• Illustration: Latest Organizational Changes

Microsoft has promoted Rick Belluzzo to president and chief operating officer (COO), greatly expanding the role of the relative newcomer and signaling a change in Microsoft's overall organizational structure. Belluzzo will retain his current role leading many of Microsoft's consumer-oriented businesses, will replace current COO Bob Herbold, who is retiring, and will oversee marketing and sales functions as well. The change streamlines the senior level of management by greatly reducing the number of people directly reporting to CEO Steve Ballmer and consolidates nearly all of Microsoft's businesses outside its traditional software development groups under a single person.

Belluzzo Keeps Current Role

A longtime friend of Microsoft CEO Steve Ballmer, Belluzzo joined Microsoft as the head of the Consumer and Commerce Group (CCG) in Sept. 1999 after a brief stint as CEO of Silicon Graphics. Prior to that, Belluzzo spent many years at Hewlett-Packard, where he helped develop the company's highly successful printer business, among other things.

Under Belluzzo's tenure, the CCG, which included MSN and WebTV, among other products, changed its name to the Personal Services and Devices Group (PSDG) and grew to encompass many product lines that had previously been spread throughout the company, such as consumer hardware, mobile device applications and services, and Web-based services (such as Passport). The PSDG also tightened its focus during that timeframe, as product lines like the Expedia travel service, bCentral small business service, and TransPoint bill-paying service were either sold, spun off into separate companies, or moved to other divisions within Microsoft.

Belluzzo will retain control over product lines within the PSDG, including existing and future Web-based services (including MSN); hardware such as the Xbox; TV products such as the Microsoft TV platform and WebTV services; and applications and services for mobile devices.

Belluzzo's New Responsibilities

Belluzzo will also take the place of COO Bob Herbold, overseeing human resources, finance and administration, IT, and other day-to-day operations. Herbold, who at 58 is considerably older than the average Microsoft employee, oversaw tremendous growth in his six-and-a-half years as COO: the company expanded from 15,000 to more than 40,000 employees, and annual revenues skyrocketed from US$4.5 billion to US$26 billion. He is credited with improving Microsoft's brand recognition and lowering operating costs by outsourcing certain functions, such as manufacturing and administrative positions. Herbold will stay with the company in a part-time capacity.

In addition to maintaining his old role and taking Herbold's position, Belluzzo will also oversee sales, marketing, and strategic investments. Orlando Ayala, group vice president of the Worldwide Sales, OEM, Marketing, and Services Group, will now report directly to Belluzzo, as will the new senior vice president of business development, Richard Emerson (both men had previously reported directly to Ballmer).

For all the organizational changes noted in the announcement, see "Latest Organizational Changes". These changes are also reflected in the online version of the Directions on Microsoft Org Chart.

Streamlining the Business

The organizational change was probably spurred primarily by Herbold's decision to retire and does not reflect a major shift in the company's strategy, although Belluzzo's expanded role may wind up increasing the visibility of and resources allotted to certain product lines in the PSDG. Nonetheless, the new organization will help streamline the business at the executive level. Previously, Ballmer had more than 10 direct reports, an impressive number even for somebody with the near-limitless energy the CEO is purported to possess. Now Ballmer can focus his attention on three individuals, each of whom has responsibility over two or three of the seven "core businesses" Ballmer mentioned in his all-company memo in Dec. 2000: Jim Allchin will oversee Windows, enterprise servers, and the .NET platform; Jeff Raikes will oversee productivity and business applications and services; and Belluzzo will oversee MSN and non-PC devices, along with all operational functions.

Although Belluzzo has taken the "president" title from Ballmer, the presidency of the company has seldom had a clear role at Microsoft. (At one time, the "office of the president" was shared among three individuals.) In this case, it is significant in that it gives Belluzzo a clear mandate as third in command (after Ballmer and Bill Gates), a position which has seldom been so clearly delineated. Nonetheless, Belluzzo's presidency is more limited than the title would suggest, as two important group vice presidents, Allchin and Raikes, will still report directly to Ballmer.