This column has been updated from June 30 with additional information.
Microsoft Corp. (MSFT - Get Report) is planning a cloud-focused restructuring that will reportedly involve laying off a large number of workers worldwide. That's not too shocking given its past restructurings, and the speed at which cloud apps and service have come to account for a giant portion of the software giant's sales.
Since Steve Ballmer announced a big restructuring in July 2013 -- not long before he announced he was stepping down as CEO -- mid-year reorgs have become a way of life for Microsoft. Much like Alphabet Inc. (GOOGL - Get Report) , Microsoft is willing to frequently overhaul its business units, as well as the people leading them, in order to both pursue strategic goals and inject fresh blood into key divisions.
This approach doesn't work for every major tech company. For example, Apple Inc. (AAPL - Get Report) , though sometimes willing to shake things up, is comfortable keeping its org chart largely unchanged for long periods of time. Facebook Inc. (FB - Get Report) has also been pretty restrained in its restructuring efforts. But for companies like Microsoft and Alphabet, where different product teams can easily feel as if they're working for different companies, there's arguably more incentive to shake things up from time to time -- particularly if it helps different teams play nice with each other.
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On Friday, June 30th, the Puget Sound Business Journal reported that Microsoft plans to announce a new re-org on July 5th that "will better align the company under its cloud-first mantra." Later in the day, Bloomberg reported the reorg will cover Microsoft's sales teams, and aims to improve their ability to sell cloud software. The shakeup was also said to feature job cuts, as well as impact Microsoft's local marketing efforts in certain countries.
On Monday, July 3rd, Microsoft confirmed the restructuring through an internal e-mail sent by EVP Judson Althoff. The company's business sales teams will be split into an Enterprise group and a Small, Medium and Corporate (SMC) group. The Enterprise group, in turn, will be split into teams for specific accounts, teams focused on adding new business and "customer success units" focused on driving additional consumption (presumably cloud-related) of Microsoft products and services.
Microsoft is also overhauling its attempts to sell to consumers. The company plans to better integrate its consumer and hardware sales efforts with its commercial software and services efforts, and pitch consumers on using the same Microsoft "creativity tools" they use in the office at home.
Althoff's memo didn't mention the layoffs expected to accompany the restructuring. The timing of the announcement is close to that for previous reorgs announced in 2013, 2015 and 2016.
The 2013 reorg, perhaps the biggest of the bunch, put an end to Microsoft divisions created around product groups such as Windows, Office and server software, and replaced them with "functional" divisions covering fields such as engineering (four different engineering groups were set up), finance and HR. Among other things, the overhaul sought to end the turf wars the product divisions were infamous for.
The 2015 reorg, launched by current CEO Satya Nadella a year after he carried out major layoffs, produced the departure of hardware chief and ex-Nokia CEO Stephen Elop, as well as a few other senior execs. It also yielded the merging of Microsoft's OS and hardware engineering teams, and added the company's Dynamics business app developer teams to its Cloud and Enterprise engineering unit.
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The 2016 reorg featured the departure of long-time COO/sales chief Kevin Turner, and handed off his responsibilities to five execs who had already been overseeing functions such as corporate strategy, finance and marketing. Nadella's stated goal with this move was to "more deeply integrate" Microsoft's Sales, Marketing and Service Group (SMSG) with the rest of the company.
Ahead of its latest restructuring, Microsoft had already carried out a pair of shakeups this year. Earlier in June, the company created three new software engineering groups: A Cloud AI Platform team responsible for things such as the Azure Machine Learning service and Microsoft's Bot Framework, an Azure + Data Platform Group covering Azure cloud service engineering and several database and analytics products, and a Business Applications Group that covers the Dynamics line and a slew of other business apps. And In January, the company consolidated teams responsible for its relationships with channel partners and third-party software vendors, and also created a Microsoft Digital unit meant to help companies adopt cloud services.
There's clearly a trend towards better integrating engineering teams working on different products that complement each other, and towards having non-engineering teams work with the company as a whole. And as Microsoft's sales mix has dramatically shifted towards cloud apps and services -- the company's Commercial Cloud revenue was on a $15.2 billion annual revenue run rate as of June -- there's also generally a trend towards giving more attention to fast-growing cloud and analytics offerings.
Google can certainly relate to Microsoft's non-stop reorg activity. In addition to its big 2015 restructuring, which created the Alphabet parent company and placed various "moonshot" projects into an "Other Bets" segment, Google has seen leadership changes for products such as Search, YouTube and Android over the last several years. It has also done things such as put most of the company's hardware work under the oversight of former Motorola Mobility hardware chief Rick Osterloh, and both the Google Cloud Platform (GCP) and the G Suite productivity apps (formerly Google Apps) under the oversight of VMware co-founder Diane Greene.
A company like Apple, whose entire business philosophy has long revolved around tightly integrating hardware, software and services, understandably feels less need to be so aggressive with its executive and organizational shakeups. But Microsoft and Google are very different kinds of companies. And given how well each one has performed over the last few years, it's hard to complain about what either is doing.