Microsoft is preparing to cut 10,000 jobs in staff redundancies in order to consider a multi-billion-dollar investment in OpenAI, the maker of ChatGPT.
The cut-off process will affect up to 5% of its global workforce and cost the business $1.2bn (Ksh 148.8 billion) in severance and reorganization costs.
Microsoft chief executive Satya Nadella said in a statement that while customer spending had grown during the Covid-19 pandemic, more people were now choosing to ‘exercise caution’.
In a memo to staff, Nadella said many parts of the world were in a recession or anticipating one, while “at the same time, the next major wave of computing is being born, with advances in AI”.
Hundreds of tech firms, including some of the sector’s big names such as Amazon and Instagram-owner Meta inclusive, have revealed lay-offs in recent weeks.
At the start beginning of 2023, Amazon announced that it planned to cut more than 18,000 jobs because of “the uncertain economy” and rapid hiring during the pandemic.
In November last year, Meta announced that it would cut 13 percent of its workforce, a total of 11,000 employees.
But Jason Wong, a tech industry analyst with consultants Gartner, warned against assuming redundancies in ‘enterprise’ businesses including Microsoft and Amazon happened for the same reasons as the cuts by big social media firms, some of which had faced additional challenges because of where they intend to take the business.
In the case of Twitter, that was moving to a model away from pure advertising, and for Facebook, he pointed to its pursuit of the metaverse.
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Like other tech companies, Microsoft’s business boomed during the covid-19 pandemic, fuelled by the increase in remote work and other online activity.
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 United States.
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The latest 10,000 are expected to be completed by the end of the third quarter of 2023. Thus, the memo said some staff would be notified immediately.
But Kevin Poulter, an employment lawyer at law firm Freeths, warns “employees affected by these cuts may struggle to secure alternative work in light of similar reductions already announced across Meta, Amazon, Salesforce, and across the wider tech sector”.
