What the Latest Management Shakeup Means for Microsoft, Satya Nadella

By Don Reisinger

When Stephen Elop clasped hands with former Microsoft CEO Steve Ballmer a couple of years ago and the company indicated the future was bright with Nokia on its side, Elop seemed like he would remain a fixture in Microsoft senior management for years. But the acquisition of Nokia’s mobile business hasn’t grown the way Microsoft had hoped. It’s apparent that Elop’s performance as head of the company’s Devices Group must have fallen short. Perhaps, Elop failed to see Nadella’s vision. Of course, that wasn’t all that surprising: Many wondered how Elop would fare in a position that included so many different device types, including the Xbox, which caters to consumers—a market Elop has never proven he’s understood. In getting rid of Elop, Nadella seems to be showing consumers that he understands they have needs.

Analysts have chimed in on Elop’s ouster, arguing that it proves that the acquisition of Nokia’s Devices and Services business was never a suitable fit for Microsoft and was Steve Ballmer’s last big mistake. One analyst told Reuters that the Elop firing shows Nadella sees little-to-no value in Nokia and is “trying to make the best of a bad situation.” It looks like Microsoft’s $7.2 billion buyout of Nokia’s Devices and Services business wasn’t worth it, after all, and Nadella knows it.

There has been some speculation over just how important Windows is to Microsoft’s future. The company is, after all, offering it for free for the first time and has been far more open with the platform than ever, causing some to wonder if Nadella sees a future elsewhere. However, Nadella said that building personal devices running Windows is a key component in his strategy, and the shake-up at the top seems to indicate that Windows is still vital to Microsoft’s future.

Nadella said that the company will form a new division, the Windows and Devices Group, which will focus, not only on its core Windows platform, but also on developing devices that customers would find appealing. That’s a critical point. Historically, Microsoft has been willing to let all other companies do the heavy lifting on hardware. Now, it’s content to play both sides of the coin—hardware and software.

Nadella has made it clear on countless occasions that the cloud is crucial to his company’s future, and he’s said it again with the latest executive shake-up. He announced that Microsoft Executive Vice President Scott Guthrie will lead the company’s Cloud and Enterprise team and added that he believes that division will be able to build “high-value infrastructure and business services.” In other words, the cloud is important, and Nadella wants an entire division to focus on it.

Although Microsoft has a suite of services designed to improve productivity, the company hasn’t always placed a spotlight on ERP and CRM. In its announcement of the executive shake-up, however, the company said that the Cloud and Enterprise team will be tasked with building better solutions to handle company needs in ERP and CRM.

Executive Vice President Qi Lu will lead Microsoft’s Applications and Services group for one, simple reason: The bring-your-own-device (BYOD) trend is alive and well. In fact, the company said in a statement that the division will focus on building products and services that can appeal to an individual’s needs both at work and at home. Microsoft, like many others, appears to be looking to bridge the gap between home and work with a new set of solutions under Lu’s lead.

Nadella said the new alignment of the business and the executive shake-up will allow his team to deliver “better products and services.” The comment, of course, begs a simple question: Were the ousted executives—Elop, Eric Rudder (former head of Microsoft Research) and Kirill Tatarinov (of the Dynamics CRM and ERP business)—holding back Microsoft’s ability to innovate and deliver exciting products? Based on Nadella’s comments, it appears the ousted executives were hampering innovation and development at the company, which Nadella wants to fix for the future.

A look at Microsoft’s executive lineup shows a new crop of people who have either been at the company long enough to add value to Nadella’s team or are his favorites. By replacing executives with people he has grown to trust, Nadella has formed a team that he can rely on to build Microsoft. It’s now his C-suite, filled with his people aimed at getting Microsoft back on track. Now, all he needs to do is prove he’s the right person for the job.

When Satya Nadella was appointed Microsoft CEO, the company also noted that Bill Gates would take on a more active role at the tech giant. The announcement was viewed as a potential issue for Nadella, possibly forcing him to compete with Gates for full control over the company. By appointing his own people and getting rid of some of the executives that have seemingly held back the company, Nadella appears to be throwing his weight around and showing that he’s not only in charge, but also willing to make major decisions to right the ship.