The coming Microsoft reorg: What's in it for customers?

No immediate impact, analysts decide

The rumored reorganization of Microsoft, which could be unveiled as soon as tomorrow, will go unnoticed by customers in the near-term, analysts said.

The rumored reorganization of Microsoft, which could be revealed as soon as Thursday, will go unnoticed by customers in the near-term, analysts said today.

"This will take years to work out," said Patrick Moorhead, principal analyst at Moor Insights & Strategy, with a just-as-long timeline before customers see a significant difference. "A company the size of Microsoft is perpetually reorganizing. They're never done."

In fact, changes in how Microsoft groups its product lines may be less important than who runs the revamped groups.

"The impact will be subtle and long term," said Rob Helm of Directions on Microsoft, a research firm that tracks only Microsoft's moves, and is famous for figuring out the Redmond, Wash. company's internal makeup. "It will be more to do with whom than how they're organized."

According to reports by the Wall Street Journal's AllThingsD blog, Bloomberg and others, the imminent reorganization will shuffle products into several new divisions and eliminate the current groups. Some Microsoft observers have pegged the expected restructuring as the largest since a 2005 recast, while Helm, who has been locked onto the company for 14 years, said, "This looks like the biggest change since I've been watching Microsoft."

Julie Larson-Green, for example, who now leads Windows engineering, will reportedly oversee all hardware design and development, including the Xbox and the company's Surface line. A new cloud computing and business products unit will be run by Satya Nadella, now the top executive of Microsoft's Servers and Tools group. Terry Myerson, currently head of the Windows Phone division, will purportedly assume engineering control of all the firm's Windows platforms. And Qi Lu, who leads Online Services -- and is thus in charge of Bing -- may pick up Microsoft Office.

The underlying concept behind the reorganization is to refocus the company along the "devices and services" concept that CEO Steve Ballmer claimed last year was Microsoft's new mantra.

"It's all about synchronizing with the grand strategy that [Ballmer] laid out with 'devices and services,'" said Carolina Milanesi of Gartner. The reorg was inevitable once Ballmer stopped talking about software, historically Microsoft's forte, and began naming hardware and services as the firm's future.

But while investors must certainly monitor the changes -- and the story is inherently interesting to others because Microsoft is, well, Microsoft -- what's in it for customers?

A lot, argued Frank Gillett, an analyst with Forrester Research. "It's of interest because of what it says about which products Microsoft thinks go together, which products you get, for example, on a device," said Gillett. "It seems to imply that they don't expect to make money selling software, although they will include software in their thinking so that, for example, the OS is just one element of their thinking of what devices are."

Gillett cited SkyDrive, Microsoft's online storage and syncing service, as an example. "SkyDrive gets monetized when you buy a device," he said, as it's included with each device purchase. Further revenue -- the "service" portion -- is generated by premium offerings, such as additional storage space.

Most analysts saw the reshuffling not only as a move to mirror Ballmer's "devices and services" strategy, but also an attempt to foster cooperation and dampen the competition that has driven decisions, sometimes to the detriment of customers.

"The quasi-independent companies, which was what the groups are now, may have made it easier for each to do what's right for their specific set of customers," said Helm, citing the development of Office for OS X as an example. But at the same time, the baked-in competition, where each division head was akin to a warlord, responsible not only for product development but also for meeting revenue targets, resulted in the Office group hesitating to adopt Windows 8's "Modern" touch-based model, while Windows put the kibosh on Office for the iPad to secure suite exclusivity on its Surface hardware.

A reorganization, if it encourages or forces more cooperation, may translate into changes customers see if, as some expect, Microsoft removes business responsibilities from division leaders, or at least severely curtails those duties.

"It would be easier to seriously hold the engineering leader of Office and the engineering leader of Windows responsible for doing whatever it takes to ship a great set of Metro Office apps ASAP if you aren't also telling them [that] job No. 1 is to meet this year's revenue and contribution margin goals," said Hal Berenson, a former Microsoft manager and engineer who is now president of True Mountain Group, a technology and management consulting firm.

Not everyone agreed with Berenson. "If the technology leaders are losing control over resources, we may see the applications group sticking even more closely to the Windows line," said Helm.

The melding of all Windows engineering -- on the desktop, tablet and smartphone -- could produce results, too, said Moorhead. "We may see a more seamless experience, a better experience, between phone and PC," he opined.

But businesses aren't sterile organizations, they're organizations of people, said Helm, who stressed that the drivers will be the group leaders, not the org chart. "Lu, for example, has been running a money loser, but from a technology standpoint there's been a lot of interesting technology coming out of Bing," Helm said. "If [Lu] moves to a greater role in technology [and less on the business side], that could amplify his, and Bing's, strengths."

On the other hand, because the reports have omitted some executives, it may imply that they will be demoted, or even prodded to leave. Kurt DelBene, who now leads the Office division, was uppermost in Helm's mind. "Kurt's been absolutely critical to Office 365," Helm said of the company's shift to a subscription revenue model for the suite. "But it may be that individuals [like DelBene] will leave."

Moorhead cautioned that, rumors and anonymous sources aside, no one knows how a Microsoft reorganization will shake out.

Only one thing's guaranteed, added Helm. "Any immediate customer impact will be limited," he said.

This article, The coming Microsoft reorg: What's in it for customers?, was originally published at Computerworld.com.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

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This story, "The coming Microsoft reorg: What's in it for customers?" was originally published by Computerworld.

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