this process will take through the end of the calendar year as we figure things out and as we keep existing teams focused on current deliverables like Windows 8.1, Xbox One, Windows Phone, etc.”

Nobody seems to think the massive reorg can be done that quickly let alone effectively.

Ballmer expects this new Microsoft to be able to innovate “with greater speed, efficiency and capability in a fast-changing world.”

He wants to “deliver a family of devices and services that best empower people for the activities they value most and the enterprise extensions and services that are most valuable to business”

That means transforming “how we organize, how we plan and how we work,” “focusing the whole company on a single strategy, improving our capability in all disciplines and engineering/technology areas, and working together with more collaboration and agility around our common goals.”

Ballmer calls it a “big undertaking” that “touches nearly every piece of what we do and how we work. It changes our org structure, the way we collaborate, how we allocate resources, how we best empower our engineers and how we market. We will allocate resources and build devices and services that provide compelling, integrated experiences across the many screens in our lives, with maximum return to shareholders.”

It’s supposed to “reshape how we interact with our customers, developers and key innovation partners, delivering a more coherent message and family of product offerings. The evangelism and business development team will drive partners across our integrated strategy and its execution. Our marketing, advertising and all our customer interaction will be designed to reflect one company with integrated approaches to our consumer and business marketplaces.”

“This new planning approach will look at both the short-term deliverables and long-term initiatives needed to meet the shipment cadences of both Microsoft and third-party devices and our services.”

Ballmer means to keep almost all his current management but in different jobs.

For instance, Terry Myerson, the former head of Windows Phone, will head a new Operating Systems Group responsible for all OS work including cloud services, Windows, Windows Phone and Xbox; Julie Larson-Green, who used to co-run Windows, will now run a Devices and Studios Engineering Group including hardware development and supply chain as well as games, music, video and other entertainment widgetry; Qi Lu, who ran Bing and Microsoft’s never profitable Online Services, will now lead a new Applications and Services Engineering Group that oversees Office and Skype; and Satya Nadella, who ran Microsoft’s ever profitable Servers and Tools unit, will run a new Cloud and Enterprise Engineering Group developing Microsoft’s data center, database and technologies for enterprise IT scenarios and development tools like Azure.

Kirill Tatarinov will continue to run Dynamics, presumably Microsoft’s conduit to the enterprise, with dotted-line reports to marketing chief Tami Reller and the COO group. Eric Rudder will lead Research, Trustworthy Computing and teams focused on technology and policy, and drive cross-company insight into key new technology trends.

COO Kevin Turner will continue to lead worldwide sales, field marketing, services, support and stores as well as IT, licensing and commercial operations.

Tony Bates, who was president of Skype, will now head a new Business Development and Evangelism Group, focused on key partnerships like silicon vendors, key developers, Yahoo and Nokia. OEMs will remain in SMSG with Kevin Turner with a dotted line to Tony who will work closely with Nick Parker on key OEM relationships.

There will also be a centralized finance group under Amy Hood with SMSG finance reporting to CFO Kevin Turner, a legal group under general counsel Brad Smith and an HR Group remaining under Lisa Brummel.

Office chief Kurt DelBene will retire while Craig Mundie will supposedly be seconded to a special Ballmer project through the end of this calendar year. He will consult next year.

Rick Rashid will stop running Microsoft Research and move into a new role driving core OS innovation in the company’s operating systems group.

There is, as practically everyone noticed, no natural line of succession Ballmer remains in charge.

As a result of the reorg there may be greater integration between on-premise and cloud services, and faster development cycles. It remains to be seen what Microsoft really does about tablets and smartphones, its greatest enemies in the face the abysmal decline in PCs worldwide.

Ballmer said, “Collaborative doesn’t just mean ‘easy to get along with.’ Collaboration means the ability to coordinate effectively, within and among teams, to get results, build better products faster, and drive customer and shareholder value.”

AllThingsDigital wondered if the reorg is going to push Microsoft into changing its financial reporting and make results more obscure.

Business Insider figured it’s a dead certainty Microsoft will be able to hide its gross failures like Bing which has cost it close to $11 billion, a sum it reckons no other company in history has ever lost online. Still it admits that Bing has serious possibilities if integrated into Windows 8, where it might be an interesting Big Data tool.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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