You’d be forgiven for mistaking the tech sector for a dumpster fire right now. Even just a cursory glance at some of the biggest tech companies in the world shows massive layoffs, stock prices tumbling, and whatever the hell is going on at Twitter. It all looks to be a giant mess as the quest for constant growth seems to have over-extended Meta and caused problems for Netflix which doesn’t really have that many more markets to break into. Is it all as bad as it seems though? Today we are going to dig a little deeper beneath the headlines and explore some of the less-reported things going on in tech to get a more developed picture of the state of the tech industry and what it means for you.
Tech layoffs and downsizing
Back at the turn of the millennium, everybody was going crazy investing in any business that had a .com URL. People were making ridiculous amounts of money until it all went bust, with the dot com crash being one of the most famous things to have ever happened in the tech sector. Back then, when the bottom fell out of the market, tech companies were going bankrupt and lots of tech workers lost their job. In fact, around 107,000 tech workers lost their jobs thanks to the dot com crash. In 2022, so far, more than 120,000 tech workers have lost their job, more than during one of the worst crises to ever grip the industry.
The easy explanation for the huge numbers of layoffs we’ve seen this year is that more people are working in tech than ever before, thanks to more than two decades of unprecedented growth. If we take Meta, Facebook’s parent company, as an example, around 11,000 employees have just lost their jobs, which is more employees than Twitter ever had. The Tech sector has grown immensely. Despite this, however, the numbers are still pretty big and immensely worrying; according to the layoffs.fyi tracker Amazon has also laid off over 10,000 workers, but it is when you look at the percentages of workforces that have been cut, it gets quite shocking. Snap has laid off 20% of its workforce, as has Intel, Robinhood has laid off a whopping 30% of its workforce, but Twitter takes the prize having laid off a full 50% of all its workers.
What’s behind it all
Behind all this turmoil are a variety of factors, which we explored a little in the article we published last week covering the layoffs at Meta. These include the ongoing economic turmoil caused by global macroeconomic factors such as rising inflation, a slowdown in spending, contracting economies, and the ongoing war in Ukraine.
Another key factor to consider is that the last couple of years has seen unusually large growth for tech companies thanks to the pandemic. Furthermore, economic forecasts do not indicate that things are going to get better any time soon. Not only are things bad now, but they also are not due to get any better any time soon and this is why tech companies have been tightening their belts over the last twelve months. According to Dan Wang, an associate professor at the Columbia Business School, talking to Business Insider:
“When they cut costs, the first thing to go is typically labor costs and also advertising and marketing […] So when it comes to forecast what their numbers will look like, it’ll depend on how they have seen the trend in advertising spending on their platforms. When that doesn’t look good, then they have to accommodate those expectations by adjusting the workforces.”
Is it as bad as it looks?
There is no getting around the fact that the tech sector experiencing a seismic shock to the system right now. However, there are some broader considerations we can look at to get a more complete view of the situation. First up is the fact that we are seeing right now is no doubt a result of economic cycles. In some respects, these companies are seeking to ‘balance their books for this year so that they can start next year in a stronger situation. With the macroeconomic factors discussed above likely to last long into 2023 and maybe even 2024, the big tech companies will still be feeling the strain, but they may be going into the next economic cycle in a stronger position than where they are now.
Also, even though we have seen record numbers of layoffs, interestingly the tech sector, in general, is still hiring at record numbers and in fact, according to CompTIA’s latest Jobs Report, tech companies hired 20,700 workers last month, marks the 23rd consecutive month of growth. This means, that if we take hiring into account, the tech sector has actually gained a whopping 193,900 workers so far this year. In total, that means it has actually grown by 28% from this time last year. This growth is being driven by the continued growth of the digital sector in general, which is seeing more and more people come online and more and more services being administered and provided digitally.
Taking it all into account then, it looks like the broader tech sector is actually in a strong position with technology and digital technology seeping into more aspects of our daily lives. It is the big tech companies, however, who are more vulnerable to the broader economic factors that are affecting the global economy. The other factor that we have to raise here, above all else, however, is the workers. Losing your job is a horrible thing to go through, not least because of the financial strain it places upon you and your family, but also the emotional and psychological turmoil you face when you are cast aside by your employer. Fortunately, for these workers they have expertise that are in demand from a sector that is increasingly embracing remote work opportunities so it shouldn’t be too long before they find new opportunities.