Analysts: MS reorganisation makes sense

Analysts: MS reorganisation makes sense

Microsoft's reorganisation makes sense for the world's largest software company, which was getting too big and unwieldy under its former structure to continue to be managed efficiently, according to industry analysts.

The vendor has consolidated six divisions into three: a Platform Products and Services division; Business Division; and Entertainment and Devices Division.

New responsibilities
The Platform Group will comprise the current Windows Client, Server and Tools and the MSN online services division.

The business group will consist of the current Microsoft Information Worker group, including Microsoft Office, and the Business Solutions group, which includes CRM and ERP applications.

And the new entertainment division will oversee the development of entertainment and digital devices, such as Internet Protocol television (IPTV), Xbox and other consumer-oriented digital lifestyle products.

This will enable Microsoft to more efficiently deliver products combining technologies from divisions that previously had difficulty working together because they were in separate organisations, Enderle Group's principal analyst, Rob Enderle, said.

"The company had become almost unmanageable," he said. "In the past two and a half years, it felt like you just couldn't get anything done. The turf wars became more pronounced."

Enderle used the example of handheld gaming machines, which are currently hot in the consumer gaming market, where Microsoft's Xbox product plays.

"Microsoft couldn't build one because you have to bring together a bunch of different groups that don't work together," he said.

An issue like this should be resolved under the reorganisation, not only because it aligns different groups that were previously separate divisions, but also because it gives people an approachable throat to choke - in the form of a division president - if there are problems with collaboration between teams, Enderle said.

"If between those big organisations there has to be cooperation, you have one person to go to in order to make sure that happens," he said.

"Before, you kind of had to go up to [Microsoft CEO, Steve] Ballmer, and you don't want to go up to him and say people aren't working together because Steve will start picking up bodies and hurling them around... Microsoft has rebuilt the company in a way that makes sense."

The new structure was also logical because, except for MSN, it reorganised businesses according to the customer base for the products and services in each group, vice- president at Forrester Research, Ted Schadler, said.

"This organisation is a simple one because the alignment here of all the product groups save one is around markets: around people who write cheques, the buyers," Schadler said.

This restructuring will allow Ballmer more time to identify long-term goals for the markets each unit serves, while leaving the coordination of various divisions and specific goal-setting up to the presidents responsible for each unit, Schadler said.

Defending decision
Though Schadler did not think the inclusion of MSN into the new Platform Products and Services Division was as logical as the rest of the new structure, a Microsoft spokesperson said

it fitted with the company's plan to depend less on selling packaged software and provide more services for customers.

MSN is increasingly becoming the division where Microsoft creates innovative service offerings, so it makes sense for that business to be alongside Windows and other pieces of server software that will become more of a services infrastructure, Microsoft corporate communications epresentative, Tom Pilla, said.

"The line is going to be blurring between static bits and always-on services," he said. "This is how we're positioning the company to take on that challenge going forward."

Vice-president of system software research at IDC, Dan Kusnetzky, said Microsoft had been moving in the direction of providing a more services-oriented revenue model for some time.

"Microsoft has been working for a number of years to move from packaged products to thinking about software as a service [that customers] pay for in perpetuity," he said.

However, Kusnetzky cautioned that Microsoft could alienate some customers because it has traditionally forced people to buy into the services model rather than clearly outlining the benefits.

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