Microsoft CEO Satya Nadella has announced a huge change in the company’s product hierarchy and leadership, shifting the firm’s focus from its signature products like Windows and Office suite to cloud and AI research. In a letter addressing Microsoft employees, Nadella detailed the formation of new product and research divisions, alongside merger of the existing ones following the impending departure of Windows and Devices Group chief, Terry Myerson.

“Today, I’m announcing the formation of two new engineering teams to accelerate our innovation and better serve the needs of our customers and partners long into the future”, Nadella wrote. The major change announced by Nadella is the merger of Windows, Office as well as devices and third-party applications under a single banner called Microsoft 365 experience, which will be a part of the Experiences & Devices team lead by Rajesh Jha. Thanks to the restructuring, Surface Chief Panos Panay has been promoted to Microsoft’s Chief Product Officer and will now lead the company’s hardware division, while Joe Belfiore will head the Windows experiences team.

Microsoft has also created a new team that will focus entirely on the combined ‘Cloud + AI’ platform for the development of cloud, edge and AI services, and their integration into the company’s products. The increased focus on cloud and AI has led to the creation of two new engineering divisions, the first one being ‘AI Perception & Mixed Reality’, which unifies Microsoft’s efforts in the field of speech, vision, MR and additional perception capabilities into a single unit, and will also be responsible for developing cloud services on Azure for third parties, a domain where Microsoft has recorded considerable growth.

The second new engineering team is ‘AI Cognitive Services & Platform’ and it will work on fields like AI Platform, AI Fundamentals, Azure ML, AI Tools and Cognitive Services under the leadership of Eric Boyd. Both the new teams will work under the aegis of Microsoft’s AI+Research division, which is led by Harry Shum and works on the development of advanced technologies required by different teams at the firm. Cloud has been one of the key areas of growth for the company under Nadella’s leadership, and the company wants to further develop its product portfolio in domains like enterprise solutions and cloud gaming.

Nadella pointed that cloud computing and AI will shape the next phase of innovation and present a huge opportunity for the company to develop products that will benefit partners as well as end users in the long run, and that the restructuring is the beginning of Microsoft’s enhanced focus on these areas.