Steve Ballmer Reorg Memo

Rogifan · Jul 13, 2013

Almost 3K words to basically say Microsoft is reorganizing from a divisional to a functional structure. I've never seen so much corporate jargon and consultant buzzwords! If I was a MS employee I'd be scratching my head wondering what I just read (that almost put me to sleep) and what it means for me.

http://www.microsoft.com/en-us/news/Press/2013/Jul13/07-11OneMicrosoft.aspx

From: Steve Ballmer
To: Microsoft - All Employees
Date: July 11, 2013, 6 a.m.
Subject: One Microsoft

Today, we are announcing a far-reaching realignment of the company that will enable us to innovate with greater speed, efficiency and capability in a fast changing world.

Today’s announcement will enable us to execute even better on our strategy to deliver a family of devices and services that best empower people for the activities they value most and the enterprise extensions and services that are most valuable to business.

This company has always had a big vision — to help people realize their full potential. In the earliest days, it was by putting a PC on every desk and in every home. We’ve come farther than we could have imagined. The impact we have collectively made on the world is undeniable, and I am inspired when talented new hires say they chose Microsoft because they want to change the world — that’s what we do today, and that’s what we’ll do tomorrow.

The rest of the letter can be read at the link above

swingerofbirch · Jul 13, 2013

I really like Microsoft as a company. I couldn't read all of that, though. You're right about the mumbo-jumbo and meta-discourse. It could have used an editor. Unless it's secretly very clever rhetoric and they don't want anyone to read it. Or they wanted to say something with no one paying attention to it. If so, well done.

roadbloc · Jul 13, 2013

Couldn't read that wall of text. I knew I'd never get the time wasted doing so back.

throAU · Jul 13, 2013

TLDR:

Ballmer re-arranging the deck chairs on the titanic.

roadbloc · Jul 13, 2013

throAU said:
TLDR:

Ballmer re-arranging the deck chairs on the titanic.

What on Earth makes you think Microsoft is sinking? Q4 last year they had a record revenue of $18 billion.

Never understood the world's obsession with companies going bankrupt. For Microsoft, Apple, Google and Samsung, bankruptcy isn't happening any time soon.

Rogifan · Jul 13, 2013

swingerofbirch said:
I really like Microsoft as a company. I couldn't read all of that, though. You're right about the mumbo-jumbo and meta-discourse. It could have used an editor. Unless it's secretly very clever rhetoric and they don't want anyone to read it. Or they wanted to say something with no one paying attention to it. If so, well done.

Yeah way too wordy. And since Microsoft reorgs every couple years is it such a big deal? They've re-org'd in 2003, 2005, 2008, 2010 and now 2013. The only time it will be a big deal is when the reorg involves Ballmer's retirement.

throAU · Jul 13, 2013

roadbloc said:
What on Earth makes you think Microsoft is sinking? Q4 last year they had a record revenue of $18 billion.

Never understood the world's obsession with companies going bankrupt. For Microsoft, Apple, Google and Samsung, bankruptcy isn't happening any time soon.

Maybe i was being a little facetious.

But the Windows platform is sinking - Win Mobile is dead, Xbox One looks to be getting a frosty reception, Windows 8 has been a disaster. They bet the farm on the metro UI, and unless they do a 180 pretty soon, they're going to lose market share in a big way.

Q4 last year was prior to full availability of Win8, Surface, etc.

Yes they are making a lot of money from cloud services, etc.

A Hebrew · Jul 13, 2013

To people calling it 'Too Wordy': I guess that is why you are not employed by Microsoft. I would rate it at a 5th grade level at best.

GermanyChris · Jul 13, 2013

8.1 brings the start button back. I don't think WinMo is close to dead I see enough Lumina's around to lead me to think it's still viable. Not to mention we'll see a Lumina 925 and 1025 coming up here.

The xBox with its alway on internet isn't going to fly...

Rogifan · Jul 13, 2013

chown33 · Jul 13, 2013

I don't see how this reorg will make anything quicker or more nimble. It just changes the alignment of teams from product-oriented into ones aligned by functional discipline.

Before: a Windows division, Apps division, Cloud division.
After: Research, Engineering, Marketing, Administration.

There will still be friction, turf-wars, empire-building, blame-shifting, etc., only now it will be between Marketing and Engineering, or Engineering and Research, or Administration and everyone else.

