Editor’s note: Matthew Casey is an analyst with Technology Business Research.
HAMPTON, N.H. – Microsoft’s (Nasdaq: MSFT) changing of the guard announced on Friday will position the company to effectively manage its transition to a devices and services giant.
Microsoft’s transition from a software company to one more focused on devices and services will be a transition that occurs under new leadership: a month after the July announcement of Microsoft’s corporate reorganization from a software company to one defined by devices and services, CEO Steve Ballmer announced that he will be retiring within the next year.
TBR believes that Microsoft’s restructuring will help break its trailing status in emerging areas such as cloud and mobility, and that new leadership will help solidify the internal messaging and cultural shifts required to transform the company. While Ballmer has been successful during his 12-plus year tenure at the helm in maintaining a stable and growing company, realigning the corporate vision from a software company to a new services and devices vendor will require a refreshed outlook from the leadership position to redefine Microsoft from the top-down.
Though Ballmer’s tenure has been widely scrutinized as the company struggled to adapt to a changing IT landscape, the stability and growth of Microsoft’s business during his time puts Microsoft in a position to successfully make the proposed transition. While the growing cloud and mobility trends have spurred other IT vendors, including Dell, HP and Symantec to make drastic strategic and leadership changes, TBR believes the leadership transition in the coming year will position Microsoft to effectively manage the transition.
With the strategic vision set in place, effectively transitioning the leadership role will solidify and formalize Microsoft’s efforts to redefine itself as a devices and services firm.
Microsoft’s New CEO Will Face Challenges
From a business model perspective, Microsoft’s new CEO will be stepping into a solid and healthy business both in terms of financial performance and core portfolio. But the lagging performance from Microsoft in the cloud and mobile spaces will present immediate challenges for the company’s new leader.
TBR believes that Microsoft’s reorganization will position the new CEO to effectively transition the corporation and improve interaction and engagement with its channel partners and enterprise customers around new initiatives. The new company structure and messaging will take some time to resonate with partners and customers, but the appointment of new leadership will solidify the messaging and the intent of Microsoft’s transition in the eyes of both customers and partners.
The shift in leadership coupled with the realigned corporate strategy will dramatically simplify the alignment between Microsoft’s outward value proposition and internal organizational structure.
From a strategic standpoint, the tighter alignment makes the company easier to do business with, which TBR believes will further drive engagement with partners and customers, driving revenue growth as a result. Internally, the organizational gaps made it difficult to execute a cohesive approach to initiatives like mobile and cloud services. Microsoft’s late entry into these important markets highlights that issue.
The organizational structure was at the same time difficult for outside partners and customers to understand who, how, and where they needed to engage given their specific areas of focus. The transitional period in the coming year in terms of leadership will enable Microsoft to effectively manage its transformation and establish itself as a devices and services vendor from the top-down.