By Sneha SahaIf you ask engineers and workers in the tech industry, they’ll stress that the entire sector is going underwater. Reason? Tech companies like Google, Meta, Amazon, Microsoft, Cognizant, IBM and others are laying off thousands of workers and it seems no one in the industry can take job security for granted. Tech companies in Silicon Valley and India have laid off thousands in recent months.
Surprisingly, there is not much clarity about the reasons why technology companies take these drastic measures. While laying off employees, tech CEOs cite cost-cutting, difficult macroeconomic conditions, poor business outlook, etc. as the main reasons behind the layoffs. However, data shows that there can be more to layoffs than saving money.
Google projects annual revenue of $279.8 billion by 2022. As for the company’s revenue, it was around $60 billion before tax for 2022, which is higher than tax. Gross Domestic Product (GDP) of some countries.
— Microsoft is similarly healthy. Revenue for the trailing 12 months ending March 31, 2023 was $207.591B, an increase of 7.81% year over year. Similarly, the company’s revenue for the financial period to date (now available for 9 months) was around $63 billion before tax.
–Amazon, which is close to operating under the zero-profit-zero-loss concept, has announced that it will reach $2 billion in revenue by 2022. Its revenue for the 12 months ended March 31, 2023 was $524.897B, up 9.87%. Increase over the year.
— But history is different for Twitter and Meta. Twitter is undergoing a restructuring under Elon Musk, and the shooting there has been viewed with a different strategy and purpose. Twitter is also a non-profit company.
–Meta is struggling somewhat compared to the last few years, although not as much as Twitter. The company continues to have Mark Zuckerberg as its CEO and its profitability. For 2022, the company has made a profit of about 23 billion dollars.
The story is the same for most of the other big tech companies that have been laying off jobs in recent months. The question comes up again: If money isn’t a problem and profits remain fat, why are tech companies laying off workers? There are mainly three things:
One: Fix overemployment
Many big tech companies that are laying off people have admitted that they are overhiring when the Covid-19 lockdown brings about some kind of technological advancement. In announcing the layoffs, Google’s CEO said the company was overstaffed during the pandemic. “We’ve seen periods of incredible growth over the past two years. To fuel and fuel that growth, we’ve employed a different economic reality than we see today,” Pichai wrote in an email to Google employees last month.
While Meta’s CEO didn’t directly mention the term “overwork,” he acknowledged that the company has invested significantly more during the pandemic. “At the onset of Covid, the world quickly moved online and the boom in e-commerce led to a surge in revenue. Many predict that this will be a sustained acceleration that will continue long after the pandemic is over. I did too, so I decided to increase our investment significantly. “Unfortunately, this didn’t work out the way I expected,” Zuckerberg said when announcing the layoff.
The story at Amazon is similar. Amazon CEO Andy Jassim has admitted that the company over-hired during the pandemic. “The assessment this year has been more difficult due to the uncertain economy and rapid hiring over the past several years,” he said. The company has laid off thousands of workers worldwide.
Two: Getting rid of employees who no longer fit the new plan
Citing cost-cutting measures and a negative economy, many tech companies are asking employees to let go because these employees are unhappy with what they are or aren’t doing. And there are two reasons why they are unhappy in their jobs: either the employees are not performing well, or they are employed in departments and roles that companies do not find necessary.
Bringing up the word “underemployed” when laid off is considered bad manners, so tech CEOs from Pichai to Zuckerberg avoid saying it. But read between the lines and it’s clear. Take Mark Zuckerberg for example. While Meta appeared to be politically correct in his resignation announcement, Zuckerberg made it clear to his employees during a town hall meeting that he prefers to let go of the underdogs.
Before the dismissal, the META boss warned the workers about the dismissal and said that some workers should not be part of the META. “Actually, there might be a lot of people in the company who shouldn’t be here. [A] Part of my hope is that by raising expectations and setting more aggressive goals and turning up the heat a little bit, I think some of you will say this is not the place for you. And that self-selection is fine with me,” said the Meta CEO.
Cloudflare CEO Matthew Browning Prince was more blunt, saying the reason was unscripted. Recently, a large number of sales staff reported low performance and missed expectations. “The macroeconomic environment is getting tougher, and we’re seeing some of our team not dressed for work. By digging in, we identified more than 100 people in our sales team who consistently missed expectations. Simply put, a significant percentage of our sales force is consistently underperforming based on measurable performance targets and critical KPIs. “This is clearly a problem,” he said.
During the cutbacks, several departments, such as teams working on technology ethics or teams not employed by core engineering, were disproportionately affected. Basically, tech companies have money. But they no longer want certain types of groups in their offices.
At the same time, the advent of AI has made it easier for tech companies to fire people in certain departments. Recently, IBM CEO Arvind Krishna openly stated that AI will take more than 7500 human jobs in the next 5 years. Krishna said that some back office tasks could be replaced by AI in the next 5 years. He also said that human resources can be permanently replaced by AI. This comes after several companies, including Amazon, laid off their human resources.
Three: Tech companies need AI engineers
Another reason tech companies fire people is to reorganize their workforce to prepare themselves for the future. Many tech companies believe that the future will be about AI tools, AI services, cloud computing, machine learning and even AR and VR. Therefore, they want to fire people who don’t have the skills to take on the roles and jobs associated with the technology services and tools of the future. This allows these companies to fill their ranks with engineers and workers with skills such as AI and machine learning.
Tech companies haven’t revealed whether they’re hiring for AI-related jobs, but they’re implicitly hinting at the same. After cutting about 27,000 jobs, Amazon’s CEO said he would see some hiring at some businesses. “As our internal business assesses our customers’ most pressing concerns, our priority decisions have sometimes resulted in reduced roles, sometimes moving people from one initiative to another, and sometimes creating new openings where we don’t have the right skills to match our existing team members. This will initially expand to 18,000 positions (in January shared) and led us to these additional 9,000 role cuts as we completed the second phase of our plan this month (although some of our businesses saw some hiring in strategic areas where we prioritized allocating additional resources),” Jassy was quoted as saying.
At the same time, Microsoft CEO Satya Nadella also said that it is the company’s priority and will focus on this new technology in the future. “We will continue to invest in strategic areas for our future, which means moving our capital and talent to other areas for the company’s global growth and long-term competitiveness,” Nadella wrote in a letter to employees. He also said Microsoft will “continue to hire in key strategic positions.” This shows that money is not an issue for most tech companies and is not the reason behind layoffs.