It hasn’t been long since Microsoft (NASDAQ:MSFT) appointed Satya Nadella as its new CEO, and the new sheriff is laying down the law. Analysts predicted the Redmond-based software giant would cut back an estimated five to ten percent of its workforce, and they have been proven correct. In fact, the numbers exceeded expectations as the company announced plans to lay off 18,000 workers over the course of a year, making it the fourth-largest in modern tech history.
When you crunch the numbers as Forbes did, the total cutbacks amount to roughly 14 percent of Microsoft’s workforce. The vast majority of those being cut, 12,500, are entwined with Nokia, which Microsoft recently acquired. Another significant caveat in Microsoft’s announcement concerns the cutback in vendors and and contractors, which will be limited to terms of 18 months, followed by a required six months of removal from company resources. The number of external employees the company had on its payroll numbered 80,000 back in 2009, and it’s safe to assume there are more than that now.
Microsoft is not alone in the amount of vendors and temporary workers it uses, as other companies in the Seattle area, most notably Amazon (NASDAQ:AMZN), do the same thing. But it also adds up to a bigger hit to the economy than appears on the surface.
Nadella released an email addressed to the company’s staff, detailing the reasoning behind his decision, as well as what he plans for Microsoft going forward.
“We will simplify the way we work to drive greater accountability, become more agile and move faster. As part of modernizing our engineering processes the expectations we have from each of our disciplines will change. In addition, we plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making,” Nadella wrote.
“Making these decisions to change are difficult, but necessary.”