by Jonathan Hassell

4 Things CIOs Need to Know About Microsoft’s Reorg

News Analysis
Jul 17, 20136 mins
Cloud ComputingComputers and PeripheralsInternet

The entirely expected Microsoft reorganization, and the accompanying memo from CEO Steve Ballmer, suggests that the company plans to focuses on devices, the cloud and a much shorter development life cycle. This will have a major impact on how your IT department operates.

Last week’s big Microsoft reorganization should have caught exactly zero people by surprise. A couple of high-ranking executives departed, and departments were shifted so the senior leadership team can purportedly focus on engineering excellence and becoming more relevant across a spectrum of devices.

But what does this mean for the CIO? What do Microsoft’s internal machinations imply for its corporate customers? From my perspective, it means four different things for you. Let’s take a look at each of them.

1. Microsoft’s Accelerated Product Delivery Curve Is Here to Stay

Microsoft Logo

When CEO Steve Ballmer wrote in his memo to the troops that this was a reorganization “that will enable us to innovate with greater speed, efficiency and capability in a fast changing world,” he wasn’t kidding about the greater speed part.

  • You’ve probably noticed by now that the ill-received Windows 8 is receiving a quick facelift in Windows 8.1. This will be released to original equipment manufacturers for inclusion in their devices by the end of August, according to the company’s Tami Reller at the recent Worldwide Partner Conference in Houston.
  • The head of Windows Azure, the company’s cloud computing platform, said at the TechEd conference that his team targets updates to cloud services in three-week intervals.
  • The Microsoft Exchange team has switched to a servicing model that releases quarterly updates. These are deployed like an entirely new version of Exchange, as opposed to just a service pack. This is a reflection of the company as a whole, which seems to be eschewing the concept of service packs and instead focusing on delivering changes via more frequent updates.

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This is a huge change for IT departments everywhere, but especially in larger enterprises, who typically wait months, if not even a year or more, before deploying new releases of critical software en masse to users.

It’s entirely unclear whether this faster release cadence is solving a problem that anyone outside of Microsoft has, but for the time being, the message is clear: Get used to being only 12 months away from a shiny new version of whatever you’re using, regardless of whether this accelerated timetable actually aligns with your organization’s strategic plans.

The fire hose is turning on. Hope you’re thirsty.

2. On-premises, LOB Software on Its Last Legs

Microsoft’s current line is that it gives you the best of both worlds—best-in-class operating systems for your own server rooms and data centers, and the same operating system that works the same way in private cloud services and up on Windows Azure.

This is absolutely correct. No competitor even comes close to creating the so-called “virtuous cycle,” where improvements in on-premises software make their way up to the company’s cloud services, while the best practices, feature improvements and bug fixes found by running hundreds of thousands of servers in the cloud make their way into the engineering for the next release of the on-premises operating system. This is a real win.

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However, this virtuous cycle can still be virtuous for Microsoft without being so valuable to non-cloud customers. In fact, the days of on-premises Microsoft line of business software for your own datacenters may well be numbered, even if the company currently promises otherwise.

It’s not difficult to see an era where, as Microsoft steers its ship into the harbor of devices in services, it decides to develop more in the cloud and, perhaps, save some of the effort and expense of engineering new operating system releases. (That doesn’t appear to be in the immediate future, given the quick follow-up Windows Server 2012 R2 release only about a year after the original Windows Server 2012 release to manufacturing.)

If Redmond is creating devices that exist to consume its services, those services will naturally be a key area of investment for the company. They’ll also drive recurring revenue, whereas perpetual software licenses generally do not, and are less “sticky” to boot.

3. Microsoft Feels Vulnerable About Shift Away From PCs

The slow but steady decline of the personal computer has not been kind to the outlook for the software giant, while the emergence of Microsoft Surface as a sort of tablet window into the era of personal devices has not gone as well as the software giant had hoped, surely.

The Windows franchise lives and breathes at this point with PC shipments, and with Barron’s reporting that PC shipments fell by 11 percent this quarter as compared with the same period last year, the problem is clear: Microsoft needed to shift, even on the server and enterprise side, one of the billion-dollar, consistently profitable segments of the company.

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Ballmer was nervous and needed to light a fire. The reorganization, according to Ballmer, is intended to help transform the company into an era where PCs are just one piece of a much larger pie.

“The form of delivery shifts to a broader set of devices and services versus packaged software,” Ballmer writes in his memo, indicating that he wants Microsoft relevant in more than just PC and Xbox.

Microsoft is playing for more than enterprises and knows that PCs aren’t where the money is anymore. For the CIO, this means a Microsoft that’s not as laser-focused on business tools as it has been throughout its existence, with some exceptions, but is attempting to reach consumers, gamers, executives, artists and so on.

4. The Cloud Won’t Be a Bad Place to Live

Cloud Data

News flash: Microsoft desperately wants you to subscribe to the cloud. It really wants your mail and collaboration in Office 365, it wants your Web services hosted on Windows Azure, it wants your sales force using hosted Microsoft Dynamics, and it wants your spam filtering done by Exchange Online Protection. It wants to hook you in, send you an invoice every month, and seal you into the Microsoft ecosystem—and for the trouble, you’ll receive upgrades, support and (hopefully) always-on service.

News: Ballmer Outlines the Road Ahead for Microsoft Office, Skype, ‘Bing Now’

More: Microsoft TechEd Focuses IT Pros on the ‘Cloud OS’

You know what? For some businesses, this is exactly where to be. This message is compelling for resource-challenged small to medium-sized businesses to play at a scale that Microsoft can offer for pennies per hour. The majority of small businesses have no reason to run an in-house email server. The majority of medium-sized businesses can’t roll out a Web application on a scale and in the timeframe by themselves that they could by spinning up some Windows Azure instances.

This Microsoft, for these businesses, is a good thing. More power and capability has never been available at a lower price than now. This focus of Microsoft means good things in these capacities for these audiences.

Jonathan Hassell runs 82 Ventures, a consulting firm based out of Charlotte, N.C. He’s also an editor with Apress Media LLC. Reach him via email and on Twitter. Follow everything from on Twitter @CIOonline, Facebook, Google + and LinkedIn.