It’s taken two and a half years, but the last of Steve Ballmer’s old guard — COO Kevin Turner — has finally left Microsoft.
CEO Satya Nadella, who took over the job in February, 2014, now holds all the pieces of Microsoft in the palm of his own hand.
That means he finally got his chance to reorganise one of Microsoft’s most important groups: its massive sales and service organisation, which had been reporting to Turner.
Nadella has taken direct control of Turner’s organisation, the Sales, Marketing and Service Group (SMSG), rather than appointing another COO to fill Turner’s shoes.
The main reason why Turner left Microsoft is that he’s an ambitious guy who wanted another CEO job, one source close to the company told us. He was CEO of Walmart’s Sam’s Club before joining Steve Ballmer at Microsoft 11 years ago. He had worked his way up from a cashier at Walmart to become the Chief Information Officer there before moving to that CEO job.
Turner had been on the short list to take on the CEO job at Microsoft before Nadella was offered the position. Typically, when an exec is passed over the top job, that exec hops on the phone to a headhunter, lines up some other potential roles, and hightails it out of the old company as quickly as possible.
But Turner apparently decided to stick it out for a bit, despite the fact that he’s very different from Nadella: Turner is tough and hard charging (very much like Steve Ballmer) compared to Nadella’s more contemplative and inclusive style.
Last of Ballmer’s brain trust
Both Nadella and Turner were part of Ballmer’s braintrust, along with Kurt DelBene (who was head of Office before leaving in 2013 after a re-org), former CFO Peter Klein (who also left in 2013), and current CFO Amy Hood.
Hood ran the finances of the cash cow Business division under Ballmer. Nadella made Hood his CFO and just gave her more responsibility. She’s now responsible for worldwide licensing and pricing, which was previously one of Turner’s jobs.
So Hood is the last remaining Ballmer old guard and the only one to have secured a place in Nadella’s new braintrust.
Judson Althoff, who Turner hired in 2013, will take over responsibility for Microsoft’s partners. We’ll likely see his public debut soon when he presumably takes over one of Turner’s signature duties: giving the keynote speech at Microsoft’s Worldwide Partner Conference, points out Infoworld’s Woody Leonhard. The WPC takes place next week in Toronto.
Sales pressure is on Nadella
In the past two years, Turner was helping Nadella shift the sales organisation away from its classic roots of selling software, toward selling cloud services. That meant changing salespeople’s incentives. And such changes were met with some resistance, people inside Microsoft told us.
For instance, at first, salespeople earned their commissions and bonuses for getting customers to agree to add cloud services to their broader Microsoft software contracts, whether or not the customers used those services.
Last year, Nadella put the focus on cloud usage and Turner came up with a plan to pay sale people based on usage, or “cloud active users.”
In 2016, under Turner, salespeople had to get their customers to buy more different types of cloud services and to use them all, one person told us.
That’s an important distinction because in the cloud world, customers pay based on usage. The more they use the cloud, the more they pay Microsoft. If they simply buy access to a cloud service, but never use it, Microsoft loses money.
Meanwhile, investors have been keenly aware that Microsoft’s profit margins have been shrinking as it shifts its customers to the cloud. That’s because, at Microsoft’s scale and the way its business has historically been set up, it costs more on an ongoing basis for Microsoft run the data centres to deliver these cloud services than it does to build and ship packages of software every two to three years.
Microsoft has been compensating for that margin pressure by cutting expenses.
In April, Nadella promised Wall Street analysts that he will solve the shrinking margin problem by selling more old-school, high-margin software while also growing cloud services usage and selling more premium-priced cloud services.
So, the future of Microsoft hinges on its salesforce, and now Nadella has more direct control over it.
By the way, none of these changes have much to do with Microsoft’s pending acquisition of LinkedIn — at least not yet, a source close to the company told us.
LinkedIn will operate as a mostly separate unit and the executives who are now in charge of sales, marketing and service have a few months to figure out how to integrate LinkedIn with Microsoft’s salesforce.