News & Analysis

Layoff Season: Microsoft, Amazon and more

While Microsoft is replacing 5% of its workforce with AI, the layoffs elsewhere appears to be a direct outcome of fears around a recession)

For those who harp on artificial intelligence never replacing human effort, it’s time to smell the coffee! Microsoft has announced a $1.2 billion package to shave off 5% of its total workforce to make way for their continued advancement of AI. Of course, not all of the bloodbath is due to machines – the company is also facing pressures around economic uncertainty. 

Elsewhere, Amazon began its biggest ever layoffs removing 18,000 people from their rolls. The process began last year and hit the company’s devices and services group, ones that build Alexa digital assistants and Echo speakers. The latest round that began on Wednesday, could impact the retail division and human resources. 


Headcount reduction around AI Growth

Microsoft CEO Satya Nadella emailed a quarter-million employees that the 10,000 jobs were no longer needed to meet the company’s long-term goals or customer demand in the light of the continued AI advancements. The $1.2 billion package relates to severance costs, hardware portfolio changes and lease consolidation costs. 

“We are committed to ensuring all those whose roles are eliminated have our full support during these transitions,” he said while pointing to extended health care coverage, career transitions services, and 60-days notice for U.S.-benefit-eligible employees. “We will treat our people with dignity and respect, and act transparently,” Nadella said in the email. 

He further indicated that the next wave of computing would be born with advances in AI which means that automation would be primed to limit the company’s need for human headcount. He further explained that Microsoft strove to deliver results on an ongoing basis “while investing in our long-term opportunity.”

However, he also sounded a note of warning that while the pandemic accelerated enterprises’ digital transformation budgets, the current economic headwinds have pushed companies across industry verticals and geographies to become tight-fisted when it came to expanding technology funding in their businesses. 


Amazon and Salesforce flounder too

Meanwhile Amazon CEO Andy Jassy also emailed his employees that the year’s review had been much more difficult given the uncertainties in the economy. He said the company had hired rapidly over the past several years but had to cut down headcount by 18,000, which is over and above the 10,000 jobs that were removed last November. 

The world’s largest online retailer spent much of last year adjusting to a sharp slowdown in e-commerce growth as shoppers returned to pre-pandemic habits. Amazon delayed warehouse openings and halted hiring in its retail group. It broadened the freeze to the company’s corporate staff and then began making cuts.

Elsewhere, Salesforce also announced that they would be removing 7,000 employees off the rolls that includes real estate and office divestitures. The Company’s co-CEO Marc Benioff took responsibility for the scenario suggesting that the company had hired too many new staff without taking into account the slowing economy. “As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that,” he said in the note.

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