Microsoft revamp: Firm will be split into three divisions

Microsoft is undertaking a high-profile structural revamp of its global operations, the software giant announced this month.

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By  Chris Whyatt Published  October 2, 2005

Microsoft is undertaking a high-profile structural revamp of its global operations, the software giant announced this month. The company is to split the business into three newly formed divisions, each led by its own president: Business; Entertainment and Devices; and Platform Products and Services. Creating a new framework within the 30-year-old firm will, Microsoft argues, enhance decision-making and the speed of execution. Recently, Microsoft has seen senior managers defect to less feted rivals and faced accusations that its internal set up was hampering its effectiveness. Now it has Google and other internet sharks breathing down its neck. “We’re not the only guy who who’s going to try to deliver software that has a service-based component. We need to get there aggressively and quickly,” said CEO Steve Ballmer. “This is part of driving software-based services in competition with anybody else who thinks they’re going to use that strategy to get ahead in the marketplace,” he added. Under the reorganisation, Platform Products and Services will see, for the first time, Microsoft’s Windows group under the same wing as its MSN online business. It will be co-run by Kevin Johnson and highly-respected VP Jim Allchin, until the latter retires at the end of 2006. The various changes, and Allchin’s decision to step down will, industry watchers believe, have a major effect on Microsoft’s operations. “He’s [Allchin’s] a guiding light in the vision of what Windows represents. Especially how the PC relates to the internet. He was the one who saw the platform being connected to the internet,” said Brian Gammage, an analyst for Gartner. “But perhaps we are at a time now when a change in that vision will have an impact. The internet is everywhere now. Plus, he’s been a very strong leader for the organisation.” The Business division will be led by Jeff Raikes who will oversee the Office software unit, of which he is currently VP, and the rest of Microsoft’s entire business software platform. The third group, Entertainment and Devices, will be headed up by, Robbie Bach, the architect of its Xbox video game business. His remit is simple: to better challenge Apple (and iPod’s dominance). None of the new ‘presidents’ built up their career on the technical side, but CEO Steve Ballmer thinks they all have one crucial quality in common: “They’re picked for leadership more than any particular functional skill,” he said. The company is also placing computing veteran Ray Ozzie, who joined from Groove Networks, which Microsoft bought this year (see IT Weekly 19-25 March 2005), in charge of implementing strategy across all its three new divisions. Industry analysts have, in the past, accused the firm of being slow to react to the threat of rivals. “It remains to be seen whether this is going to be less or more management, but it broadly make sense,” said Gammage of Gartner. “If you look at Microsoft’s financial results one can hardly be critical, but if the questions is will it make them any easier to deal with that remains to be seen,”Gammage noted. He said the time to really judge whether it made a difference was when feedback on customer organisation was received. “Initially, it appears there will be, no there is no customer-facing impact,”he added.

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