Microsoft offloads Nuance Enterprise Professional Services, pauses hiring U.S. consultants

Business news sites are reporting that according to an internal Microsoft memo, the company is looking to cut expenses further with a hiring freeze on U.S. consultant roles.

This comes on the heels of last week’s layoff news which reportedly eliminated less than 1% of its workforce.

But it seems the cost cutting measures aren’t over yet. HCLTech, the do-it-all tech arm of India-based HCL Group, has made a deal with Microsoft to absorb (“re-badge”) all 550 Nuance Enterprise Professional Services employees, take over contracts, and deepen the partnership. HCLTech will offer the Microsoft Dynamics 365 Contact Center solution as well as provide migration services from Nuance.

No specific financial information was disclosed about the deal, so it’s hard to say how much money Microsoft saves from this. However, since Microsoft’s total expenses were $35 billion from the most recent quarterly report, such a deal must’ve come with a long string of numbers and at least two commas for it to register significant cost savings.

At least for now Microsoft appears to still value the Nuance product portfolio. Since the $20 billion acquisition in April 2021, Microsoft has left Nuance alone and even kept its branding. The most significant change was to tie it to the Dynamics 365 Contact Center solution, which online visitors may get redirected to as they navigate through the website.

Two somewhat uncomfortable questions when it comes to this type of deal.

First, will there be a headcount reduction on the HCLTech side stemming from this? Companies like HCLTech are usually very sensitive to billing rates and margins. Sure, taking over workers and contracts means bringing in more business, but also means closer scrutiny to justify the buyout. And just for reference, the company states a 13.2% TTM attrition rate.

Second, how does this reflect on Microsoft in terms of its CCaaS ambitions? Like other hyperscalers who’s dipped their toes in CX, it seems more of a side hustle since other cloud products and services make up the majority of revenue. Microsoft has a unique opportunity, however, being the leader in business software and success in spreading the gospel of Teams. Getting customers to sign onto Dynamics 365 CC seems to be a very enticing proposition, but the competition is fierce.