A look at a Microsoft Re-Org

No I am not going to spill oodles of Microsoft gossip about the latest McKinnsey Consulting engineered re-org at Microsoft. In fact I cannot even say that it was McKinnsey that engineered it. Pick your choice of any of the hundred year old consulting firms and I am sure one of them was the winner of the Microsoft sweepstakes.  Somewhere a lucky Account Manager just blew away his quota.  Hopefully he has found a sunny beach somewhere on this great planet of ours.  These things garner a lot of press and are scrutinized and analyzed by people with greater credentials than myself.  However it is fun never the less and worth the effort.  Re-orgs are a part of America’s corporate culture, it’s a way of life.

When I first started at Microsoft in 1991 we went through a re-org almost right away.  It just was not called a re-org at the time.  It was decided to create the Office of the President with 4 separate heads of state.  We of course had Bill Gates, Steve Ballmer, and then Frank Gaudette who was our CFO and Mike Maples, who headed all applications.  Because at the time Microsoft was a shooting star and the leaders were well-known and respected, it was not such a big deal.  Plus the company was only 7500 employees.  Any type of restructuring did not take very long.  Usually within a week it was business as usual and for most employees it did not seem to impact us at all.

Since those early days every re-organization has been bigger, broader and bolder.  The politics have become more brutal as there are always winners and losers.  It has become a virtual white-collar blood bath.  To be fair this is in no way unique to Microsoft, it is a simple function of corporate America.  What seems a tad sad is it used to feel like Microsoft was above that kind of petty politics, but over time Microsoft has been hardened as a company.  It has matured and evolved as employees have grown older and now have families, which is a larger responsibility.  It has weathered a brutal DOJ trial.  And it has seen its once bright star fall from the sky.  Now re-orgs are more viewed as a way to back to a glorious past.

The current re-org just announced a few weeks ago is big.  It will fundamentally alter how the Microsoft Product Groups will work.  No longer silos as they have been throughout Microsoft’s history but part of a larger broader engineering organization.  Trying to create what is believed to be a more strategic and nimble organization, made to service customers with new releases in six to twelve month cycles and no longer three-year cycles.  It is daunting in the sense of not that it cannot be done, but how long will it take to create the structure in order to execute upon the vision.

When you think of what happened you have four engineering orgs – and here are the winners:  Terry Myerson owns the Operating System stuff (Windows, Windows Phone, and Xbox).  Qi Lu owns Application Services (Bing, Office 365, Office Servers and Client, Skype, Yammer and Lync).  Satya Nadella owns heads the Cloud and Enterprise Group (Azure, Windows Server, SQL Server, Visual Studio and System Center),  Finally Julie Larson-Green owns hardware (Surface, Mice, Xbox, keyboards and anything else hardware).  I am going to spare going into detail on each group.  In my simple view Satya Nadella is the winner as he will not have to change a lot for the Enterprise.  Microsoft is doing well in the Enterprise and his re-org does not change the overall structure too much.  Julie Larson-Green has a big challenge in making Microsoft into a viable hardware company, but that being said since Microsoft is not known as a hardware company it represents a green field opportunity for the company.  Terry Myerson has all the OS’s and it should be interesting to see from an engineering stand point what that means, in particular Xbox which has always done their own thing.  Qi Lu I do not envy you.  At a high level I think it is about integrating Bing with all the apps inherited, kind of like Google has done.  But is a bunch of disparate applications that somehow will have to come together.  From an engineering standpoint not an easy task.  Not to mention I am not sure what integration between Yammer, Skype, Office and Bing will look like.

I could write much more about the challenges and probably an essay on each engineering group, not to mention the challenges in marketing that Tammy Reller faces.  This ranks as the biggest shift in how Microsoft operates ever.  Gone are the Business Groups.  The Product Groups are now subsumed into the various engineering groups.  All the processes that supported the old system will now have to be evaluated and changed.  From a sales operations standpoint, change will take place.  Internal communications will change.  How partners work with Microsoft will change.  Development processes will change. All these things are being done to create a faster and nimbler organization.  The question is how long will it take to get there?  More importantly how long does Microsoft have?

