Reports last week that Microsoft was considering layoffs in the wake of restructuring were confirmed yesterday as the company began cutting thousands of positions, most within sales teams and mainly outside the U.S.
The staff reductions are aimed at aligning Microsoft's workforce with the company's "cloud-first" strategy, initially announced more than three years ago. The lay offs were also widely expected as Microsoft has rolled out similar cuts during the summer months, when one fiscal year ends and the next begins.
This latest workforce shuffling kicked off Monday, when sales and marketing executives emailed a memo to their teams stating that employees will need to "operate in new ways." No specifics about layoffs were included in that email, but various reports said staff reductions could total "several thousands."
Most Cuts Outside U.S.
According to its March 31 update on headcount, Microsoft employs nearly 122,000 people around the world, with more than 45,000 working at its headquarters in Redmond, Washington, and approximately 16,000 working elsewhere in the U.S. Just over 18 percent of employees, or more than 22,000, work in sales and marketing.
Citing unidentified sources, CNBC reported yesterday that the workforce cuts would "amount to less than 10 percent of the company's total sales force, and about 75 percent of them will be outside the U.S."
"Layoffs will also fall on some groups that had supported sales staff, including Microsoft's information-technology department, finance and the Corporate, External and Legal Affairs department, according to a person briefed on the cuts," according to a report yesterday in the Seattle Times. "Some of those to be laid off work at Microsoft’s Redmond headquarters."
More Layoffs Later this Year?
"While some see this as surprising and an indication of trouble in Redmond, I don't," Jack Gold, founder and principal analyst at Massachusetts-based J. Gold Associates, wrote yesterday in a guest commentary on VentureBeat. "I actually see this as a positive development that indicates management is further aligning to new market realities."
Since announcing its mobile-first, cloud-first strategy in March 2014, Microsoft has shifted its Windows operating system business model from one based on disk-based software sales to exclusively cloud-based delivery. The company has done the same with other software products, such as Office, now provided via the cloud as Office 365, and supports a growing number of enterprise customers via its Azure cloud platform.
"You no longer need lots of on-site support since most of the effort is done in the cloud and is highly automated," Gold said. "And the sales model is different as well, since more of the effort takes place remotely than through on-site handholding."
This is not the first round of layoffs Microsoft has undertaken; a similar reorganization announced in 2016 also led to nearly 3,000 job cuts. The company went through a even larger reduction in 2014, when nearly 18,000 jobs were eliminated, the bulk of them related to Microsoft's acquision of part of Nokia.
The cuts that began this week aren't likely to have as noticeable an impact on Microsoft's offerings as did the round of layoffs in 2014, tech writer Paul Thurrott noted yesterday on his Web site. He added a source told him to "expect another round of layoffs after the summer as well."