Amid Microsoft's Management Turnover, Change Is In The AirAmid Microsoft's Management Turnover, Change Is In The Air

Not long ago, Steve Ballmer posed a rhetorical question--one many people are asking: Who will replace Bill Gates?

"Find me someone who's the second-richest man in the world and who can claim to have started the computer software industry," Ballmer quipped.

Ballmer's point: No one can fill Gates' shoes, so stop the hand-wringing about his pending "retirement" and get on with business. Gates plans to stop working full time in July to focus on philanthropy, though he will continue as chairman.

In fact, Microsoft's co-founder is just one of several veterans who are on the way out or who have recently departed. Earlier this month, Jeff Raikes, president of Microsoft's business division, said he would be leaving in September after 27 years with the company. General manager of platform strategy Charles Fitzgerald and M&A chief Bruce Jaffe recently headed for the exit. Last year, longtime Windows leaders Jim Allchin and Brian Valentine waved bye-bye.

That's a lot of institutional memory to lose, and it remains to be seen just how Microsoft will adjust. Without Fitzgerald, for example, who will serve as a reality check? "He was the only guy that was both connected and would raise his hand and say, 'This is stupid. We can't do this,'" says analyst Rob Enderle. "With Microsoft, there's a lot of high-flying visible folks who, for the most part, have made their career on saying yes [and] who suddenly have to make the decisions."

Looked at another way: New decision-makers will emerge--they must--and that's not necessarily a bad thing for a 30-year-old software company that's being challenged by younger, nimbler rivals, not the least of which is Google. Microsoft's hiring new talent just as fast as it's losing it.

Stephen Elop, the former chief operating officer of Juniper Networks and CEO of Macromedia, jumped to Microsoft this month to lead the business division, which is responsible for everything from Office to ERP software. Microsoft this month also hired a new CIO, Tony Scott, whose credentials include stints as Walt Disney's CIO and General Motors' CTO.

They join relative newcomers in Microsoft's management ranks who have begun to exert their influence. Senior VP of advertising Brian McAndrews came to Microsoft six months ago with its acquisition of online ad specialist aQuantive. Chief operating officer Kevin Turner, who hailed from Wal-Mart, is a member of Microsoft's strategy-setting senior leadership team, while chief software architect Ray Ozzie, of Groove and Lotus fame, is quietly leading the company's push into software services. Both executives came on board in 2005.

Those execs, along with recently promoted Windows Server marketing general manager Bill Hilf, a former Linux champion at IBM, bring fresh thinking to Microsoft. Their backgrounds and actions so far suggest a Microsoft that exhibits greater openness and pushes aggressively into Internet services.

CHANGING OF THE GUARD
Despite the turnover, Microsoft continues to have a core of senior managers whose experience predates the 2001 release of Windows XP. (At Microsoft, tenure tends to be measured in operating system releases.) They include Ballmer, senior VP Bob Muglia, platform division president Kevin Johnson, Windows chief Steven Sinofsky, and entertainment and devices president Robbie Bach.

"One of the great things about [the execs leaving] is that they brought that knowledge and gave it to a lot of other people that are still here and are also really engaged," says Muglia, a 20-year company veteran. With Raikes' pending departure, Muglia has begun reporting directly to Ballmer and taking on corporate responsibilities in addition to his job heading up the company's server and tools business.

Gates and Raikes are easing out of their roles, which means there's still a grace period for the newbies to come up to speed. Nevertheless, it's only a matter of time before Microsoft's new guard takes over.

We already know that no one can replace Bill Gates. The real question is how Microsoft itself changes. We're about to find out.