1/18/2023: Microsoft is Laying off 10,000 People

Digital transformation spending is slowing down

Microsoft is laying off 10,000 people or approximately 5% of the employees, citing global corporate spending slowdown. In a memo sent to employees, CEO Satya Nadella said the decision is difficult but necessary. He also said

As we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less. We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one. At the same time, the next major wave of computing is being born with advances in AI, as we’re turning the world’s most advanced models into a new computing platform.

Basically, the growth is slowing and they need to do something about it. To respond to the new environment, the three priorities mentioned are 1) cost reduction 2) focus on long term strategic investments such as large AI models and 3) treat people with dignity and respect, and act transparently.

Microsoft is very profitable and let’s be honest here. They don’t need to lay off people to survive. But they have over-hired during the pandemic. Their revenue was up 58% in the past 3 years but the headcount grew at a similar rate. For a software business, supposedly the revenue should grow a lot faster than the headcount. But this hasn’t been the case for many software companies. Over-hiring can also sometimes result in negative productivity as bureaucracy creeps in and some employees don’t even know which high impact projects they should be working on. It sucks that people will lose their jobs. Unfortunately, it’s always the rank-and-file employees who suffer most from these large layoffs while the leadership team who made the over-hiring decision continue to collect their multi-million dollar paychecks.