Microsoft Had to Reorganize to Revive Business Growth: 10 Reasons Why

by Don Reisinger

Looking at Microsoft’s decisions over the last few years, it’s hard to see how the company hasn’t looked downright confused. The company has acquired several companies, including Yammer and Skype, for sums that many believed were too high. It’s practically begging PC buyers and users to upgrade to Windows 8 despite their issues with the software. And Microsoft has yet to establish itself as a leading band in the field of mobile devices.

Nowhere are Microsoft’s troubles more apparent than in the tablet market. The company was late to react to the tablet’s uptick. What’s worse, Microsoft launched a Surface RT tablet that most customers found useless. By the time the Windows 8 Pro version launched, the Surface was already being ignored. Tablets are drowning the PC market. And Microsoft needs to respond to that more than ever. Luckily, it appears the company understands that.

Windows 8 could go down as one of Microsoft’s biggest blunders. The operating system has a completely new design, which brought with it a learning curve that has pushed corporate users away. Microsoft keeps insisting that customers will eventually come around. But this is the second time since the release of the much-maligned Windows Vista that Microsoft has seen its flagship operating system fail in the marketplace. With a new operating system division, Microsoft will perhaps find a way to address Windows 8’s problems and improve it to the point that more buyers will adopt it.

Microsoft had divisions on top of divisions in its old corporate structure. Everything from CRM software to Office to accessories is part of the company’s product mix. Each division was headed up by someone who was looking to climb the corporate ladder. With its reorganization, Microsoft has streamlined that into a handful of divisions under the control of one leader. Those leaders report to Ballmer. It’s a good move.

It’s impossible to say that Windows Phone is anything other than a loser. The operating system has only been able to gain single-digit market share in the worldwide smartphone market, and Microsoft has been unable to coax vendors to adopt the platform. That needs to be addressed, and it appears it will be under the company’s new direction.

PC vendors are starting to question whether they should invest in Windows nearly as much as they had in the past. In fact, several prominent companies, including Dell, HP and Samsung, are considering or have already jumped into the Google pool with Android and Chrome OS. That’s bad news for Microsoft, and that’s probably why it’s focusing so heavily on devices under the new reorganization.

PC sales are tanking, and that is a major concern for Microsoft. In fact, a recent report from research firm IDC claims PC sales were down 11 percent last quarter, due mainly to the strong uptick in tablet sales. Considering PCs have long been a core component in Microsoft’s success, the company made the smart decision to reorganize now and start focusing on other areas at which it could be successful.

Microsoft’s decision to focus more on hardware is a good one. The company is actually quite capable of producing high-quality hardware. The Surface, despite its software troubles, is a solid device. Microsoft’s Xbox 360 is another nice product, and the Xbox One looks to be even better. Don’t discount Microsoft’s hardware abilities.

One of the biggest complaints shareholders had with Microsoft was that Steve Ballmer didn’t appear to be as in control as he could have been. For years, Ballmer presided over a Microsoft that generated billions of dollars in profits in a world where PC sales were expected to keep growing forever. Those days are gone and Ballmer needs to prove he can make Microsoft a success in new and even unfamiliar markets.

Google has proven to be a major thorn in Microsoft’s side. Google’s Android operating system is dominating the mobile space. It’s dominating the online and advertising worlds, and now it’s encroaching upon Microsoft’s software territory. What’s next? Microsoft needed to dramatically change its structure and its business focus to avoid being taken down by Google and a swarm of more agile mobile and cloud companies.