Tech Industry Layoffs: What Do They Mean?

Tech Industry Layoffs: What Do They Mean?
Tech Industry Layoffs: What do They Mean?

The discipline of computer science first emerged in the late 1950s and consistent and constant research and upgrades resulted in the advent of the World Wide Web as the world entered the new era of the internet. The revolutionary effect of emerging technology on culture and commerce included near-instant communication by electronic mail, instant messaging, voice-over-internet protocol (VoIP), video chats, discussion forums, blogs, social networking sites, and online shopping sites. The importance of this technology was felt in the nineties as many companies sprang up with business ideas around technology.

The Emergence of the Big Tech
Sudden Growth Spurt and Over Hiring
The Current Reality
What do these Layoffs Mean?
Conclusion

The Emergence of the Big Tech

It was after the 2000 dot-com bubble crash that these technology companies thrived and grew to dominate the market with little regulation. The year 2013 was when the term ‘Big Technology’ entered into mass consciousness. ‘Big Tech’ became popular in the year 2017 due to the investigation into the role that technology companies played in the 2016 United States elections. The term also refers to the tech giants that currently dominate the global tech market. These are the five largest American tech companies – Alphabet, Amazon, Apple, Meta, and Microsoft. These companies are also called the ‘Big Five’.

List of Top Companies That Have Laid off Their Employees in 2022!
Top Companies are laying off their employees in 2022. Check out the list of companies that have done this and their reasons for this drastic step.

These companies are leading players in their respective technology fields that range from artificial intelligence, cloud computing, consumer electronics, e-commerce, home automation, online advertising, self-driving cars, social networking, software, and streaming media. With a market capitalization of anywhere between USD 1 trillion to USD 3 trillion these companies are among the most prestigious employers in the world.

Sudden Growth Spurt and Over Hiring

The technology industry has seen unprecedented growth in the last three decades increased multi-fold during the global covid-19 pandemic. Global lockdowns forced companies to overnight scale up their remote working options and find effective alternatives to in-person meetings and conferences. This resulted in tech companies responding with quick over-hiring as product needs evolved rapidly.

Examples of such quick responses to product needs by different businesses include Google, which changed its video conferencing platform Google Meet to accommodate more participants, and Meta changed Whatsapp’s video conferencing facility. These changes required specialized manpower that included product managers, developers, UI/UX designers, etc leading to companies hiring additional staff. Unfortunately, these companies foresaw such a high demand continuing and went on a hiring spree that led to over-hiring.

Sunder Pichai wrote in his letter that he sent to employees after he announced the termination of 12,000 employees – “Over the past two years we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today.”

The Current Reality

The tech industry has seen more than 200,000 job cuts, since the beginning of 2022, a majority of which have come from the ‘big five’. The one major reason being cited for these layoffs has been the slowdown of the global economy and the impending threat of a recession. Of course, over-hiring during the boom has also caused companies to downsize in order to maintain the company’s bottom line during this slowdown.

Fund managers and early investors in successful technology companies also increase pressure to make quick and productive decisions to counter the slowing economy. Altimeter Capital, one of the investors in Mark Zuckerberg’s Meta wrote a letter to Zuckerberg stating – “Like many other companies in a zero-rate world – Meta has drifted into the land of excess – too many people, too many ideas – too little urgency. This lack of focus and fitness is obscured when growth is easy but deadly when growth slows and technology changes.” Similarly, Sunder Pichai received a letter from the Founder and CEO of TCI Fund Management, Christopher Hohn stating – “I believe the management should aim to reduce headcount to around 150,000, which is in line with Alphabet’s headcount at the end of 2021. This would require a total headcount reduction in the order of 20%.”

Another big reason is that many investments into new initiatives are proving to be unprofitable. Some examples include Amazon’s robotics division, Microsoft’s virtual reality and metaverse division AltspaceVR and Meta’s Substack competitor called Bulletin.

CIO of Bridgewater Associates, Ray Dalio said – “What’s happening is that a number of these investments by big techs have negative cash flows. That means that they didn’t have earnings that will support those prices. And in many cases, they just didn’t have earnings. And they relied on either borrowing money to make up the gap or raising venture capital or private equity money.”
Dan Ives, MD of Wedbush Securities, an investment firm, further clarified – “Big Tech has been having fun up to this point but clearly they are going to see significant cost cuts, headcount cuts as well. I think over the next six to nine months as the recession is at the doorstep, time will get tough. I think this dark storm will pass but you cannot think of these tech companies as isolated from this. I think there'll be a massive rip in them as well.”

What do these Layoffs Mean?

Even though tech layoffs have been dominating news headlines recently, the US economy has added 223,000 jobs. Even though Microsoft laid off 10,000 employees, they have, since 2019, added almost 80,000 jobs. Amazon hired 300,000 people last year, even as they laid off 18,000 employees.

What this essentially means is that the tech sector is maturing and now hiring people who can help improve the business’s bottom line. Tech businesses are reducing engineering and operational roles while reallocating their hiring budget to business-related roles that focus on maintaining healthy cash flows for the company.

Conclusion

Although it is likely that tech lay-offs will continue in 2023, the sector is growing and many companies within the sector will continue to hire. It might be to an employee’s benefit to invest in personal and professional growth and narrow efforts towards opening opportunities with the growing companies.

FAQs

Are tech companies laying off?

More than 106,000 workers in U.S.-based tech companies (or tech companies with a large U.S. workforce) have been laid off in mass job cuts so far in 2023.

Which tech sectors are laying off?

In 2023, the workforce reductions have been driven by the biggest names in tech like Google, Amazon, Microsoft, and Meta.

Why is the tech industry laying off?

There are several factors contributing to tech layoffs, including the economy, inflation, higher interest rates, and overhiring.

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