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Microsoft CEO Steve Ballmer has unveiled plans for a massive restructuring at Redmond. From today, the company’s product groups will be dissolved and resurrected as slimmed-down devices and services teams ready to take on Apple, Amazon, Google and others.

Microsoft’s chief executive today announced the death of the mighty five Microsoft business units: Windows; Server and Tools; Microsoft Business Division; Entertainment and Devices; and Online Services.

Ballmer has shuffled and regrouped Microsoft into four new divisions: Operating Systems Engineering; Devices and Studios; Applications and Services; and Cloud and Enterprise Engineering.

All work is now aligned around engineering rather than product, according to the Ballmer party line, with the specific focus on four particular engineering efforts: operating systems, applications, cloud and devices.

This means the break-up of the Windows group and merger with elements of the entertainment and devices team who worked on Windows Phone and Xbox.

“We will pull together disparate engineering efforts today into a coherent set of high-value activities,” Ballmer said in a statement on his moving of the corporate chess pieces. “We will plan across the company, so we can better deliver compelling integrated devices and services.”

He promised technologies will be consolidated “coherently” into the new groups “pulling together some things that have been spread out in our current BG [business group] structure like cloud infrastructure, operating systems, mail and identity.”

Heading the groups are the same faces that ran the old units.

Operating Systems and Engineering is responsible for all of Microsoft’s work on operating systems, spanning PC, server, mobile and “core” cloud services.

That group is headed by former Windows Phone leading man Terry Myerson, who is now executive vice president of operating systems.

Responsibility for building Microsoft’s hardware and for working with PC and device partners falls to Julie Larson-Green at Devices and Studios Engineering. She’s also assuming control of Microsoft’s games, music and video "experiences".

Larson-Green was temporarily in charge of the Windows Group engineering and development following the sudden departure of group vice president Steven Sinofsky in November last year. Her Windows group colleague Tami Reller, who ran marketing and finance, is now EVP of Microsoft marketing.

A new applications and services engineering group is headed by the former head of the loss-making Online Business business group, Qi Lu. He will “lead broad” applications and services “in productivity and communications” - which sounds like Office 365.

Reporting to Lu will be the one product group chief whose unit actually remains intact: Dynamics chief Kirill Tatarinov will continue to lead Microsoft’s ERP and CRM software division.

Also, it seems Lu will be leading Skype, the failed VoIP web telco bought by Microsoft for $8.5bn in 2011. Tony Bates, the Skype CEO who had become the president of Microsoft’s ring-fenced Skype division following the deal, is now EVP of a Business Development and Evangelism Group. Those in the old business groups working on business development and corporate strategy report to Bates.

The old server and tools product group gets more of a rebrand than a reorg. The vice president of S&T Satya Nadella is now EVP of Cloud and Enterprise Engineering, in charge of development of back-end technologies such as data centre and database – which is what he was already doing at S&T.

Ballmer announced the rumoured changes on day 11 of Microsoft’s fiscal year. Details are still being worked out and won’t be finished until the end of the calendar year, he said, to minimise disruption on existing product work such as Windows 8.1, Xbox One and Windows Phone.

The ascendancy of engineering over product means the President of Microsoft’s Office Division and 20-year Microsoft veteran Kurt DelBene is retiring. In the announcement, the CEO said DelBene was a "special person" and that he would "truly miss him". ®

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