If I am taken by one thing from this re-organization it is how readily the model was borrowed from a primary competitor, Google.  This idea that everything springs from engineering.  From a Google standpoint this concept is very much a part of the companies DNA.  This is how they grew up, how they evolved.  Microsoft grew up in an environment where each product group charted their own destiny.  Competed in the marketplace and competed internally for the Microsoft sales forces attention.  From an engineering standpoint each of the 4 units will have to put processes in place so that software engineering across the individual unit will march to the same cadence.  Not easy when you are taking various products and mashing them together with other products to come up with a singular flow.  This after decades where product groups each operated in their own silos.

So the final and biggest question is why?  I think a large part of this is Microsoft has finally accepted the reality of the post-PC era.  Try as they could to deny it, and trust me they tried so many ways of doing marketing spin to warp reality.  First it was some apps could only be done via PC as they required the local processing power of a PC.  There was Software as a Service which they tried to spin as Software AND a Service.  Ballmer thought the iPhone was stupid.  Then he said Apple would never sell those iPad things.  To be honest it is kind of an embarrassing list.  Now that is has been accepted the realization must have been that the current organization does not support the direction Microsoft needs to go to survive, so it had to be changed.

It would be easy to come to the conclusion is this is a last gasp effort to stay relevant as a company, but I don’t think so.  Despite its recent earning miss, Microsoft is still pretty much a money printing machine.  They can still generate cash even of the re-org fails.  Can they last forever?  No company can last forever, and in a dynamic industry like technology that is especially true.  It is going to be an interesting process to watch.  The most interesting will be to watch how quickly they can move.  In the meantime some business consulting’s acct manager is sipping drinks on a beautiful beach many miles away, I think I will go join him or her,

Good Night and Good Luck

Hans Henrik Hoffmann July 25, 2013

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Bing-ality

Microsoft Bing since its launch has been considered the primary competitor to the behemoth known as Google search. It is a valiant effort in a very lucrative market space. However despite the immense opportunity,the term success has so far eluded Microsoft Bing.  When you look at Search Engine market share the numbers continue to improve for Bing as it hit over 17% in April, however the revenues have so far failed to materialize.  In Q2 of Fy13 for Microsoft’s Online Services Division lost money, $283 million.  In Q1 Google generated over $11 billion in revenue.  Granted Microsoft’s OSD is not just Bing, but all the other online services such as MSN and Outlook Mail.  The flip side of course is we really don’t know how Bing as a stand alone business is doing, despite the market share increases.

The history of Bing some may say is one of failed opportunity.  I am not so sure it is so much that as it is understanding online reality.  Bill Gates and Steve Ballmer often have said they blew it on search and I have often said they would never have figured it out.  Even if they had I am not so sure they would have been willing to take the financial risk to challenge Google at the time (remember we are going back to the 2002/2003 time frame) .  In his short stint at Microsoft Ray Ozzie provided the best analysis of Google.  He stated that they were using their immense revenues to fund software development projects that would compete against Microsoft. It was an indirect model, where ad revenues funded software engineering.  As has been shown Google has a lot of revenue to fund these projects.  It was difficult for Microsoft to grasp as they for so long have lived off of volume license revenues.

In the past decade it took a long time for Bing to come to the forefront.  First Microsoft toyed around with  Live search.  It was not a well named product.  Certainly not as fun as saying, “Google”.  But globally it did ok and when you looked at the top 100 websites, Live did appear in the top twenty.  It just did not have an ad word business model set up that could compete with what Google was doing.  Microsoft was slow in understanding the competitive threat that Google posed, if not holistically, at least opportunistically.  My view is Microsoft viewed it as another software market to conquer rather than the threat it was to existing businesses, namely Microsoft Office and Microsoft Windows.   This is just another market space in which we are entitled to own.

As things progressed so did Microsoft’s desperation ending in an audacious bid to acquire its competitor Yahoo.  Luckily for Microsoft and many grad schools across America this would end in the ego of Yahoo founder Jerry Yang as he made every attempt to kill  the deal. In the end this may have worked out for the benefit of Microsoft as they entered onto a partnership rather than spending $40 billion on an acquisition that may have been doomed to fail. While Jerry Yang seemingly failed business 101 which is to increase shareholder value, not decrease it.  He is now a case study for business graduate school history.

