Big Tech Companies Layoff Continues in 2023. Thousands of workers are being let go by Big Tech

Thousands of workers are being let go by Big Tech. Why? And to what extent should we worry?

IT businesses always seem to promote the newest, most fantastic thing. But lately, the latest invention or device hasn’t taken centre stage in the tech news cycle. Layoffs are what are now making headlines. Without accounting for the knock-on impact of contractors (and other organisations) losing business as budgets get tighter, Big Tech corporations have laid off more than 70,000 people globally in the past year.

What happened to cause this significant shakeout? What does it signify for you and the industry, right? How bad is the damage? Major big companies like Alphabet (12,000 people), Amazon (18,000), Meta (11,000), Twitter (4,000), Microsoft (10,000), and Salesforce have sacked a substantial number of staff after the epidemic hiring binge ended (8,000).

Other well-known brands like Tesla, Netflix, Robin Hood, Snap, Coinbase, and Spotify also receive attention, but their layoffs pale compared to those of the companies above.

It’s important to note that these numbers exclude layoffs that occur later in the hiring process, such as those at advertising agencies when ad spending declines, at manufacturers as orders for tech products fall, or even those that may still occur.
And let’s not forget the people quitting on their own, either because they don’t want to go to work, despite their supervisors, or aren’t fans of Elon Musk’s “hardcore work” ethic.

All the effects above will be felt in the consulting, marketing, advertising, and manufacturing sectors as businesses cut spending and shift to investing in AI innovation.

Then why are there layoffs? Reduced advertising spending and revenue served as the canary in the coal mine. Advertising provides funding for many tech businesses. Therefore, employment expenses were stable for as long as that source of income was, notably in the years before COVID. Layoffs were a foregone conclusion when advertising revenue dropped last year, partly because of worries about a pandemic-induced worldwide slump.

Apple is one example. Although it hasn’t been immune to worker losses brought on by changes in work-from-home policies, it has resisted hiring more people in recent years, so it doesn’t need to reduce staff sizes. How does it affect consumers? Although the headlines may be shocking, the layoffs won’t significantly impact customers. Overall, the development of tech-related goods and services continues to grow.

Even Twitter, which many thought would have died by this point, is attempting to diversify its sources of income. That being said, it’s likely that some side projects, like Mark Zuckerberg’s Metaverse, won’t progress as far as their founders had intended.

The layoffs concentrated in these significant innovation bets that senior leaders make are proof of this (at least at Amazon, Microsoft, and Meta). Leaders have dared to invest in novel items in recent years thanks to low-interest rates and rising COVID-related demand. Aside from AI, that investment is currently slowing or nonexistent.

What about those who experienced a job loss? For the people affected, layoffs may be heartbreaking. But who is impacted in this situation? Most of those who lose employment are highly educated and employable professionals.

They frequently receive severance payouts and support that go above the bare minimums mandated by law. For instance, Amazon stated clearly that their losses would not be in warehouses but in IT workers and people who support them.

These workers will enter a more competitive job market, even though it doesn’t seem to be as heated as many had anticipated, and having a Big Tech employer on their resume will be a huge advantage.

How does this affect the sector? Salaries are anticipated to decline as experienced computer professionals seek work again, and higher education and experience will be needed to find jobs. These market corrections may indicate that the sector is catching up to other, more established market segments.

The recent layoffs are noteworthy, but they won’t significantly impact the economy as a whole. Even 100,000 layoffs by Big Tech would only represent a small portion of the industry’s workforce.

Even though the reported statistics may appear enormous, they are frequently not expressed as a percentage of total pay expenditure or personnel. For other tech companies, they represent just a tiny portion of the enormous number of new personnel made during the pandemic. Big Tech is still significant employment and will continue to influence many facets of our lives significantly.

Continued tech job layoff

As many firms struggled to find skilled IT staff, 2022 became known as the year that dozens of tech organisations started to lay off thousands of employees. Additionally, 2023 appears to be going along the same lines, with numerous IT companies reducing their workforces.

