Microsoft Will Cut 10.000 Jobs as Spending Slows

Microsoft Will Cut 10.000 Jobs as Spending Slows

By Valentina Tuta

Currently, it is known that Microsoft is joining the tech giants that have decided to make cuts in their personnel in recent months due to the slowdown in global growth. Among them, we can highlight Google, Alphabet. Amazon, Facebook and Salesforce. In this note we’re going to take a look at Microsoft’s point of view, how this will affect the technology sector and briefly discuss the potential losses that the company will have to bear.

How will it affect the technology workforce?

Last Wednesday, January 18, the company made a statement on the global problem, announcing that it will cut 10.000 jobs in all of its facilities worldwide due to the global economic slowdown. Through a post in his official blog, the CEO Satya Nadella said the organization was working to align its cost structure with projected revenues while prioritizing customer demand.

“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,” he wrote. “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.”

How will it affect the technology workforce?

However, he stated that the cuts will affect up to 5% of the software giant‘s total employee base. A decision that will cost approximately 1.2bn (£972m) in severance and reorganisation costs.

Likewise, by breaking the news in his memo to staff, Mr Nadella said many parts of the world were in recession or anticipating one, while “at the same time, the next major wave of computing is being born, with advances in AI”.

Given the situation, we know that by now, the last to make this decision was Microsoft. Nonetheless, it’s very likely that more companies in the sector will join in the future, as the giants seek to tighten their belts following the boom time of the pandemic, when lockdowns meant people were stuck at home, wanting to spend their cash on digital entertainment and devices.

As we mentioned above, hundreds of tech firms, including some of the sector’s biggest names like Amazon and Instagram-owner Meta, have revealed lay-offs in recent weeks. In fact, at the start of this year, Amazon announced that it planned to cut more than 18,000 jobs because of “the uncertain economy” and rapid hiring during the pandemic. Meanwhile, in November, Meta announced that it would cut 13% of its workforce, a total of 11,000 employees.

Pandemic boom

Nevertheless, in order to understand the real reason for the personnel cuts in this sector, it’s necessary to go back to the beginning of the pandemic, when like other tech companies, Microsoft’s business boomed during the pandemic, fuelled by the increase in remote work and other online activity.

Actually, its workforce grew by roughly 40,000 between June 2021 and June 2022, when it reported having about 221,000 full-time employees, including 99,000 outside the US. 

But as business slowed last year, the firm embarked on a series of job cuts.

The latest 10,000 are expected to be completed by the end of the third quarter of 2023 and the memo said some staff would be notified immediately. Although Mr Nadella promised to “treat our people with dignity and respect and act transparently”. 

Lastly, according to some reports, this year, including the latest Microsoft losses, the site says 26,061 tech sector employees have already been made redundant but experts say there is still demand for job hunters with the right skills, particularly engineers experienced in AI and data science.