Alignment along functional disciplines is a fairly traditional way of organizing large enterprises, and has been around for a long time:
http://en.wikipedia.org/wiki/Organization_structure#Functional_structure
http://en.wikipedia.org/wiki/Organization_structure#Divisional_structure

Starting from a matrix-managed organization:

640px-Matrix_organisation_scheme.svg.png

this reorg is just switching from "grouped along a horizontal" to "grouped along a vertical". Nothing else changes, and it adds a lot of confusion.

Current managers won't know how to do their new jobs as well, current workers will be confused about who has responsibility for what, and there will be at least as much "left hand doesn't know what the right hand is doing" as before. Having spent some time in a functionally-organized large company, I predict a lot of employees will become frustrated and leave over the next few years.

Rogifan · Jul 13, 2013

chown33 said:
I don't see how this reorg will make anything quicker or more nimble. It just changes the alignment of teams from product-oriented into ones aligned by functional discipline.

Before: a Windows division, Apps division, Cloud division.
After: Research, Engineering, Marketing, Administration.

There will still be friction, turf-wars, empire-building, blame-shifting, etc., only now it will be between Marketing and Engineering, or Engineering and Research, or Administration and everyone else.

Alignment along functional disciplines is a fairly traditional way of organizing large enterprises, and has been around for a long time:
http://en.wikipedia.org/wiki/Organization_structure#Functional_structure
http://en.wikipedia.org/wiki/Organization_structure#Divisional_structure

Starting from a matrix-managed organization:
Image
this reorg is just switching from "grouped along a horizontal" to "grouped along a vertical". Nothing else changes, and it adds a lot of confusion.

Current managers won't know how to do their new jobs as well, current workers will be confused about who has responsibility for what, and there will be at least as much "left hand doesn't know what the right hand is doing" as before. Having spent some time in a functionally-organized large company, I predict a lot of employees will become frustrated and leave over the next few years.

It will depend on how Microsoft reports its P&L and if they make changes to how people are reviewed and compensated. It sounds like with the current structure the different divisions were responsible for their own P&L and the divisions had their own CFOs. If each of these functional areas controls their own P&L then yeah same disaster as now. But if they go the Apple route and have one P&L owned by the CFO it could work. Will be interesting to see how bold Ballmer is in changing how MS reports to the street and how they do their employee reviews. I've heard they use stacked/forced ranking system which a lot of employees don't like.

GermanyChris · Jul 13, 2013

As much as Ballmer loves MS I think he is the problem. Maybe it time for him to step out of his active management roll.

boss.king · Jul 14, 2013

throAU said:
Maybe i was being a little facetious.

But the Windows platform is sinking - Win Mobile is dead, Xbox One looks to be getting a frosty reception, Windows 8 has been a disaster. They bet the farm on the metro UI, and unless they do a 180 pretty soon, they're going to lose market share in a big way.

Q4 last year was prior to full availability of Win8, Surface, etc.

Yes they are making a lot of money from cloud services, etc.

Windows mobile hasn't existed for years, they're fixing the Xbox one, and Windows 8 is one of their most successful products ever. You're so far beyond the reality that it hurts.

throAU · Jul 14, 2013

boss.king said:
Windows mobile hasn't existed for years, they're fixing the Xbox one, and Windows 8 is one of their most successful products ever. You're so far beyond the reality that it hurts.

By Windows Mobile - i am including the mobile versions of Windows 8
XBOX one? remains to be seen
Windows 8 most successful ever?

LOL

THe sales numbers are worse than Vista. HP (and others) is advertising machines as coming with Windows 7 being a feature because the reception has been so bad.

I've been in the PC industry for a living since 1995. Windows 8 is the biggest botched product in Microsoft's history since Windows ME.

roadbloc · Jul 15, 2013

throAU said:
By Windows Mobile - i am including the mobile versions of Windows 8
XBOX one? remains to be seen
Windows 8 most successful ever?

LOL

THe sales numbers are worse than Vista. HP (and others) is advertising machines as coming with Windows 7 being a feature because the reception has been so bad.

I've been in the PC industry for a living since 1995. Windows 8 is the biggest botched product in Microsoft's history since Windows ME.

For someone who has been in the PC industry for a living since 1995, you're remaining ignorant of a few important factors.

