Microsoft reorganized with a bang on Wednesday. It ousted big-name executives Stephen Elop and Mark Penn. It gave Windows leader Terry Myerson the Devices group that Elop once led. Driving these and other dramatic changes are a fundamental corporate shift that wasn't explicitly stated: At the modern Microsoft, hardware is now a very big deal.
The reorganization encompasses most aspects of Microsoft's business, tossing out some of Microsoft's most noteworthy executives in the process. Stephen Elop, who led Nokia and oversaw its integration with Microsoft, is out. Ditto for Mark Penn, the controversial political operative who was instrumental in Microsoft's "Scroogled" campaign.
Instead, Microsoft now sees its "mobile first, cloud first" vision from chief executive Satya Nadella organized around three initiatives: to reinvent productivity and business processes, to build the intelligent cloud platform, and create more personal computing.
Instead of different business units governing hardware and Windows, Microsoft now has placed them under one roof: Terry Myerson will oversee the Windows and Devices Group, combining the Operating Systems Group and the Microsoft Devices Group that Elop formerly helmed.
"WDG will drive Windows as a service across devices of all types and build all of our Microsoft devices including Surface, HoloLens, Lumia, Surface Hub, Band and Xbox," Nadella said in an email to employees. "This enables us to create new categories while generating enthusiasm and demand for Windows broadly."
Windows as a service is an evolution that Microsoft has talked about for some time, although it still hasn't clarified its vision: whether Microsoft will ask future Windows PC owners to pay on an annual, rather than a one-time basis, or simply continue to add security updates and new features over time, as it's emphasized over the past few months. And no, that aspect will be critical to how you engage with Microsoft and its products in the future.
But Microsoft hasn't said what it plans to do in that regard. What it is saying, today, is that hardware matters. A lot.
Why Microsoft now cares about hardware
Scott Guthrie will lead the Cloud and Enterprise team, focused on Microsoft's server-side offerings, while Qi Lu will continue to oversee the Applications and Services Group that encompasses Office and related productivity products. But, chances are, it's the new WDG group that you'll be thinking of when you think of Microsoft.
Historically, of course, Microsoft developed Windows, and you bought a PC to run Windows on. Under the new vision, Microsoft not only wants you to buy a PC to run Windows on, but also a Surface tablet, a Microsoft-powered smartphone, and a Surface Hub to connect it to while at the office. Oh, and a Band, too, to remind you of your upcoming meetings. No, there's no reason to believe that Microsoft will stop promoting its products on other ecosystems. But the Microsoft's hardware business now enjoys a pride of place that it never did before.
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