microsoftwayMicrosoft’s decision to cut 18,000 jobs from its workforce represents the largest round of layoffs in the company’s history, but it also understates the impact on the company and the job market.

In addition to those core cuts, the company is aiming to significantly reduce its reliance on contingent workers — the thousands of vendors and contractors who work on Microsoft projects and products but are employed through third-party placement firms and consulting companies.

In Microsoft lingo, these are “orange badges,” as opposed the blue badges worn by people employed directly by the company. This is sometimes described as Microsoft’s “shadow workforce,” because the jobs aren’t included in the official employment numbers provided by the company.

Microsoft isn’t saying how many contingent jobs will be cut across the company, but we’ve confirmed that the 18,000 number released by the company doesn’t include the expected additional cutbacks in vendors and contractors.

Mary Jo Foley of ZDNet cites an email from Microsoft chief operating officer Kevin Turner to the company’s sales and marketing group, in which Turner says the plan inside that group is to “reduce our reliance on contingent staff augmentation by over 20 percent year-over-year.”

We’re hearing from people inside the company that Microsoft started changing its practices with some contingent contracts even in advance of this morning’s announcements — putting some workers on shorter-term contracts, allowing them to be reconsidered after the current quarter.

Microsoft CEO Satya Nadella alluded to the impact on contingent staff in his email to employees, saying that the changes “will affect both the Microsoft workforce and our vendor staff,” without going into additional details. This is part of Nadella’s broader effort to streamline the company’s engineering and product development to be more responsive and bring products to market more quickly.

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  • Patrick Husting

    Good move. Hire people that can do their own job and not sub it out.

  • Christopher Budd

    Not surprising, there’s been oddness on the ground around contracts since May or so. So this change has been in the works for a while.

    This is potentially huge: it can change how Microsoft works since they rely so heavily on CSGs to get stuff done.

    • Thomas

      I used to work for a loc vendor and boy did we feel like being a part of Microsoft. We even had access to Product Studio which wasn’t even limited to the loc bugs of our products at the time.

      Seeing that my old employer is still going strong with Microsoft (including having offices in and around Redmond) it could be a blow to both MS internal loc and some vendor companies. It will be interesting to observe how it plays out during the coming months.

  • Christian Hansson

    Wonder how many of the layoffs done in the US will be H1B visa holders, my guess 0%, and then MSFT will go and ask for MORE H1B visas as well….

  • really

    “Microsoft isn’t saying how many contingent jobs will be cut across the company”

    If Microsoft asks for more H1-Bs or even the same as the previous year, they are freakin’ criminals. Full stop.

    One could ask. The passive voice here implies reporters are helpless. But hey, maybe they could hire “no comment” Amazon robo-press secretary.

    We get hard figures on full time layoffs due to a federal law passed during the Reagan years dealing with large layoffs. You guys need to get politically active because companies are only going to do things for workers they are required to do by law and are actually penalized if they don’t.

  • Dave

    I truly don’t understand the vitriol toward H1B holders. The typical H1B holder is a highly skilled, well compensated individual who contributes greatly to the local economy, including paying their fair share of taxes for schools, infrastructure, etc. Having more talent here in the area means a more fertile ground for local industry to continue to grow and prosper, and it also makes the Puget Sound area more attractive for additional employers looking to open new satellite offices. The alternative would be having our local employers open remote offices overseas, which really doesn’t help us out here locally at all.

    • Bob

      You have a lack of imagination to say that the “only alternative” is to open remote offices. You are driving an agenda to hire more H1-Bs.

      H1-B suppress raising market rates for tech professionals. As we tell the kids to get into STEM, they see the truth that their Dads are discarded and employers are disingenuous about hiring Americans, especially those over 40 and minorities when qualified ones apply.

      Many openings on Dice are more H1-Bs and they have no intention to hire Americans. There is not a great future for your workaday programmer due to H1-Bs in our market. H1-Bs are not paid market rate and it’s an indentured arrangement where, if they complain, they get black listed and sent home. Their visa is held by the employer not the employee. This is socialism and welfare of indentured workers for the company. The only ones that can file formal complaint is the H1-B or an employee at the company. That’s how it’s set up. Funny, huh?

      Everyone hates H1-Bs except the 1% and H1-Bs and those that make their money peddling them. They see no prosecutions or penalties to anyone for breaking the thread-thin protections we have now. No wonder people hate it.

      • z

        Unfortunately, you cannot push American kids into STEM though first-gen immigrants do this with theirs.

        Looking at schools in Issaquah and Redmond, kids of first-gen immigrants concentrate on academics and their parents emphasize value of this, they take additional classes in math etc., often at the local classes/schools teaching in their native language. American kids prefer sports or popularity crap, their parents put more value on these topics. School program is so dumbed-down and illogical that even truly talented kids give up on STEM subjects by the time they reach high school unless parents worked with them or sent them to these additional classes.

        Good luck, keep on staying butt-hurt and unemployed. It is likely your kids will do the same.

      • SeaSpider

        Suppressing market rates? Are you kidding me? Software engineers make more than just about any other category of engineer out there. For a job that doesn’t even require a college degree it’s extremely well paying. Boo-hoo for the poor oppressed software engineers! Also H1-Bs at MS do not cost less to employ – I know this for a direct fact from having seen the offer letters in the system. They work off the same pay chart as everyone else and that pay chart has gone up year after year. Midpoint for a Level 63 engineer is $141,500 + 15% bonus whether you’re from Indiana or India (actually that’s a FY14 number so by now it’s actually higher). On top of that companies have to pay considerable legal fees with no guarantee of actually getting a visa (and after about mid-May you can pretty much forget about getting an H1-B visa). Most of the recruiters I know at MS try to avoid candidates who need a H1-B because A) there’s no guarantee they’ll get one and B) it’s just that much more paperwork and headaches to deal with.