Layoffs. FYI, a website that tracks releases reports that 200 tech businesses have fired 59,448 people in 2023. The official unemployment rate in the United States as of December 2022 is 3.5 per cent, matching the 10-year low mark attained in February 2020, right before the COVID-19 epidemic started.

CompTIA reports that the unemployment rate in the tech sector was just under 2 per cent as of December, which is more telling. Nevertheless, CompTIA also noted that the number of IT job listings decreased from their peak of almost 400,000 in January 2022 to just over 250,000 in December.

While receiving a pink slip can be difficult, not everything is lost in the gloom. In the tech sector, businesses—at least the bigger ones—often offer severance packages that include several weeks to months of income, paid insurance, and assistance finding new employment.

Furthermore, it’s possible that those individuals won’t be out of a job for very long because many businesses—even ones that aren’t traditionally thought of as “tech companies”—rely on expanding their IT capacities to satisfy the demands of their clients.

According to an article published on Wednesday by the Los Angeles Times, the early 2000s dot-com bubble implosion caused a rush of experienced IT workers, particularly software engineers, to enter the labour market, which in turn fueled a fresh wave of IT spending. That might happen once more now that recently released tech workers can migrate to smaller firms with more flexibility and other businesses eager to increase their IT capacity.

With 3,900 job cuts worldwide, IBM announces layoffs amid the tech slump.
International Business Machines Corp. anticipated positive yearly revenues while stating it will reduce its global staff by 1.5%, mirroring similar job cuts made in recent months by many of its technological competitors.

Chief Financial Officer James Kavanaugh said in an interview on Wednesday that the cutbacks will roughly total 3,900. According to him, the cuts will cost the business approximately $300 million and will target staff who remained following the spinoff of the Watson Health and Kyndryl segments. According to Kavanaugh, IBM still plans to fill positions in “higher-growth areas.”

In its prediction, IBM stated that while sales will grow by the mid-single digits, free cash flow in the fiscal year of 2023 is anticipated to be $10.5 billion. According to statistics provided by Bloomberg, analysts predicted a free cash flow of $9.18 billion yearly sales growth of 1.2%, on average.

According to Kavanaugh, IBM is benefiting from the anticipated decline of the US currency in 2023. According to him, currency changes should have an overall neutral impact in 2023; they will hinder performance in the first half before becoming a tailwind.

After closing at $140.76 in New York, shares decreased by nearly 2% in after-hours trade. One of the few significant technology companies that saw a value increase in 2022 was represented by the claims, which rose 5.4%.

Arvind Krishna, the CEO, has been working to shift Big Blue’s traditional business of infrastructure and information technology services to the quickly expanding cloud computing sector. After nearly ten years of no growth or declining sales, the company’s revenue climbed in 2022 for the second consecutive year.

The Armonk, a New York-based corporation, reported that fourth-quarter revenue remained constant at $16.7 billion. Analysts pegged the value at $16.4 billion on average. The period ended December 31 saw earnings of $3.60 per share versus analysts’ expectations of $3.58 per share.

Anurag Rana, a Bloomberg Intelligence analyst, wrote in a note following the results that the projection “signals steady demand for its consultancy and software offerings.” Considering the recent decrease in valuations, “another major figure that stuck out to us was the free-cash-flow estimate of $10.5 billion for the whole year, which we believe now provides them some flexibility to pursue a software acquisition.”

In 2022, hybrid cloud revenue increased by 11% to $22.4 billion. Krishna’s approach has been centred on enhancing the business’ hybrid cloud capabilities, which include services for clients that manage their own data centres in combination with those from third-party, public cloud services providers like Amazon.com Inc. and Microsoft Corp.

Software sales rose 2.8% to $7.29 billion, while those of infrastructure gained 1.6% to $4.48 billion. Analysts predicted declines in both categories. To $4.77 billion, they were consulting increased by 0.5%.

Krishna’s purchased division Red Hat, which has been a significant component of his plan, saw a gain in revenue of 10%; yet, this was another relatively slow quarter for a business that typically experienced growth of over 20%. Two hundred sixty thousand people work at IBM currently, according to Kavanaugh. That is almost 22,000 less than what was revealed for December 2021.

Edited by Prakriti Arora