By Rob Helm [bio]
Posted: Mar. 24, 2003

The following is the full text of an article published by Directions on Microsoft, an independent research firm focused exclusively on Microsoft strategy & technology. Each month we make one or more key articles available to non-subscribers.

Orlando Ayala is leaving his post as group vice president of Microsoft's worldwide sales organization to oversee sales to small and mid-sized businesses and expand the Microsoft Business Solutions channel to include more Microsoft partners. The newly available Mar. 2003 Directions on Microsoft OrgChart (see sample of a past OrgChart) also shows digital media chief Will Poole leading the Windows client business, and Home and Entertainment chief Robbie Bach overseeing the company's interactive TV efforts, suggesting that consumers and entertainment will be a major focus of the upcoming Windows "Longhorn" release and of the company's strategy in the coming year.

This article summarizes the changes to Microsoft's organization at the vice-presidential level and higher since the publication of the Nov. 2002 OrgChart. The Mar. 2003 OrgChart highlights most of these changes, except for Ayala's new position and related organizational changes, which do not become official until July 1, 2003.

Ayala to Focus on Smaller Businesses

Orlando Ayala, a 12-year Microsoft veteran, is stepping down after three years as group vice president of the Worldwide Sales, OEM, Marketing, and Services Group to lead a new Small and Mid-Market Solutions and Partners (SMS&P) Group targeting businesses with up to US$800 million in annual revenue.

Ayala will be replaced by Kevin Johnson, who is being promoted to group vice president; Johnson is currently the senior vice president in charge of sales in the Americas.

Ayala's change becomes official on July 1, 2003, but Ayala is already working in his new capacity. The move will help Microsoft consolidate sales and marketing initiatives for the Microsoft Business Solutions products—the accounting and business management software Microsoft acquired from Great Plains and Navision—with other Microsoft products. This is an important task, as Microsoft expects Business Solutions to contribute US$10 billion in annual revenues by 2010 (up from less than US$1 billion a year today).

To reach this goal, Ayala will oversee the expansion of the Business Solutions reseller channel beyond today's approximately 6,000 partners, possibly to include some Microsoft Certified Partners. Ayala's group will also be charged with evangelizing the Microsoft Business Platform, a set of technologies and tools for building business applications, to systems integrators and vertical ISVs.

Instead of reporting to CEO Steve Ballmer as he does today, Ayala will report to Business and Productivity Group Vice President Jeff Raikes, and he will work alongside Business Solutions Senior Vice President Doug Burgum, who also reports to Raikes. Burgum will continue to oversee development and product planning for Business Solutions, including the crucial task of rationalizing the Business Solutions line, which is largely made up of products from Great Plains, Navision, and other acquisitions, as well as better integrating them with other Microsoft products.

Reporting to Ayala in the SMS&P Group will beLindsay Sparks, who will oversee sales strategy for mid-size businesses, and Allison Watson, who oversees Microsoft's relationship with certain partners, including Certified Partners and systems integrators. Don Nelson, who is in charge of the current Business Solutions partner channel and currently reports to Burgum, will now report to Watson.

Other Sales Force Changes

Microsoft's Asian sales force has also been reorganized to better focus on Japan. The Asia Pacific region has been split: Michael Rawding, formerly vice president of the region, will now focus exclusively on Japan, with President and General Manager Shinichi Ata reporting to him. Sanjay Mirchandani has been promoted to regional vice president of Asia Pacific, but that region now includes only South Asia (where Mirchandani was regional director), Australia, New Zealand, and Korea. Chris Atkinson, vice president of sales and marketing for the Asia Pacific, will report to Mirchandani. Alex Huang, regional director for Greater China, will report to Ayala's replacement.

Division of the region likely reflects the continued challenges the company faces there. Sales in Asia Pacific have been noticeably flat, growing 7% from Dec. 2000 to Dec. 2002, compared with growth of 44% in the Americas and 31% in EMEA over the same period.

Elsewhere in the sales force, Eugenio Beaufrand has been named vice president of Latin America, replacing Mauricio Santillan Razo, whose new role with the company was not disclosed. Paul Houghton replaces Beaufrand as vice president of the South region, which encompasses Texas and the U.S. southeastern states.

Homes, Communication Major Windows Focus

Will Poole has been promoted to senior vice president and will have profit-and-loss responsibility for the Windows Client business, a role formerly held by Group Vice President Jim Allchin. Poole led the company's digital media division, which develops the company's Windows Media audio/video technologies and products, and which was responsible for many of the new digital media features of Windows XP. Instead of reporting to Allchin as before, Poole will report to Senior Vice President Brian Valentine, who remains in charge of the company's overall Windows business (client and server).

