Microsoft, like other software makers, has been shocked by the increasing number of applications available on the Internet and not on the PC, many of which have been pioneered by Google and Yahoo! These include better and faster versions of Internet applications such as email, advanced specialized search engines, Internet phone services, imaging searching, and mapping such as Google's Earth. Rapid innovation is taking place in these and other areas, and the danger for Microsoft is that these online applications will make its vital Windows PC platform less useful and perhaps obsolete. If, in the future, people begin to use new kinds of online word processing and storage applications, then the only important PC software application will become operating system software. This would cause Microsoft's revenues and profits to plummet. So a major push is on at Microsoft to find ways to make its new software offerings work seamlessly with developing Internet-based service applications and its Windows plat- form so customers will remain loyal to its PC software.

To achieve this, Microsoft announced a major redesign of its organizational structure to focus on three major software and service products areas: Platform Products and Services, Business, and Entertainment & Services, each of which will be managed by its own new top management team. In doing this, Microsoft has created a new level in its hierarchy and has decentralized major decision-making responsibility to these managers. Inside each division, IT specialists will continue to work in small project teams.

Microsoft claims that the new structure will not only speed technological innovation in each division, but it will also create many synergies between the productive divisions and foster collaboration and so improve product development across the organization. IN essence, Microsoft is trying to make its structure more organic so it can better compete with nimble rivals like Google. As Microsoft's CEO Steve Ballmer commented, "Our goal in making these changes is to enable Microsoft to achieve greater agility in managing the incredible growth ahead and executing our software-based services strategy." Some analysts wonder, however, if adding a new level to the hierarchy will only create a new layer of bureaucracy that will further slowdown decision making and allow Google to take an even greater lead in Internet services in the decade ahead.

Discussion Questions:

1. Which of the following technology best characterizes the way Microsoft operates (a) craftswork, (b) engineering production, or (c) intensive technology?
2. In what ways does Microsoft hope its new way of organizing will help it to continually improve its competences and technology?