Windows isn't Mac OS X. You don't have to upgrade since it has a much longer support lifecycle. Even XP has only just run out of support. Windows 9x only went out of support in 2006. Many people don't upgrade their OS, simply because they don't have to. Windows 8 is catered to a wide variety of devices, not just PCs, but tablets and hybrids. Many of these new devices hadn't even been made by manufacturers when Windows 8 was released and are only just getting into circulation now, as we look towards the release of 8.1. The slow sales is more than understandable when from a desktop/laptop point of view, Windows 8 doesn't add many new features since the evolution of the desktop interface is nearing completion. Remember when people trashed the iPad as a 'massive iPod Touch' and claimed it a failure? Windows 8 is just Microsoft's version of very that.

That aside, have you even used Windows 8? For me, it has been the best OS from Microsoft in a long time. I hated ME, XP and Vista, finding them all unusable, but Windows 8 is solid as a rock, fast, simple to use (much faster than Windows 7 and very simple once you take the time to learn the ropes) and doesn't do that awful slow-down thing that Windows likes to do over time. It isn't perfect, there are a few UI discrepancies and inconsistencies. But it is no way near as bad as people make out. And with 8.1 on the way, more stuff should be fixed and made easier.

As for Windows Phone, it has done nothing but gain marketshare. Not much, but enough to gain interest from developers since I have recently seen the App Store have a flooding of new cool apps that the platform was missing. Again, it is solid, easy to use and ahead of iOS (6) in many aspects. Hell, even iOS 7 takes inspiration from it in many parts of the OS.

Xbox One... can't say. I'm not a console fan. But since the DRM policies have been reversed, I'd say the tables are balanced again in the console wars.

Maybe you should take the time to use these devices before forming an opinion. Your ignorance is showing.

boss.king · Jul 15, 2013

throAU said:
By Windows Mobile - i am including the mobile versions of Windows 8
XBOX one? remains to be seen
Windows 8 most successful ever?

LOL

THe sales numbers are worse than Vista. HP (and others) is advertising machines as coming with Windows 7 being a feature because the reception has been so bad.

I've been in the PC industry for a living since 1995. Windows 8 is the biggest botched product in Microsoft's history since Windows ME.

Windows Phone 8 is not Windows Mobile. Considering it as such already shows you attitude on the subject.

Yes, the Xbox One is still on its way, but already MS has reacted to negative feedback, which is promising. I won't be buying one but their attitude towards customer feedback has already changed a few friends minds for the better.

Lastly, I didn't say Windows 8 was their most successful product, I said it was one of them. As was pointed out, users don't have to upgrade the way OSX users have to, MS supports their older systems far longer. Given the amazing OS that Windows 7 was, a lot of people don't have any need to upgrade, and yet they do. I count that as success.

I'm curious, when you say you've worked in PC industry, in what capacity do you mean? Technically a receptionist could claim that, it doesn't make their opinion worth anything.

Rogifan · Jul 15, 2013

Why does Microsoft need to be a devices company when there's a ton of OEM's to chose from? Is the Surface really that much better than what you get from Lenovo, Asus, Samsung, etc.?

I think Microsoft needs to focus on software and services, not hardware (outside of Xbox). Ballmer still doesn't seem to be addressing the elephant in the room - declining PC sales. Make a tablet friendly version of Office available for iOS and Android. Don't try and force a tablet UI on a PC. Make Windows Phone the tablet software and keep traditional Windows. This one device to do everything ends up being a compromised experience. Either too heavy and crap battery life for a tablet or not the right form factor/screen size for a laptop. Microsoft needs to be willing to cannibalize the PC as tablets are where people are migrating to. Apple sells way more iPads than they do Macs, but they don't care. Microsoft should focus on a great tablet OS and getting developers to want to develop for the platform. Make the software really cheap for OEM's so they can focus on making great hardware and not crap because margins are so thin.

No one yet has been able to explain why Microsoft needs to be in the PC hardware business. It doesn't seem like people are in need for Microsoft hardware when there are so many other choices out there.

roadbloc · Jul 15, 2013

Rogifan said:
No one yet has been able to explain why Microsoft needs to be in the PC hardware business. It doesn't seem like people are in need for Microsoft hardware when there are so many other choices out there.

Because they can? Did they really need to be in the Console industry? Not really, but it worked out for them. OEMs come and go and can often do a shabby job of both hardware and the software drivers. Why not show them how it should be done?

There is no guarentee OEMs will continue to choose Windows in the future. Why not have your own hardware line-up to ensure that you still have at least somebody using your software?

Liquorpuki · Jul 15, 2013

Rogifan said:
Why does Microsoft need to be a devices company when there's a ton of OEM's to chose from? Is the Surface really that much better than what you get from Lenovo, Asus, Samsung, etc.?

