Microsoft reacts to the Google menace
Published: 21 Sep 2005 16:20 BST
Microsoft's just-announced reorganisation gives hosted-software services a starring role, providing a clear picture of the company's plan to stimulate revenue growth.
In an effort to speed up decision making, Microsoft said Tuesday, the company will restructure into three divisions led by individual presidents. Significantly, the reorganisation signals an accelerated commitment to hosted-software services.
In a memo to employees, company chief executive Steve Ballmer said the goal of the changes is to "achieve greater agility in managing the incredible growth ahead and executing our software-based services strategy".
To make hosted services a more central part of the company, Microsoft has folded its MSN Web portal business into its platform product development group. Ballmer has also tasked chief technology officer Ray Ozzie with expanding software services throughout the company.
Microsoft's decision to combine MSN with its platform products group is "a Google reaction", said Frank Gillett, an analyst at Forrester Research. "Microsoft is certainly alerted to the impact Google is having on what Microsoft thinks is their domain."
Google has an expanding roster of Web services, which are not reliant on having Microsoft Windows on a user's desktop PC, he noted. The Sidebar feature on Google's recently introduced Google Desktop Search, for example, has ties to Google-delivered information services.
Indeed, Microsoft's bet on software services reflects the growing interest in Web-delivered services and the need to find new avenues to deliver its goods, said analysts. The company is facing a slowing pace of contract renewals and upgrades for its traditional desktop software, they said.
"It's pretty clear Microsoft is seeing some heat from this emerging market of software on demand," said Israel Hernandez, an analyst with Lehman Brothers. "Microsoft has not put people and processes in place to pursue that."
At Microsoft's financial analysts meeting in July, and at a partner conference last month, Ballmer outlined the company's growing investment in managed services, such as running a company's desktop PCs.
And last week at Microsoft's Professional Developers Conference, chairman Bill Gates provided more insight into the company's thinking with services.
Long term, Gates said, the company intends to add...
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