Microsoft disclosed plans to realign into three newly formed divisions. The one that holds the most importance for IT managers is the platform products and services division, which combines the software vendor’s Windows client, server and tools operations with the Microsoft Network (MSN).

Kevin Johnson, Microsoft’s former sales chief, and Jim Allchin, who had been group vice president of platforms, will serve as co-presidents of the expanded platform division until the end of next year. At that point, Allchin plans to retire, following the scheduled release of the Windows Vista client operating system.

In a memo to employees, Microsoft CEO Steve Ballmer said the goal of the reorganization is to make the company more agile for executing its “software-based services strategy.” As part of the announcement, Ballmer noted that Microsoft’s operations are being aligned “in a way that will enhance decision-making and speed of execution.”

Microsoft is gearing up to better position itself against Google Inc. and Yahoo Inc., which the company sees as its long- term competitors, said IDC analyst Al Gillen.

Ballmer said responsibility for driving the software-based services strategy across the three new divisions will fall to Ray Ozzie, who created Notes and founded Groove Networks Inc. before becoming one of Microsoft’s chief technical officers in April, when the company bought Groove.

The changes should address complexities in Microsoft’s sales organization and product deve-lopment groups, said Forrester Research Inc. analyst Ted Schadler.

Microsoft’s previous structure consisted of seven business units organized around products. That approach “is fine if the products don’t have the same customer,” Schadler said. “When the products have the same customer, it creates problems.”