Big Tech job cuts: a silver lining?

Long stories short

• Amazon prepared to close three UK warehouses as it cuts costs.
• Apple started hiring retail store workers in India.
• Chinese billionaire Jack Ma relinquished control of Ant Group following Beijing’s tech crackdown.

Eleven days into 2023 and already more than 18,000 tech employees have lost their jobs – an attrition rate of roughly 2,000 a day. 

A purge that led to 150,000 tech job losses last year will only accelerate in the coming months, as companies from San Francisco to Lahore shed record numbers in response to tough economic conditions. 

Last week, Salesforce announced it was making 10 per cent of its workforce redundant – the second round of cuts at the company in three months. Amazon, which expanded aggressively during the pandemic, is cutting 18,000 employees, including 1,200 in Hertfordshire, Yorkshire and Scotland. Meta is laying off 13 per cent of its global workforce. The list goes on.  

Why is it happening? Many of Silicon Valley’s biggest companies simply misread demand. In March 2020, Facebook usage was so high that CEO Mark Zuckerberg said he was “just trying to keep the lights on”. Meta scaled up from 47,268 staffers that month to more than 87,000 in September 2022. The company thought the momentum would continue after Covid-19 receded. It was wrong. “Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended,” Zuckerberg wrote. “I did too. Unfortunately, this did not play out the way I expected.” 

Zuckerberg wasn’t the only one to make this mistake. Online forums where tech workers used to publish interview tips or compensation packages are now filled with posts about layoffs across the sector. 

The silver lining. Out of work programmers, recruiters, human resources staff and sales teams have to go somewhere. After years in which the best and the brightest were hoovered up by the big tech companies – with their free meals and fancy offices – there are signs that’s changing. 

– Start Ups. Day One Ventures, an early stage venture fund in San Francisco, launched an initiative in November to fund start-ups founded by recently-laid-off tech workers. Its slogan – as reported by Reuters – is “Funded, not Fired”. In contrast to overall venture capital funding which was down 33 per cent last year, early-stage funding has remained buoyant. Some investors have compared the 2022 downturn to the dotcom crash of the early 2000s, which flooded the market with talent and sparked a new wave of companies.

– Universities. MIT Sloan, an elite business school, is extending its MBA application deadline to allow recently laid-off tech workers time to prepare. Two other business schools – UC-Berkely Haas and Georgia Tech – are waiving their application fees for tech candidates who have been laid off in the last six months. Generous severance packages are handing former tech employees the freedom to go back to school.  

– Governments. The US Department of Veteran Affairs (VA) is trying to fill 750 tech roles to help solve problems like modernising benefits software. Charles Worthington, the VA’s chief technology officer, told Wired that “new headwinds in the tech industry” presented an opportunity. He noticed an “increased interest in public service” among many prospective employees – something which might compensate for significantly lower salaries. 

Looking forward, the outlook for big tech remains grim. “Shareholders should brace themselves for a brutal tech bloodbath,” Eric Schiffer, CEO of the private equity firm, the Patriarch Organisation, told Fox Business. “Many tech companies will enact job carnage in the first quarter, with Salesforce and Amazon just the start.” 

Elon Musk – Schiffer said – had shown that most start-ups and mid-level firms were “insanely overstaffed”. Tough times are ahead – but maybe new opportunities too.