Yesterday, Tuesday of the week, Microsoft started with happy news. The company’s CEO, Satya Nadella, announced that Microsoft will integrate the creative artificial intelligence technology of the portfolio company that promises Open AI also in its information cloud product, Azure, days after it announced that it would also integrate technology from the same company in the Bing search engine. This was a huge ego boost for a company that until now owned a cloud platform that was in second place after Amazon, and a search engine that was far behind Google.
Open AI, the big company behind some of the creative artificial intelligence revolutions of the last few months, including the DALL-E image engine and the ChatGPT text engine, has become the most talked about and intriguing company, and the fact that Microsoft was able to get its hands on it – with a $10 billion check – placed the blue giant from Seattle in a much more optimistic place. This, by the way, even though Open AI is bleeding money: its revenues at the end of the year will be about 200 million dollars, but its expenses are expected to reach about 1 billion dollars.
But at the end of that day, a series of leaks brought Microsoft – or at least the image it was trying to develop – back to reality. The promise of creative artificial intelligence is still far away, and the economic crisis, together with the cut in the computing budgets of the companies – is here to stay. This is not the first wave of layoffs at Microsoft, nor the last, certainly not for Satya Nadella, who upon entering the company fired 18,000 workers – which at the time constituted 14% of the company’s workforce. Microsoft also fired last summer and fall as part of several rounds of workers in places that are on the fringes of action, such as in the Xbox game console department or in positions involving future products that have not yet matured.
Jobs will be transferred to external consultants
Now, according to the reports of a number of media outlets, including The Information, Bloomberg and The Verge, it seems that the layoffs are already affecting the core of the company’s operations – including around the Azure cloud platform. These are expected to start probably only next Wednesday, with the publication of the company’s results for last year, and include about 5% of the company’s total workforce, that is, about 11,000 employees. One of the departments that will be affected is the sales department managed by Omar Abush that markets Azure services to existing and new customers. Departments that sell Azure products globally are expected to be affected, as are service and maintenance personnel who are close to customers. According to reports, Microsoft will transfer some of the jobs to external consultants.
According to Bloomberg, software developers who were spared from the previous waves of layoffs are also expected to be affected, as well as a large cut in the recruitment departments, which could reach up to a third of the recruiters and bring back to the headlines plays that were seen in Meta in November, when hundreds of recruiters were fired via e-mail.
It should be noted that unlike other giants that doubled the number of their employees during the Corona years, Microsoft did not grow excessively. Unlike companies such as Google, Meta or Amazon – it is not exposed to harm from one product or another – this is because its revenues are distributed and include the sale of operating systems, cloud services, customer management systems and databases, advertising from the Bing search engine, game consoles and computer games. However, Microsoft is very sensitive to changes in currency rates and the strengthening of the dollar, as a company that sells its products around the world, and especially to the appetite of purchasing managers in organizations of all sizes to upgrade their information systems. The slowdown in growth from the sale of cloud products, for example, is a phenomenon that has been visible for several quarters – it does affect Amazon and Google as well, but also Microsoft’s Azure, which was a major growth engine for it. The dramatic decline in sales of personal computers, which affects the sale of Windows-based computers, and the decrease in the market share of these computers in relation to Apple’s Mac computers are also taking their toll.
The company stated that its sales would increase by 2% during the last quarter which it will report next week – a figure considered to be the lowest since 2017.
According to all predictions, the year 2023 was supposed to open with a significant wave of layoffs: on the one hand, American companies avoided waves of layoffs in December due to the end of the year holidays; On the other hand, companies wish to “clean the table” already at the beginning of the year in order to improve their profitability in each of the following quarters. Since the beginning of the year alone, 25,000 people have been laid off, according to the Layoffs.fyu website.
Meanwhile, large waves of layoffs were recorded at Amazon, which announced at the beginning of January that it would lay off 18,000 employees, and also at Salesforce – which competes with Microsoft for the customer management systems (CRM) niche and information security for corporate software products. There it was decided to lay off about 8,000 people, 10% of the workforce.