What has happened as these events have unfolded  is that Google has systematically found other business opportunities to augment and promote its search business and increase revenues.  Namely using the mobile phenomena to launch Android.  This has led to great headway in the mobile phone business and the tablet.  In 2013 it is projected that there will be 800 million Android devices sold.  None of these devices will have Bing as the default search engine.  In addition there will be 300 million iOS devices sold in 2013, again none will have Bung as the default search engine.  I only wrote this to share with Steve  as he seems to be unaware of this fact, but hey, he is a numbers guy.

So what does Bing do?  For starters that Apple iOS number is key.  One of Steve Jobs last talks to the Apple faithful at their corporate headquarters was about the evils of its key competitor Google.  There is no question that there is no love lost between the two.  Apple has tried to compete with Google head to head.  The failed Apple Maps comes to mind.  In my opinion a rare case of me saying, “Whose stupid idea at Apple was this?”  Google owns that space and barring some catastrophe, I do not see them losing in that space.  So with all that hate and failure what if Bing was the default search engine for Apple iOS?  Instantly Bing would have access to 300 million users.  Granted this would be a bizarre twist of fate, but Microsoft is not in a position of power in this space and Apple would like nothing better than to hurt Google.  If Bing can meet Apple’s high quality standards they could have a very compelling play in this space and be considered attractive to Apple.

There is also a bigger question of “if Not Microsoft than who?”.  Competition  that is not challenged is a threat to the greater benefit of society.  They can dictate terms, which is never a good thing.  When we look at companies that are able to challenge Google there are few with the cash reserves to do it.  One of the few would be Microsoft.  And frankly they owe it to us all.  Fundamentally competition is a good thing and maybe Bing is competing, it’s just that Google is pushing their game to a higher place.  If that is true than Bing needs to set a higher bar, not just compete at parity.  Faster more accurate search is nice, but we are reaching a point where for the end-user it is becoming increasingly difficult. to distinguish in milliseconds.

Another factor is much of Bing’s success is tied to other products like Windows 8, Surface and Windows Phone.  To successfully get people to switch alla Coke versus Pepsi, is not so easy as there is a lot more tied to it than just switching a can. The effort Microsoft must put in will take years, which in technology is worlds away.    So far it has been slow in coming and market share has increased at a snail’s pace.  This may drain Microsoft’s cash reserves but the reward is high Once yo have been great there is always a thirst to be great again and I think that more than anything drives Microsoft.  To get there search will be a key cog in the engine.  Information rules the world and if Bing is not successful Google very well could rule that world.  Bing is in a tough place but it is a fight worth fighting.

Good Night and Good Luck

Hans Henrik Hoffmann July 10, 2013

The Continental

It started innocently enough, following our regular Sunday mass the wife and I decided to go out to breakfast.  We were in the University district, where Blessed Sacrament church is located.  We walked over to the “ave” and quickly settled on a small little Greek restaurant that we had both  been in before in our younger years, called The Continental.  It was a non descriptive place, but it was definitely Greek.  Besides seating space for customers, it had a shelf dedicated to purchasing Greek items such as Greek wine, Retsina, olives, olive oil, coffee, pasta, rice, grape leaves, – pretty much any item you would need to make a nice Greek dinner.  Right next to it was a display of Greek pastries including baklava, honey bars, elephant ears, and more (we will come back to this!).  Over the next 17 years this would become a part of Jean and our lives.  With the birth of each child, one of  their first venture into the world would be a visit to The Continental.  As they grew it would be a part of their lives as well as their childhood memories.

The Continental was started over forty years ago by a couple of Greek immigrants, George and Helen Lagos,  After 40 years the Continental shuts its doors this past Sunday on June 30th.  To read about the history, the Seattle Times ran a nice article on its history (click here). The final weeks since it was announced the Continental has been packed with patrons wanting to pay a final visit and say their goodbyes to both the restaurant and the family they had come to love.  It was beautiful and at times emotional.    So what was it about this little place that made it special to so many?   I can only add the many experiences of my family, which are worthwhile, but I bet there are thousands more stories out there that are so compelling.

