Big Tech or Big Bubble?
Navigating a Big Tech Crisis: Expectations and Actions? Since the beginning of 2023, all we’re hearing about are tech layoffs:
- Amazon first cut 18 thousand jobs and then announced an additional 9 thousand jobs cut, including positions in its HR, Twitch, and AWS divisions.
- Zoom fired 15% of its workforce or 1300 employees.
- Coinbase announced the lay-off of about 20% of its workforce.
- Dell cut 6500 thousand of jobs or about 5% of its team.
- Meta has made a second massive cut to its team. The previous one came in November 2022, when Meta announced it would lay off 11 thousand of workers. In addition, Meta is also going to close 5 thousand open vacancies.
We pay extra attention to Meta because it is one of the most prominent examples of the post-pandemic tech bubble. According to Meta’s former employees themselves, the company has hired so many people that some of them simply had nothing to do.
This over-the-board hiring is now causing issues. And not only for the laid-off employees but for the entire tech industry. What else is causing this crisis, and how can we weather this storm?
The Drop-in Online Spending:
The COVID-19 pandemic was online shopping’s time to shine. From 2019 to 2020, online shopping grew by almost 30% due to people’s inability to shop in person. This triggered a huge growth in the e-Commerce industry. Online shops and e-Commerce platforms needed to hire more people. Amazon, for example, not only went on what the New York Times described as a “Hiring Spree”, but increased their minimum pay by $2 an hour to attract new employees.
As global vaccination rates grew and COVID became another part of our lives, people started to return to in-person shopping and the volumes of online purchases decreased.
What to expect? Despite the post-pandemic dip, online shopping is here to stay. By 2026, experts predict that e-Commerce will comprise 24% of all global purchases. That means this setback is temporary and is mostly a result of the overall feeling of insecurity that stems from the war in Ukraine and multiple bank crashes.
What to do? Being a part of Big Tech, e-Commerce giants need to keep on diversifying. With many of them already dipping their toes in SaaS or cloud technologies, there is a good chance they can power through this crisis and come out of it with even more strengths.
Big Tech Crisis & The Layoffs:
When Mark Zuckerberg announced the year of efficiency, no one could have predicted the ripple effect it would create. With numerous other companies following suit, it is hard to predict what the consequences of these mass firings may be.
As a CEO and a Managing Partner, I fully understand the need to make the team as efficient and productive as possible. After all, there is no reason for a business to hold onto employees who have nothing to do. On the other hand, one of a leader’s most important tasks is to make sure those who trust and count on us know they can build their future safely and won’t be hung out to dry. Massive layoffs, especially when they are public, can damage not only a leader’s but a business’ reputation.
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What to expect? Despite 91 thousand workers already laid off by companies like Meta and Samsung, there are still almost 400 thousand open tech positions that need to be filled in the US alone. Professional developers, cybersecurity, and QA engineers are not going to stay without jobs for long.
What to do? One company’s layoff is another company’s hiring opportunity. The massive layoffs are a good opportunity for small- and medium-sized businesses to fill their open tech positions with trained and ready-to-work professionals. All in all, the situation created the opportunity for the tech market to adjust to the new reality.
The Overinflated Budgets & Tech Crisis:
Because of the industry growth, tech budgets became overinflated, which prompted some experts to think we are dealing with a tech bubble. It started in 2011 when several startups gained unicorn status shortly after their IPO. This urged investors to pour another $45 billion into the US startups.
While being in a bubble sounds scary, its bursting is not the end for the industry. It just means investors would stop investing as much money as they used to.
What to expect? Due to the lack of new investment, Big Tech may keep on shrinking. Together with layoffs, shrinking budgets can keep on sending echoes around the industry for a long time.
What to do? Tech business leaders have already started to try to resolve the issue. Zoom’s CEO already said he would be taking a whopping 98% pay cut. The same was announced by the CEOs of Apple, Intel, and Google. This is only one of the steps that can be taken to stabilize Big Tech. Businesses can also decrease their spending on offices and their maintenance — since COVID 62% of workers expect to be allowed to work remotely anyway, so office spending will be soon cut to the bare minimum, which can be the right call for a lot of businesses.
Big Tech is indeed in crisis. The industry will be able to survive it, for sure. All businesses need is to assess their needs, diversify their client base and their team, and cut costs on what they can without damaging their operation.