Microsoft to announce major restructure tomorrow?

Reports of an imminent and broad Microsoft business reorganization keep mounting, including an anonymously sourced article from The Wall Street Journal's AllThingsD blog that says CEO Steve Ballmer will unveil the plan on Thursday.


Reports of an imminent and broad Microsoft business reorganisation keep mounting, including an anonymously sourced article from The Wall Street Journal's AllThingsD blog that says CEO Steve Ballmer will unveil the plan on Thursday.

Microsoft critics have pointed out for years that the company has a product lineup that is too big and too varied, and that it could make sense to split up the house that Bill Gates built into more independent subsidiaries or even spin off some units entirely.

This, observers have said, could bring more agility and innovation to the different teams by streamlining the decision-making process both at the product development and business strategy levels.

Currently, Microsoft has products as disparate as the Xbox gaming console, the Bing search engine and the SQL Server enterprise database.

Far from consolidating and paring down its product roster, Microsoft has ventured into new areas, like its surprising decision last year to build its own tablet device -- the Surface -- at the risk of alienating its hardware partners.

There has been dissatisfaction among investors about stagnant growth in the stock price, and the company has been criticised for adapting too slowly to key trends, including cloud computing and consumerisation of IT.

Glaring examples of missed opportunities by Microsoft are the minor presence of its Windows OS in tablets and smartphones. While Microsoft is trying to remedy that with Windows 8 and Windows Phone 8, the OS is very far behind iOS and Android, and Microsoft has missed three years of blazing hot sales for these devices, which many people now use both at home and at work.

On the enterprise software side of things, Microsoft has also scrambled to respond to fast-moving trends. For example, it spent $1.2 billion a year ago to buy Yammer in order to boost the weak enterprise social networking capabilities of its SharePoint collaboration server and of other business software like Office, Exchange, Lync and Dynamics.

In addition, rivals have been sniping at the Office franchise for several years, offering up less expensive, cloud-only options like Google's Apps suite that have found success in a market Office has historically dominated.

According to AllThingsD's report on Monday, the reorganisation will be drastic and has many company leaders on pins and needles because Ballmer has apparently kept the details confidential, sharing them with only a select few. According to a Fast Company article, the restructuring intrigue and uncertainty played a part in Don Mattrick's decision to leave his job as president of the company's Interactive Entertainment unit and join Zynga as CEO.

But the overall goal, according to AllThingsD, is to bring "functional coherence" to the company and group some products under different leaders, including the creation of a new unit for cloud computing and business products led by Satya Nadella, who is now in charge of the Servers and Tools division. Qi Lu, now head of Online Services, which includes Bing, would also oversee Office and other apps. A Bloomberg article last week also included details on a number of such moves that are reportedly part of the plan.

Of course, major restructurings and reorganisations are common among large IT vendors, and often the plans end up being so convoluted and hard to implement that they do more damage than good. Sometimes the plans slow down the company or simply prove outright unwise, leading down a path of failure.

An unwanted byproduct can always be that enterprise customers and employees interpret these shakeups as signs that the vendor is in crisis and rudderless, leading them to lose confidence in the companies. Customers then begin to second-guess their decisions to invest in the vendor's products, while employee morale dips and staff turnover increases.

David Johnson, a Forrester Research analyst, said that Microsoft's internal divisions are getting in the way of its progress. The division leaders are judged on the financial performance of their business unit, but also on potentially conflicting goals including product integration, quality and shared financial results.

"It can be extremely complex to track progress and success and failure across a confusing organisational structure and set of priorities, and divisional revenue will always trump other goals, so when the pressure is on for revenue or profits in one division, it can be difficult or impossible to get collaborative, cross-silo work done," Johnson said via email.

The potential upside is that, given the company's enormous capabilities and resources, Microsoft could speed by competitors and blaze a trail of innovation if its inner workings were properly coordinated, he said.

"The best purpose of a large company is the ability to coordinate resources and talents across a large number of things, to get a few very important things done," Johnson said.

"But the way they're structured now, they can innovate but only in silos or pockets, and so they're not bringing the full potential of a well-coordinated, large organisation to get that handful of really important, high-value things done," he added.

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