The 2022-23 tech winter was bitterly cold. It was characterized by hiring freezes, icy workforce cuts, and abruptly terminating employee access to company resources.
Tech layoffs made headlines in 2022, and the trend appears to be continuing in 2023. The 2022 tech winter will be remembered as one of the coldest periods in the industry’s history. Several stages of the pandemic saw a hiring freeze in technology firms.
In Silicon Valley, the competition for software engineers sparked a “talent war” in which companies provided lavish compensation packages to attract and retain top talent. As revenues skyrocketed, CEOs pretended as if the good times would never end.
Big tech leaders and executives blamed economic conditions, which were exacerbated by rising interest rates and inflation. They admit, however, that they over-hired because they underestimated the duration of the pandemic acceleration in the rise of online services.
Mass Cuttings in the Technology Sector
The global nature of layoffs has an impact on the entire IT industry. The downsizing has had an impact on both tech giants and startups. Tech.co has compiled a comprehensive list of the companies that have reduced their workforce. In November 2022, Mark Zuckerberg laid off 11,000 employees at Facebook’s parent company, Meta. This represented a 13% reduction in the firm’s workforce. Amazon, like Meta, reduced its corporate workforce by 10,000 people.
Google laid off 12,000 employees, or 6% of its workforce, while IBM laid off 3,900. Following his takeover of Twitter in October, Elon Musk laid off 3,700 employees, accounting for roughly half of the total workforce (many more have left voluntarily since then). Other smaller organizations experienced similar outcomes, such as the layoff of 1,050 number of employees at the payments company Stripe. Noom, a fitness startup, has cut 1,095 jobs. Kraken, a Bitcoin exchange, also announced the layoff of 1,100 employees.
What Does the Year 2023 Have in Store for the Technology Sector?
Analysts predict that layoffs will continue until at least the first half of 2023. According to Layoffs.fyi, the total number of layoffs in the IT industry in the first 20 days of this year has already surpassed the total number of layoffs in the first six months of 2022. This year has taken an unusual turn, with 154 technology companies alone reporting 55,225 layoffs this month. Amazon announced 10,000 layoffs in November, and another 8,000 layoffs were announced last week. Microsoft announced its intention to lay off 10,000 employees more than a week ago. Google will lay off another 12,000 employees. Spotify also announced on Monday that it will be laying off employees.
Big Tech’s Aggressive Hiring Throughout the Pandemic
At a time when the economy was in a state of flux when the supply of people willing and able to work was rapidly dwindling while labor demand skyrocketed, it’s no surprise that many organizations (notably big tech) adopted aggressive recruiting strategies.
Recruiters and hiring managers became obstinate in their recruiting efforts. So much so that businesses were ‘hoarding’ talented candidates. Any and all candidates were pursued, contacted, and educated on the company in an attempt to sell them the job. Why? Because as Sundar Pichai stated, businesses expected demand growth to continue on its uphill trajectory for a long time.
Amazon’s Surge In Human Capital Demand
At the start of the pandemic, countless retailers around the world were closing their doors, forcing many people to rely on Amazon to fulfill their consumption needs. There was a good reason for this: Amazon is the world’s largest e-commerce company, allowing customers to order anything they need, from groceries to office supplies. However, as more people flocked to Amazon, the company required more workers.
Amazon announced at the time that it would hire 100,000 workers to help with online deliveries across the United States due to increased demand for their services. Amazon hired people for everything from warehouse work to administrative work to going out and delivering packages.
After the Ukraine War sparked an energy crisis and a severe economic downturn, most businesses prioritized overhiring in 2020-2021, forcing them to drastically reduce their spending and lay off a large number of employees. On the other hand, big companies like Apple continued to hire slowly until November 22, 2022, when it announced a hiring freeze.
Apple has avoided layoffs due to its emphasis on product reinvestment. To maintain a competitive advantage, the company reinvests in its current products. Despite safety regulations causing a general decline in demand for physical goods, demand for Apple’s digital services like iTunes, App Store, iCloud, Apple Music, and many others increased.This enabled the company to not only break even, but also profit and grow over the last nine months.
Hire and Fire Quickly: A Dying Strategy
Even though big tech companies wield considerable power in terms of setting the tone and paving the way for the tech industry’s future directions (both in the US and globally), their recent layoffs have not been met with complacency.
Many stakeholders are now questioning whether large tech companies should be allowed to fire employees in large numbers at their discretion. Should workers be viewed as readily replaceable resources? or is it time to exercise some level of care and consideration when cutting costs? Should the careers and job security of everyone be at the mercy of directors and executives?
The fast hiring strategy when the future is “assumed” to be bright and then firing quickly when things appear to be going wrong is unethical and unsustainable. A strong and well-informed labor market now renders this growth mantra obsolete.
Aside from the unpopular and debatably unethical nature of this approach, firing a large number of employees may be costly for companies due to internal restructuring, severance packages, the productivity hit borne by internal teams, rehiring when needed, losing tacit knowledge, and of course, your company’s public image.
Sustainable Hiring for the Future
A LinkedIn report on technology recruitment states, nearly half of recruiters have difficulty finding qualified candidates. Simultaneously, as companies choose to let go of a significant part of their workforce, recruiters are concerned about finding business clients who will hire candidates from them. This has been a season of layoffs and quiet resignations, leaving the labor market in an uncertain mood. It has also sparked debate about the hiring practices of large corporations.