With an incredibly competitive technological horizon, Microsoft (NASDAQ:$MSFT) has released plans to expand their cloud-computing business in order to capture the fast-growing sector. According to a memo released to employees, Microsoft plans to accomplish this through the realignment of their sales team goals.
Although there have not yet been details about layoffs, there is belief that cuts will be made to team. Albeit, layoffs are not expected to be very deep.
According to anonymous chats between Microsoft employees, the tech giant is refocusing a large portion of its efforts to cloud based services rather than the licensing of software. Despite talks of potential layoffs, employees of Microsoft seem to agree with this change, as it seems to be the best route for the company to take in order to grow.
While the reorganization was reported last week, details regarding talent cuts from reorganization were reported by Tech Crunch, with GeekWire clearing up that there were no mentions of layoffs in the memo. Although Microsoft representatives had little to say about the rumored employee cuts, a company representative did comment, “Microsoft is implementing changes to better serve our customers and partners.”
This new push for top-line growth comes as Microsoft’s traditional buy-once software business, albeit still huge, has experienced decline due to the rage of the cloud business. As such, Microsoft aims to reorganize their sales strategies in order to take advantage of a fast-growing subscription-based cloud service that has brought them great success.
As GeekWire continues to report, Microsoft plans to focus its sales efforts on just two groups of customers. The first targeted group being general enterprises, while Microsoft aims to target SMC (small, medium, and corporate customers)
The re-focusing of their sales group might lead investors to believe that their cloud service isn’t performing as well as expected, but in reality, sales are great, with a run rate of $15.2 billion thus far. Rather, the reorganization of sales teams was announced with the intention to reduce overall cost of selling these services, ultimately increasing the revenue per employee levels that Microsoft would be more comfortable with.
Another factor in Microsoft’s decision was an over-saturation of their sales team. That is, there were far too many people selling Acure, their product in competition with Amazon Web Services, which resulted in multiple commission and credit claims from varying teams and people.
This leads to a secondary with Microsoft’s Azure, as there is a lack of actual adoption by companies. Although enterprise software allows for a trial run that lets users test the product, cloud services are a pay-buy-use model, so if companies never use their credits, they don’t pay for the service. As a result, many companies simply load the minimum amount of credit required to satisfy their contracts.
As a part of the memo, Microsoft also expressed their belief that focusing on industries rather than on products will be a more effective strategy as they are better able to sell a tightly knit bunch of cloud services that suit the direct needs of the client. Microsoft plans to accomplish this through this reorganization, by streamlining efforts of the enterprise sales teams to sell to six core industries: government, health, education, manufacturing, and financial services.
Additionally, the memo noted that there will be creation of new teams, as well as the re-shuffling of ones that already exist.
June 30th marks the end of Microsoft’s fiscal year, which means it will typically announce reorganizations and layoffs in the beginning of July. Employees are eager to hear more details, as Microsoft has promised to release information of any significant changes.
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