Microsoft has put its top sales executive into a fledging new division on Thursday in a move that analysts read as a sign of a broader management changes ahead at the world's largest software maker
Orlando Ayala, Microsoft's No. 3 executive and group vice president of sales, will head a new group that will sell software to small to medium-sized businesses, a market that Microsoft believes will grow to $10bn in sales by 2010.
"The small and mid-market is a vastly underserved customer segment with huge growth opportunities," Microsoft chief executive Steve Ballmer said in a memo sent to employees on Wednesday, "But there is still a lot of work we need to do in this space."
Ayala will now report to another group vice president, Jeff Raikes, who heads the Microsoft segment that includes the Office suite of products, instead of reporting directly to Ballmer. Ayala said the opportunity to head a crucial division was not one he could pass up.
"This is what I wanted to do," Ayala told Reuters. "In my current job it's a very horizontal position. This is a chance to go deep into a division ... I can't be more proud than to be picked as the one to take the company into a new era."
Ayala said he will remain a member of Microsoft's core business leadership team, which charts the Redmond, Washington-based company's strategy.
Given that Ayala is one of Ballmer's most trusted lieutenants, Matt Rosoff, analyst at independent researcher Directions on Microsoft, said that Ayala's move was unlikely to be seen as a demotion.
"He's seen as a can-do guy and they have a high-priority project that they have to execute," Rosoff said.
Ayala will head a new global sales and marketing group targeting small and medium-sized businesses called "Small and Mid-Market Solutions & Partners" that will be backed by a $2bn investment.
Microsoft has already spent more than $2.5bn buying smaller software companies Great Plains and Navision that specialize in small- and mid-sized business software.
Smaller companies are, increasingly, using computers to track everything from sales contacts and customer information to payroll and accounting, but the market is highly fragmented and other software heavyweights, such as Oracle and Siebel Systems, are also targeting the space.
Shake-up at the top
Since replacing co-founder and Chairman Bill Gates as chief executive officer, Ballmer has been tinkering with Microsoft's management structure for the last three years.
Microsoft has yet to name a chief operating officer, a position that became vacant nearly a year ago with the departure of Rick Belluzzo, who left to head Quantum.
Analysts have said that too many executives were reporting directly to Ballmer, creating problems with retaining a team of senior executives just below the CEO.
Asked if he would be replaced by another top sales executive, Ayala declined to comment, saying the current structure of Microsoft's stand-alone sales group could be under review.
"It is really Steve's domain," Ayala said, "He is saying that he will think about strategy along the segment lines."
In the middle of 2002, Microsoft started to report revenues according to seven different product segments.
"If they start to move the sales organization into the product groups, that already reduces the number of direct reports to Ballmer," Rosoff said.
Ballmer said Doug Burgum, head of the Business Solutions group that creates software for small- and mid-sized businesses, would remain in his current role and continue to report to Jeff Raikes.
"Microsoft is recognising the size of the opportunity to have someone of Orlando's experience and stature to come over to help drive this effort," Burgum told Reuters.