Alibaba Group Holding Ltd’s cloud unit has started a round of downsizing that will impact 7% of the staff as it streamlines its business in preparation for an IPO, a source familiar with the matter said on Tuesday.

The cloud unit has started to offer severance to employees, the source said. Alibaba did not immediately respond to a Reuters request for comment.

Earlier this month, the Chinese tech giant laid out listing and fund-raising plans for four of its business units, including its logistics unit Cainiao. As part of the plans, China’s largest cloud service is slated to be listed next year.

Alibaba misses revenue estimate, approves cloud unit spinoff

The development is part of Alibaba’s announcement earlier this year of plans to restructure into six units, following a two-year regulatory crackdown on China’s tech sector.

Alibaba’s cloud division reported a revenue of 18.6 billion yuan ($2.69 billion) in the recent quarter, down 2% year-on-year.