The new Microsoft: How the reorg will affect you

If you use Microsoft products -- and who doesn't? -- there are some important changes ahead

Steve Ballmer just made the single most important decision of his career: In a reorganization that far eclipses his 2005 shake-up, the Microsoft CEO made good on his promise to start turning Microsoft into a "devices and services" company.

There's one little problem: Right now, Microsoft is a software, cloud server, and game company with a toehold in the highly competitive cloud and hardware businesses. It's saddled with a whole lotta losers that are either dying organically or need to be euthanized. Although the change Ballmer announced today may not be as drastic as former CEO Bill Gates's sudden conversion to the Internet faithful, per the famous Internet tidal wave email of 1995, or the introduction of Microsoft software as a service pursuant to Gates's "services wave" email 10 years later, it's going to shake the foundation of every Microsoft product.

The new organization

To make the transition from the cash cow past to the cloudy future, Ballmer has set up two main divisions:

  • Cloud and Enterprise Engineering, led by Satya Nadella, the current fair-haired boy deemed by many as most likely to succeed Ballmer, will include "back-end technologies like data center, database and our specific technologies for enterprise IT scenarios and development tools ... data center development, construction and operation."
  • Devices and Studio Engineering, led by Julie Larson-Green, a well-respected software engineer who's long been known as ex-Windows chief Steve Sinofsky's able assistant, gets "all hardware development and supply chain from the smallest to the largest devices we build ... studios experiences including all games, music, video, and other entertainment."

Although Nadella has a long, illustrious history leading Microsoft's Server and Tools efforts, Larson-Green's only hardware experience involves the Surface tablet -- damning with faint praise, that. To longtime Microsoft watchers, she's best known as the driving force (with Jensen Harris) for the Office 2007 ribbon interface and Windows 8 Metro interface -- sorry, but to many, damned again.

CFO Amy Hood, HR head Lisa Brummel, and legal boss Brad Smith all keep their current positions.

That leaves a whole lot of "other" at Microsoft -- very profitable pieces of the mothership that are neither devices nor services, including everything from Windows to Office to Dynamics. Those chips fall thusly:

  • Qi Lu keeps Bing and "broad applications and services core technologies in productivity, communication, search, and other information categories" in what is now the Applications and Services Engineering group. I can find no official confirmation, but it sounds like the entire Office division has moved under Lu. Office isn't even mentioned in Ballmer's announcement, except for historical references. It's worth remembering: Nadella used to work for Lu.
  • In a "small fish swallows big fish" manuever, Terry Myerson gets Windows in the Operating Systems Engineering group. Myerson, you may recall, took over Windows Phone when Ballmer effectively moved Andy Lees out of Sinofsky's acquisition path in December 2011 -- Lees was in charge of Windows Phone, Sinofsky wanted Windows Phone, Lees was moved to the side on "special projects," and Myerson took over Windows Phone. Less than two years later, the guy who was brought in to take care of Windows Phone now finds himself in charge of all of Windows. Sinofsky must be steaming. (More likely, with $14 million in stock coming his way, he doesn't really care.) Responsibilities "span all our OS work for console, to mobile device, to PC, to back-end systems ... [and] core cloud services for the operating system."
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