Microsoft – Silent knife

Cuts look much bigger than they seem.

• Microsoft’s planned 18,000 job cuts seems to spell the end of in-house manufacturing and has wide implications for Microsoft overall.
• A total of 18,000 permanent positions are to go of which 12,500 are coming from the Nokia Devices and Services business.
• At the same time Microsoft has imposed a policy change to external workers such that they will be now precluded accessing Microsoft’s buildings or its systems for 6 months after every 18 months worked.
• For many external workers, this will have the effect of preventing them from being able to work for the company.
• This is significant because Microsoft is thought to have more than 70,000 external or temporary staff on its books.
• This restriction has been nominally put in place to preserve security but will also have the effect of meaningfully reducing the number of workers on the books.
• The Nokia devices and services business will now be combined into a single business unit under Jo Harlow and Microsoft will look to migrate as much of Nokia X to Windows Phone as it can.
• It also looks very much as if the Asha (low end feature phone) business will be meaningfully reduced in size and all in house manufacturing will be ceased.
• Elsewhere, the organisation is being flattened and streamlined to make it more efficient but above all nimble, aggressive and responsive.
• In the past it has been slow and lumbering and has missed a number of large market opportunities as a result.
• It is clear that Nadella is forcing rapid change upon Microsoft but the real cultural shift has yet to happen.
• The different business lines inside Microsoft have existed for many years in glorious isolation, often proud of the fact that they are independent from one another.
• If Microsoft is to have a chance at being a successful ecosystem company, the ivory towers have to be destroyed and all the businesses need to start pulling together.
• Lack of integration is the biggest and most difficult challenge that Microsoft faces when it comes to transforming its ecosystem into one that users will love.
• There are signs of this coming from the top of Microsoft but this has to filter down through the ranks for it to really have the necessary impact.
• I am increasingly optimistic that Nadella will be able to implement the necessary change but there remains an awful long way to go.
• Efficiency will boost the bottom line but the real story will come to life when the top line begins moving once again.