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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

July 12, 2013 at 10:43 AM

Microsoft’s risky reboot – can Ballmer make it work?

It’s just as well Steve Ballmer didn’t get an NBA team this year.

Ballmer at Microsoft’s BUILD developer conference last month. Photo by Justin Sullivan, Getty Images.

Without a basketball franchise to build, he’s putting 100 percent of his considerable zeal into a new starting lineup and game plan in Redmond.

Ballmer is reorganizing Microsoft to ensure that it continues growing and prospering  through the next generation of personal and business computing.

It may seem like inside ball, but Ballmer’s moves will affect billions of people around the world whose lives are touched by Microsoft software, devices and services.

The outcome is especially important to the Seattle area, where Microsoft is the fountainhead of the region’s tech industry and a hedge against Boeing’s defection.

Ballmer, 57, chose a fresh and strikingly cosmopolitan group to lead the next era of Microsoft, restore its dominance of personal computing and expand its role in corporate infrastructure.

Three of the company’s five product groups — plus a new evangelism group — are now led by immigrants, raised in China, India, England and Russia.

Women are elevated to crucial new roles, heading the Xbox and devices businesses and more centralized marketing and finance groups, in addition to human resources.

This reflects changes across the computing industry, where most of the leading companies have reorganized leadership in recent years, and IBM, Hewlett-Packard and Yahoo are now led by women.

Perhaps more admirable is that Microsoft is  maintaining its egalitarian ambitions.

Yes, it’s following Apple’s path in trying to better integrate its software and hardware products, and it’s now calling itself a device and services company. But it still positions itself as building products accessible to everyone.

Ballmer told employees Thursday that they should continue to be motivated by the “chance to make the lives of billions of people better in fundamental ways.”

Still, Microsoft executives have been saying that sort of thing for years.

What remains to be seen is whether Ballmer is fixing the bureaucracy and turf wars  that have held the company back and kept it from taking risky bets on innovative new product categories.

Some think he’s on the right track.

“I see it as a pivot in which related things are coming together, so as a result the speed of the organization should be increased,” said Harvard Business School professor Marco Iansiti, who co-authored a book called “One Strategy” with former Microsoft President Steven Sinofsky.

It’s a “risky proposition” to shift Microsoft from being organized around independent product groups to a single, integrated company, former Distinguished Engineer Hal Berenson wrote on his blog.  But the other options were to break the company apart or do relatively minor reshuffling, he said.

Berenson noted that Microsoft has replaced nearly its entire senior leadership team since he left the company in 2010.

“It’s new blood, new dynamics, lots of experience both internally and externally,” he wrote, adding that some of the new leaders are proved while others “are stepping up the next level in their career development and have a lot to prove.”

Others observers I spoke to were skeptical.

“It’s a needed centralization of operating systems, some centralization of some of these other groups,” said Michael Cusumano, a management professor at Massachusetts Institute of Technology who has written books about Microsoft and other software organizations.

“But the big questions about Steve Ballmer — does he have the vision to see the future before the future happens, or can he make the future happen —  those questions are not answered by this reorganization at all.”

One of the new leaders anointed Thursday may take Ballmer’s place when he retires, perhaps in about five years.  But it’s early to read those tea leaves. There  probably will be another reorganization or two before he steps down.

Activist investors were expected to make a move on Microsoft this summer, nominate new board members and push for changes, such as spinning off business groups or perhaps even replacing Ballmer.

Ballmer’s heading off those adversaries and asserting his control before being pressured by outsiders. The reorganization binds the company into a more integrated unit, making spinoffs less feasible.

It’s also a gamble. With the PC and corporate-computing markets in transition, and Microsoft in a pitched battle with Google, and others, the company can’t afford to spend much time dawdling as it sorts out the reorganization.

If Microsoft stumbles or loses momentum because of the changes, Ballmer will be vulnerable and could lose the support of company directors who backed him through rough patches in years past.

Or he could end up seen as the architect of an inspired turnaround, capping his legacy and encouraging him to retire early to the comfort of an NBA owner’s suite.


Comments | More in Columns | Topics: Billionaire techies, Boeing, Microsoft


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