By Rob Helm [bio]
Posted: Jan. 21, 2008

The following is the full text of an article published by Directions on Microsoft, an independent research firm focused exclusively on Microsoft strategy & technology. More samples of our content, as well as a list of upcoming articles and reports are also available.

Jeff Raikes, the mastermind of Microsoft's largest and second-most-profitable business, has announced his imminent retirement. The move could bring strategic changes to a unit that drives a great deal of business for resellers and service partners, and that competes fiercely with enterprise software vendors. Elsewhere in the organization, key sales and operations positions are currently vacant, and some longtime Windows engineers have taken their leave.

Summarized here are changes to the Directions on Microsoft OrgChart at the corporate vice-presidential level and above since Oct. 2007. For further details, see the most recent online OrgChart.

Macromedia Ex-CEO to Replace Raikes

One of Microsoft's executive leaders has announced plans to leave the company in Sept. 2008 and hand most of his duties over to the former CEO of a key Microsoft competitor.

Jeff Raikes has announced plans to retire from his post as president of Microsoft's Business Division, the company's largest unit by revenue. Hired in 1981 from Apple, Raikes was a key influence in the development of the Office application suite before moving to lead Microsoft's worldwide sales force in 1992. In 2000, he returned to Office and related applications in what became the Information Worker division. There he oversaw a steady stream of releases and stronger antipiracy efforts that kept the Office suite business growing and also diversified the division by building the SharePoint line (credited with US$800 million in revenue for the company's fiscal year 2007), building up the Project and Visio businesses (which crossed US$1 billion in combined revenue in 2006), and spearheading the company's push into unified communications (which Raikes predicted would be a US$45 billion industry by 2009).

Given his high-ranking position and his history with the company, Raikes was the most likely successor to CEO Steve Ballmer. His planned departure raises the question of which executive now takes that spot, if any; Raikes himself told the Seattle Times of Ballmer, "He wants to be CEO for many, many years—maybe 10 years or more."

Stephen Elop has been hired to succeed Raikes as president of the Business Division. Elop was most recently Chief Operating Officer of Juniper Networks, but before that he was a longtime executive at Macromedia, leading that company as CEO through its merger with Adobe before leaving the combined company in June 2006.

Elop will have to deal with some important unfinished business at the division. A key challenge will be managing Microsoft Business Solutions, which produces Microsoft's Dynamics enterprise resource planning and customer relationship management products. Raikes had hoped Business Solutions would reach US$10 billion in annual revenue by 2010, but it has so far reached only US$1 billion (as of the end of the 2007 fiscal year) and it has rarely been profitable. Elop's experience at Macromedia, a firm with a large Web developer following, could help deal with two other challenges: establishing an Office development platform to replace the successful but technically obsolete Visual Basic for Applications, and beating back Web-based competitors to Office, such as Google Apps.

Bob Muglia, senior vice-president of the Server and Tools Division, will report directly to CEO Steve Ballmer; he formerly reported to Raikes. Muglia's division develops Windows Server, SQL Server, Visual Studio, and a variety of other server applications. Exchange, Communications Server, Project Server, and SharePoint Server will remain in the Business Division.

OEM Sales Spot Vacant, New CIO Arrives

Several notable changes have occurred at the top of Microsoft's sales, marketing, and operations group, led by Chief Operating Officer Kevin Turner.

Scott Di Valerio left his post as corporate vice president, OEM Sales and Marketing in Oct. 2007. He now leads sales in the Americas for Lenovo, a major PC manufacturer (which also employs former Microsoft head of Human Resources Ken DiPietro). Di Valerio's former position at Microsoft is currently vacant.

Tony Scott has been named corporate vice president and chief information officer (CIO). He replaces Stuart Scott (no relation), who left the company in Oct. 2007 following "an investigation into violation of company policies," according to Microsoft. Tony Scott most recently served as CIO of Disney and before that was chief technology officer at General Motors, where among other things he led an enterprise architecture initiative to rationalize the company's internal systems.

Robert Youngjohns has been named corporate vice president, North American Sales and Marketing. Youngjohns comes to Microsoft from Callidus Software, a sales management software vendor, but he previously led sales at Sun Microsystems and saw long service at that company and at IBM. Youngjohns fills a position that had been vacant since early 2007, when Bill Veghte moved to lead the Windows Business Group.

Old Guard Leaving Windows Core

Several departures have occurred in the groups that develop the Windows kernel and network stack, led by Senior Vice President Jon DeVaan. Together, these departures mark the end of the Windows "old guard" that led Windows development from Windows NT 4.0 through Windows Vista.

Jawad Khaki has left his position as corporate vice president, Windows Hardware Ecosystem, where he was responsible for hardware support in Windows. Khaki moved to that position in 2006, shortly before the release of Windows Vista, having formerly led Windows networking since Windows 95. Khaki's responsibilities will probably move to other groups in DeVaan's division. Khaki himself has taken a leave and currently plans to return to Microsoft in another role.

Robert Short has decided not to return to Microsoft after a one-year sabbatical. Short was formerly corporate vice president, Windows Core, a position now occupied by Fathi. Short was part of a group of engineers hired from Digital Equipment Corporation, including Dave Cutler and David Thompson, that drove development of Windows NT 4.0 and Windows 2000. That group has moved on: Cutler now reports to Ray Ozzie as a senior technical fellow, while Thompson leads Microsoft's efforts to develop hosted versions of business applications (such as Exchange) in his role as corporate vice president, Business Online Services Group.

New Platforms CFO, TV Efforts Consolidated

Two changes of note have occurred in the Platforms and Services Division under President Kevin Johnson and the Entertainment and Devices Division under Robbie Bach.

Tami Reller has taken the job of chief financial officer, Platforms and Services Division, reporting directly to Kevin Johnson. Reller replaces Christa Davies, who left Microsoft for Aon Corporation in Oct. 2007. Reller is a former chief financial officer of Great Plains, the business application vendor that Microsoft acquired in 2001. She also ran the Microsoft Business Solutions group's sales and marketing and headed the entire group on an interim basis between the departure of Satya Nadella in March 2007 and his replacement by systems management executive Kirill Tatarinov three months later.

Joe Belfiore, corporate vice president, eHome and Media Center group, now reports to Enrique Rodriguez, corporate vice president of the Connected TV group (formerly the Microsoft TV group). Belfiore formerly reported directly to Robbie Bach. The change suggests that the product team in charge of Microsoft's Mediaroom IPTV platform for telecommunications companies will have more influence over Windows-based TV products and services. One likely change: future versions of the Media Center interface might add support for Mediaroom, so a PC could serve as a Mediaroom receiver in place of a dedicated set-top box; Microsoft has already added Mediaroom support to the Xbox 360 game console.