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7 Reorg Moves Microsoft Should Make

CEO Steve Ballmer's major shake-up of Microsoft is reportedly imminent. Here are seven ways he could lead his company to success.

10 Hidden Benefits of Windows 8.1
10 Hidden Benefits of Windows 8.1
(click image for larger view)
Microsoft CEO Steve Ballmer has been foreshadowing a major overhaul since last fall, when he asserted in his annual letter to shareholders that the company's future rests in "devices and services." Windows 8, the Surface Pro and other recent developments are signs that Ballmer's vision is beginning to take shape. But according to reports, the CEO plans to galvanize the process with a company-wide reorganization.

The most recent rumors indicate Microsoft could make an announcement as soon as Thursday.

Under Ballmer, new Microsoft ventures such as Azure and Office 365 have grown at a spectacular rate. But the CEO remains under pressure due to the retreating PC market, and Windows 8's lowly market share. With Windows 8.1, the company is shifting to an accelerated update cycle, which Ballmer believes will help his company set the pace in a rapidly evolving, mobile-oriented world. But for this rapid-release mentality to pay off, various units will have to be working in sync.

[ What's Microsoft's plan for the more than 160 million users who are still stuck on Windows XP? See Microsoft Preaches XP Conversion. ]

For a company of Microsoft's scale, achieving this sort of cohesion will be no small feat. Here are seven smart moves that will help.

1. Keep Pushing The Next Big Thing

In hindsight, it's clear Microsoft underestimated the importance of mobile devices. Windows 8 has struggled not only because of its radically redesigned UI, but also because Microsoft's late entrance into the tablet game allowed iOS and Android to build large and loyal user bases. The company can avoid repeating history by staying ahead of the curve on the next wave of important technologies, such as the cloud.

In an interview, Gartner analyst Carolina Milanesi said that Microsoft has valuable assets in SkyDrive, Azure, Nokia's mapping technologies, the Xbox and so on -- but she countered that, "Most of the time, you see single ingredients, and they don't come together in a recipe." A reorg, in other words, needs to help Microsoft demonstrate real value -- rather than potential value -- in its connected ecosystem.

Forrester analyst David Johnson noted in an interview that Microsoft can also leverage the cloud, the Internet of Things and mobile retail. He stated that Apple's iPad has infiltrated the point-of-sale market almost inadvertently, simply because the device is easy to use and manage. "Windows can do the same," he said, "by combining Azure with point-of-sale functionality, and having different services for stores, retailers and others."

2. Stop Giving Business Units Competing Goals

Reorg rumors suggest the new business divisions will allow closely related units to collaborate more effectively. If the Windows ecosystem is eventually going to provide a seamless device-to-device experience, for example, it makes sense for the Windows 8, Windows RT and Windows Phone 8 teams to work together. It also makes sense for them to have close ties to the device teams, so their products can mutually enhance one another. Likewise, the more the OS and device teams are in sync with the cloud teams, the more effectively Microsoft can stitch its devices and services together. And so on.

In an email, Forrester's Johnson noted that Microsoft's current organizational structure allows innovation to occur only in pockets. Each division has its own revenue goals, which can impede collaboration and produce competing agendas within a single project.

3. Understand When "Consumer Vs. Business" Matters, And When It Doesn't

Thanks to BYOD, Microsoft and its OEM partners have to be more cognizant of the consumer experience, even when designing business PCs and tablets. That said, it also has to continue supporting no-nonsense IT staffers and desktop workers who are less interested in touchscreens and Angry Birds than in productivity and security. So far, Windows 8 hasn't achieved this balance.

"There are two types of clients -- consumers within the enterprise, and IT managers," said Gartner's Milanesi. She said these bases often prioritize different things; the former might want more compelling devices, whereas the latter wants easier licensing terms and simpler manageability. Balancing the needs of divergent groups with a single product is a challenge, but Milanesi thinks Microsoft is making progress.

"Windows 8.1 is the first fruit of a faster-paced and more agile company," she said. "If a reorganization will lead to software, services and hardware working together, that's the right direction."

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