Dell staff say they aren't surprised about layoffs following its AI pivot

• Dell laid off more workers this week, starting a process that some think may be the biggest in its history.
• Ten sources at the company shared their reactions to the layoffs with Business Insider.
• They said the move is all about AI and reducing the workforce to about 100,000 people.

Dell began a major internal overhaul this week. Its goal is to "simplify how we operate and reimagine work and customer experiences with AI," Dell execs told employees in an internal memo.

As part of the changes, the sales division was restructured and management streamlined.

Dell also initiated a round of workforce reductions that some employees said they believed would continue across the quarter and potentially be the largest cut in Dell's history.

"Through a reorganization of our go-to-market teams and an ongoing series of actions, we are becoming a leaner company," a Dell spokesperson told Business Insider.

Ten workers from across the company spoke to BI about how they view the changes. All asked not to be named as employees are not permitted to speak to the media.

One sales support employee described how work had slowed down all week as staff watched their inboxes for an invitation to a meeting.

"This is horrible short-term for morale," the employee said. "I wouldn't be surprised if it's going to be in the dumpsters until the next Tell Dell or until we see third-quarter earnings."

"The analogy being used is 'we're burning the boats,'" said another, adding that the situation was "a bit of a dumpster fire."

AI strategy

The layoffs come as Dell rolls out its new AI strategy.

Dell has been trialing AI tools internally since October 2023 and is now putting the plan into action, applying AI across product development, content management, sales tools, and customer service.

The tools will make staff more efficient and free up their time for more important tasks, corporate strategy SVP Vivek Mohindra told BI.

As AI is adopted in the workplace, roles that involve more mundane and repetitive work are expected to become redundant. By 2030, McKinsey estimates that 12 million workers will need to change careers altogether.

Workers said it was unsurprising that layoffs have started as the strategy is initiated.

"I expected it. It's a new quarter, and they're working on getting all support AI-focused," said one laid-off sales worker, who has lost more than 60 people from their team. "I'd rather be let go with a package than quit," the person added.

Several Dell workers said that though layoffs were hard, they understood that AI was changing the nature of work.

"Purely from a business perspective, it makes sense," said one worker, adding that some roles involved only providing statements of work to another division.

"There is a desire to considerably downsize this specific workforce and replace them with AI solutions for sellers to be more self-sufficient and to speed up our current solutioning processes," the employee explained.

Another pointed to the increasing cost of AI servers, saying that reducing the workforce was a way to recoup costs on the enterprise side.

Getting leaner

Aside from the impact of AI and automation, many workers also believed that the restructuring and layoffs were unsurprising business decisions.

"Most of it makes sense ... reductions in sales and marketing because we're relying more heavily on external sales channels that have deeper relationships with customers," shared one senior engineer.

The consolidation of different storage product teams meant some roles were no longer necessary, the engineer said.

But having team managers oversee multiple products rather than focus on one was a downside to the restructuring.

Two Dell employees in human resources told BI that layoffs would bring the workforce to under 100,000 people. Given the company had just under 120,000 full-time employees, according to internal data seen by BI in May, tens of thousands of staff are being let go.

A Dell representative told BI: "We did not report or confirm any numbers associated with the restructure communicated to our internal team."

One of the HR workers said that the target was driven by a Bain mantra that to be a $100 billion company you need to have 100,000 employees.

The worker said they knew Dell had worked with Bain consultants on a number of projects since at least 2021.

More to come

Dell shares were trading at about $180 in late May, but have since tumbled to about $91, valuing the company at just over $64 billion.

Three workers in other departments agreed that Dell liked to run lean.

"This has been an ongoing legacy thing that everybody always says. Anytime we go over 100,000 employees expect some workforce reduction," a sales support worker said.

The employee believed that meant more layoffs lie ahead: "It's going to suck all quarter — let's be real."

Are you a worker at Dell or another company introducing AI tools? Contact this reporter at pthompson@businessinsider.com