Our earliest experiences centered around three people, George, Helen and Katarine.    These were the days of a young emerging Hoffmann family.  We had one child at the time, our son Henrik.  As anyone with kids knows when they are infants a restaurant is but a vessel to wreak havoc with their food.  And wreak havoc is what Henrik did very well.  Food was hurled to the floor and ground into the carpet.  Yet this never bothered Helen or Katarine.  As time would pass, we would add a second (Finn) and a third (Jens Christian).  In each instance one of their first ventures into the world would be a trip to the Continental.  Many times Helen or Katarine would coddle our infant boys so Jean could actually eat her food.  As they grew George would often rise up from the regular table and walk over to the boys and ask them to ‘give me five’ and then jokingly wince and say they hurt his hand.  The boys would giggle with delight.  Mothers and fathers love places that accept and treat their kids well.  It eases our stresses.  Often in the early days, Helen and George’s son Taso would come in, usually with a book and have breakfast, and help if necessary.

We would have many events at the Continental.  When my father was still alive he and my mom would join us for a birthday breakfast.  My dad was an old-timer born in 1917, so the Corn Beef and Onion omelette was a must for him.  Even though he was getting towards the end of his life and his appetite was not what it once was, he had no issues finishing that omelette.  We would often meet friends at the Continental.  If I had co-workers from out-of-town I would take them there.  Jean met her friend Barb there once a month during dance season.  Dmetre would just choose the wine for them.  Then they would just talk and enjoy one another’s company.  Somewhere along the way Dmetre really started running the show as George and Helen were getting along in years.

There were major life events such as Nov 4, 2009.  That was the day Microsoft gave me my walking papers after eighteen years.  I had started on November 4, 1991.  Microsoft HR has a wonderful sense of humor.  It was very difficult on Jean, but there was only one place we could go, The Continental.  As we entered Helen stood there and Jean burst into tears as Helen gave her a big hug.  At a time of need it was a place of comfort.  Lunch was taken care of by Helen and in some way the day as dark as it could have been remains a positive memory in my life.

The regular table was reserved for the true patrons.  There was often a group of Greeks.  On Sundays there were some Police Officers who we got to know, sometimes they gave the kids police badges.  A grumpy old guy named Preston, who has since passed a hundred years old.  Somewhere along the way we obtained the status of regulars.  One day when we walked in we were told to sit at the regulars table. Some Seattle Seahawks dream of being in the Ring of Honor, I just say you have not done your time. To get to the regular table takes over a decade, so it was a pleasant surprise when we were asked. But I never assumed.  We were a morning crowd, but sometimes during the evenings when I came I would be invited to join a group of people and partake in the evenings political discussions.  It was nice to sit at the table, but to be honest I just liked hanging out there and enjoying the friendly ambience.

One thing that always impressed me about the Lagos family is there handling of the area, as the location they were in the district was not necessarily the nicest  A lot of street people asking for money.  Some mentally, not capable.  Sometimes they would wander in the door but whether it was Dmetre, Helen or George they were handled gently and without incident.  It seemed second nature to them and I guess it would be after 40 years but it always impressed me.

Places like the Continental are a dying breed.  Family restaurants passed down between generations.  A regular clientele who come not just for the food but the company.   A place where you feel welcome when you come in the door.It is common in Europe, but as you move west in the US there are fewer and fewer.  But this little place allowed George and Helen to raise a family and dream of a better life for their children.  Dmetre was able to do the same for his children.  But as sad as I am about losing this establishment, times are changing.  The restaurant business is tough and unlike days of old where you lived, worked and died, we have opportunities to allow us to live more these days.  To enjoy our later years in life.

Our community is a little less today.  However it is not a time to cry, but to be thankful that for so many years so many people had a place to go, to enjoy good food, to enjoy one another’s  company and to simply just be.  It was a chance to enjoy the simpler, but more important things in life such as family and friends.  With that I would just say to the Lagos family, from the Hoffmann family and probably thousands of others a heartfelt Thank You!  You will be missed greatly by all, but loved by them as well.

Good Night and Good Luck

Hans Henrik Hoffmann July, 4 2013