Why Big Tech lay-offs aren’t representative of the strength of the tech industry
It’s been a tough few months for Big Tech and particularly for those employed by Big Tech companies. Layoffs and hiring freezes – often with very little warning – have left thousands out of work.
Apple, Amazon, Meta and Twitter have all made very public layoffs and many other large-scale IT companies are freezing hiring and/or cutting staff. It is understandably an anxious time for those working in the tech industry, especially amidst a backdrop of a looming recession and cost of living crisis, but WaveTrackR data has shown that IT & Internet jobs remain high. If this isn’t the dot-com crash II, what’s going on?
What companies have been affected?
Upon purchasing Twitter, Elon Musk immediately fired a host of top executives and then infamously fired around 50% of all employees at the company, with many saying they found out via email or after being remotely logged off Slack.
Meta recently let go over 11,000 workers, amounting to 13% of its workforce.
Others include, but certainly not limited to: Snapchat parent Snap, which has cut 20% of its employees; enterprise software company Salesforce, which is laying off 2,100 employees; online payment platform Stripe, losing 14% of its workers; Microsoft haven’t revealed how many employees it has cut but is thought to be around 1,000; Amazon has recently announced layoffs (with a recent report in the New York Times revealing a planned 10,000 cut of employees, the largest cut in its history); and Shopify laid off 10% of its global workforce.
Big Tech and the tendency to over-hire
Technology is an incredibly fast-paced industry and the need to furiously hire to keep innovating and to enable development, often causes Big Tech to over-hire.
Meta is a case in point. Zuckerberg’s metaverse dreams led to the company hiring more than 27,000 people over 2020 and 2021 and a further 15,000 people in 2022. That seismic growth over a very short amount of time has meant that the recent layoffs (due to a reported US$9.4 billion loss in 2022 alone) only take the company back to where they were 10 months ago.
Many tech firms boomed during the pandemic when people turned online for both business and entertainment. Hiring sprees were fierce, with companies in a race to secure the most talented candidates out there.
However, several – including Stripe and Shopify – have recently admitted that they misjudged how long the pandemic-fuelled e-commerce boom would last and, in the face of a decrease in online spending, now need to cut roles.
It was a perfect storm of over-investment, sudden changes in consumer spending, and inflation. The looming recession is also causing brands to reduce their digital advertising spend, affecting social media platforms such Meta-owned Facebook and Instagram, Twitter and Tik-Tok, as well as Microsoft and Amazon.
SME tech companies are still hiring…
The good news for many recruiters in the tech industry is that SMEs and companies looking to invest in digital infrastructure are continuing to hire.
October WaveTrackR data revealed that IT & Internet posted 24% of all jobs and it has topped the job posting charts for nearly a year. Hiring has certainly not dropped yet amongst tech SMEs.
There are two main reasons for this.
Firstly, smaller organisations tend not to over-hire in the way that Big Tech does, partially because there often isn’t the capital to grow headcount so quickly.
Secondly, it’s not just tech companies that are hiring tech workers – organisations in every industry need IT professionals but a historical skills shortage has meant that finding qualified candidates remains a challenge.
… and there will now be a flood of talent in the market
Start-ups and SMEs have often struggled to compete with the inflated salaries often offered by Big Tech companies in boom time but that level of salary competition has now eroded, giving smaller tech companies a chance to attract some of the talented candidates that will now enter the jobs market.
Given the skills shortages that continue to plague the tech industry, an influx of experienced candidates is a great thing for SME tech companies and non-traditional tech sectors such as pharma/biotech and financial services – and of course the recruiters that work in these industries. The wealth of talent can now be shared more democratically across a range of different tech spaces.
Smaller tech companies are unlikely to enact huge cuts like big tech
It is expensive for smaller organisations to re-hire once the tech market picks up again – which it will. For many, it is more cost-effective to retain talent even when business is down than it is to let people go and then re-hire when we emerge from the recession that will undoubtedly hit.
Essentially, if these companies want to make it out the other side, they need to hang on to their workers.
This was a lesson learnt by many following the opening up of the economy post-pandemic. Industries such as travel and hospitality couldn’t fill vacancies and business suffered because of a lack of staff.
The last year has seen a candidate-short market in which finding and attracting talented candidates has been incredibly difficult. That climate, plus a continuing skills shortage in the tech sector, will force employers to keep hold of their employees.
Talent may hold off job searching until economy improves
In recent years, especially within Big Tech, there has been a lot of job movement – workers who knew that their skills are highly in demand, moving from job to job, searching for higher pay and compensation.
What we may find now is that there is less movement as workers prioritise job security. There is likely to be a more cautious approach to job searching by those already in tech jobs – something that was highlighted in WaveTrackR’s October Recruitment Trends Report, which found that IT & Internet applications dropped slightly month on month at the same time that application numbers across all industries as a whole rose to the highest level of 2022.
How to attract candidates in the tech industry
It was once the ultimate dream of anyone in the tech industry to work for a Big Tech company. That dream won’t have entirely evaporated but many will be wary of working for a huge multi-national tech company that can hire and fire at will.
The move by some Big Tech organisations to U-turn on remote working has also left many with a sour taste in their mouths. Elon Musk put an end to remote work in his first email to Twitter staff, ordering employees to be at the office at least 40 hours a week, and companies including Apple are facing a rebellion from workers unhappy about new return to office mandates.
If you want to attract the best, offer flexible working arrangements, a healthy company culture (perks that include health and wellness rather than free drinks and a table football table), opportunity for growth, and pay that is aligned with industry expectations.
Across Big Tech, the assumption seemed to be that a consumer move to the digital realm was a permanent behaviour change. They recruited accordingly, hiring in the thousands, leaving them overstaffed when the pandemic-fuelled tech boom shrank and revenue plummeted.
This leaves smaller tech companies who are in a good position to hire – and who clearly are actively hiring, judging by the jobs data – with a wealth of talent suddenly in the pool.
Tech skills are still very much in demand and companies who may have struggled to attract talented candidates are now in a much better position to do so. Those who are now out of a job, or who may find themselves part of future job culls, will not find it difficult to find roles. And recruiters will find a greater supply of tech candidates in the pool.