Microsoft biz heads slash makes Ballmer look like dead STEVE JOBS

Looks like Microsoft needs a change of guard. Aivars Lode Avantce

Microsoft biz heads slash makes Ballmer look like dead STEVE JOBS

The Microsoft re-organisation unveiled by chief executive Steve Ballmer yesterday is the biggest - and riskiest - in his company's history.

Not since Microsoft shifted from a PC software company to a PC-and-server-software-and-internet company have the top brass shifted the reporting lines so thoroughly. Back then, the change was simple: while previously Microsoft shipped boxed product for PCs, it would now ship boxed product for servers and virtual boxed product for the internet.

But the industry has become a lot more complex since then. Other firms have moved on to huge success selling high-margin goods that hook users into a never-ending stream of software, hardware, services and accessories, all working together to make the rest of the biz units' output indispensable.

In response, Ballmer has unveiled a new, supposedly engineering-lead structure designed to harness the technology talent inside Redmond while feeding that into a new unified whole that is Microsoft. A total operation, not an operation of separate pieces.

It's an engineering problem
Collaboration
Co-operation never looked so rough
The buck stops... where?
Collaboratation issues

In that respect, Ballmer's overhaul is trying to make Microsoft more like Apple and Google. Apple succeeded with the iPhone and iPad because it harnessed the ideas and passions of its people - not just the demonic zeal of one chief executive.

Google, on the other hand, is famed for giving its engineers 20 per cent free time for working on projects that improve Google's services.

It's Apple and Google that are today synonymous with smartphones, tablets, internet search and services - all areas where Microsoft is lagging badly and has failed to make money.

But Ballmer's plan is dangerous: he's ripped up the corporate model that's helped turn Microsoft into the world's largest software company and also a money-making monster.

By breaking down internal barriers inside Microsoft, he's smashed the existing lines of leadership and accountability on product and service development. The old certainties are gone.

Power, meanwhile, has transferred away from product people and been concentrated further in the hands of one man: Steve Ballmer. But he's a salesman CEO, not a technology CEO like Steve Jobs or Larry Page - or even Bill Gates - whose signatures are landmark technologies.

Under CEO Ballmer, Microsoft was caught napping on internet search, ads, smart phones and tablets. The risk is this will happen again.

The changes unveiled this week marked the end of Microsoft's five product groups.

These groups had become the fundamental unit for running Microsoft, delivering product. The Windows group, for example, handled every aspect of the Windows client operating system: product planning, engineering, development, marketing, business and partners.

There was also minimal interdependence between units. Collaboration was on a case-by-case basis - between, say, Windows and Office on integration, interface and, lately, web.

Units working in vertical silos, building and delivering total products are now dead. In their place we have four technology groups working thematically: operating systems and engineering; devices and media; applications and online services; and cloud and enterprise engineering.

The idea, according to Ballmer, is to make Microsoft more of an engineering-focused company with more collaboration.

So, for example, the operating systems and engineering team under former Windows Phone chief Terry Myerson will work on Windows on mobile, PC and backend systems.

If you've been watching the munging-together of Windows for PCs and slabs and Windows for phones and have been either encouraged or horrified, expect more.

The new groups, meanwhile, only do engineering. Responsibility for business, finance and marketing that the product groups had enjoyed has shifted.

The end of the groups and breakup of their powers can be good for Microsoft and for execs like Qi Lu, who is now EVP of the application and services engineering group. Conversely, the change is also bad for Microsoft ... and for execs like Satya Nadella, the EVP of the cloud and enterprise engineering group.

The former Microsoft bod, Lu, a technologist hired from Yahoo! before the changes, had been group vice president of Microsoft's online business group. But OLB was a financial black hole - a constant loss-maker. Yet, under Ballmer's plan, Lu will control Office, Office 365, Skype and Lync along with Bing search and ads and Microsoft's other online services.

Fortunately for Office, he will do so free of any business concerns.

Nadella, on the other hand, was in charge of one of Microsoft's biggest three business units as group vice president of Server and Tools. Now, while he'll continue developing server and tools for cloud and enterprise, he has lost responsibility for business, marketing and sales of those products.

One person to watch will be Tami Reller - she is now running the entirety of Microsoft's marketing. Previously, marketing had been done by the product groups and also by a central marketing group. Now, Reller will develop communications, branding, and conduct product and market research for Microsoft's consumer and business products and services.

Prior to her new role, Reller had served as head of marketing and finance for the Windows group.

OK, so the model is an engineering organisation, more like Apple and Google. But who is in charge, who is accountable and how will development be channeled into the kind of success Ballmer wants? In the new Microsoft, where would the new Surface come from? And who would take ownership for it?

It's hard to know and, I'd argue, even Microsoft doesn't have an answer. With the old product reporting lines gone, Microsoft is placing great faith on people's willingness to work together at different levels.

Take a new Surface: The operating systems and engineering group under executive vice president Terry Myerson would be responsible for the operating system but the responsibility for hardware is with Julie Larson-Green, EVP of devices and studios engineering.

Xbox is a similar challenge. Larson-Green now runs all Xbox engineering, but the success of Xbox is not the engineering; it's the marketing of the units and the games to partners and the yoof. But marketing now rests with a completely different operation - Reller's group. Neither does Larson-Green own Xbox's software - that's under Myerson.

One former Microsoft source highlighted the communication and management rough edges. "If they take a functional engineering point of view, you will have functional disconnects. Who is developing product strategy and who sets the vision for driving the business or the product forward?"

Worse, who sets - and is accountable for - product business goals, and for profit and losses? In the old group structure, that fell to the group vice president. Sales of Windows were down? Pull in Steven Sinofsky. Sales of Windows Phone are tanking? Bring me the head of Robbie Bach - head of phones as vice president of the Entertainment and Devices group, who retired in 2010. Of course Entertainment and Devices has now been dissolved.

Success in this new model will depend more on individual's having bright ideas that management approves - and, later, on staffers from other departments being willing to collaborate with them.

The incentives for Myerson, Larson-Green, Nadella and the others have changed. Ballmer is expecting they collaborate, but they have a lot less control over their destinies than under the old Microsoft model. The weakest point in the success of their careers and their projects is the worst performer one somebody else's team.

Further, collaboration doesn't come easily to a company culture like that of Microsoft. The firm's culture is notoriously competitive, and insiders say this can mean death by best PowerPoint rather than by best product or most logical argument.

As for those imagined, beautiful synergies of engineers working in a single unit - these don't always flow. For all the success of Apple's iPad and iPhone, there’s also Mobile Me and iOS Maps.

Google encourages techies to channel their creative juices for 20 per cent of their time, but there’s a difference between good ideas and good ideas that work based on the number of dead projects.

Microsoft is supposedly becoming a flat, unified engineering operation. But technology and business success still requires strong vision, leadership and accountability. With the old structure gone, the question will be: who will corral the techies into working together and who will keep the business functioning?

If not Reller, then it’ll be Ballmer rolling up his sleeves.

As one ex-Microsoft source told me: "The amount of work Steve Ballmer is signing up to do is amazing. He wants this to be a gigantic, single business." ®