Information technology — the sunshine sector seems to be overcast by the dark cloud of pink slips. Thousands of workers in Big Tech have been let off by their companies, as part of cost cutting measures, in what appears to be an unforgiving economic milieu. One of the biggest enterprises in online retail, Amazon set the wrecking ball into motion with the announcement of 10,000 layoffs ahead of Christmas. Apart from pulling the plug on its home delivery robot Scout, it has also wound up its EdTech platform in India. A drop in operating income to $2.5 bn from last year’s $4.9 bn in the same quarter could offer pointers on where things went downhill.
The domino effect of retrenchment is being seen across other firms including Facebook’s parent company Meta, which will shed 11,000 staffers or 13% of its workforce. Twitter also witnessed a bloodbath as its new boss placed 50% of the company’s workforce on the chopping block, essentially 3,700 employees. As many as 4,400 of its 5,500 contract employees were shown the door, while in India, the majority of the team had been dropped. Put together as many as 1.37 lakh white collar jobs spread across 850 tech companies have gone off the radar.
So what has prompted this spate of firings? Let’s wind the clock back to when COVID struck the world. Most companies in Big Tech had made substantial investments in their workforce during the pandemic when many had resorted to working from home. However, as soon as a vaccine was on our hands, we had dropped our masks for good and the new normal made way for the old-fashioned mode of work, learn and play.
The scene in India unravelled as over 15,700 employees were asked to quit by around 44 start-ups owing to the drying up of funds. While EdTech witnessed the most layoffs, consumer services and e-commerce trailed behind. Some of the biggest players in EdTech had ramped up recruitments, with the hope that the virtual party will continue for long, which was not meant to be. Right now, Byju’s plans on laying off as many as 2,500 staffers.
Several macroeconomic factors led to this streamlining in India’s start-up scene as well. Russia’s invasion of Ukraine sent stock markets tumbling, which compelled national governments to employ measures to combat recession. These included increasing interest rates, putting a premium on debt and ridding private and public equity markets of liquidity. As a result, limited partners chose to hold onto their investments in safe avenues, steering clear of parking their funds with venture capitalists.
For Big Tech, the biggest source of revenue was advertising, which took a hit in the aftermath of curtailed spends by companies reeling under sanctions, in a world split into two blocks. Not only international fashion labels, but even F&B majors to shut shop in Moscow. As a result, many companies are deprived of the perks of globalisation, whose impact is being felt in Big Tech too.
It will be a long journey towards recovery for the global tech industry. But the irony is not lost on those who witness the tall claims of industry champions. On one hand, they espouse the need for frugality and conservatism in the months to come, while letting go of employees by the truckloads. On the other hand, they put up a brave front of business as usual, with million dollar brand ambassadors and the promise of a bargain like no other.