What led to layoff menace?
903 tech firms have laid off over 143,197 workers globally, more job cuts are coming, and Indian companies are not going to remain unscathed either.
Anushruti Singh December 8, 2022
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Since the second half of 2022, tech giants have been announcing large-scale layoffs, and it appears that things are only just beginning to get worse. After Elon Musk’s decision to eliminate nearly half of Twitter’s global workforce, Amazon and Meta followed suit by laying off thousands of workers just before the holiday breaks.
Amidst this global meltdown, at least 903 tech companies worldwide have laid off about 143,197 employees to date, and the tally is only going north, generating further anxiety about an oncoming global recession.
Worst year for the tech sector
According to layoffs.fyi, a crowdsourced database of tech layoffs, 1,437 tech companies have fired a total of 239,188 employees since COVID-19 began, but 2022 has been the worst year for the tech sector so far.
As of mid-November, over 73,000 workers in the US tech sector had been laid off as a result of mass layoffs spearheaded by companies such as Meta, Twitter, Salesforce, Netflix, Cisco, Roku, and others.
Robinhood, Glossier, and Better are just a few of the tech companies that have notably trimmed their headcount in 2022, according to Crunchbase.
Amazon and PC and printer giant HP Inc have jumped on the global layoff bandwagon as well, with plans to lay off more than 10,000 and up to 6,000 employees, respectively, in the coming days.
Amazon CEO Andy Jassy has warned employees that the company will be conducting more layoffs in early 2023 “as leaders continue to make adjustments.”
Massive job cuts have impacted several divisions of Amazon, particularly their Alexa virtual assistant business, which is expected to lose $10 billion this year due to the voice assistant’s inability to generate an ongoing revenue stream.
Google’s parent company, Alphabet, is reportedly planning to lay off 10,000 “low-performing” employees, or 6 per cent of its workforce.
According to a report in The Information, Google plans to ease out 10,000 employees through a new ranking and performance improvement plan.
India is not an exception
In India, nearly 16,000 employees have been asked to go by about 44 start-ups, led by edtech companies like BYJU’S, Unacademy and Vedantu, as VC funding dries up.
Other tech start-ups and unicorns that have laid off employees in India include Ola, Cars24, Meesho, LEAD, MPL, Innovaccer, Udaan and more.
At the same time, big giants like Amazon have been shutting off their various businesses in India. The latest on the list is Amazon Distribution, its wholesale e-commerce website available in some parts of Bengaluru, Mysore and Hubli. Earlier, Amazon discontinued its food delivery and online learning platform called Academy in India.
“We don’t take these decisions lightly. We are discontinuing this programme in a phased manner to take care of our current customers and partners,” a company spokesperson said in a statement. If we go by the sources, these exits will result in a few hundred more layoffs.
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Meanwhile, thousands of contractual employees have also been let go of, making 2022 the harshest year for workers in the technology sector.
Indian start-ups are implementing steep hiring cuts and the hiring of permanent employees has dipped by a significant 61 per cent in the last 12 months, according to the annual insights report by RazorpayX Payroll, the business banking platform of Razorpay. There were only two start-ups in India, Shiprocket and OneCard, that attained unicorn status (valuation $1 billion and above) in the July-September period, according to the latest PwC India report.
Seeing this domino environment, Kalyan Krishnamurthy, Flipkart’s CEO has warned that the start-up ecosystem’s funding winter could last another 12 to 18 months and the industry may face “a lot of turmoil and volatility,” he was quoted as saying.
Reasons for the layoff mayhem
Layoffs are still occurring because of both internal and external economic factors, reasons Daya Prakash, Founder, TalentOnLease, a recruitment platform that provides IT hiring.
“This most recent round of layoffs reminds me of the dot.com bubble, when thousands of people lost their jobs. The recent mass layoffs could be the result of excessive recruitment during the pandemic, inflation, the fear of an economic downturn, and slow business growth,” he comments.