        As for worries about age discrimination, being 49 I’m familiar with this and it is a VERY real problem in tech. That said, it’s also something a lot of candidates bring on themselves. I see candidates who insist on listing every job on their resume even if it’s completely inapplicable to the role they’re applying for. If you’re applying for a job to develop an Android app your Lawson experience from the early 90’s is completely irrelevant. If a job calls for 5-10 years of experience there is ZERO reason you should list any jobs older than 10 years. It does NOT make you look more experienced, it just makes you look too expensive and/or too old. Why shoot yourself in the foot like that? Also NEVER list your graduation dates. Nobody cares when you graduated and more often then not they don’t even care about your degree unless it’s an engineering role. Finally, just because you’re older and have more experience doesn’t mean you’re smarter, better or even more mature.

        • waldo Pepper

          But disguising your age is DECEPTIVE. And imagine the embarrassment you’ll face when you enter the interview looking 55 and they thought you were 35. I for one did this, drove 1 hour each way only to have the AS APP walk out of the friggin room after 5 minutes. BE TRUTHFUL they are expecting a 55 year old, be authentic,

  • apfwebs

    Of course, the cuts also don’t mention cuts on down the line…like how many fast food workers will lose work due to MS staff moving away.

    • balls187

      Maybe those fastfood workers should have used their income to buy Zunes and Windows Phones instead of ipods and iphones.

      • balls3000

        Maybe Microsoft employees shouldve been encouraged to buy ipods and iphones so they could see what the competition does and compete instead of encouraging employees to live in an echo chamber where the outside world doesn’t exist.

        • balls187

          Zune and Windows Phone did/does compete with ipod and iphone from a product perspective, but MSFT was way too late to the game.

          Innovators Dilemma.

      • boop

        Or maybe they should buy Zunes, Windows phones, iPods or iPhones but instead save their money for a rainy day.

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  • Michael2255

    What about the H1-B’s?

  • David Mowers

    America needs to break up all the monopolies and let the people carve up what pieces they can afford to purchase and start millions of individual smaller firms.

    When a company starts dictating legislative policy…THAT is the sign it is too big to be allowed to continue.

  • J242

    This is a really bad move. There are thousands of current V- employees who have been working at high levels on teams throughout the company that will have to be replaced for 6 months now. If MS wants to be more competitive, it’s not the best idea to kick out a ton of skilled, valued vendors who the competition (Amazon) will be happy to pick through and bring on as FTE to their heart’s content. MS is going to lose a LOT of talent over this.

    • boop

      I am not so sure about Amazon picking these folks.

      • J242

        Amazon has been snagging former MS employees left and right for the past couple of years. I know many former high-up folks at MS whose positions were downsized by Sinofsky & Ballmer and Amazon swooped right in to get them. Now they are making more money, with better benefits and Amazon is reaping the rewards for it. Amazon is growing FAST and in a HUGE way. If you ever check out the downtown/South Lake Union area of Seattle you’ll notice more than a dozen construction cranes as Amazon is building a massive campus addition which based on estimates is to house upwards of 35,000 new employees. Do you honestly think they won’t look to grab folks MS decided weren’t relevant anymore? Well, you’d be wrong. It’s their MO these days.

        • SeaSpider

          Flipside is Amazon is doing a horrible job at retaining employees. For every MS employee leaving for Amazon you can probably find an Amazon employee leaving for MS. Amazon has one of the highest employee turnover rates of any company in the Fortune 500. Much higher than MS. Personally, you couldn’t pay me enough to work at either company these days!

          • J242

            I don’t know if you’re aware but Amazon has a program where they pay people to leave after training. It’s for the majority of employees working the warehouses and whatnot but Amazon gives them a pretty good sized bonus if they decide it just isn’t in their wheelhouse or they don’t want the job anymore. That directly adds to their turnover rate and artificially inflates the numbers reported. Amazon pays better than MS, offers a better benefits package and more. Knowing and having worked with many people here in the industry I haven’t yet heard of any significant # of people leaving Amazon for MS, it’s been overwhelmingly the other direction.

    • Guest5000

      Agreed. This is an egregious move made in incredibly poor taste. There’s no question that MS needs to clean up dead weight hindering it from being agile and competitive. Doing it by carpet bombing the entire vendor program is not the answer however. What you’ve essentially done Microsoft is, a) insulted high strength talent, b) disrupted a clean ecosystem and job security system for that matter, c) revisited a dirty past which was the permatemp lawsuit; all of which will ultimately drive away talent. Your focus should be agnostic and focus on every single person working for or at your company. If you are a talented individual that provides strong value and meet the requirements that make MS successful, you stay. If not, whether blue or orange, you get a sexy pink slip in your locker. End of story. My only hope, ending my sentiments, is that Microsoft does the right thing and converts contract employees to blue or aids in reassignment by other means.

    • waldo Pepper

      Amazon doesn’t pay nearly as well so I doubt this.

      • J242

        I suppose that depends on the role. For technical program managers, the pay seems to be quite a bit better and they aren’t bogged down in presenting endless ppts and reporting. It’s “get it done and get it done right” without all of the extra hoops to jump through.

  • ReallyDisqusted

    It’s been a little over a week now since this new policy was announced. I would be interested to hear how the v- companies are responding. All you v-dashers out there–tons of you our there I’m sure reading this–what are your companies telling you they’re going to do now. This is a huge blow to the business model of many companies, not to mention a blow to individual v- workers. What are you hearing?

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