July 19, 2013
Most years, Microsoft’s Worldwide Partner Conference has little trouble holding the attention of the IT world. This year, though, Microsoft all but upstaged itself. For even as its top brass was briefing partners on upcoming priorities, all eyes in tech-dom were on Microsoft HQ in Redmond, Wash., where word of a long-rumored, much-anticipated, and potentially historic reworking of the company’s org chart was expected at any minute.
Sure enough, on July 11, as WPC was wrapping up in Houston, details of the reorg contained in a companywide email from CEO Steve Ballmer leaked out to the media. They were every bit as momentous as expected.
Last fall, in a letter to shareholders, Ballmer announced that to compete more successfully in an industry increasingly defined by cloud computing, mobile solutions, and consumer-oriented hardware, Microsoft would remake itself from a software company into a provider of “devices and services.” Realizing that strategy, Ballmer’s July memo explained, required a sweeping overhaul of Microsoft’s structure, culture, and operating processes.
“To advance our strategy and execute more quickly, more efficiently, and with greater excellence we need to transform how we organize, how we plan and how we work,” Ballmer wrote.
The reorg he then outlined aligns the company around centralized, functionally oriented groups in areas such as marketing, finance, and engineering. The latter group, which contains Microsoft’s product developers, is divided into four sub-entities: an operating systems group covering all versions of the Windows OS as well as Microsoft’s core cloud services; a devices group in charge of hardware like Microsoft’s Surface tablets, along with the company’s entertainment services; an applications group with control over productivity, communication, and search solutions; and a cloud and enterprise group responsible for servers and development tools as well as construction and operation of Microsoft’s global network of cloud data centers.
All of that is change enough for a business as big as Microsoft. But the larger goal Ballmer described—unifying a company that has long functioned as a series of disparate product groups around a common vision—is even more ambitious.
“We are rallying behind a single strategy as one company—not a collection of divisional strategies,” Ballmer’s memo stated.
That, believes Andrew Brust, is what most distinguishes this latest Microsoft reorg from its all but bi-annual predecessors. Brust is CEO of Blue Badge Insights, an analyst firm that covers Microsoft from its headquarters in New York. “At least rhetorically, Microsoft business groups will work more cooperatively and less competitively from here on,” Brust said in an email interview. “If that is implemented successfully, it will make for a very different Microsoft.”
Will the reorg make for a very different Microsoft channel too? Probably not any time soon, according to at least some partners. “In the short term it doesn’t matter at all to folks at our level,” asserts Josh Liberman, president of Net Sciences Inc., an Albuquerque, N.M.-based solution provider. Your contacts at Microsoft may shift a little, he concedes, but little else is likely to change for now.
Liberman and other partners see worrying hints for the long term in Ballmer’s memo, however. For example, they note, the company’s apparent intention to make additional devices beyond the Surface itself heralds increased competition with its OEM channel. Could other partners be in for the same treatment?
“This is another piece in the puzzle that has a lot of partners out there concerned about where Microsoft is heading as a partner-focused company,” says Jamison West, CEO of Arterian, an integrator and managed service provider in Seattle.
Indeed, observes John Krikke, vice president of Onward Computer Systems Inc., in Burlington, Ont., while Ballmer’s memo had plenty to say about enterprises and consumers, channel pros and their customers were conspicuously absent. “You didn’t hear anything about SMB and not very much about partners,” he says.
Sadly, Krikke continues, that’s less than surprising coming on the heels of Microsoft’s decision last summer to discontinue the on-premises edition of Microsoft Small Business Server and the Small Business Server brand, not to mention its earlier cancellation of the highly popular Small Business Specialist partner community. “Their SMB engagement has been a little weak in the past number of years,” he says. “The reorg itself is just one more little piece where the SMB partners think they’re being ignored.”
Even so, though many of those partners are reselling solutions from other vendors more frequently these days, few have immediate plans to sever ties with Microsoft. “I’m still betting on Microsoft,” says West, who remains enthusiastic about the company’s technology. He’s just not counting on Microsoft returning that commitment anymore.
Brust endorses that kind of cautious realism. Yes, Microsoft is now competing with some of its partners, he observes, but that competition is far from absolute. “Microsoft is still, primarily, a partner-driven company,” Brust says. “But now the relationship is more complicated.”