I don't think they wanted to but the OEM's ruined the Windows 8 brand. Win8 is made for a touchscreen - MS sent guidelines to all the OEM's w/ HW requirements. Those guidelines were ignored and OEM's were doing stuff like putting out $300-400 W8 laptops with no touchscreen. If you ever tried using one of these, it sucks.

I don't blame the OEM's though - the culture of Windows has always been an expensive OS running on cheap hardware. The OEM's that produce the hardware are basically off the shelf assemblers that compete not on quality but on stuff like customer service, customization, etc. So they were just doing what they always did. Regardless, they ruined the brand so MS putting out their own hardware was an attempt to rescue the brand and drag the OEM's back up. And yeah the Surface hardware is a lot better, they could run their OEM's off the market if they wanted to do but they need their OEM's to be successful for their ecosystem to grow.

I think Microsoft needs to focus on software and services, not hardware (outside of Xbox). Ballmer still doesn't seem to be addressing the elephant in the room - declining PC sales. Make a tablet friendly version of Office available for iOS and Android. Don't try and force a tablet UI on a PC. Make Windows Phone the tablet software and keep traditional Windows. This one device to do everything ends up being a compromised experience. Either too heavy and crap battery life for a tablet or not the right form factor/screen size for a laptop. Microsoft needs to be willing to cannibalize the PC as tablets are where people are migrating to. Apple sells way more iPads than they do Macs, but they don't care. Microsoft should focus on a great tablet OS and getting developers to want to develop for the platform. Make the software really cheap for OEM's so they can focus on making great hardware and not crap because margins are so thin.

I've been watching MS pretty closely since last year and they've addressed the declining PC market 2 ways. One is related to what you said - which is disrupting the tablet market. The tablet market is 100% ARM and a budget ecosystem. W8 and the PC market is x86. By merging PC's and tablets they disrupt the tablet market by offloading PC marketshare into it. Considering the x86 ecosystem is irreplaceable and Intel's roadmap is cutting into ARM's, it's actually a pretty brilliant strategy. Execution and marketing are another story though.

Second is by duplicating PC functionality in the cloud. Their cloud infrastructure is second only to Amazon's. MS doesn't make desktop computers so they don't care about hardware. But their platform and Office Suite is what they make money from so by sticking it on the cloud, they hedge themselves against shrinking PC hardware.

And that reorg was necessary. Groups working against each other. Groups hoarding resources. Groups wasting resources working on identical products. All fixed.

MS and Apple have mirrored each other a few times this past year in terms of reorgs. Cook got rid of Forstall. Ballmer got rid of Sinofsky. Both were important guys that caused infighting. Cook joined similar functional groups under one manager - Mac and iOS under Federighi, Interface and Industrial design under Ive. Ballmer's reorg does the same thing

decafjava · Jul 15, 2013

Excellent analysis Liquorpuki, makes sense to me. I thought the comparison between Apple's and Microsoft's reorganisation very interesting.

Rogifan · Jul 15, 2013

roadbloc said:
Because they can? Did they really need to be in the Console industry? Not really, but it worked out for them. OEMs come and go and can often do a shabby job of both hardware and the software drivers. Why not show them how it should be done?

There is no guarentee OEMs will continue to choose Windows in the future. Why not have your own hardware line-up to ensure that you still have at least somebody using your software?

Who are OEM's going to go to? Not much out there besides Windows. And Windows is entrenched in corporate IT. Don't see that changing any time soon.

roadbloc · Jul 15, 2013

Rogifan said:
Who are OEM's going to go to? Not much out there besides Windows. And Windows is entrenched in corporate IT. Don't see that changing any time soon.

Me neither to be honest, but with all the claims of Microsoft's apparent decline on here, you never know. The world might just start hating Microsoft a little more than it does now.

Rogifan · Jul 15, 2013

Liquorpuki said:
I don't think they wanted to but the OEM's ruined the Windows 8 brand. Win8 is made for a touchscreen - MS sent guidelines to all the OEM's w/ HW requirements. Those guidelines were ignored and OEM's were doing stuff like putting out $300-400 W8 laptops with no touchscreen. If you ever tried using one of these, it sucks.

I don't blame the OEM's though - the culture of Windows has always been an expensive OS running on cheap hardware. The OEM's that produce the hardware are basically off the shelf assemblers that compete not on quality but on stuff like customer service, customization, etc. So they were just doing what they always did. Regardless, they ruined the brand so MS putting out their own hardware was an attempt to rescue the brand and drag the OEM's back up. And yeah the Surface hardware is a lot better, they could run their OEM's off the market if they wanted to do but they need their OEM's to be successful for their ecosystem to grow.

