Why are there so many layoffs in the tech industry?

By Soutrik BanerjeeTuesday April 11, 2023

The domain of computers and technology dates back decades ago in the 1950s. Since then there has been a tremendous amount of innovation and research happening which ultimately led to the introduction of the Internet or the World Wide Web. We are going to explore in this blog, why there are so many layoffs in the tech industries.

With the help of constant research and revolutionary inputs in the sector, modes of communication have progressed with the help of electronic mail, messaging, video chats, discussions in blogs and social media platforms, e-commerce websites, and many others. It was during the nineties when ideas around business and innovation were renovated massively into our society.

The Rise of Massive Tech Companies-

Let us go back to the 2000s when the dot com bubble burst and produced several technology companies. Back then, these companies had enough building space to create their products with limited regulations. And so whoever had the best ideas and products dominated the market.

‘Big Tech’ not only paved society with new standards of life but also aligned with our personal lifestyle. Currently, in the United States of America, five of the biggest tech companies are Apple iPhone company, Alphabet, Amazon, Meta, and Microsoft. These companies are called the ‘Big Five’.

Companies like Apple, Alphabet, Amazon, Meta, and Microsoft are leading in domains like Artificial Intelligence, Ecommerce, Researches in Cloud Computing, Electronics goods for consumers, social networking, auto-driving vehicles, software innovation, platforms for media streaming, and many others.

Reports indicate that these companies are valued between $1 trillion to $3 trillion and are considered some of the most reputed employers around the world.

The emerging growth phase-

Tech companies have been growing at a rapid pace over the last few decades. This situation multiplied enormously during the COVID-19 pandemic. Due to the introduction of lockdowns, companies had to revamp remote working criteria and curate a way towards video conferencing rather than an in-person meeting. Such phenomena led the companies to over-hire as the product developed over this span of time.

The most amount of work was done online during the pandemic as the technology was demanding more online operations. People were ordering groceries, attending classes from home, shopping from e-commerce websites, and streaming movies from several platforms. All these required more workforce.

Profits roared along with the over-hiring of these tech companies. Sources indicated that Meta doubled their number of employees where in 2020 there was about 48,268 staff and by 2022 increased to about 80,000.

By November 2022, Meta officially announced laying off about 11,000 people. People are now choosing to go to events, and seminars, travel to other places, and join recreational activities and these have reduced the usage of tech needs.

The product needs required tech companies like Google, Amazon e-commerce, Meta, and Microsoft to address prompt replies and expert supervision. These were to be directed towards skilled individuals and so the companies hired more professionals.

Google enhanced the usage of its Meet video conferencing platform to allow multiple participants to join for meetings. Meta on the other hand also bolstered the video capabilities of Whatsapp. These operations allowed more workforce like UX designers, developers, and several additional employees.

But what these companies lacked was the growing need for such demands after the possible end of a global pandemic. They went on an incessant hiring spree.

Some ground reality-

Current times portray unfortunate situations where above 200,000 lays-off occurred since the start of 2022. All these employees mostly come from multi-trillion dollar companies like Google, Meta, Amazon, and Microsoft.

Citing the official statements of the higher management of these companies, widespread company restructuring is the cause of an economic slowdown followed by global inflation.

These companies were instructed by investors and major stakeholders to address the economic slowdown with immediate solutions and job cuts were the outcomes of these decisions.

In June 2022, consumers witnessed a massive rise in the prices of products by about 9%. In a regular phase of inflation, this generally stands at about 2%. This rise has been recorded highest in 40 years according to the statistics by the US.

The living expense also increased at a daunting rate with businesses making cutbacks in operations. In all spheres, businesses were looking to reduce costs by reducing employee counts and restricting any amount of costs in advertising.

Reports suggest that investors of Meta asked that over-hiring led to the occurrence of excessive ideas which allowed for the slowing of growth and innovation. Another investor of Alphabet said that a 20% reduction in employees should address about 150,000 people, and is needed to maintain the economic development of the company. Also, several investments made in recent times have proved to be unsuccessful and this had led to investors getting cautious with the global economic slowdown.

The robotics department of Amazon followed by Virtual Reality Research by Microsoft and Metaverse studies of Meta have proved to be unsuccessful so far. Since a lot of products are already making profits in the market, tech companies are now looking into diverse options. This will further mature the industry and will be looking for skilled individuals.

During the pandemic employees being hired were not only fresh graduates but also seasoned professionals with huge salaries and multiple benefits. These tech companies are now sensing the pressure to maintain these high-paying skilled individuals.

The global banks increased the interest rates significantly in order to contain the purchasing power of consumers and control inflation. When the interest rates are high companies need to figure out the amount they can borrow in order to grow their businesses.

Such situations directly have lasting impacts on VC funding where investors defer from putting funds into high-risk areas. With continuous inflation, investors have ceased several areas of funding.

What are the ultimate outcomes of these lay-offs?

On the one hand tech layoffs are causing alarming situations for professionals and on the other hand the economy of the US added about 230,000 jobs in their market. Companies like Microsoft Corporation and Amazon have been laying off employees.

But these companies are also adding jobs with diverse roles and skills. This can only indicate that the tech industry is evolving with time and looking to hire experts that can shape the future of the tech industry. These companies are looking for individuals who are well-versed in understanding and maintaining cash flows for the companies.

Some key takeaways-

There will be hiring and firing in any industry. But it is crucial to understand that the tech industry is growing and it will keep on growing. Employees should align their professional growth with companies who have enough space for innovation and research. In the US, the tech industry employs around 8.9 million individuals.

Although big companies announce mega layoffs. But it can be considered that smaller companies keep on hiring experts in their fields. Economists are still unsure about inflation moving downwards.

The current geo-political situation between Ukraine and Russia is also accelerating the concern. But there have been economic uncertainties before and only time and careful strategies by the Government, policymakers, and economists can turn this profoundly alarming situation.

Frequently Asked Questions-

Which companies have laid off employees?

Ans– Companies like Alphabet, Meta, Amazon, and Microsoft had laid several employees.

When will the inflation end?

Ans– Inflation should end with the help of higher interest rates which should reduce the purchasing power of the consumers. The market will make amends with changing trends and require more skilled individuals.