Tech giants on sacking spree

Subir Roy

Senior Economic Analyst

THE world’s leading tech companies — Meta (Facebook), Twitter, Alphabet (Google), Amazon, Apple and Microsoft — are all in the grip of a severe business slowdown which has caused them to lay off thousands of employees — over 50,000 till October. What is amazing is that these repositories of the latest technological skills seem no different from the rest of the business world in poor anticipation of the business slowdown or its wrenching consequences.

Those laid off are turning to their own networks to seek help in finding jobs and some are seeing help pour in from Indian companies offering appointments.

This is affecting Indians in two ways. Faced with revenue growth slowdown, Indian tech companies have paused hiring and are taking inordinately long in issuing offer letters. Plus, personal tragedy stalks many who are in the US on H1B visas and have to return to India if they do not find alternative jobs within the stipulated 60 days from the termination of one job. This marks at least the temporary end of their dreams to make a good life in the US.

The bad news seems unending. The latest to go in for such action is Amazon which will lay off 10,000 by the end of this week. This has come close on the heels of Twitter laying off thousands of employees a week after it was acquired by billionaire Elon Musk, thereby bringing down its overall employee level by 50 per cent. Not just lower-level employees, but the entire C-suite of the company also appears to have been asked to go. Meta, for its part, is laying off 11,000 people, or about 13 per cent of its workforce, right after adding 28,000 in the preceding nine months.

Alphabet is not laying off staff but plans to cut down on hiring which had reached nearly 13,000 in the last quarter. Microsoft is also not sacking people but going slow on hiring. It added a good 20 per cent of its current staff strength of 2.2 lakh in the previous financial year.

These layoffs have come as a result of the revenue challenges that the big tech companies are facing as advertisers' rethink on spending amidst recession fears in an extremely uncertain macroeconomic environment. This has affected their revenues, with all five reporting for their quarter ending June their softest results in a year.

The key cause for the deterioration of the business environment is the Ukraine war which began early in the year. It sent global energy prices sky high, subjecting the entire world to high inflation. To tackle this, the world’s most important central bankers have raised interest rates, following in the footsteps of the US Federal Reserve.

Under such conditions of economic uncertainty, investment funds from across the world have made a beeline for the safety of the US system. As a result, the dollar has strengthened, thus making imports costly, adding to the inflationary pressure exerted by the high fuel prices. Today, most of the global economy, particularly the Euro region, is looking at recession ahead.

The slowdown needs to be seen in the context of the strong growth that tech companies witnessed during the pandemic when businesses across the board sought to enable their systems to handle ‘work from home’ and consumer product companies heightened ordering from home (online commerce). If we look back to the pre-pandemic days, business for these companies is in a way ‘normalising’.

Big tech’s problems also come from growing big too quickly compared to historical time frames or what it takes for a brick-and-mortar company to grow even today. Competition among them has also played a part. Growing too big in a fast-moving environment has created a rebound, a desire to be conservative and save cash when demand is weak, and hence, the layoffs.

The only redeeming feature is that there is at least one industry leader, Mark Zuckerberg, of Meta, who says he is sorry. ‘I want to take accountability for these decisions and how we got here.’ He attributed the job cuts to growing too quickly during the pandemic when there was a big rise in online commerce, leading to a big rise in revenue. He thought the shift would be permanent.

But one industry leader who does not seem to have time for apologies is Elon Musk, who has acquired Twitter and is now overseeing its staff cuts. In the midst of the sackings, he said during an interview that he was planning to make cheaper electronic vehicles and dwelt on his ambition to go to Mars. On the fiasco of his takeover of Twitter, he said, ‘I tried to get out of the deal.’

The situation among tech companies in India is somewhat better. It is limited to going very slow on fresh hiring, which is now down by 70-80 per cent. Attrition, which was a problem earlier as companies were forced to pay more in order to retain staff when the whole industry was in a hiring mood, has gone down. Volatility is more among startups, which are seeing a severe tightening in fresh funding. Their emphasis now is on reducing cash burn by controlling expenditure, including fresh hiring.

There is a huge human cost to the large-scale layoffs. Those laid off are turning to their own networks to seek help in finding new jobs and some are seeing help pour in from Indian companies offering appointments.

There is talk of engaging in an urgent dialogue with the US administration to change the visa rules suitably in order to take care of the unusual circumstances under which tech companies have gone in for such massive layoffs. The argument that should work with the US is that Indian tech workers in the US add great value to US tech capabilities and the economy’s competitiveness. If a sizeable number of tech workers actually do return to India, the country will be the gainer, but right now, it is the human angle, the material and emotional cost of dislocation which is the dominant sentiment on social media.

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