Tech Job Watch Jan 13 2011

Microsoft Server Chief's Ouster May Show Pressure on Ballmer

By john shinal

How an executive departs a company can be as telling as the departure itself.

To some observers, Microsoft CEO Steve Ballmer's dismissal of Robert Muglia as head of the company's server software unit this week suggests Ballmer is feeling the heat as he tries to refocus the software giant on new markets.

Typically, the notice announcing the departure of a senior executive who's served a company for more than two decades, as Muglia had at Microsoft, would include praises for the person's service and a mention of the executive's desire to pursue "personal interests."

Yet the language that Ballmer reportedly used in a letter to inform Microsoft staff about Muglia's departure called for a change of direction at the division he ran.

"When I see something like that, I think the person who is doing the firing is under a lot of pressure," said Gren Millard, a senior partner with the executive recruiting firm Korn Ferry International in Washington D.C. "It looks reactive," said Millard, who recruits senior-level executives into software companies but said he hasn't done work for Microsoft.

Muglia is the latest in a growing list of senior Microsoft execs who've departed. Ray Ozzie, chief software architect, Stephen Elop, the Office group's president, Robbie Bach, president of Microsoft's entertainment division, and Chris Liddell, the company's chief financial officer, have all left in just over a year.

The nature of Muglia's exit is all the more telling given that the Server and Tools unit he ran was among Microsoft's most-profitable businesses.

While many of Microsoft's largest corporate clients aren't yet ready to move their systems and applications onto remotely-hosted servers, many small and mid-sized businesses are doing just that, according to one analyst.

"Smaller, fast-growing customers -- that's the market segement Microsoft is at risk of losing to the cloud," said Al Gillen, vice president of the system software practice at Framingham, Mass.-based market research firm IDC.

Gillen said that he was also surprised at Muglia's ouster because he had been in charge of formulating Microsoft's cloud product strategy and communicating it to the company's base of large corporate customers.

"Even if (those customers) aren't ready to switch right now, they need a clear road map that gets them from file servers to the cloud. Bob was doing that," Gillen said.

Even so, however, Microsoft's cloud product – dubbed Azure – still lacks some important features and is quite likely generating significant losses for the company, according to Gillen.

"There's no way they're making any money from Azure right now," Gillen said. "It's a long-term investment that's going to take a long time to pay off."

Write to John Shinal



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