Microsoft’s latest round of layoffs come as the company revises its strategy for selling artificial intelligence tools amid increasing competition from OpenAI and Google, according to sources familiar with the plans and internal documents.
The company’s recent job cuts included thousands of salespeople, the people said, and largely targeted traditional salespeople that the company intends to replace with more technical salespeople to better sell AI tools.
Microsoft on July 2 said it plans to lay off less than 4% of its workforce, which would be around 9,000 people. The company typically makes changes to its workforce around this time of year as July 1 marks a new fiscal year, but this year’s layoffs are significant as the company cuts costs to make up for massive spending on AI.
Microsoft plans to replace many traditional salespeople, often called “specialists” internally, and replace them with “solutions engineers,” who can show customers actual demos earlier on in the sales process, the people said.
Microsoft confirmed the company is replacing some specialist roles with solutions engineers to increase the technical and industry understanding among its salesforce, and plans to hire more salespeople outside its headquarters to get more sellers out in the field.
The company has received feedback from customers that they had to engage with too many salespeople before getting down to the technical details and demos. “The customer wants Microsoft to bring their technical people in front of them quickly,” one of the people said. “We need someone who is more technical, much earlier in the cycle.”
The changes come as Microsoft faces increasing competition for enterprise customers in AI. Microsoft has an advantage in that many large companies already use its other tools, but many of those companies’ employees want the more well-known ChatGPT.
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The sales cuts are tied to a plan to simplify how Microsoft sells AI, detailed internally earlier this year.
In a memo to the sales organization the day before the layoffs were announced, Microsoft sales chief Judson Althoff laid out a vision to revamp the organization.
Althoff called for “continued agility” and “reinventing Microsoft and MCAPS” to become “the Frontier AI Firm,” and outlined the five priorities of the sales organization, including to “establish a Copilot on every device and across every role.”
Althoff also internally unveiled plans in April to slash the number of the sales team’s “solutions areas” by half during the next fiscal year, which starts July 1. BI obtained copies of slides from his presentation.
Microsoft previously had six solutions areas: Modern work, Business Applications, Digital & App Innovation, Data & AI, Azure Infrastructure, and Security. Beginning July 1, these areas were set to be combined into three: AI Business Solutions, Cloud & AI Platforms, and Security, according to those slides.
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