Microsoft Reorganizes

As part of a corporate restructuring, the once-separate Windows client division and server and tools group will be merged together with MSN under one roof as the Microsoft Platform Products and Services Division. The group will be led by sales chief Kevin Johnson and Windows desktop guru Jim Allchin, who will act as co-presidents until Allchin&s planned retirement next year.

Microsoft also merged its Information Worker and Microsoft Business Solutions divisions together into the Microsoft Business Division.

Microsoft also gave CTO Ray Ozzie full responsibility for the company&s software-based services strategy and execution across all three divisions, underscoring the magnitude of the battle brewing between Microsoft and Google, observers say.

“There has been a fundamental shift away from products and services and toward platforms across technology, especially in the enterprise space,” said John Parkinson, a longtime industry strategist who has done work for Microsoft, Redmond, Wash.

“Microsoft has been slow to respond, in part because of entrenched interests in the Windows franchise, but reorganizing around the three platform families makes a lot of sense and gives Microsoft better leverage to compete with Google and Yahoo, which are increasingly more of a threat than IBM,” he said.

Partners said the reorganization signals the beginning of a war akin to the historic Microsoft-Netscape battle in the mid-1990s. Gearing up for the faceoff, Google stole a page from Microsoft&s playbook by launching its own Enterprise Partner Program.

Google&s growing search and services portfolio and defection of key Microsoft technologists Marc Lucovsky and Kai-Fu Lee to the Silicon Valley Internet firm contributed to the reorganization, the first major shakeup since Microsoft made its seven divisions separate profit and loss centers in 2002.

The defection of Microsoft researcher Lee to Google in July “really brought this to a head and made it clear Microsoft needed to make changes,” said Rob Enderle, analyst at Enderle Group.

“Both Google and Apple are beating them and shouldn&t be, in Microsoft&s view, and this should do a lot to help address that,” Enderle said. “If you look at the MSN/Platform relationship, expect Microsoft to go vastly beyond where either of those services are today and better link the platforms and services together.”

Microsoft recently has popped the cork on plans to offer hosted CRM, SharePoint, managed desktop services and security services to businesses, and integrate them with its Office, Windows and Dynamics applications platforms.

Google&s success on Wall Street and on the Web no doubt jump-started Microsoft&s search effort, but some partners claim Microsoft reorganizes periodically to align itself with marketplace shifts.

“Google has had an impact on Microsoft by affecting the way they think about search, complementary technologies and managed services, but not to the point of driving Microsoft to reorganize,” said Douglas McDowell, director of operations at Solid Quality Learning in Atlanta.