I've been watching MS pretty closely since last year and they've addressed the declining PC market 2 ways. One is related to what you said - which is disrupting the tablet market. The tablet market is 100% ARM and a budget ecosystem. W8 and the PC market is x86. By merging PC's and tablets they disrupt the tablet market by offloading PC marketshare into it. Considering the x86 ecosystem is irreplaceable and Intel's roadmap is cutting into ARM's, it's actually a pretty brilliant strategy. Execution and marketing are another story though.

Second is by duplicating PC functionality in the cloud. Their cloud infrastructure is second only to Amazon's. MS doesn't make desktop computers so they don't care about hardware. But their platform and Office Suite is what they make money from so by sticking it on the cloud, they hedge themselves against shrinking PC hardware.

And that reorg was necessary. Groups working against each other. Groups hoarding resources. Groups wasting resources working on identical products. All fixed.

MS and Apple have mirrored each other a few times this past year in terms of reorgs. Cook got rid of Forstall. Ballmer got rid of Sinofsky. Both were important guys that caused infighting. Cook joined similar functional groups under one manager - Mac and iOS under Federighi, Interface and Industrial design under Ive. Ballmer's reorg does the same thing

Interesting and thoughtful response. But I don't think Microsoft need to build hardware to show OEM's how it's done. Intel didn't start building laptops, they provided OEM's a reference design which became Ultrabooks. Microsoft could have done something similar, along with making Windows licenses cheaper. Sure some OEM laptops are crap, but not all. Lenovo, Asus, Sony and Samsung make some great hardware. Microsoft could have followed the Google model of partnering with OEM's to create "pure" devices that have great hardware specs/design and are free of bloatware.

I still think Microsoft should develop Office for iPad and Android. People are buying iOS and Android devices anyway so an Office subscription = $$ for Microsoft where they're getting nothing now. Most people probably won't leave iOS or Android because of Office but if it was available in the App Store or Google Play they might buy it.

----------

roadbloc said:
Me neither to be honest, but with all the claims of Microsoft's apparent decline on here, you never know. The world might just start hating Microsoft a little more than it does now.

To be honest I think BYOD along with corporate IT stubbornness is Microsoft's biggest problem. Corporate IT isn't ready to jump in to cloud based computing; it's all about job security for them. And with BYOD policies employees aren't forced to use Windows products at work. I can connect my iPad to the corporate network and get email via Good app. And companies probably get big fat discounts to purchase PC's from HP, Dell, Lenovo, etc. and those aren't $1,000+ touchscreen Ultrabook hybrids (I know from experience - I have a crappy HP laptop that has less than 2GB RAM and battery life is ~2 hours). Plus most large companies are running XP or 7 (where I work we're just upgrading to 7 now) so they really have no incentive to purchase something like a Surface device for their employees.

Liquorpuki · Jul 15, 2013

Rogifan said:
Interesting and thoughtful response. But I don't think Microsoft need to build hardware to show OEM's how it's done. Intel didn't start building laptops, they provided OEM's a reference design which became Ultrabooks. Microsoft could have done something similar, along with making Windows licenses cheaper. Sure some OEM laptops are crap, but not all. Lenovo, Asus, Sony and Samsung make some great hardware. Microsoft could have followed the Google model of partnering with OEM's to create "pure" devices that have great hardware specs/design and are free of bloatware.

The thing, is the OEM's listened to Intel and not to MS. Here's an article from back in January where MS and the OEM's were going at it.

I still think Microsoft should develop Office for iPad and Android. People are buying iOS and Android devices anyway so an Office subscription = $$ for Microsoft where they're getting nothing now. Most people probably won't leave iOS or Android because of Office but if it was available in the App Store or Google Play they might buy it.

Yeah the only thing is they're now vested in hardware. Their goal moving forward is to have first party hardware like the Surface occupy 50% of all Windows device sales, and OEM hardware the other 50%. Office is huge for them - it has the highest profit margins and they can leverage it as a product differentiator to generate sales of their own platform/hardware. Meanwhile if they stick it on iOS or Android, they automatically lose 30% of their profit margin along with product differentiation. I expect the iOS/Android versions of Office to always be crippled compared to the Windows version.

Steve Ballmer Reorg Memo

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