Microsoft

http://www.nytimes.com/2013/07/12/technology/microsoft-­‐revamps-­‐structure-­‐and-­‐ management.html?ref=technology&_r=0&pagewanted=print  

New  York  Times                   July  11,  2013  

Microsoft  Overhauls,  the  Apple  Way  

By  NICK  WINGFIELD  

SEATTLE  —  A  couple  of  years  ago,  a  satirical  set  of  diagrams  depicting  the  organization  of  Amazon,   Apple,  Facebook  and  other  technology  companies  made  the  rounds  on  the  Internet.  The  chart  for   Microsoft  showed  several  isolated  pyramids  representing  its  divisions,  each  with  a  cartoon  pistol  aimed   at  the  other.    

Its  divisions  will  war  no  more,  Microsoft  said  on  Thursday.    

The  company  said  it  would  dissolve  its  eight  product  divisions  in  favor  of  four  new  ones  arranged  around   broader  functional  themes,  a  change  meant  to  encourage  a  tighter  marriage  among  technologies  as   competitors  like  Apple  and  Google  outflank  it  in  the  mobile  and  Internet  markets.    

“To  execute,  we’ve  got  to  move  from  multiple  Microsofts  to  one  Microsoft,”  Steven  A.  Ballmer,  the   longtime  chief  executive,  said  in  an  interview.    

The  notion  of  organizing  the  company  around  the  trinity  of  modern  technology  products  —  software,   hardware  and  services  —  is  most  famously  used  by  Apple.  It  is  yet  another  sign  of  how  deeply  Apple’s   way  of  doing  things  has  seeped  into  every  pore  of  the  technology  industry.    

And  in  the  process,  some  of  the  biggest  technology  companies  are  starting  to  look  much  more  alike   organizationally.  The  goal  is  to  get  thousands  of  employees  to  collaborate  more  closely,  to  avoid  some   duplication  and,  as  a  result,  to  build  their  products  to  work  more  harmoniously  together.    

“The  current  model  is  obviously  Apple,  given  how  phenomenally  successful  they  have  been,”  said  Kevin   Werbach,  an  associate  professor  of  business  at  the  Wharton  School  at  the  University  of  Pennsylvania.   “What  Apple  has  been  great  at  is  creating  these  experiences.”    

The  changes  at  Microsoft,  a  giant  in  the  tech  industry  for  decades  that  has  stalled  in  the  last  few  years,   echo  similar  moves  at  its  biggest  rivals,  including  some  tweaking  at  Apple.  Craig  Federighi,  who  led  the   development  of  Apple’s  operating  system  for  computers,  was  also  given  oversight  of  much  of  the   operating  system  for  iPhones  and  iPads.  Jonathan  Ive,  the  industrial  designer  behind  the  slick  look  of   Apple  hardware,  took  charge  of  the  interface  of  Apple  software.  At  Google,  the  development  of   operating  systems  for  mobile  devices  and  computers  was  put  into  the  hands  of  a  single  executive,   Sundar  Pichai,  rather  than  two.    

Microsoft  said  on  Thursday  that  it,  too,  would  consolidate  its  major  operating  systems,  including   Windows,  Windows  Phone  and  the  software  that  powers  the  Xbox,  under  Terry  Myerson,  who  handled   engineering  only  for  Windows  Phone  before.  The  underlying  goal  is  to  create  software  with  tighter   linkages  to  power  an  array  of  devices,  making  it  easier  for  people  to  use  their  smartphones,  tablets  and   game  consoles  as  adjuncts  to  one  another.    

But  Microsoft’s  charges  are  far  more  sweeping  and  involve  many  more  people.  “This  is,  in  my  mind,  the   biggest  thing  we’ve  ever  done,”  said  Lisa  Brummel,  a  24-­‐year  Microsoft  veteran  who  leads  its  human   resources  department,  noting  that  the  company  has  nearly  100,000  employees.    

It  remains  to  be  seen  whether  more  cohesive  teamwork,  if  that  is  what  results  from  all  the  movement,   will  offer  the  spark  that  has  been  missing  recently  from  so  many  of  Microsoft’s  products.  The  company   remains  one  of  the  most  lucrative  enterprises  on  the  planet,  with  nearly  $17  billion  in  profit  during  its   last  fiscal  year  on  $73.7  billion  in  revenue.  But  it  has  been  widely  faulted  for  being  late  with  compelling   products  in  two  lucrative  categories,  smartphones  and  tablets.  Its  Bing  search  engine  is  a  distant  second   to  Google  and  loses  billions  of  dollars  a  year  for  Microsoft.    

Rivalries  among  the  Microsoft  divisions  have  built  up  over  time,  sometimes  resulting  in  needless   duplication  of  efforts.  Microsoft  managers  often  grumble  privately  that  one  of  the  most  dreaded  

circumstances  at  the  company  is  having  to  “take  a  dependency”  on  another  group  for  a  piece  of   software,  placing  them  at  the  mercy  of  someone  else’s  development  schedule.    

