But other big players in the IT sector like Apple, Amazon, Cisco, Roku, and Meta have also laid off many of their employees. Even companies like Phillips, Asana, Stripe, Zendesk, Lyft, Salesforce, and Redfin have announced layoffs.
In most cases, companies have laid off 5 to 15% of their staff. Twitter is something of an outlier, though, with intentions to lay off up to 50% of its total staff. Given the general atmosphere of cutbacks on expenses, employees who keep their jobs at these companies may still see reductions in benefits and bonuses.
It’s certain the tech sector is going through a volatile period. Observers are primarily attributing the layoffs in Big Tech to the bad macroeconomic situation. But several other factors may have also contributed to layoffs.
Why Is Big Tech Laying off Employees?
Tech companies are bloated. They have too many employees doing little to no work. A prime example of this is what happened at Twitter following Elon Musk’s takeover, with many of the company’s employees taking advantage of its excessive hiring budget but not doing much work in return.
Some companies are even talent hoarding by paying hefty salaries to employees to deprive other tech companies of their talent. Google, for example, is a notorious talent hoarder. The company pays its employees more than 70% higher than Microsoft and 150% more than the other top 20 tech firms (on average).
Fluctuations in interest rates also heavily influence boom and bust periods in the tech sector. Given the rising interest rates from the federal reserve, which have affected digital advertising and tech stock values, the tech industry is now undergoing a bust period.
Interest rates have always been a key factor in determining how well economies are doing. Low-interest rates are correlated with rising economies, while higher interest rates are correlated with contracting/declining economies.
This economic decline means tech companies are no longer enjoying the perks and investments they once had. And as a result, they’re cutting back on staff to match the slowdown in the economy.
Finally, declining e-commerce activity, pressure from investors, and declining revenues all play a part in the ongoing Big Tech layoffs.
Implications for Small and Medium-Sized Businesses
The mass layoffs will surely make the global talent pool swell in the coming months. But this could be a double-edged sword for small and medium-sized tech businesses.
Since most of the laid-off workers might move to freelance, they’ll be free to hop from role to role. Startups and business owners will then have a harder time hiring and retaining talent.
Hiring, rehiring, and retaining employees is a resource-intensive process for HR. Finding, vetting, training, and onboarding new talent takes time and costs money. And, if an employee leaves after just a month, it could mean all those resources end up down the drain. However, a market downturn can also induce a need for stability among people.
That said, companies can turn profits during a market downturn by using their resources wisely. For example, with such a large chunk of the workforce looking for jobs, startups can draw from a wider talent pool to capitalize on new business opportunities.
Big Tech Layoff Timeline
Big Tech has been reducing operations for quite some time. The following is a brief timeline of how the reductions have played out over the past 6 weeks:
- Oct. 18, 2022 — Microsoft plans to reduce its workforce by 1,000
- Oct. 25, 2022 — Phillips plans to reduce its workforce by 4,000.
- Oct. 28, 2022 — Zillow announces laying off 300 workers, a year after it announced plans to lay off 2,000 workers
- Nov. 02, 2022 — Elon Musk announces plans to reduce Twitter’s workforce by 50%, amounting to around 3,700 workers
- Nov. 03, 2022 — Stripe announces plans to fire over 1,100 workers
- Nov. 03, 2022 — Lyft announces plans to reduce its workforce by around 650
- Nov. 08, 2022 — Zendesk announces plans to reduce its workforce by 350
- Nov. 08, 2022 — Salesforce announces plans to reduce its workforce by 2,500
- Nov. 09, 2022 — Meta announces plans to reduce its workforce by 11,000
- Nov. 09, 2022 — Redfin announces plans to reduce its workforce by 862 employees
- Nov. 15, 2022 — Asana announces plans to reduce its workforce by 230
- Nov. 16, 2022 — Amazon plans to reduce its workforce by 10,000, though it didn’t confirm the actual numbers
- Nov. 16, 2022 — Cisco plans to reduce its workforce by 4,100
- Nov. 17, 2022 — Roku announces plans to reduce its workforce by 200
- Nov. 18, 2022 — Nuro emails employees about cutting 300 of its workforce
- Nov. 22, 2022 — HP announces that it will remove between 4,000 and 6,000 employees by 2025
- Nov. 24, 2022 — Reports show Google could be laying off 10,000 “low-performance” workers using a new assessment model
Companies announced these layoffs in their regulatory filing, earning reports, company statements, emails, and press releases.
The Way Forward for Tech Businesses
Now is not the time for business owners to be ambitious with their budgets. “Take some risk off the table. Keep some dry powder at hand. Just a little bit of risk reduction could make all the difference for that small business if we do get into even more serious macroeconomic problems. You’ve got to play the probabilities a little bit,” Jeff Bezos, Amazon’s founder, recently said, cautioning consumers to reduce purchases and keep cash on hand given that the recession is already in gear.
Businesses will benefit from that advice, too, but the IT industry can still make the best of a bad situation. They simply have to review and proactively improve their practices. First and foremost, business owners have to assess who is genuinely providing value to their businesses. Some workers may not fit a company’s values, and are, thus, dispensable.
In response, laid-off employees will do well by upskilling and becoming more productive so companies can consider them for the value they bring to the table. Since demand for tech jobs remains high, specialized tech firms may be able to hire employees from Meta, Google, Amazon, and Twitter at lower rates for now.