Big Tech layoffs are a problem of their own doing

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The tech industry is reeling from a seemingly non-stop parade of layoffs to and from Silicon Valley and beyond.

Nor are we talking about small numbers.

Meta (META) cut 11,000 jobs in November and started a train of mass layoffs. Then, on January 4th, Amazon (AMZN) laid off her 18,000 employees and piled up. Two weeks later, Microsoft (MSFT) laid off his 10,000 employees, and two days later, on January 20, Alphabet (GOOG, GOOGL) laid off his 12,000 employees. Did.

And those are just the major announcements.

Tech companies have cut 240,000 jobs from the beginning of 2021, according to Since the beginning of 2023? The industry has lost 68,149 jobs.

And there are no signs that the bleeding will stop anytime soon. Just this week, IBM laid off 3,900 of his employees, while SAP announced it would cut 3,000 of his jobs.

But the number of jobs lost isn’t everything.

The tech layoffs that have rocked the industry over the past two years are a disaster of the tech companies themselves. From over-employment to the belief that the world will remain online forever after the pandemic, the industry is battling its own miscalculations.

And now, those employees who staked their futures on these strategic misfires are left to deal with the fallout.

So how did you get here? The short answer is that the economy has taken a turn for the worse as the world begins to emerge from the pandemic. Inflation rose and the Federal Reserve raised interest rates. At least, that’s what the tech executives say.

NEW YORK, NY – JANUARY 25: A man walks near Google offices in New York City on January 25, 2023. The U.S. Department of Justice and a group of eight states ruled Google’s monopoly on the technology that powers online advertising. It sued Google, accusing it of illegal abuse. (Photo by Leonardo Munoz/VIEWpress)

Microsoft’s Satya Nadella told employees that consumers are trying to do more with less after spending so much during the pandemic.Google’s Sundar Pichai told employees In response, the company said it had increased its headcount during the pandemic, but economic conditions had changed. He said the company’s decision is the reason the company is proceeding with furloughs.

In reality, it’s a company hired for a world that thought the growth it experienced during the pandemic would be permanent. We were all stuck at home, ordering products online and streaming content.

Or, in the words of analysts and investors, the pandemic seemed to dramatically increase the TAM (Total Addressable Market) these companies were targeting. Using this logic, growing a larger market than expected at any cost was not only rational, but necessary to remain competitive.

From Q4 2019 to Q3 2022, Microsoft increased headcount by 53.5%, while Google added an additional 57%. Amazon and Meta brought in 93.5% and 94.3% more employees respectively.

With earnings skyrocketing and stock prices skyrocketing, Big Tech was looking for a way to keep the party going. Adding more employees seemed like the best way to go.

And now, with Jay Powell turning the lights on and the music off, those same tech companies must weigh their crude decisions. And consider that the way the industry measures future success will change significantly.

Coinbase CEO Brian Armstrong wrote earlier this month when disclosing his own company’s decision to cut 20% of its team. Especially in this economic environment, it is important to shift focus to operational efficiency. “

Even before the pandemic, I recall talking about the investments Meta Platforms (then known as Facebook) needed to make hiring to capture the ever-growing opportunities they thought were in front of them. can do.

Those days, apparently, are gone for now.

But workers aren’t the only ones Big Tech is cutting.

Companies like Amazon, Microsoft, and Google are reassessing their product portfolios to determine what to keep and what to throw away. Amazon, which has dramatically expanded its warehouse footprint during the pandemic, is looking for ways to sublease some of its warehouse space to third parties.

Google just shut down its Stadia game streaming service, but it’s been around for a while. Meta has cut some of its experimental product divisions, according to Platformer.

Despite these layoffs and moves, Yahoo Finance’s Sam Ro points out The technology industry accounts for just 2.8% of total US employment. In addition, the US economy saw him add 223,000 jobs in December and last year he added 4.5 million jobs.

And while big tech companies are cutting headcount, other industries are hiring more.

Chipotle this week announced plans to hire 15,000 employees in an ongoing expansion plan. Boeing also says he will employ 10,000 people in 2023 as production ramps up.

So while the tech giant seems to have skied off by projecting short-term trends into the future, other industries see the current economic climate as calling for expansion.

Which side of this divide proves right over the long term could have a big impact on the economy in the years to come. Or perhaps both positions will be correct.

Any tips? Email Daniel Howley ( Follow him on Twitter. @Daniel Howley.

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