Microsoft cuts off 9,000 employees’ jobs. They did this in their second round of job cuts within months. The layoff impacted the essential departments like sales, xbox, and cloud operations. Microsoft’s head says that they aim to shift its focus more on AI and realign new resources for long-term goals. Thus, it marked Microsoft’s one of the largest workforce layoffs in over 2 years.
Sales Department Faces the Hardest Hit
Microsoft recently took a huge decision to reduce headcount within their international sales departments due to restructuring strategy. The organization mainly aims to streamline their operational activities and align the workforce to meet new business goals. Such a step is followed to increase focus more on cloud services and AI. However, due to the new strategic shift, the regional sales team also faced job cuts. It includes employees from customer success, partner solutions, and client management.
Let’s look into the data and impact due to the layoffs:
1. Scope of Cuts and Sales Data
- Microsoft took onboard 228,000 employees in June 2024, with around 45,000 in the sales and marketing department.
- However, in the month of May, a 6,000 job cut happened affecting production and engineering division. The next round will take place in early July to highly target sales department’s employees.
- Bloomberg as well as other reports says “thousands of jobs” were cut in the sales department. Thus, analysts and experts say that the layoff can later lead to more job cuts.
2. Operational Breakdown
- Microsoft will later consolidate several sales employees along with separate account representatives for Data & AI, Core, and Innovation. The roles will be consolidated into one single Azure sales representative to make customer interaction easy.
- Therefore, the company decided to outsource SMB software sales by decreasing employees communicating with less business clients.
Major Setback to Xbox Team
The recent layoff by Microsoft of 9000 employees created a major hit on the Xbox department. This layoff led to disruption of leadership teams, game studios, and essential development projects. As Microsoft starts to realign its focus towards cloud infrastructure and artificial intelligence, Xbox absorbed the major blow of the created impact. Thus, the department now faces major setbacks like closure of studios, cancellation of game projects, and internal restructuring.
1. Fallout within Xbox Department
- Microsoft terminated several employees across Xbox Game Studios. Thus, affecting the teams at Turn 10, Rare, Compulsion Games, Undead Labs, and ZeniMax.
- Microsoft also closed The Initiative and led to closure of Perfect Dark reboot. The project was one of the long-awaited projects and also shut down Rare’s Everwild.
- Microsoft took back one of an unannounced project named MMORPG at ZeniMax Online Studio. Thus, they redirected the resources to the title that are more commercially viable.
2. Reconstructing Xbox
- The Xbox leaders and Phil Spencer took part to remove the mid-level management team to strengthen communication and make decisions smoothly.
- Microsoft laid off more than 200 employees from King, the makers of the Candy Crush game. Thus, it amounted to almost 10% of the employees working in the studio.
- Later, Xbox faced a recruitment freeze along with several internal departmental transfers or few reassigned to projects related to AI.
3. Layoffs Due to Financial Problems
- Microsoft faced a pressure of delivering high ROI after following $7.5 billion for ZeniMax as well as $75 billion acquisition of Activision Blizzard.
- Microsoft also faced a huge surge in development cost for AAA titles to $200 million in the past. Thus, they decided to trim off the risky and long-term projects.
- Following the layoff, the organization plans to invest $80 billion in infrastructures related to AI this fiscal year. Thus, to do this, they will pull off funds from their iconic department like Xbox.
Strategic Shift in Microsoft’s Operations
Microsoft plans to make a major strategic shift after reducing headcounts internally. They shift their focus on working more on cloud computing, AI, and streamline operational activities. The company’s leaders focus more on optimizing resources as well as pulling funds from other segments.
1. Key Investment in AI-Related Projects
- Microsoft created a strong partnership with OpenAI and integrated Copilot in Azure, Microsoft 365, as well as GitHub.
- Next, Microsoft released MAI-1, as a next generation AI model trained internally. They consider it the part of the push created to decrease dependence on any external foundational models.
- Recently, Azure AI revenue increased by 53%, helping Microsoft to take in more talented employees and funds within their expanding projects.
2. Legacy Roles Replaced by Automation
- Microsoft handed over major roles to the AI. Thus, AI now handles technical sales support, coding, and even the early stage customer services.
- Officially, the leaders stated that 30% of developer codebase of Microsoft comes from AI copilot. So, they feel that the requirements of certain products and engineers are not needed anymore.
- Microsoft outsourced a little portion of their SMB software sales to cut off increasing internal cost and maximize automation process.
Cloud & Mixed Reality Units Affecting Job Cuts
Microsoft recently cut off or reassigned many employees within Azure Support Engineering and Azure Core. They moved the employees who are mainly tied to hybrid cloud and legacy infrastructure. Employees present in legacy on-prem tools, private cloud solutions, and tier-1 customer service faced a consolidation to decrease overlapping problems.
Furthermore, Microsoft shifted most of the employees from cloud support to AI copilot and automated systems. Such steps reduce manual errors or escalation of workflows.
1. Prioritizing AI in Cloud Department
- Now, engineers from low-growth Azure are shifted to OpenAI integration, Azure AI, and infrastructure scaling.
- The internal information says that Microsoft wants 50% of workload from Azure consumption growth to be accounted for in the upcoming fiscal year.
- The company now focuses more on hiring new data scientists, AI engineers, and silicon optimizers after cutting off operational cloud roles.
2. Reduction of Mixed Reality
- Microsoft eliminated employees from departments like Mesh, HoloLens and MR initiatives. Thus, cited reduced commercial adoption along with high R&D prices.
- The organization paused or canceled many MR projects in terms of defense, education, and enterprise training to push off funds to AI projects.
- However, a report leaked saying Microsoft shelved all important hardware development and worked towards the marketing of HoloLens.
Conclusion
Microsoft’s recent decision to layoff 9000 employees in over 2 years created a huge shift in their priorities. By terminating or shifting employees from Xbox, sales, cloud, and mixed reality, the company focused more on AI projects. Thus, the change in workforce showed Microsoft’s new goals towards long-term innovation, growth, and competitive positioning to adopt the evolving tech landscape.
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