Credit: Microsoft

Microsoft officials internally announced today, September 8, that the Microsoft U.S. Federal team is moving under Azure Executive Vice President Jason Zander's engineering organization. At the same time, effective October 1, the U.S. Federal team will begin operating as its own subsidiary.

Microsoft's U.S. Federal organization is headed by President Rick Wagner, who has held that position since July 2020. The U.S. Federal organization works with various U.S. government agencies beyond the Department of Defense, as well as independent agencies like NASA, the U.S. Postal Service, Congress, federal courts and more.

In June, Toni Townes-Whitley, President of U.S. Government and Regulated Industries, announced that she had decided to leave Microsoft for "her next big transformational role in a new industry." Her last day is slated to be September 30, 2021. (I wonder whether her departure is/was connected in any way with this latest reorg. The official word is no, for what it's worth.)

Why is Microsoft moving the Federal team under Azure? The official internal reasoning is that both the Federal and the Azure engineering organizations will benefit from closer collaboration. Officials say the technologies that Microsoft has been building for its federal customers have been helped make Azure more reliable and secure for all Microsoft customers.

Even though Microsoft ended up forfeiting the$10 billion, 10-year Joint Enterprise Defense Infrastructure (JEDI) win because of legal and political wrangling, Microsoft still learned a lot from JEDI. Officials said in e-mails to employees about this latest reorg.

From Executive Vice President and Chief Commercial Officer Judson Althoff's email today:

"Through our direct experience with JEDI and similar initiatives, we know that working with the U.S. federal government requires the ability to deliver highly customized solutions. Our experience has also taught us the tremendous value of bringing our engineering team and our U.S. federal business unit closer together. Doing so allows us to be more responsive to our customers' distinct needs and make breakthroughs in terms of our product portfolio."

Microsoft isn't planning to move any of its other vertically focused organizations or other global public-sector businesses under Azure engineering, according to Althoff.

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