Muglia Exits Microsoft: How to Replace the Irreplaceable?

Bob Muglia, president of Microsoft’s server and tools division, yesterday became another in the recent spate of top executives to part ways with Microsoft.

Muglia, a 23-year veteran with the company, joins Microsoft chief software architect Ray Ozzie, entertainment and devices group president Robbie Bach, and business software head Stephen Elop as a ex-Microsoftie. All four executives have left in the last nine months.

But Muglia may have been the biggest surprise yet considering he was in charge of one of the company’s healthiest and most profitable divisions, Server and Tools, which is in charge of Windows Server operating system, SQL Server, and tools for software developers. The division accounted for almost 24 percent of Microsoft’s total revenue in fiscal 2010.

Muglia is also, by all accounts, a loyal Microsoft soldier and is widely considered a class act.

Bob Muglia

“Bob is irreplaceable,” says Wes Miller, a VP at independent research firm Directions on Microsoft. “He was an incredibly well-respected Microsoft employee of over 22 years — and there aren’t many of those.”

In an e-mail to the company, Microsoft CEO Steve Ballmer wrote: “Bob Muglia and I have been talking about the overall business and what is needed to accelerate our growth. In this context, I have decided that now is the time to put new leadership in place for STB.”

According to industry analysts close to Microsoft, it’s hard to know for sure what exactly caused the disagreement between Ballmer and Muglia. It could have just been that Muglia was burned out on an demanding job and when offered a demotion, said no thanks.

Slideshow: 7 High-Profile Executives Who Left Microsoft

“It’s a hard and fast pace at Microsoft with long hours and a lot of travel,” says Al Gillen, research vice president at IDC. “Muglia may be approaching that point in life when his priorities are changing.”

Gillen speculates that it was an amicable parting, otherwise Muglia would have been out the door instead of remaining for six months to help with the transition.

Transcript of Microsoft CEO Steve Ballmer’s e-mail on Bob Muglia leaving

More than likely, says Miller, the disconnect between Ballmer and Muglia had to do with the competing missions of the company.

“I think it came down to a disagreement over the cloud versus systems management,” he says. “Muglia maybe had issues with the question: Once you’ve gone to the cloud, what is left to manage?”

This is not to say that Muglia didn’t “get” the cloud. It’s just that, unlike other cloud players, Microsoft has a massive legacy server business to clean up and Muglia may not have had the energy for that task.

“Bob knows both the cloud and Microsoft’s legacy business better than anyone,” says Gillen. “But now Microsoft’s legacy business has to change, and breaking down the install base of millions of customers is maybe more than Bob wanted to take on.”

So where does Microsoft go from here? Who could replace someone with Muglia’s knowledge and experience and guide Microsoft’s server business into the cloud using Windows Azure?

Both analysts agree that Microsoft is not likely to search for a replacement outside the walls of Redmond.

“Sure, they could tap a cloud guru from Google,” says Gillen, “But an outsider stepping into such an important role might have trouble with Microsoft’s competitive culture. The person would need to be deeply familiar with Microsoft technology, and it’s difficult for someone from the outside to have that knowledge.”

An outsider would also need to navigate the sometimes choppy political waters of Microsoft, which is not for the faint of heart, says Miller.

“Just as important as understanding the server business and the cloud, an outsider would have to understand how to get things done at Microsoft, and that doesn’t happen right away for most new executives.”

If Microsoft does choose a non-Microsoftie to fill Muglia’s role, what type of person would fit the profile Microsoft needs?

“They realistically would need a well-established CEO,” says Miller. “Someone who has expertise with servers and the cloud, but also has the intellect and political smarts to get the rest of the company on board with his or her vision.”

Shane O’Neill covers Microsoft, Windows, Operating Systems, Productivity Apps and Online Services for CIO.com. Follow Shane on Twitter @smoneill. Follow everything from CIO.com on Twitter @CIOonline. Email Shane at soneill@cxo.com.