Top Grounds Why Large IT Businesses Are Firing Workers

Need answers to why some of the top tech It businesses in the world are laying off workers and how many jobs may be lost as a result. Learn the details here.

Introduction

Over a million people have been laid off at Silicon Valley’s biggest digital companies in recent months, including employees at Facebook, Apple, Amazon, LinkedIn, Instagram, Google, Cisco, Snap, and others. How many additional jobs will be lost as a result of the layoffs at some of the world’s largest technology companies?

Over-Hiring During COVID

Because of the sudden increase in product demand in a quarantined globe, IT companies hired more personnel in the wake of the COVID-19 epidemic. Meta, the company behind the popular messaging app WhatsApp, also developed a video calling feature during the pandemic, and Google updated its video conferencing tool Google Meet to support additional users. Companies responded by increasing its headcount across the board, particularly in areas such as Product Management, Development, User Interface/User Experience Design, etc., due to the increased demand for such specialized skills. Products have since matured to the point that radical innovations aren’t necessary at the moment, so IT businesses are cutting back on staff to meet the demands of the present.

Sundar Pichai alluded to this in his message to staff after announcing the termination of 12,000 employees. Over the previous two years, he said, “we’ve witnessed periods of spectacular increase. We recruited for a diverse financial reality to match and feed that development.

Investor’s Pressure

Management teams of major internet companies such as Google, Facebook, Amazon, Twitter, etc. are under pressure from investment firms and early investors to act swiftly in response to the companies’ slowing growth. A letter recommending layoffs and other cost-cutting measures was sent to Meta’s founder and CEO, Mark Zuckerberg, in October of last year from Altimeter Capital Chairman and Chief Executive Brad Gerstner.

It was stated in the letter, “Like numerous other organizations in a zero-rate world — Meta has gone into the region of excess — too many employees, just so many ideas, too little urgency. When times are good and growth is rapid, this lack of discipline and physical preparation is easy to overlook, but it may be fatal when times are tough and technology evolves.

In addition, TCI Fund Management’s founder and CEO, Christopher Hohn, recently penned an open letter to Google CEO Sundar Pichai, urging even more layoffs. I think management should seek to cut headcount to roughly 150,000, which would be in par with Alphabet’s workforce towards the end of 2021,” the letter said. This would necessitate a 20% cut in personnel across the board.

Maturity Of Tech Field

Experts feel that the latest job layoffs are a sign that the tech industry is maturing following a period of hypergrowth over the last three decades. “We’re witnessing at Amazon, Apple, Microsoft, and other companies that the clock struck twelve for hypergrowth and now they’re making cuts across the board,” Dan Ives, Director of Wedbush Securities, a private equity firm managing over $4 billion dollars, told Business Today. This is a cost-cutting measure in preparation for future periods of slower growth.

In the same letter in which he informed staff that Microsoft will be laying off 10,000 people, Satya Nadela expressed his agreement with this point. We are in the midst of profound change, and in my conversations with clients and business associates, a few things have become abundantly evident,” the letter began. First, after customers increased their digital spending to cope with the epidemic, they are now decreasing that spending and increasing efficiency.

Negative Cash Flow

There are a number of new investment ventures by Silicon Valley tech giants that are losing money. The robotics division at Amazon, the virtual reality and virtual world section at Microsoft (AltspaceVR), and Meta’s Substack competitor (named Bulletin) are all examples of IT businesses that are somewhat futuristic in nature yet have drained Amazon’s and Meta’s resources. A company’s need to reduce expenses is one response to its cash burn.

Investing veteran and CIO of Bridgewater Associates Ray Dalio explains the phenomenon as follows: “What’s occurring is that a lot of these acquisitions by big firms have negative cash flows. That indicates that they were unable to sustain those pricing with their earnings. And many of them didn’t have any way to support themselves financially. They had to rely on financing from outside sources, such as loans or investments from venture capitalists and private equityists, to bridge the gap.

Recession Anticipation

The top brass at major technology firms expects a depression in the near future, according to management opinion. While certain countries around the globe are experiencing a recession, others are bracing for one, as Satya Nadela explained in a message to staff following the layoff announcement.

Conclusion

As the economy continues to struggle, experts predict more layoffs in the near future. Ives predicted that “Big Tech” will be forced to lay off large numbers of employees and reduce spending. As the recession approaches, I expect things to get difficult during the following six to nine months. Although we believe this gloomy weather will eventually pass, it would be nave to imagine that the tech industry is immune to the current climate. We anticipate a major tear within them as well.