Microsoft’s Restructuring: Developers Losing Jobs to AI and the Future of SaaS

Microsoft (MSFT), the U.S. enterprise software and cloud computing provider, recently announced a large-scale restructuring across all divisions. Microsoft explained that although the company’s revenue growth remains strong and its margins are solid, restructuring is necessary to proactively prepare for the coming AI era and to realign its talent strategy with the company’s future direction. It plans to lay off just over 6,000 employees, slightly under 3% of its total workforce, and a significant portion of those affected are believed to be based at its headquarters in Seattle, Washington.

In the United States, companies carry out workforce restructuring based on strategic needs, so the mere fact that layoffs are happening while business performance is strong is not particularly surprising. In fact, restructuring when results are good increases the odds of strengthening compensation for key talent and reshaping the organization to align with the growth strategy. When performance is deteriorating, there is neither the capacity to enhance compensation for core talent nor the flexibility to do so, and if layoffs are announced for that reason, the most mobile high performers are the first to leave. In Korea, because it is virtually impossible to fire employees unless they commit serious misconduct, restructuring tends to occur only when the business is already in deep trouble, which triggers an exodus of key talent and makes a turnaround even harder. I believe that allowing companies more freedom to dismiss employees while expanding unemployment insurance benefits would make the labor market more efficient and strengthen corporate competitiveness. The rigid labor market created by the entrenched caste-like status of permanent employees is a policy failure born of shifting the government’s role onto companies.

To prepare for the coming AI era, Microsoft is maintaining massive levels of infrastructure investment in GPUs and other hardware, and has said it is revisiting every budget from scratch to set priorities in order to manage rapidly rising costs.