The employees in Microsoft’s Developer Division spend their days creating a virtual environment for software development — making Visual Studio and related technologies used to develop apps and services across the cloud, device and desktop.

So it was with a great amount of thought that the leaders of “DevDiv,” as it’s known, completely upended the division’s own physical work environment, remaking a three-story building in the middle of Microsoft’s Redmond campus to create a workspace more aligned with the principles of agile software development.

Inside the remodeled Building 18, the company’s traditional private offices are nowhere to be found. They’ve been replaced by open team rooms, conference rooms, informal common areas and smaller “focus rooms” for intensive coding and private discussions. Desks are on rollers to make it easy to quickly change the layout of a room. Employees say they’re involved in fewer email threads and more face-to-face interaction.

“That has broken down barriers beyond belief,” said S. “Soma” Somasegar, the longtime Microsoft executive who is the vice president in charge of the Developer Division.

In addition to the “focus rooms” and conference rooms, the division has made a point of creating open “public” spaces throughout the building and adjacent to many team rooms where employees can have informal conversations.

The division is critical to the company’s future, as Microsoft tries to build a strong ecosystem of third-party apps for Windows, Windows Azure, Windows Phone and Windows tablets.

And the change wasn’t without risk. The company faces stiff competition for talent from Google, Facebook, Amazon and thousands of technology startups, and a change this radical had the potential, at least, to alienate some longtime DevDiv employees. Individual offices were the norm in the Developer Division’s previous headquarters building.

Walking around Building 18 with Somasegar one recent weekday morning, we spotted plenty of employees wearing earbuds and headphones — the traditional office worker’s refuge when an “open and collaborative” environment collides with the need for sustained concentration.

Somasegar acknowledged that it took some time just to figure out how loudly to talk in the open environment. He has experienced this first-hand, with his own desk in one of the team rooms. (He still has a meeting room to use for private and one-on-one meetings.)

“It took longer than we thought, but I think people are finding the right balance,” he said. “You don’t want to stifle conversation. At the same time you want to be respectful of what is happening around you.”

Eight months after cutting the ribbon on the remodeled building, leaders of the Developer Division say they believe they’ve found that balance. Employees who were skeptical about the new arrangement are warming up to it. Citing anecdotal evidence, Somasegar says he believes the change has even helped the division retain employees who might have otherwise gone to other divisions or companies.

The change was necessary, he says, in a world where software is updated constantly and collaboratively, not by coders with their heads down behind closed doors for years at a time.

It’s the latest effort by Microsoft’s leaders to rethink the company’s work environment. Walking around Microsoft’s original buildings in Redmond, for example, often felt like being stuck in a rabbit warren, or maybe a rat race. Fifteen minutes later, you still hadn’t found the office you were looking for.

But starting with the Microsoft Research building and extending to the current Windows and Xbox headquarters, the company has followed a model of creating more open and flexible work environments, with large central atriums and natural light.

Building 18 is different in part because it was a retrofit, not new construction from the ground up. It also takes the concept of an open environment even further, with not even a cubicle wall separating workers in many cases.

Somasegar says his one lament is that they had to work with the existing building’s structural walls, rather than tearing everything out and starting from scratch.

And no, it’s not a coincidence that Visual Studio Team Foundation Server has a feature called “team room,” where members of a software development team can have a conversation. Somasegar explained that the company’s initial experimentation with alternative workspaces in the physical world helped to inspire the approach to the feature in the virtual world.

“It’s the same concept here,” he said.