AI is raising the bar for sales — and Microsoft's layoffs prove the 'relationship guy' is out, says a software investor

Microsoft began culling less than 4% of its workforce, or about 9,000 employees, earlier this month, many of them generalist sales reps.Sven Hoppe/picture alliance via Getty ImagesThe traditional "relationship guy" in sales might be on the way out, said a software investor.AI has raised the bar for customer expectations, said Jason Lemkin, an investor in software startups.Microsoft's layoffs show that solution engineers who know the product will replace salespeople, he added.The traditional "relationship guy" in sales might be on the way out in the AI era, said Jason Lemkin, an investor in software startups.The VC said Microsoft's recent layoffs are a sign of what's to come.Microsoft began culling less than 4% of its workforce, or about 9,000 employees, earlier this month, many of them generalist sales reps. That move reflects a broader shift: Salespeople who rely on soft skills may soon be replaced with solution engineers who know the product inside out, Lemkin said on an episode of the "Twenty Minute VC" podcast published Thursday."My rough sense is 30% to 40% of one-to-two call sales reps are going to be replaced by AI," he said.Microsoft is doing what other companies are only thinking about, he added."We're not going to have a guy that doesn't know our product in the age of AI show up to big deals," Lemkin said. "I would rather have a solution engineer that knows this cold, that partners with somebody, or is less good in sales.""You better be worried if you're a generalist sales guy that thinks being a relationship guy wins today. That's Microsoft's point," he said.Lemkin also said AI has raised the bar for customer expectations. Companies would want to "replace folks that don't know my product with folks that do," he added.Rory O'Driscoll, a longtime general partner at Scale Venture Partners, said on the episode that Microsoft's layoffs weren't framed as the company replacing employees with AI."It was couched as a 'replace with better people' story," he said. "It's hard to argue with that.""It's always impressive to me that these companies with 40% operating margins are still willing to grind another point out of it," O'Driscoll said. "It's just so capitalistic."Lemkin and O'Driscoll did not respond to a request for comment from Business Insider. A representative for Microsoft declined to comment.Microsoft rewires its salesforceMicrosoft's latest round of layoffs comes as the company revises its strategy for selling AI tools amid increasing competition from OpenAI and Google.The job cuts targeted traditional salespeople that the company intends to replace with more technical salespeople, Business Insider learned earlier this month from sources familiar with the plans and internal documents.Microsoft confirmed it's replacing some specialist roles with solutions engineers to deepen the technical and industry understanding among its salesforce, and that it plans to hire more salespeople outside its headquarters to get more sellers out in the field.The company has received feedback from customers that they had to engage with too many salespeople before getting down to the technical details and demos. "The customer wants Microsoft to bring their technical people in front of them quickly," one of the people said. "We need someone who is more technical, much earlier in the cycle."In an internal memo viewed by Business Insider, Microsoft's sales chief, Judson Althoff, said he is revamping his unit to make it more AI-focused.Read the original article on Business Insider

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