Product  development  groups  will  sometimes  go  to  great  lengths  to  avoid  this,  creating  software  like  e-­‐ mail  programs  that  duplicate  the  functions  of  other  products  at  Microsoft.  While  its  old  divisions  all  had   their  own  finance  and  marketing  organizations,  Microsoft  is  now  centralizing  those  functions.    

Bill  Whyman,  an  analyst  at  the  ISI  Group,  said  Microsoft’s  promise  to  make  all  of  its  technologies  work   better  together  would  be  challenging  given  the  sheer  breadth  of  its  product  portfolio,  which  covers   corporate  and  consumer  products.    

“That  sounds  right  but  it’s  really,  really  hard  to  do,”  Mr.  Whyman  said.  “Maybe  Apple  does  it  with  the   iPhone  ecosystem.  Microsoft  is  proposing  to  do  it  over  a  much  broader  set  of  customer  applications  and   uses.”    

Amazon  has  already  been  trying.  It  has  become  a  major  player  in  devices,  with  its  Kindle  family  of  e-­‐ readers  and  tablets.  Google  tiptoed  into  hardware  production  with  products  like  the  Chromebook  Pixel   laptop  and  Google  Glass,  as  well  as  the  failed  Nexus  Q  for  streaming  media.  And  Google’s  boldest  and   riskiest  move  in  hardware  was  spending  $12.5  billion  to  buy  Motorola  Mobility.    

The  focus  on  the  full  suite  of  offerings  has  led  several  companies  to  rethink  how  they  are  organized.   When  Larry  Page,  Google  co-­‐founder,  took  over  as  chief  executive  in  2011,  he  shook  things  up  at  the   search  company,  whose  structure  had  become  bloated  and  labyrinthine.  To  help  the  company  move   faster,  Mr.  Page  centralized  decision-­‐making  power  with  him,  eliminating  Google’s  former  triumvirate  of   equal  decision  makers  at  the  top.    

Michael  A.  Cusumano,  a  professor  at  the  Sloan  School  of  Management  at  the  Massachusetts  Institute  of   Technology,  said  revamping  an  organization’s  structure  tended  to  provide  only  temporary  remedies.    

“I  never  take  these  reorganizations  too  seriously,”  said  Mr.  Cusumano.  “Almost  any  reorganization  is   designed  to  solve  current  problems  people  see.  Over  time,  other  problems  come  up.”    

Perhaps  the  most  pressing  issue  facing  Microsoft  now  is  the  decline  of  personal  computers.  Most  of  the   company’s  revenue  rests  on  the  personal  computer  business,  in  one  form  or  another,  and  that  market  is   mired  in  a  brutal  slump  —  one  that  Windows  8,  the  new  tablet-­‐friendly  operating  system  Microsoft   released  last  year,  failed  to  reverse.  This  week,  Gartner,  the  research  firm,  said  second-­‐quarter  PC   shipments  fell  10.9  percent  from  a  year  before.    

“This  organization  does  not  answer  the  following  question:  What  happens  to  Microsoft  if  PC  shipments   continue  to  go  down?”  asked  Jean-­‐Louis  Gassée,  a  venture  capitalist  and  former  Apple  executive,   referring  to  Microsoft’s  new  structure.    

Other  maturing  technology  companies  have  successfully  responded  to  challenges  in  their  businesses.  In   2004,  I.B.M.  made  a  pivotal  decision  to  exit  the  personal  computer  business  to  focus  on  corporate   technology  services.  With  its  revamping,  Microsoft  did  not  announce  plans  to  leave  any  businesses.    

One  of  Microsoft’s  biggest  changes  is  the  creation  of  the  devices  and  studio  group,  headed  by  Julie   Larson-­‐Green,  which  will  oversee  the  development  of  Xbox  hardware,  the  Surface  family  of  tablet   computers,  hardware  accessories  and  games.    

Mr.  Ballmer  did  not  say  what  other  devices  Microsoft  might  make  in  the  future,  but  he  hinted  in  an   interview  conducted  over  Skype  that  Microsoft  could  play  a  role  in  the  development  of  technologies   that  make  videoconferencing  feel  more  natural,  allowing  participants  to  make  eye  contact.    

“It  takes  evolution  in  the  physical  form  factors.  It  takes  evolution  in  the  software,  in  the  services,”  Mr.   Ballmer  said.    

Qi  Lu,  the  head  of  Bing  and  Microsoft’s  other  Internet  initiatives,  will  take  over  a  new  applications  group   and  oversee  the  company’s  lucrative  Office  franchise  and  Skype.  Satya  Nadella,  as  the  head  of  the  new   cloud  and  enterprise  group,  will  manage  the  network  of  data  centers  that  power  all  of  Microsoft’s  online   services,  in  addition  to  Windows  Azure,  the  cloud  service  he  has  been  running  for  some  time.    

“It’s  not  like  our  old  structure  didn’t  allow  us  to  do  some  of  this,”  Mr.  Nadella  said.  “The  question  is   whether  you  can  amplify.”    

Claire  Cain  Miller  contributed  reporting  from  San  Francisco.