Poole's promotion comes as the wave of business upgrades from Windows 95, 98, and Me is drawing to a close, and with it the major source of growth in the Windows Client business. New digital media features and entertainment-oriented versions of Windows (such as Windows Media Center) that spur PC upgrades could thus become the main source of future growth. Digital media will also play an important role in the company's efforts to make PCs an important endpoint for voice and video communication in both homes and businesses. Poole's primary challenge will be to make Windows Longhorn a compelling platform for these uses, while continuing to improve PC security and manageability in corporations.

One key group for pursuing consumers will be the Extended Platforms Division, headed by Vice President Rick Thompson, who reports to Poole. Formerly called the Windows eHome Division, Thompson's unit will drive creation of new versions of Windows, such as the Media Center edition which provides entertainment-oriented features (such as video recording). Alex Loeb, vice president for Tablet PC, and Bill Mitchell, vice president in charge of the company's Smart Personal Objects Technology (SPOT) project, will report to Thompson, as will General Manager Tom Phillips and his Windows Hardware Experience Group (which manages hardware evangelism and the Windows device driver platform). Thompson is a returning Microsoft veteran who oversaw the company's mouse and other hardware products before leaving the company in 2000. He replaces Mike Toutonghi, who is on a three-month leave and plans to return to Microsoft in a new role.

Chris Jones, vice president of the Windows Client unit, will also now report to Poole rather than Valentine. Poole also retains all of his digital media subordinates with one exception: John Manferdelli and his Trusted Platforms Technologies Group, which oversees the newly announced Windows Rights Management Services for Windows Server 2003 and is developing the company's digital rights management (DRM) platforms, now reports to Vice President Mike Nash of the Security Business unit. (See "Rights Management Comes to the Enterprise".)

Finally, Poole will get a Windows Client "chief financial officer," yet to be named. The new position illustrates a general trend: administrative support tasks such as finance, human resources, and IT are gradually being distributed to the company's seven key business units, giving the heads of those units greater autonomy and clearer oversight over these cost centers.

TV Moved to Home and Entertainment

Vice President Moshe Lichtman's TV Division has been moved into the Home and Entertainment Division, headed by Senior Vice President Robbie Bach. Lichtman formerly reported directly to Ballmer.

The strategy of Lichtman's division will increasingly merge with that of Bach's Xbox, the game console that the company hopes will emerge as a lucrative home entertainment hub, possibly encompassing a variety of functions, such as storing and playing back audio and video. The move continues a trend begun with the Jan. 2002 reorganization of the TV Division, in which many of the division's hardware developers were moved to the Xbox team.

Bach, like Poole, also gets a chief financial officer, Bryan Lee, who has been promoted to vice president and will oversee finance as well as business development and planning for the division.

Bach also has a new international sales team to take on the challenge of bringing the Xbox to living rooms in Japan and the EMEA region. Former Sega America president Peter Moore has been named vice president of retail sales and marketing for those regions. Reporting to Moore will be Eduardo Rosini, who replaces the retiring Sandy Duncan as Home and Entertainment regional vice president for EMEA. Moore's principal challenge will be in Japan, however, where sales of Xbox consoles have been slow compared with the competing GameCube and PlayStation 2.

Finally, Lisa Brummel, vice president of the Home Products Division that produces consumer software, such as Encarta, and hardware, such as mice, now reports directly to Bach. Brummel formerly reported to Mitch Koch, vice president of worldwide retail sales for Bach's division.

New Collaboration Group and Other Changes

Other notable changes include the following:

Preben Damgaard, vice president of the Business Solutions Division for the EMEA region, will leave the company effective June 2003. Damgaard was formerly co-CEO of Navision, a European business software vendor that Microsoft acquired in July 2002.

Anoop Gupta has been named vice president of the new Real Time Collaboration Group, reporting to Jeff Raikes. Gupta will lead all of the company's efforts in real-time communications, such as instant messaging, voice, and video, including development of the Windows Messenger client and the "Greenwich" real-time communications service for Windows Server 2003.

Rex Smith has retired as vice president of MSN Operations, where he oversaw all MSN data center operations and infrastructure. A replacement has not yet been named.

Richard Purcell has resigned as Microsoft's chief privacy officer. Scott Charney, the company's chief security officer, will take Purcell's duties until a replacement is found.

Resources

For background on Microsoft Business Solutions, see "Business Solutions Group Begins to Consolidate" on page 9 of the Nov. 2002 Update.

For an overview of the Microsoft Business Platform, see "Business Platform to Draw ISVs to .NET" on page 12 of the Jan. 2003 Update.

The Windows Client business and Microsoft's other six strategic businesses are summarized in "Seven Core Businesses Explained" on page 28 of the Sept. 2002 Update.

The future of Xbox as a home entertainment hub and its role in the TV strategy were outlined in "DVR Lives on After UltimateTV" on page 25 of the Aug. 2002 Update and "TV Division Changes Signal New Realism About Market" on page 18 of the Mar. 2002 Update.

The Real-Time Collaboration Group's formation and mission are discussed in "Acquisition Moves Collaboration Strategy Forward" on page 22 of the Mar. 2003 Update.