Microsoft Reorganizes Again, Moves Server Division

Published: May 23, 2007

by Alex Woodie

The Windows Server Division is on the move once again. In an e-mail message sent to employees Monday, chief executive Steve Ballmer said Microsoft is moving the team that develops the Windows Server operating system from its current home in the Platform & Services Division into the Microsoft Business Division. The move separates, for the first time, the teams that develop the client and server versions of Windows, even though the code bases for the two operating systems are as close as they have ever been.

In his e-mail, a copy of which can be read here, Ballmer laid out the move and the reasoning behind hit.

"Our Server and Tools Business (STB), led by Bob Muglia, is moving from the Platform & Services Division (PSD) to the Microsoft Business Division (MBD)," Ballmer writes. "Also moving from PSD to MBD are Sanjay Parthasarathy and his Developer & Platform Evangelism (D&PE) team. The STB and D&PE teams will move intact, with Sanjay reporting into Bob and Bob reporting to Jeff Raikes [MBD president]. D&PE will continue to evangelize the entire roster of Microsoft offerings, as well as server and tools."

The last time Microsoft reorganized was in September 2005, when the company paired itself down to three units from five. The PSD was created to house the Windows server and client products, development tools, middleware servers, and MSN assets, and was headed up by two co-presidents--Kevin Johnson and Jim Allchin--before Allchin's scheduled retirement in late 2006.

The second group created in September 2005 was MBD, which brought in the company's ERP and CRM applications, its Office products and related server products previously sold under the Information Worker division. The final group created was the Entertainment & Devices Division, which combines the former Home and Entertainment Division and the Mobile and Embedded Devices Division.

In his e-mail, Ballmer says the recent realignment of the Windows Server group was needed to keep pace with a changing industry. "The decision to realign these groups emerged from a great deal of thoughtful discussion by the senior leadership team," the CEO wrote. "Since September 2005, when we consolidated product development into three core divisions, . . . a lot has changed in our business and the world, and we've learned a lot about how best to drive growth, spark customer excitement, and promote partner success."

While Microsoft isn't yet discussing its rationale behind the move (Ballmer says that is forthcoming in a future communication), it will undoubtedly have repercussions inside Microsoft.

On the positive note--and probably what Microsoft was looking to get out of the move--paring the men and women in charge of the Windows Server and .NET tools with the people responsible for developing and driving Microsoft's ERP, CRM, and collaboration application strategy should provide better integration in and among the products. This brings the potential for easier application deployments and customizations. These are benefits that Microsoft is counting on to drive growth in the next five years. Much of that growth is expected to come from Exchange Server and Office Communications Server 2007, the company's flagship product representing its "Unified Communications" strategy, which is scheduled to ship later this year.

The obvious negative aspect of the move is the potential for less interaction between the groups responsible for designing and developing Windows client and server versions of the operating system. Since the big push to develop the security-focused Windows XP Service Pack 2 (SP2) and the infamous "code reset" that entailed, the Windows client and server teams have been working off a single code base. The work on XP SP2 formed the basis for products that immediately followed, including Windows Server 2003 SP1, Windows Server 2003 for 64-bit Extended Systems, and Windows XP 64-bit Edition for 64-bit Extended Systems, not to mention Windows Vista and Windows Server 2008, which is due later this year. However, now the core development work on Windows will be the responsibility of the Windows client team operating under the Platform and Services Division.

Microsoft's Online Services Group, which is responsible for driving its "Live" Web offerings, including Windows Live and Office Live, remains in the Platform and Services Division. This creates a potential divide between the server and applications stack--now consolidated in the Microsoft Business Division--and its online offerings, which remains in the group responsible for development of the core Windows operating system.

It will be interesting to see what Microsoft will do to boost the fortunes of the Online Services Group, which competes against Google and Yahoo!. The company made a big move Monday, when it announced it will spend $6 billion to buy aQuantive, an online advertising company. But there doesn't appear to be much there affecting its online applications business, which is seen as the next big driver of revenues.

RELATED STORIES

Microsoft Reorganizes Ahead of Allchin's Retirement in 2006

Executive Memos Point to a Disrupted Microsoft

Microsoft Moves Forward with Extended 64-bit Windows

Windows XP SP2: Finally Open for Business

                     Post this story to del.icio.us
               Post this story to Digg
    Post this story to Slashdot