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Summary:

Software may be eating the world, but unfortunately for Microsoft, it doesn’t make as much of that software as it would like. After this week’s massive reorg, it’s clear Microsoft has decided that it wants to control its own destiny.

Nothing ever stays the same. On more than one occasion, it has taken Microsoft, one of the most important engines powering the rise of the technology industry, years to understand that. But with this week’s sweeping reorganization of the nearly 100,000 people who work for Microsoft, the company has signaled that it’s finally ready to abandon two-plus decades of business as usual in the tech industry.

Sure, Microsoft tends to shuffle the chairs a bit every year, as CNET’s Charles Cooper noted earlier this week. But this was more revolution than evolution: Microsoft’s famously loose union of sorta-friendly independent states has been thrown overboard in favor of an organizational structure “focusing the whole company on a single strategy,” as CEO Steve Ballmer wrote in an internal memo (later shared with the world) outlining the changes.

That may be easier said than done. In true Microsoft style, the memo announcing the reorganization was bloated and complicated: at nearly 2,700 words, had I been his editor, I would have saved it back to Ballmer with some tweaks and suggestions.

There are now 12 separate groups at Microsoft, and the descriptions of each group were populated with words only a management consultant could love, like “dotted-line report” and “cross-company looks.” But the vision was understandable: in order to become a modern technology company, Microsoft has to become a company that “… will focus on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most,” Ballmer wrote.

Meet the new boss

That’s a very different Microsoft from the one that, from the early 1990s until around the mid 2000s, dominated the personal and business computing industries. Companies moving in the right direction don’t reorganize themselves.

The new Microsoft is no longer the enabler of technology delivered to consumers with help from Intel, Dell, HP, Lenovo, and other partners. The new Microsoft has realized that it’s going to need to do it all itself, a truism of the modern computing age made clear by the overwhelming success of Apple over the last six to eight years.

Microsoft has never publicly endorsed the late Steve Jobs’ description of the early days of this new era of computing as the “post-PC era,” for obvious reasons. But the term “PC” is only mentioned in Ballmer’s memo four times, and three of those references are to history — to ways in which Microsoft has changed the tech industry in the past. The word “devices,” on the other hand, is mentioned 18 times, and most of those are, as they say in this business, “forward-looking statements.”

Microsoft Surface RT

And on the enterprise side, Microsoft finds itself behind Amazon — a company originally organized around a very different purpose than enterprise computing — when it comes to providing infrastructure capabilities to the companies that are outlining the future of mobile computing on platforms that, also somewhat painfully, aren’t Windows Phone. The low-cost Windows-Intel server juggernaut that ruined the likes of Sun Microsystems is itself under attack from cheaper servers built by companies using Linux and servers built around chips made by ARM.

Yet Microsoft is not a company in peril, as many of us appear to think. The PC market, while contracting, is still quite large and profitable — for Microsoft at least. The company earned $6 billion in overall profit during its last quarter and the former Windows and Business divisions remain profit engines. It’s unclear how Microsoft will report earnings in the future (company executives dodged several questions to that effect this week) but we might get a better idea in a few weeks when the company reports its latest earnings numbers.

Crossroads seem to come and go

However, there is no dispute that Microsoft is a company searching for direction.

The defining company of the PC era — which for the purposes of this discussion we’ll consider the 25 years from 1981 to 2006 — has not articulated a unique and compelling vision for the future of computing since Apple’s iPhone rocked it to its core in 2007. It has certainly made its presence felt — the design breakthroughs from the Windows Phone efforts have without question made an impact on the mobile era, as Apple’s Jony Ive is well aware — but Microsoft is somewhat of an afterthought when measuring how buyers react to the most important computing trend of the present, and that hasn’t happened since Jimmy Carter was president.

In Mirosoft’s history, Ballmer’s memo might go down as equivalent to the famous memo Bill Gates sent to his troops in 1995, regarding the rise of the internet as something that Microsoft must navigate in order to survive.

“The Internet is a tidal wave. It changes the rules. It is an incredible opportunity as well as incredible challenge,” Gates wrote in that memo.

