As expected, Microsoft is reorganizing its enterprise sales teams into new units that will focus more on cloud computing, artificial intelligence and other up-and-coming technologies, pushing Redmond away from its older model of selling on-premises software and traditional business services.

Employees received a memo on Monday, July 3, about the changes, according to a report in Bloomberg. News about the change leaked out the week before, although reports about numerous layoffs were not confirmed by the memo. (See Is Microsoft Planning Reorg Around Cloud?)

Microsoft's commercial sales division is now broken up into two segments: One will focus on the company's largest customers, while the second is dedicated to small and midsized businesses (SMBs). The change also means that sales will focus on six specific verticals that include manufacturing, financial services, retail, health, education and government, according to the report.

Figure 1: Redmond's forecast calls for more clouds.
(Source: Microsoft)

The biggest changes, however, concern the software products that Microsoft will focus on, which include:

Microsoft is considered a leader in the cloud space, not only with its Azure infrastructure-as-a-service (IaaS) offering, but also with its various software-as-a-service (SaaS) products such as Office 365. However, the software giant still finds itself in several major battles, including one with Amazon Web Services, which is still considered the leader in public cloud. (See AWS Public Cloud Dominance Continues – Report.)

Google is also making a play for public cloud, and there's also pressure from newer companies such as Salesforce, as well as traditional competitors, such as Oracle and IBM, that are also rushing their products to the cloud.

It's been several years since Redmond reorganized its sales staff, and some see this as a welcome change to the company's structure, although more work is needed.

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"I see these moves as aligning Microsoft to better take advantage of cloud and Dynamics products and services," Patrick Moorhead, principal analyst at Moor Insights, wrote in an email to Enterprise Cloud News. "I consider these tweaks, not full-on changes required to do better at the new products and services."

In its latest Magic Quadrant for IaaS, Gartner noted Azure's success in attracting enterprise customers, but said the company still has a way to go:

Monday's memo was written by Executive Vice President Judston Althoff. Over the weekend, there were several reports about massive layoffs coming to Microsoft, although ZDNet's Mary Jo Foley wrote that her sources indicated that large job cuts were not part of the reorganization.

"The situation at Microsoft is one we've seen time and again in the tech industry as vendors reorganize and retool to prepare for and take better advantage of emerging trends and business opportunities," Charles King, an analyst with Pund-IT Research, wrote in an email.

In addition to the commercial unit, Microsoft is changing its device and consumer sales divisions as well, to focus on high-growth areas including Windows, Surface devices, Internet of Things, mixed reality and Office 365.

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— Scott Ferguson, Editor, Enterprise Cloud News. Follow him on Twitter @sferguson_LR.