Explained: Why are tech giants laying off a mass of humanity?

"I found out that I am one of the 10 per cent impacted by the Salesforce layoffs announced in January. I'm certain that everyone who has received similar news has their own private battles to overcome. As for myself, this involves being able to continue working in a country that I now call my second home," shares Jayant Dutta, an Indian-origin worker who recently got laid off by Salesforce in the U.S.

In what could be touted as the worst month ever for the tech industry, close to 1 lakh employees have been laid off in the month of January globally. The tech giants leading the mass wave of layoffs are Amazon (18,000), Microsoft (10,000), Google (12,000), Meta (11,000), HP (6000), and Twitter (3700), barring Apple.

According to TheLayoff.com, a layoff tracking website, more than 3,300 tech employees lost jobs daily on average by more than 288 companies worldwide. Now joining the ongoing layoff season is Salesforce, which sacked 7000 employees, slashing 10 per cent of its entire workforce as it announced last month.

Mid-day Online reached out to city-based economists and tech heads who break down the mass firings that are wreaking havoc in the technology sector. Samie Ahmad, a professor at Narsee Monjee Institute of Management Studies says, "The sacking episodes have gained pace amid the global economic meltdown and weak investor sentiments that could topple into a recession."

The real reasons for the big tech layoffs:

Over-hiring during the pandemic
"The tech sector is a case of exponential growth owing to perpetual capitalisation on the rising trends. Hence, its peaking performance during the work-from-home revolution did not surprise market researchers and analysts," said Ahmad. The Covid-19 pandemic led to a rise in demand for products like video conferencing applications, UI and UX designs, and other project management tools.

With the increased demand came the bloated hiring campaigns to compensate on the supply front. This led to an employment spree with fat paychecks on a global level. Tech giants like Amazon and Meta doubled their worker count in a matter of months leading to over-hiring during the pandemic. However, three years into it, the products began to mature with no steep development required now. Thus, companies have started reducing their headcount to adjust to the present times.

What followed was a rough 2022 when big tech firms began bleeding workers left, right and centre. Sundar Pichai pointed out this in the letter he sent to employees after announcing the termination of 12,000 people. He said, "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."

In the mood for Recession
City-based tech head, Rajeev Karanth shares that the market slowdown due to panic over a possible recession, coupled with the big blow to tech companies' stock prices last year, has made "efficiency" a new concern for tech CEOs.

Gaurav Gupta, the technology head at India's prominent fintech company (name undisclosed) adds, "Amid widespread rumours regarding the global economic slowdown, we are reassessing our budgets to align with a potential recession. Our economic advisors have released a cautionary statement impending a global recession in 2023."

The World Bank and International Monetary Fund (IMF) have already cautioned economies to brace up for an economic slowdown in the face of growth. A majority of the World Economic Forum's Community expects the Russia-Ukraine war to continue to affect the global economy and anticipates further monetary tightening across the world.

Rise of restless investors
Tech companies are facing a myriad of challenges since the past financial year slipping into the next. Rising interest rates combined with inflation over the past year have staggered technology shares, leaving advertisers with tight budgets and a rollback on online advertisement spending.

Gaurav adds that hikes in global interest rates in particular have led to a loss of appetite for Big Tech company shares. The bleak macroeconomic climate has in turn piled pressure on fund managers and early investors in big tech to make quick decisions for countering the slowdown in the growth of the tech sector.

In October last year, Meta's founder and CEO Mark Zuckerberg received a letter from Altimeter Capital Chair and Chief Executive Brad Gerstner who suggested a lean working structure and streamlining of operations. The letter read, "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."

Flattening growth of the tech sector
Ahmad comments, "The tech sector has grown rapidly over the past three decades and experts are of the opinion that the recent job cuts indicate the maturing of the tech sector after a period of hypergrowth."

Satya Nadela resonates with this theory in the letter he sent to employees after announcing the layoffs of 10,000 people at Microsoft. The letter read, "We're living through times of significant change, and as I meet with customers and partners, a few things are clear. First, as we saw customers accelerate their digital spending during the pandemic, we're now seeing them optimise their digital spending to do more with less."

"Layoffs are hard! When we work, we create a very high plan and ambitions with the company. We have taken a house loan, a new car and a lot on the dream of future stock valuation. And suddenly, one day, our emails started bouncing, we had difficulty logging in, and our badge stopped working," posted Shivi Tandon on her LinkedIn after she received her pink slip from Amazon.

Braving the layoff season
To cope with the catastrophic mass layoffs, Ashish Modani, the founder at SLA Finserv Private Limited takes us through ways to brave a layoff:

1. Update your resume and LinkedIn profile, and actively search for job openings in your field or related fields.

2. Consider taking online courses or upskilling to make yourself more attractive to potential employers.

3. Network with friends, family, and professional contacts to see if they know of any job openings.

4. Utilise unemployment benefits if you are eligible.

5. Seek support from friends, family, or a support group if you are feeling overwhelmed.

In the future, it is advisable to have a contingency plan in place in case of job loss, such as having an emergency fund saved up or considering freelance or gig work options. It is also important to stay updated on industry trends and continuously update your skillset to remain competitive in the job market.

The current ongoing global layoffs can be seen as a result of the VUCA environment we live in. The Covid-19 pandemic has significantly impacted the global economy, leading to increased Volatility, Uncertainty, Complexity, and Ambiguity.

This is a commonly recommended guideline to help manage debt and maintain financial stability. By keeping debt payments below 25 per cent of your take-home income, one can ensure that they have enough money to cover other expenses and have some savings. However, it's important to keep in mind that everyone's financial situation is unique and what works for one person may not work for another.

Avoid making impulsive purchases that are not necessary. It's important to have a balanced approach to spending and saving so that you can achieve your long-term financial goals while still enjoying life's pleasures.

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