Microsoft Reorganizes Ahead of Allchin's Retirement in 2006

by Timothy Prickett Morgan

Microsoft said this week that it has yet again reorganized itself as it seeks to heal around the departure of another of its top executives and to configure itself to better pursue business opportunities in the IT sector. How much of the reorganization is due to the retirement in 2006 of Jim Allchin, who was vice president of the Platforms Group at Microsoft until this week's reorg, and how much of the chair shuffling is due to an opportunity presented by Allchin's departure, is unclear.

The structure of any organization is a function of the abilities and experience levels of the executives who are chosen to lead it, and as people's lives change and the companies they work for change, the structure of that organization has to change. Microsoft founder Bill Gates is one of the few high profile executives who date from Microsoft's establishment in 1975; Steve Ballmer, Microsoft's CEO, might have been in the same Harvard dorm hall as Gates, but he didn't join Microsoft until 1980. Many of the original leaders of Microsoft have left--the list is too long to rattle off--and have been replaced by younger executives who have a slightly different view of the world. While the timing of the latest reorganization is being pegged to Allchin's retirement, such a reconfiguration of Microsoft's product, development, and power structure might have been inevitable as the company gears up to take on threats such as Linux and open source software and search engine giants Google and Yahoo.

Allchin is a pretty tough guy for Microsoft to replace. He has computer science degrees from the University of Florida, Stanford University, and the Georgia Institute of Technology. As part of his doctoral thesis at Georgia Tech, Allchin created a distributed, object-oriented transaction processing system called Clouds and then went on to become a founder of Banyan Systems, which had a network operating system called VINES that sold against Novell's NetWare and IBM's and Microsoft's jointly developed OS/2 in the 1980s. Bill Gates might have been a genius in foreseeing the PC revolution and putting together compilers for PCs, but Allchin is a hard-core network operating system guru, and that is why he joined Microsoft in 1990. While Dave Cutler was the main architect of Windows NT, Allchin took over after Windows NT 3.5 and has been in charge of the server platform since that time. In 1999, Microsoft merged the desktop implementation of Windows with the server version, and Allchin became the vice president of the newly formed Platform Group. This Microsoft group has been responsible for the Windows XP desktop and Windows 2000 Server and Windows Server 2003 operating systems, the Windows Server System middleware add-ons, and the .NET glue and development tools that bind them together.

With this week's reorganization, Microsoft is reforming itself into three units, effective immediately, each with a president reporting directly to CEO Ballmer. Allchin will be co-president of the Platform Products & Services Division with Kevin Johnson, who has been in charge of Microsoft's worldwide sales, marketing, and services organization. Johnson has also been in charge of Microsoft's field and corporate IT operations. Johnson took over sales and marketing for Microsoft in 1992 after working for six years at IBM Global Services. When Windows Vista, the commercial name for the "Longhorn" release of the desktop version of Windows, ships in 2006, Allchin will retire from the company at the end of the calendar year--something he says he decided to do a while ago after a health problem that is now not an issue. (You can read Allchin's memo to Microsoft employees by clicking here.) The Platform Products & Services Division will include Windows server and client products, development tools, middleware servers, and MSN. Eric Rudder, who has been in charge of the formerly independent Server and Tools unit, will start working with Gates on special projects after Visual Studio 2005 and SQL Server 2005 are launched later this year. The Microsoft statement said that Rudder will "focus on some of the company's key advanced development efforts as well as overall technical strategy," which is a bit vague.

The second new group at Microsoft is the Microsoft Business Division, and it will now have all of the company's ERP software as well as its Office and related software, all under control of Jeff Raikes, who is now a president at Microsoft. He was formerly in charge of the Information Worker unit, which had control of Office and related servers and services. He has been one of the key forces behind the evolution of Microsoft's graphical user interface and its Office suite for decades, and it comes as no surprise that he is being tapped to make the future Dynamics ERP suite Microsoft announced two weeks ago play nice with Office.

The third new business group at Microsoft is the Entertainment & Devices Division, which combines the Home and Entertainment Division (which sells Xbox game machines, PC and Xbox games, peripherals, Office for the Mac, the Encarta encyclopedia, and Virtual PC, among other things) and the Mobile and Embedded Devices Division (which is responsible for Windows CE and Windows Mobile editions for PDAs, phones, and other embedded devices). Robbie Bach, who has been in charge of the Home and Entertainment Division, is now president of the Entertainment & Devices Division.

Ray Ozzie, who became Microsoft's chief technology officer in April 2005 when Microsoft acquired Groove Networks, a peer-to-peer startup that Ozzie founded after leaving IBM's Lotus unit, has taken on broader responsibilities as part of the reorganization. Ozzie, as most of us know, is the main creator of the Lotus Notes/Domino groupware and was also once of the key people behind VisiCalc, the first PC-based spreadsheet program that started the commercial PC wave back in 1979, after it was created by Dan Bricklin and Bob Frankston (who eventually sold VisiCalc to Lotus). Ozzie is being tapped to spearhead Microsoft's software-based services strategy (which seems to mean service-oriented architecture, or SOA) across the three divisions.