Partners: Nadella's 'Overdue' Layoffs Set Microsoft Up For Success


Microsoft will cut some 18,000 jobs over the next year – 12,500 of them from Nokia – in a move channel partners hope signals Microsoft's transformation into a more nimble company that's easier for solution providers and customers to work with.

In a brief statement Thursday morning, Microsoft said the layoffs are part of a restructuring plan "to simplify its operations and align the recently acquired Nokia Devices and Services business with the company's overall strategy."

Microsoft said it expects the cuts to be "substantially complete" by Dec. 31 and "fully completed" by Jun 30, 2015, the end of the company's fiscal year. Microsoft will take a pre-tax charge between $1.1 billion and $1.6 billion to covers costs associated with the restructuring.

[Related: Inside The Memos: How Nadella, Elop Broke Layoff News To Employees]

Channel partners, many of them attending Microsoft's Worldwide Partner Conference in Washington D.C. this week, said they weren't surprised by the news.

Two-thirds of the cuts are coming from Nokia, which Microsoft just acquired April 25 for $7.1 billion, and elimination of redundant positions from an acquisition of that scale are to be expected, said Ric Opal, vice president of Peters & Associates, an Oakbrook, Ill.-based Microsoft partner.

But Opal noted that leaves nearly one-third of the cuts coming from elsewhere in Microsoft, and he sees that as part of the broader restructuring and transformation that is now underway under Satya Nadella, who became Microsoft CEO Feb. 4. Peters & Associates works with a number of Microsoft's faster growing products and cloud services such as Office 365, Azure and Lync Server.

Nadella "wants the right people in the right seats, driving the right outcomes for customers and partners," Opal said, saying he was not surprised by the news of the layoffs. Microsoft's CEO is trying to be "disruptive" and is "driving toward a simpler [corporate] structure that's more nimble."

"If I had to give a one word answer I would just say: overdue," said Dave Powell, vice president of managed and cloud services at TekLinks, a Birmingahm, Ala.-based Microsoft partner. "What you need to look at is that there is a huge philosophical shift that’s going on, that needed to go on. You have [former Microsoft CEO Steve] Ballmer's strategy on devices versus Nadella's strategy around mobile- and cloud-first. That’s going to come with a change in the skill set and the people."

Powell said other market leaders are going through similar transitions, citing networking giant Cisco and its CEO, John Chambers. "Everyone out there, the market is changing rapidly, they have to figure out a way to adapt and respond to that. And that’s hard. Once you become the market leader it's much more difficult to say on top than to get on top sometimes. That's the hard part."

"No one is happy to hear about layoffs, but this is something Microsoft needed to do. My Microsoft cloud business is growing every day. If this means Microsoft will now focus on key enterprise pieces of its business than great," said Larry Velez, CTO and founder of Sinu, a New York-based Microsoft partner with a fast growing Azure cloud business.

Valez said Nadella was cutting the "ball-and-chain" that was part of the Ballmer-era of Microsoft and paving a clear path for Microsoft's future. "Change is good at Microsoft. I hope we see more decisive moves by Nadella. If there is one thing you can’t be in this industry, it is indecisive."

Valez's take-a-way is not only does Microsoft need to reconfigure itself for changing IT-landscape, but so do partners. "It's tough medicine losing 18,000 jobs. But if Microsoft isn't successful, than there are a lot more jobs on the line than 18,000."

NEXT: "The First Major Salvo In The New Nadella Era"