Microsoft Reorganizing to Focus on Customers and Developers

Microsoft Corp. is reorganizing to focus the company on the needs of its customers and software developers, and to change its image as a company with too much emphasis on its products and technologies.

Microsoft Corp. is reorganizing to focus the company on the needs of its customers and software developers, and to change its image as a company with too much emphasis on its products and technologies.

Two product groups currently exist within Microsoft: the platforms and applications product group and the interactive media product group.

The Wall Street Journal reports that the reorganization, initiated by Microsoft president Steve Ballmer, will create a new enterprise unit, apparently out of the platforms division within the platforms and applications product group, to sell products to chief information officers. The platforms division is currently responsible for the development of Windows 2000. Microsoft hadn’t formally announced the reorganization when ENT went to press.

Another part of the current platforms and applications group will be spun off to form a new unit that concentrates on the needs of knowledge workers as well as working on the Office and BackOffice software suites, the report said. The interactive media product group, which includes the company's Web portal Microsoft Network, may be renamed the consumer division, according to the report.

A completely new group, designed to meet the needs of software developers, will be added at Redmond as well, the report said.

Immediate speculation among market analysts and industry watchers claimed the restructuring was designed to avoid a breakup by the government should Microsoft be found guilty in the antitrust trial being waged by the U.S. Department of Justice (DOJ).

The Software and Information Industry Association (SIIA, www.siia.net), of which Microsoft is a member, recently recommended to the DOJ that Microsoft be broken up if it is found guilty of antitrust violations, according to reports.

The SIIA document suggests dividing Microsoft up into companies focused on different markets, such as the Internet portal and operating systems, or into three or four smaller companies, according to reports.

Zona Research Inc., (www.zonaresearch.com) predicts that a divestiture into several smaller companies would protect Microsoft's shareholders and still allow the company to move into new markets. In a report, Zona speculates that Microsoft may see a forced breakup coming, therefore it is exploring the possibilities and opportunities the breakup may create.

Zona’s report also says a potential breakup of Microsoft could even have long-term benefits for Microsoft by preserving stockholder value and allowing Microsoft to continue competing in the markets it is currently in.

Dan Kusnetsky, director of operating environments research at International Data Corp. (IDC, www.idc.com), agrees that Microsoft could be reorganizing to avoid the wrath of the DOJ, but also says Microsoft simply needs to change its business model.

"Microsoft’s current business model is really getting in the way of the company’s success in the back office because they support a largely consumer model, and the needs of large corporate consumers are very different," he says.

Microsoft’s current approach calls for selling as many low-value products as possible. If the company wants to be successful in the back office, according to Kusnetsky, Microsoft needs to focus on selling a lower volume of high-value products to meet the needs of enterprise customers.

"Microsoft realizes that it is not being as successful in the enterprise as it might like, and the reorganization can help differentiate between consumers and corporate customers," Kusnetsky adds.