Companies, be it here or worldwide are either reorganising, reducing expenses, or piloting innovative techniques. As a result of the surge in demand following the outbreak of COVID-19, a large number of technology companies had augmented their workforces significantly in preparation for substantial business expansion and entry into new markets.
Sridhar Vembu, CEO and Co-founder of Zoho Corporation likens it to the recurring Silicon Valley trend of big booms and huge busts, saying that this is the first time that it has hit employees in India to such a large extent.
“That is the Silicon Valley model; go as fast as you can before you get crushed and have to sack your employees. They can find the next big company. But that model only works where it works. It works there in the US. In India, we do not have all the deep capabilities to build that next company which can hire back,” Vembu said while speaking to IANS.
According to Prakash, the sudden increase in demand necessitated the hiring of many of these resources at a higher cost. “These businesses are reducing costs by terminating underperforming projects and firing the additional and expensive resources that they had employed to speed up growth as demand returned to the pre-COVID levels. On the other hand, several start-ups are having trouble surviving in an unstable environment due to a cash shortage and a lack of investments,” he elaborates.
Another reason for why things are going awry for Indian start-ups in 2022 is the advent of the funding winter. “It hasn’t really been a great year; they are currently suffering immensely due to the funding winter. Many investors are abandoning their positions or are requesting companies to find any way possible to reduce costs,” Prakash observes.
At the same time, the pandemic, the Russia-Ukraine war, and inflation are just a few of the negative factors that have affected the world. In an effort to get past all of these ups and downs, the world is currently hitting the reset button.
Hiring freeze is the new trend
Experts feel that the current layoff season might be the best thing that could have happened, with a few important lessons for everyone. “It’s a necessary correction, a painful one, but it will foster wisdom among the founders and the CEOs, especially of the start-ups,” said Vembu.
In his view, Indians have blindly imported the Silicon Valley value system, and India Inc. has been badly bruised. That’s why its feeling it so hard, but it’s a norm there. “Historical awareness would have led us to foresee with reasonable accuracy even a year ago, that a downturn was imminent. I have always said that we should learn from Silicon Valley, but we cannot apply all those lessons here. We have to build companies differently,” said the Zoho CEO.
The pandemic and the mass layoffs have shown how quickly the economy can change; and that layoffs can affect anyone, even the CEOs of the most enduring companies.
“One day, you might land the job of your dreams. The following day, you might receive an email saying goodbye. The hiring freeze and layoffs that we are currently experiencing might not be a long-lasting trend. However, the situation will get tighter between January and February 23,” says Prakash.
In the midst of these unforeseen circumstances, we should find our rock, maintain hope for the future, and take the necessary precautions to weather the storm, he recommends.
But the hiring freeze is making it impossible for those who have been impacted by these layoffs to move forward and stand on their feet again.
It’s difficult to get jobs
An Indian origin data engineer, who worked as a data engineer at Twitter, said that companies are not sure about the current economic situation. “Earlier, the situation was entirely different. My take is that no one wants to commit now to a full-time job, because companies are not sure about the economic situation. Only about 20 per cent are focused on full-time positions. The rest are seeking contract workers — who can more easily be let go of,” he said to an international media house.
Newly laid-off workers are experiencing anxiety as inflationary pressures and recessionary concerns mount. Even those people who were laid off earlier and have found work again continue to remain pessimistic about the current market. Several Indian-origin people have been left in the lurch after being laid off, as their work visas are now in jeopardy. LinkedIn and Twitter and other similar platforms are being flooded with posts about job losses and the plight of laid off employees.
The global technology industry finds itself at a very critical juncture today. While the layoff season is not here for the first time, it might be one of the harshest yet. The staff cuts are now more notable due to the massive layoffs within the tech giants. However, it seems like it’s not over yet. The layoff wave in the tech sector, which started in April, is most probably going to take more jobs.
Why do you think that the big tech companies are on a layoff spree? Do share your views on this topic with us.