Raikes Steps Aside

Raikes departure will have a huge impact on Microsoft as it completes its 2008 fiscal year on June 30. His division is one of two responsible for nearly all Microsoft's profits.

On one hand, Raikes' exit is timely, as it comes following the highly successful launch of Office 2007. On the other hand, Microsoft has placed big bets on Business division expansion into business intelligence, collaboration and unified communications. Many of the division's products depend on Windows Server 2008, which won't launch until end of next month. Microsoft also will release hosted versions of Exchange Server, among other products, over the next few months. Raikes' departure comes at a critical juncture for Microsoft's larger enterprise strategy.

Raikes won't immediately leave Microsoft. There will be a transition period through September, as his replacement, Stephen Elop, assumes more of Raikes' responsibilities. Elop, who is the COO of Juniper Networks, is a surprise choice. He's a Microsoft outsider, promoted to only one of three president positions.

"I presume that with [Bill Gates'] departure, Jeff's using this as the opportunity to go off as well," said Michael Gartenberg, a JupiterResearch research director. "While the cemeteries are full of folks who couldn't be replaced, this is a big hole for Microsoft and it's a little odd it's not being filled internally. This will leave a big gap in the orb and some pretty hard footsteps for Stephen to follow."

The choice of Elop is in some ways revealing. He is former Macromedia CEO, and he remained with Adobe in the top field operations position for a year following the merger. I've been saying for years that Adobe and Microsoft are on a collision course in the enterprise. Biggest competition comes from Microsoft's Business division. It's no coincidence, methinks, that Raikes' replacement comes from Adobe/Macromedia. The Elop choice foreshadows where Microsoft is going in the enterprise, and it's to places where Adobe also competes.

"Raikes has been a real loyal soldier for Microsoft," said Paul DeGroot, Directions on Microsoft's lead analyst for Sales, Support and Desktop Strategies. "He's often been credited for the idea of bundling Word, Excel and PowerPoint together as Office. He did that when a lot of people thought it was madness. Microsoft learned from that. Putting a bunch of stuff in a bundle can be very, very powerful."

Raikes isn't the only Microsoft executive departure. Two others are worth noting: Bruce Jaffe, corporate vice president of corporate development, and Charles Fitzgerald, general manager of platform strategies. Fitzgerald has been involved in platform strategy related to Windows Live. He also leaves at an unfortunate time for Microsoft.

All three men are long-time Microsoft employees—seasoned executives with, combined, nearly 70 years of experience at the company. Leadership at this level leaves behind a vacuum when gone. But nature abhors a vacuum. There is opportunity for Microsoft to put in place younger executives that came of leadership age during a different time and perhaps reflect a different corporate culture.

In the 1980s and 1990s, Microsoft groups fiercely competed with each other to get new products to market. But in the 2000s, Microsoft corporate culture encourages many more incubation projects and puts greater emphasis on customer satisfaction. Demands are no less, just the emphasis.

A little house cleaning at the top should be good for Microsoft, its customers and partners. It's the timing that's problematic. Or, maybe there never is a good time for someone at Raikes' level to step aside.

What about the other two presidents? My predictions: Entertainment and Devices president Robbie Bach won't be going anywhere soon. Kevin Johnson, Platform and Services president, appears firmly footed, but I'm not as confident about him as Bach. Bach's division is on the way up, up, up. Microsoft is building a new campus for the Entertainment and Devices division, which, as I understand, is flooded with applications within the company.

For now the focus will be on Raikes and his legacy. "Raikes was one of the few executives that crossed the boundary between the product groups and sales and marketing," DeGroot said. "He had the credentials to be taken seriously by the whole company."

Still, the question remains: Why would Raikes go now?

Microsoft is hard on people. It's a company with really high expectations for people," DeGroot said. "It's very demanding for time, travel and stuff. That Raikes lasted as long as he did is remarkable."

Gartenberg took a related but different view. "He's worth close to half a billion if not more. It's hard for folks like you and me to understand."