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Microsoft reorg could fix some problems, create others

Juan Carlos Perez | July 12, 2013
Industry analysts are split on how effective Ballmer's reshaping of the company will be.

Steve Ballmer's grand plan to reinvent Microsoft has garnered mixed reviews from industry analysts, ranging from enthusiastic endorsements to frowning skepticism.

Some predict the reorganization will accomplish its goal of making Microsoft more efficient and innovative, and thus better able to compete against rivals like Apple, Oracle, IBM and Google. Others are concerned that internal accountability will drop and the company will become less responsive to customer needs and market inflections.

At the heart of the restructuring, announced Thursday, is the dissolution of the company's five business units — the Business Division, which housed Office; Server & Tools, which included SQL Server and System Center; the Windows Division; Online Services, which included Bing; and Entertainment and Devices, whose main product was the Xbox console.

They're being replaced by four engineering groups organized by function, around operating systems, applications, cloud computing and devices, and by centralized groups for marketing, business development, strategy and research, finance, human resources, legal and operations.

Ballmer wants the company to operate more cohesively, so it can build blockbuster products that cater to the needs of people both at home and at work in a variety of ways.

"The form of delivery of our value will shift to really thinking about devices and services versus packaged software," Ballmer said during a press conference Thursday.

"We need to move forward as one Microsoft, with one strategy and one set of goals," he added.

Teams will work in an interdisciplinary fashion on all major projects to make sure efforts are in sync with the overall goals of the company, according to Ballmer.

Tom Austin, a Gartner analyst, is skeptical of this shift from business units to functional groups.

"The business of business is business. Companies should be organized by major business units, not by functional units," he said.

With this new setup, it may become harder for outsiders such as customers, partners, investors and analysts to decipher Microsoft's strategy and evaluate its performance, he said. In short, he fears there will be less transparency and visibility into the company.

"I would have preferred that there was a clear message they were going to continue to manage and report by business. Whether they structure [the company] that way or not is less material," Austin said.

"The value of transparency is that it lets customers and investors make more informed decisions as to the level of accuracy or spin that are in Microsoft's executive statements," he added.

IDC analyst Al Gillen views the plan with more optimism, saying Microsoft is making necessary, bold changes.

"Microsoft's core business is being undermined by changes in the market and the company needs to be more responsive and think about things differently than it has in the past," he said.


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