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This morning Microsoft announced changes to its organizational structure and leadership team.
Some of its most senior executives are departing, and the company is shifting internal teams in what the company described as a change to better match its personnel to its strategy, according to a memo published both internally and externally by its CEO, Satya Nadella.
It’s worth noting that Microsoft is coming up on the end of its fiscal year, making the changes not particularly temporally surprising. Still, the internal reshuffling is notable as it helps underscore how the software company is working to change to face a rapidly evolving market.
In its memo, Microsoft said that the changes will help it build at a faster pace, and improve engineering alignment. For a company known in the past for having fractious internal units, the changes are interesting as they appear to be designed to combat its infamous discord.
The best way to approach the changes is to take it in pieces. We’ll start with Windows.
Terry Myerson, formerly the head of the company’s operating system work, will pick up new responsibilities in the new structure. Specifically, Myerson will now lead a new unit called the “Windows and Devices Group” that combines Microsoft’s Windows work, and its hardware.
The Windows and Devices group is simply named: The division will include Windows, and the devices that have become associated with the company’s hardware push — think Lumia, HoloLens, Surface Hub, Xbox, and Surface.
The combination of hardware under Myerson with one of the firm’s most internally critical platforms might sound odd — why fuse hardware and software? The answer, so far as I can discern from watching the company over the past few years, is that the hardware efforts at Microsoft have long been a conveyance mechanism for Windows.

That’s become mildly less true as Microsoft has ground out improving developer support from third parties, but the hardware work of the company falls under the broader Windows rubric. Xbox, Lumia, and Surface for example are all products that leverage Windows 10 in increasing quantity.
Apple has long been lauded for harmony between its hardware and software work. Microsoft, by combining its now-former Operating Systems Group and Devices Group is likely hoping for similar synergy.
So, a promotion for Myerson, and one that puts him in place to be the next CEO of Microsoft. This leads us to the next piece of news:
Out.
The returning Microsoftie didn’t make it to the two-year mark this time around. Stephen Elop is best known for leaving Microsoft for Nokia, and then bringing that company’s hardware assets to Redmond. Given that Myerson is now running his ship, there isn’t much need for two captains.

Akin to Myerson, Soctt Guthrie is accreting more responsibility. Keeping his place atop the company’s cloud business, Guthrie is also picking up the engineering assets from Microsoft’s Dynamics business.
According to the Microsoft memo, Dynamics is now close to a $2 billion business. That’s a revenue statistic, of course, not a market value metric. For reference, Box, a company that sells enterprise file sharing services to enterprise customers is projecting revenue of under $300 million in the current year. Box is valued at more than $2 billion by the public markets.
Given that Guthrie is snagging some Dynamics assets, the following:
Out.
Microsoft said in its memo that it learned from Kirill Tatarinov — who ran Dynamics — the importance of CRM. Given the company’s carefully worded note, I can’t be entirely certain, but it seems that the company is fragmenting the Dynamics team into other divisions entirely.
Qi Lu, head of the company’s Applications and Services Group is picking up the company’s education efforts’ engineering assets. This, again, is one of Microsoft’s senior leadership team (SLT) picking up more responsibility.
The other side of that is:
Eric Rudder is out. Rudder did a number of things at Microsoft over the last quarter century, but his final tenure involved the same education efforts that Lu is taking on.
Again, two chefs and a single soup is akin to watching me cook: No one is happy, most people want to crowd the kitchen, and then we end up eating bad pizza and dreaming of living in New York.
Also bouncing is Mark Penn, a controversial figure inside of Microsoft.
Interestingly, Microsoft did not note that Penn would return to politics specifically, instead saying that the now-former executive would “form a private equity fund, among other things.” It will be quite interesting to see what those other things are. Regardless, they will not be Microsoft things.
Microsoft has had a busy few years trying to rebuild itself to better fit the current, and coming technology market. A new CEO — Satya Nadella — a previous re-org, and a business model shakeup have all been put into place.
With the above changes what’s notable is that Microsoft isn’t actually shifting course, but instead appears to be doubling down on its plans. Moving hardware into Windows, for example, isn’t abandoning hardware, or slimming it down I wouldn’t think — the company wouldn’t be shipping new hardware lines, or software to run on its phones if it wanted to shirk the responsibility.
And to be clear, I don’t think that Microsoft is shedding its most popular executives.
A final thought: By giving Myerson more responsibility in the face of the coming Windows 10 launch, Microsoft is giving its current Windows Boss a vote of confidence. Should its current operating system efforts falter, Myerson now has a higher perch from which to fall.
More soon, I have some calls to make.
