Its Time for Microsoft Heads to Share Power

Microsoft needs to do two things at once. It needs to act like the big multibillion company it is, and at the same time it needs to act like the adroit, nimble company it once was and its founder Bill Gates remembers.

Those twin needs led the Redmond giant to its latest restructuring, reorganizing and refocusing. But it may not be enough.

On Tuesday, the company announced a restructuring along with the departure of one key exec from its Windows platform and the elevation of another exec, who once made his living by doing end runs around the Microsoft product portfolio.

In reorganizing into three business units, Gates and CEO Steve Ballmer are attempting to push responsibility and decision making further down into the company ranks.

This makes great sense in a company where much of the decision making and product review process still resided at the top of the company despite the firm being a nearly $40 billion software giant earning over $12 billion in its fiscal year ending in June 2005.

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Microsoft reorganizes and Allchin steps down. Click here to read more.

The three new groups essentially divide Microsoft into a platform group (the ubiquitous Windows), an applications group of which Microsoft Office plays the key role and an entertainment and games group.

The Microsoft Platform Products & Services will hold responsibility for the Windows operating system, the corporate servers and the MSN Internet operation.

The unit will be led by Kevin Johnson (who came to Microsoft from IBM in 1992) and Jim Allchin. Allchin, the prime driver behind the Windows platform, is retiring from Microsoft at the end of the year, a decision he stated in an internal memo to Microsoft several years ago.

The Microsoft Business Division will be headed by longtime Microsoft exec Jeff Raikes and include the Office suite which has long been a prime profit driver for the company and is due to come out with a new version (Office 12), along with the companys Vista operating system.

Robbie Bach will head the Entertainment and Devices unit. The company has needed to build a focus in its games groups as it continues to face the determined efforts of game platform makers including Sony and Nintendo, as well as the rise of online and group game services on the Web.

Along with Allchins announced departure, there were two other significant personnel changes.

Eric Rudder (the senior VP of the companys server business) will report directly to Gates in a somewhat undefined role of helping to develop overall technical strategy.

Ray Ozzie, who joined Microsoft when the company bought Massachusetts-based Groove Networks, has been elevated to the role of helping to develop a software services strategy across all three divisions.

Ozzie was instrumental in developing the Lotus Notes platform which was one of the first successful groupware applications.

Microsoft must evolve to survive. Click here to read more.

The rise of service-based applications and companies such as Salesforce.com has been problematic to Microsoft, which grew and found success in the structured client and server world of computing.

While the company holds a monopoly and lucrative position on the computing desktop, it has not had a strong answer to the unfolding computing world where software is offered on a subscription-based service available to users as a browser-based application.

One of the key figures in helping the company develop that dominance was Jim Allchin.

Allchin was largely credited with getting the massive Windows development process on track after repeated delays and detours.

In a memo to the companys platform products group, Allchin stated he made the decision to retire at the end of 2006 nearly two and a half years ago, following a medical event from which he has recovered, but led to a evaluation of priorities.

Company reorganizations are only as effective as the follow-through. Creating distinct divisions and spurring the development of web services will only be effective if those division heads can truly exercise their power.

Web services will have to be implemented even if they run counter to the wishes of the highest levels at the company, which include the wishes of Gates and Ballmer.

Eric Lundquist is editor in chief of eWEEK. He can be reached at eric_lundquist@ziffdavis.com.

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