When CEO Steve Ballmer announced Microsoft's most sweeping
reorganization in years Thursday, he said it was to make the company
faster-paced and more collaborative -- all the better to advance his vision of
turning the software giant into a devices-and-services company.
That's what makes the restructuring so crucial: The future of the company, and how well it competes in a changing tech market, hangs at least in part on how well this reorganization is executed.
Ballmer has realigned the company according to function, cutting in half the number of product divisions and centralizing operational services.
Previous divisions such as Windows and Windows Phone, or Office and Bing, have been collapsed into the larger engineering units.
Operational services such as marketing, finance and business development will now all go through a central companywide leader of those functions, rather than through each product division.
There are no plans for layoffs, Ballmer said during a call with reporters and analysts. But he did say there would be many changes in people's job duties.
The reorganization attempts to address some of the shortcomings that have led a scrambling Microsoft to play catch-up in the smartphone, tablet and search markets as competitors, including Google and Apple, soared with their offerings.
This massive realignment is part of Microsoft's strategy for the future -- one in which desktop and notebook PCs and in-house servers on which Microsoft built its empire are increasingly overtaken by mobile devices and cloud services.
"We see this as being a really significant move for Microsoft," said Al Gillen, analyst with research firm IDC. "It opens the door for them to make more aggressive moves to compete in the new world of computing."
Microsoft recognizes that in this new world, it has to provide a more coherent, cohesive message to users about why to choose its offerings and to developers about why to build for and on Microsoft platforms.
"This is a change that Microsoft is putting in place to set them up for the next five years, not for the next few months," Gillen said.
Microsoft traditionally has had a vertical hierarchy, with product divisions operating as silos, each with its own goals and strategies.
In the new structure, which is effective immediately, though likely to take months to fully implement, the company will be organized around the functions of: engineering, marketing, business development and evangelism, advanced strategy and research, finance, human resources, legal, and functions such as field sales and support, commercial operations and IT that fall under the chief operating officer.
The engineering groups contain the products and services that most people think of when they think of Microsoft.
The four groups:
--Operating Systems, run by former Windows Phone head Terry Myerson, will handle Windows, Windows Phone and Xbox.
--Applications and Services, run by former Online Services President Qi Lu, will include Office, Lync, SharePoint, Skype, Yammer, Bing and MSN.
--Cloud and Enterprise, run by former Server and Tools President Satya Nadella, will include Windows Server, Windows Azure, SQL Server and Systems Center.
--Devices and Studios, run by former Windows engineering head Julie
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