Can this clear and massive shift in priorities have a similar effect on Microsoft? If nothing else, it has surely set off the race to replace Ballmer, as BusinessWeek’s Ashlee Vance pointed out earlier this week. And it’s still a very fair question as to whether Ballmer is the leader best equipped to bring usher Microsoft into this era.

But what this reorganization makes clear is that Microsoft now thinks it will have to control its own destiny: no longer will it depend on Intel for the computing power, Dell for manufacturing expertise, or HP for marketing heft (and, lest we forget, all of them for its technical support) to get its technologies in front of the public.

The cozy days of the PC industry are over. Much like Google’s purchase of Motorola put every Android smartphone and tablet maker on notice that one day they’ll probably have to take matters in their own hands, Microsoft’s reorganization reminds a wide variety of partners — from Dell to Nokia — that their longtime patron has decided they are part of the problem, and not part of the solution.

Featured photo courtesy Flickr user (and, I assume, Geekwire co-founder) ToddABishop.

  1. Jordy Clements Sunday, July 14, 2013

    IBM was never considered a major player in the B2C software space, as Microsoft is and has been, but they’ve proven even companies of that size can effectively pivot (B2C HW -> enterprise services). Apple didn’t so much pivot as rose from the ashes. Microsoft has deep pockets and surely plenty of talent. I think the article makes a cogent point: it’s going to be a hard road, but let’s not count them out just yet. People may not yearn for Windows Phone or even Windows 7/8, but they’re still uniquely positioned — incredible brand recognition, robust channels, and a lot of embedded advantages — to be successful for years to come.

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    1. Let’s first see how the fighting across groups & C/D level impacts Ballmer’s plans. Embedded advantages? Looking at Nokia’s & MS’s sad market share numbers there are no advantages. Just major problems like how are they ever going to get even a quarter of Apple’s or Android’s market share. Frankly I do not see that happening any time soon. Robust channels? Once MS’s partners figure out that they are on their own and that MS just became a competitor, things will go sour. This ain’t 1995 any more with a market up for grabs by MS by slapping IE and TCP/IP onto Windows. Welcome to the Post-PC world, MS. There are bigger bullies in the yard now and they will never hand over their candy without a fight.

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  2. Lou Mazzucchelli Sunday, July 14, 2013

    This was inevitable: see http://lminfernaloptimist.blogspot.com/2012/06/scratching-surface.html

    The only thing wrong with this reorg is that Mr. Ballmer is still on the chart.

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  3. You have to give Microsoft credit for being so nimble. Not many large and mature companies are so adept at creating their own successful futures. Craig Herberg

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    1. Joe Mitchell Monday, July 15, 2013

      They haven’t created anything yet. We’ll see how nimble they are in 3 years.

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  4. ThisIsTheList Sunday, July 14, 2013

    The reason to not echo the “Post PC era” comment is simply because we are not in a “Post PC era”. Maybe a Post PC-is-the-only-device-worth-talking-about era. While PC sales are down, this isn’t because the need for PC’s has been obviated – they’re still needed for content creation and software development (at minimum), it’s just that a proliferation of other formats exists for (primarily) content consumption. You don’t code Angry Birds *on* an iPhone, while it might be *for* an iPhone. You don’t post-edit 50 tracks of music and video *on* a tablet in a Starbucks, but someone might check out the results on a tablet while in Starbucks.

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  5. David Thielen Sunday, July 14, 2013

    I agree that Microsoft has made a major change in direction. I saw a large part of that at Build – in the individual sessions. It was a lot of little things – I listed them in my blog at http://blogs.windward.net/davidt/2013/06/30/this-is-not-your-fathers-microsoft/

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  6. Best line in the article…
    Companies moving in the right direction don’t reorganize themselves.
    While it’s not entirely true. It is in M$ case.

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  7. If they wasted the cloud storage space to archive it, go back an watch the CES – January 2013 Qualcomm keynote on Youtube.

    There you will find Steve Ballmer as the clown car driver. How embarrassing. How impotent. How ineffective. I said good by to Microsoft many years ago in my IT plan and portfolio. The only way I may reconsider is when Ballmer is out in a retirement pasture somewhere.

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