Microsoft to shut down office in Pakistan, lay off 5 employees

Microsoft has decided to close its office in Pakistan and lay off five employees, according to a media report.

Earlier, media reports had said that the global tech giant had shut down its operations in the country.

The reports were based on a post on LinkedIn by Javed Rehman (former head of Microsoft Pakistan), who claimed, citing sources, that the company was officially closing its operations in Pakistan.

It is also reported that Microsoft’s on-the-ground presence in Pakistan was intact until recently, although the local workforce was quite limited, with most of the company’s operations being run through overseas offices and partners in Pakistan.

A Microsoft spokesperson said that we will provide services to our customers through our strong and extensive partner organization and nearby offices, a model we have successfully implemented in many other countries around the world.

The spokesperson stated that the company will provide services through local partners and overseas offices.

The decision to shift operations from Pakistan is part of the company’s ongoing global layoffs as it shifts to artificial intelligence (AI).

On Wednesday, Microsoft announced that it was laying off 4% of its approximately 228,000 employees, according to Reuters. In May, the company announced the layoffs of 6,000 employees.

The company said it plans to run its operations with fewer managers and improve its products, processes, and roles.

Changing business models

In a statement issued on Wednesday, the Ministry of Information Technology (IT) and Telecommunication said that global tech companies are shifting from on-premises software deployment to the Software as a Service (SaaS) model, and Microsoft’s decision reflects the same shift.

According to technology expert Habibullah Khan, large software companies operate on two business models: on-premises and SaaS.

Under the on-premises model, the company installs and runs the software on the customer’s servers or infrastructure, while the hardware and data centers are maintained by the customer, with the company generating revenue from the sale of one-time licenses.

On-premises software deployment is a capital-intensive model and involves a high initial cost, while there are also recurring costs for maintenance and upgrades.

In contrast, the SaaS model allows the company to provide services at a specific location without a physical presence, as the software is hosted in the cloud, with the company generating revenue through subscription fees.

Habibullah Khan explained that with the evolution of technology, more companies have shifted to the SaaS model, which reduces initial costs.

Not an ‘exit’, change in service model

The IT ministry added that Microsoft’s move cannot be seen as an exit from Pakistan, but rather a shift towards a partner-based, cloud-based service model.

Over the past few years, several multinational companies in various sectors have either closed their operations in Pakistan or sold them to local entities. Last month, ride-hailing service Careem announced that it would shut down its services in Pakistan from July 18.

However, Habibullah Khan believes that Microsoft’s move is different from other companies’ withdrawals, as the company now earns almost all of its revenue through cloud-based subscriptions.

He added that the company is cutting costs globally, and the decision to close the office in Pakistan reflects a shift towards a SaaS and AI model, and does not have any negative impact on Pakistan’s technology ecosystem or economy.