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From the Directions on Microsoft archives, circa 2009, L-R: Research director Rob Helm, Rob Sanfilippo, Paul DeGroot (now an alum) Rebecca Duffy (alum), co-founder Rob Horwitz, Michael Cherry, Don Retallack and former analyst Matt Rosoff, a journalist who spent a decade at the firm. Not pictured: Current analyst Wes Miller and co-founder Jeff Parker.

One of the best ways to understand Microsoft is to read reports by Directions on Microsoft, an independent research firm that specializes in explaining Microsoft’s products, strategy and plans. Its audience is corporate IT departments, Microsoft partners and others who need to know the information for their jobs.

An indication of the firm’s impact: Directions on Microsoft’s poster-sized Microsoft organizational chart — assembled, maintained and updated by the research firm’s experts — has traditionally been found tacked to the walls in the offices of Microsoft engineers, managers and executives.

Directions on Microsoft co-founder Rob Horwitz is among the firm’s experts who worked previously at Microsoft.

Yes, even Microsoft needs help understanding Microsoft sometimes.

Directions on Microsoft is marking its 20th year in business this year. That’s a testament to its expertise and to the ongoing need for Microsoft’s customers and partners to figure out what the heck the company is doing at any given moment.

The research firm has created a profitable niche for itself by focusing largely on Microsoft’s software and services for businesses — a side of the company that doesn’t get as much attention in this era of Xbox 360 and Microsoft Surface. Even as Microsoft puts more emphasis on consumers, huge numbers of companies still rely on its technologies. That’s where Directions on Microsoft has placed its bet, with its product roadmaps, regular reports, licensing bootcamps and other services.

About that org chart … 

But the widely used Directions on Microsoft org chart is going away — and the reason provides a window into Microsoft’s evolution as a company.

First, a bit of history: The Directions on Microsoft org chart made its debut after the firm started in 1992. Overwhelmed by the first months of publishing detailed reports, and seeking an easier project to give themselves a bit of cover, co-founders Rob Horwitz and Jeff Parker went through Microsoft’s annual report, took the names and titles of the named executives and added an intelligible job description for each. Then they drew lines to connect them.

An example of the org chart from 2006. (Click for larger version.)

A tradition was born. 

Not long after publishing the org chart, they received two calls — one from Microsoft’s legal team, telling them to stop; and another from someone else at Microsoft ordering around 500 copies. (The firm informed the lawyers that the names were publicly available, and that resolved the issue at the time.)

It became a status symbol for Microsoft executives to be on Directions on Microsoft’s org chart, with one even paying for an extra run that included his name.

Over the years, however, Microsoft has become increasingly concerned about that org chart being public. Among other things, it could give rivals insights into its internal operations, or reveal which Microsoft executives are prime for poaching.

In defense of the org chart, Directions on Microsoft has long argued that it’s important because Microsoft’s own partners use it to navigate the company. Its value isn’t as much in the high-profile changes, such as the departure this week of Windows president Steven Sinofsky, but in changes further down that aren’t otherwise made public.

But that argument recently stopped working. Microsoft told the research firm to stop contacting its executives to confirm their roles and org changes, which had been a key step to ensure the accuracy of the org chart.

It’s one example of Microsoft becoming more secretive in recent years — more like Apple, in some ways. Other examples include the company boosting security to an unprecedented level at Xbox HQ, and removing the bios of its legions of vice presidents from its public website.

At the same time, from Directions on Microsoft’s perspective, the importance of the org chart has diminished among its customer base, as the mix has shifted to include more Microsoft customers and fewer partners.

Bottom line: Direction on Microsoft’s Microsoft org chart is going away. They decided it wasn’t worth the fight. The current version is expected to be the last. The firm is planning to divert those resources instead into its product roadmaps and licensing advice, areas seeing high demand among Microsoft customers.

Parker explains, “We’ve always had a really good, professional relationship with Microsoft. We stick with the facts, and our ethic is being accurate. We’re not trying to be newsy. We’re trying to explain technology.”

How the firm began

Directions on Microsoft started in 1992. Horwitz and Parker had met as roommates at Wharton Business School. After getting his MBA, Horwitz went back to work for Microsoft, traveling the world to evangelize Windows NT, when he noticed that businesses were asking what he viewed as the wrong questions. Horwitz told Microsoft executive Steve Ballmer (this was years before Ballmer succeeded Bill Gates as CEO) that it might be more efficient for Horwitz to stay in the office and write reports explaining what people should know.

Horwitz asked Ballmer if he would mind if he tried it on his own. Ballmer basically said to Horwitz, “Knock yourself out.” So Horwitz took a sabbatical, called up his old Wharton roommate Parker, and they tested the market with an initial report on Windows NT. They received a strong response from businesses, and soon they had a business of their own.

Co-founder Jeff Parker

Today the company is headquartered on the waterfront in Kirkland, Wash., with a core team of experts — including several Microsoft veterans — driving its subscription-based service.

Parker calls it an “eat-your-vegetables” type of service. “We only cover one vendor, but we cover it deeply and what we do is we strip out all the marketing hype and the B.S., and we explain: This is what it is, this is how it works, this is where it’s headed, this is where you get more information.”

He acknowledges, “It’s not fun reading — but if it’s necessary, if it’s your job, you need to know this. Microsoft is one of the biggest line items in any CIO’s budget.”

What about Microsoft’s future?

“They’ve got a tough row to hoe in the consumer space. Everybody knows that, including Microsoft,” says Parker. “They’ve become so critical in the business space that for the foreseeable future, they’re going to continue to do well, but just like everything else they’re going to have to fight to keep it, because there’s always that threat of an alternative.”

And given how consumer technology trends are now driving corporate technology decisions, it’s clear that Microsoft will need to up its game in tablets and smartphones if it wants to maintain the loyalties of its core business customers for the long haul.

Whatever happens to Microsoft, Directions on Microsoft’s perspective will be informed by its history as a pragmatic observer of the company. Back in 1992, a decade before Windows XP Tablet PC Edition and two decades before the launch of Microsoft Surface, the firm’s second research report focused on an emerging technology that Bill Gates had identified as the next big thing — tablet computing.

One of Directions on Microsoft’s upcoming briefings is designed to help companies figure out how to properly license Microsoft software for use by their employees … on iPads.

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