Will Microsoft’s Executive Shuffle Scare Yahoo?
If there was apprehension at Yahoo already about the prospect of a takeover by Microsoft, the fear will no doubt increase as those in Sunnyvale study the details of Microsoft’s reorganization announced Thursday.
There is a consensus at Yahoo that many of Microsoft’s ills can be traced to near paralysis that stemmed from its complex matrixed organization, excessive bureaucracy, and war between competing internal units.
Microsoft has long thrived with a bifurcated organization—half the company devoted to engineering, the other half to sales and marketing. This worked well enough in a software world where the engineers would hand a gold master CD of a program every year or two to the sales side which would take it to market.
The Internet, where product cycles are months, sometimes weeks, generally requires much more tight coordination between functions.
Microsoft is positioning many of its online sites as Internet extensions of its software products. That led to the renaming, for example, of its Hotmail service, once the market leader, as “Windows Live Hotmail,” a brand that resonates with few outside of Redmond.
Microsoft looked like it was trying to overcome some of these problems and create more accountability two years ago when it hired Steve Berkowitz, the former head of Ask Jeeves, to be the senior vice president of what it called the online services group. But Mr. Berkowitz never had control of the engineering teams for the products he was charged with running, which created friction within Microsoft, according to Internet company executives.
Mr. Berkowitz will leave Microsoft this summer after a short transition.
The online business will now be split between four executives, who all work for Kevin Johnson, a former I.B.M sales executive. Three of those four make up a group charged with the overall strategy and marketing for Microsoft’s Internet services.
Marketing and product management for Microsoft’s online operations will be handled by Bill Veghte, who also performs that role for Windows Vista and its successors. (His unit is called the online services & windows business group.)
Satya Nadella, a longtime engineer, now will run what is called the search, portals and advertising group. Mostly, this will look after the engineering for Microsoft’s Web search, advertising systems and related systems. Awkwardly, he will also have responsibility for the programming of the MSN portal, which is run by Joanne Bradford.
Mr. Nadella doesn’t even control all the technology related to the Internet operations. Steven Sinofsky, runs engineering for both user interface of Windows and the Windows Live services like e-mail and instant messaging. Mr. Sinofsky, however, is not part of the three-person group overseeing online strategy.
The third member of the Microsoft online triumvirate is Brian McAndrews, the former chief executive of aQuantive, the advertising company Microsoft bought last year. His area is dubbed the advertiser and publisher solutions group, includes both engineering and marketing for the company’s advertising systems.
A Microsoft spokesman said its too early to say whether this structure is what the company will use if it succeeds in buying Yahoo.
For Microsoft to get its $45 billion worth out of Yahoo and create a real challenge to Google, it will need to have a much more nimble structure, with clear lines of responsibility, and an unambiguous mandate to win online without any regard for the effect on the Windows franchise.