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Microsoft Announces Massive Reorganization

The model of five separate business units is scrapped.

Although Microsoft remains a profitable company, it has some catching up to do in key areas like the shift to mobile computing. In an effort to gain traction in those areas, it's undergoing a major reorganization.

The goal is to have all the company's oars rowing in the same direction.

The news became public when CEO Steve Ballmer this morning announced the widely-expected organizational and management shakeup that creates four new engineering groups: operating systems, applications and services, cloud and datacenter and devices and studios.

The move elevates four executives:

  • Terry Myerson will run the new OS business, which includes consoles, Windows and all back-end systems including server and cloud operating systems.
  • Qi Lu takes over apps engineering, covering Office, SharePoint, communications and search.
  • Server and Tools president Satya Nadella will head cloud and enterprise engineering of all back-end technologies, including datacenter, database and development tools. Nadella will also oversee datacenter development, construction and operations.
  • Julie Larson-Green will run the devices organization, which includes hardware development and supply chain management.

The re-org leaves one high-level exec, Kurt DelBene, president of Microsoft's Office group, out of the mix. Ballmer said DelBene is "retiring from Microsoft," without any further explanation. Another major player left with a diminished role is Craig Mundie, who stays on as a consultant through 2014.

In creating this major realignment, Ballmer is looking to break down the silos of Microsoft both from a marketing and engineering standpoint. This so-called "One Microsoft" creates these four new engineering areas and reflects the structure to deliver on Ballmer's vision of becoming a devices and services company, announced last year.

In a letter to employees, Ballmer said the move is aimed at revamping how it deals with all of its stakeholders. "We will reshape how we interact with our customers, developers and key innovation partners, delivering a more coherent message and family of product offerings," Ballmer said in the letter. "The evangelism and business development team will drive partners across our integrated strategy and its execution."

Ballmer emphasized that the re-organization of its engineering silos is just as critical as its go-to-market realignment. "We will pull together disparate engineering efforts today into a coherent set of our high-value activities," he said. "This will enable us to deliver the most capability — and be most efficient in development and operations — with the greatest coherence to all our key customers. We will plan across the company, so we can better deliver compelling integrated devices and services for the high-value experiences and core technologies around which we organize. 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."

Here's a breakdown of the new groups as outlined by Ballmer:

  • Operating Systems Engineering: Covers all OS development, including game consoles, mobile devices, PCs, back-end systems and the operating systems that run its cloud services.
  • Devices and Studios Engineering: Includes all hardware development and supply chain management of those devices. Larson-Green also oversees all games, music, video and other entertainment.
  • Applications and Services Engineering: Brings productivity apps such as Office, SharePoint and Lync as well as search and other information offerings under a common engineering organization.
  • Cloud and Enterprise Engineering: Nadella will manage development of all back-end technologies that run the datacenter, as well as database development tools. In addition, Nadella will oversee datacenter development, construction and operation.
  • Dynamics: Kirill Tatarinov will continue to run Dynamics, but product leaders will report to App Services and Engineering's Lu, with marketing reporting to Tammi Reller, who will now oversee all marketing company-wide, while Dynamics sales will report to the group's COO.  
  • Advanced Strategy and Research: Eric Rudder heads the Research and Trustworthy Computing teams.
  • Marketing: As noted, Reller will head all marketing, while Mark Penn takes "a broad view" of the marketing strategy with centralized advertising and media operations.
  • Chief Operating Officer: Kevin Turner's role as COO remains unchanged.
  • Business Development and Evangelism: Tony Bates, who came over from Microsoft's acquisition of Skype, will oversee important partnerships with OEMs, and key partners such as Nokia and Yahoo.

About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.

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