All is not well in the IT market in the U.S. IT layoffs in Sept. 2017 have shown that large companies, such as Microsoft Corporation (NASDAQ:MSFT) and Hewlett Packard Enterprise Co (NYSE:HPE), are struggling to keep up with competition. The recent HPE job cuts and the Microsoft job cuts announced prior to that indicate a problem in the IT industry.
HP Starts with Layoffs as Microsoft Continues with Job Cuts
Right on the tail of the Microsoft job cuts announcement, HPE declared a layoff that would affect 10% of its global workforce, or about 5,000 employees, by the end of this year. What HPE is attempting to do is to reduce the lines of business and streamline the business priorities through these layoffs.
Company management realizes that a different edge is needed to survive in the competitive environment and that a simpler, nimbler, and more responsive operating model will help them achieve this survival goal. CEO Meg Whitman clearly sees the challenge that HPE is facing, especially from cloud service providers. This seems to be one of the drivers behind the layoff strategy. With most people opting for cloud-based storage services from Amazon.com, Inc. (NASDAQ:AMZN) or Alphabet Inc (NASDAQ:GOOGL), they are simply not buying any data storage boxes anymore, like they used to some years ago. Providing storage servers and in-campus data archiving solutions is one of the fundamental business lines of HPE that seem to be under attack, resulting in potential job losses.
The Microsoft Layoffs Analyzed
In early Sept. 2017, Microsoft laid off a few employees, an action that may not be a part of some job cuts announced earlier this year. Based on information from anonymous sources, it seems that the job losses have impacted product development teams, sales teams, and some engineers as well. Though Microsoft announced in July that the job losses would be from overseas locations, these Sept. lay-offs occurred on the U.S. campuses of Microsoft.
Like any large company, Microsoft needs to shed flab and come out slimmer and leaner from time to time, making it part of the industry-wide IT layoffs happening around the globe.
Management seems to realize that, as Microsoft has grown organically and through acquisitions, streamlining the operations and slimming down on employee count is a part of the strategy of structural changes, or reorganizations as they are infamously called.
The July announcement was likely to have the greatest impact on the sales teams, outside the U.S. as well. But this recent announcement seems to indicate that the IT industry is faced with the issue of extra workers, a load that must be jettisoned to stay afloat in the choppy waters.
Focus on Cloud Computing Led to Layoffs at HPE & Microsoft
If we look closely at the reasons for these layoffs, we can come to a conclusion that points towards advancements in the technology.
Microsoft laid off employees a couple of times in 2017, saying the job cuts were introduced to bring in a workforce that is technically qualified with the industry knowledge to address the artificial intelligence (AI) and cloud computing requirements of the industry. These disruptive technologies have changed a number of things in the industry, so sales teams that are better equipped to answer customer queries and speak the same language as today’s cloud computing workforce was the need of the hour. No surprises then that the layoffs were announced to shed the extra flab that did not comply with these industry changes.
Cloud computing is changing the data storage equation completely. While storage security and data privacy are concerns, cloud security technologies are becoming advanced enough to assure the customers of the security of their data on cloud storage. HPE found this technology advancement a disruptive change that set off its strategic layoff decision
People are looking at storage solutions in a totally different way. At one time, HPE could count on the sales of data storage boxes from its storage line of business. But of late, it has experienced a slowdown in those sales. This was one of the main factors that caused it to announce the layoffs in Sept. 2017.
Conclusion on IT Layoffs in Sept. 2017
The IT industry, which has seen a lot of changes in the last decade with the arrival of artificial intelligence and cloud computing, has been lagging with the extra weight of employees that were on-boarded either due to acquisitions or other reasons best known internally. Staying competitive is the number one survival strategy, and this can be achieved through simplified operations and leaner, more equipped teams.
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CNBC Tech; https://www.cnbc.com/2017/07/06/microsoft-will-layoff-thousands-of-employees.html, last accessed October 6, 2017.