Why are Mega Tech companies laying off 1000s of Employees?
At the time of writing this blog, some of the biggest tech companies in the world, including Meta, Alphabet, Amazon, Microsoft, Twitter, Netflix and Salesforce are laying off thousands of employees. Forecasts for the year 2023 are looking gloomy, and these layoffs could be the first signs of what’s to come! Most company officials have claimed these layoffs are primarily due to economic uncertainty and fears of an upcoming recession.
The reasons for these layoffs vary from one tech company to another. However, one common factor between the companies is they all saw a surge in demand, spending and usage on their platforms during the pandemic. As people were stuck at home, they had more time to spend online. These mega companies tried to keep up with that surge in demand and went on a hiring spree. In fact, they paid a premium to hire the best tech talents in the market.
As the pandemic threat reduced and people started moving out, they could spend less time online than before. With the looming recession, they also started optimizing their digital spending to do more with less. Not only have B2C companies cut down on spending but so have B2B companies.
At the time of writing, below are the number of layoffs announced by the big tech companies
- Amazon - 18,000 Jobs
- Meta – 11,000 Jobs
- Microsoft – 10,000 Jobs
- Google – 12,000 Jobs
- Salesforce – 8,000 Jobs
- Netflix – 300 Jobs
Apple is the only FAANG company which hasn’t announced job cuts yet. However, it has announced a hiring freeze for many jobs outside of research and development. This decision largely applies to roles in corporate functions and standard hardware and software engineering roles.
Other tech companies who have announced job cuts or some cost savings measures around this area include Intel, which has announced it will cut jobs and slow spending on new plants to save $3 Billion. Ride-hailing company Lyft said it would eliminate 13% of its staff, nearly 700 people. Qualcomm also announced hiring freezes anticipating a slow-down in demand for chips due to a slow-down in smartphone sales.
Some other tech companies announcing job cuts or hiring freezes are
- Vimeo
- Upstart
- Adobe
- HP
Apart from the fear of recession, another significant factor contributing to these layoffs is weak consumer demand. The geopolitical crisis faced by the world has resulted in consumer price inflation soaring worldwide, including in major economies such as the US, UK, EU, Japan and India. The ongoing Russia-Ukraine war has disrupted major trade routes making matters worse.
To curb the rapidly rising inflation rates, many central banks across the world were forced to raise interest rates. This results in the slowing down of the economy, which in turn slows down demand, resulting in cost cuttings by companies.
Pressure from investors is another major factor resulting in these tech job layoffs. Most of these major tech giants have plenty of cash reserves to weather the storm while retaining their employees. However, investors don’t have the patience for slow or delayed growth. They want results now, and they put a lot of pressure on these tech companies to make these layoffs.
Some analysts say they do these layoffs to reduce the ballooning salaries of tech workers over the last few years.
Despite facing layoffs from large tech companies, tech workers are not remaining unemployed for long periods of time. Their skills and experience are still in high demand, and they are quickly finding new opportunities in industries such as the automotive industry, non-profit organizations, the Department of Veterans Affairs, and smaller technology firms. These alternative employers recognize the value that these tech workers bring and are eager to hire them.