Big layoffs at Big Tech

The wave of massive layoffs that Big Tech is carrying out and that seems to be contagious, since we are not talking about one, but several of the largest, such as Google and Microsoft, which have been the last to join this terrible trend, it doesn’t seem to end. The first will lay off 12,000 employees, 6% of its workforce. The second has already confirmed that it will lay off 10,000 employees, which represents about 5% of its workforce.

Before them there have been other notable cases. Amazon announced the layoff of 18,000 employees, Meta of 11,000, Salesforce of 8,000 and Twitter of more than 4,000. The panorama is terrible, and even more terrible is that it can be summarized in the graph that heads this article, since the talent war of late 2021 has gone from a time of lean times in which many companies have had to tighten their belts.

Where then lies the problem?

The times of expansion of large companies reach such an end of their cycle, which has always been accompanied by a somewhat messianic language, personified in their CEOs, prophets of the good news of technology that would change the future of humanity. To a large extent, it has been.
This is an unprecedented scenario for “big tech”. Amazon, Meta, Apple or Tesla became the great champions of contemporary capitalism thanks to a mixture of technological disruption, business innovation, scalability and gigantic stock market valuation.

It happens that every transition comes to an end at some point. We have seen it on account of mobile phones: they simply have nothing new to tell, every time they have revolutionized the domestic life and of millions of people. Today the big technology companies face a problem that other disruptive industries faced in the past: normality, and with the arrival of the succession of crises, the sails are lowered and the march slows down, and this is the underlying problem in which today companies are located, and that is that they had overcontracted in times that they considered to be booming and in the face of a future that they thought would continue to be promising and expansive. But after a global pandemic that messed everything up, with a war in Europe that never ends, and an inflationary crisis that is disrupting the world economy, they have managed to make the current macroeconomic situation complicated, and the managers of large companies (technological or not) have to take measures and are resorting to the easiest way to save costs immediately: layoffs.

The threat of a recession is the other big problem facing large companies. Therefore, in addition to firing, companies are also freezing new hires. Amazon is the best example: a few months ago it had 32,000 job offers, but today the number has dropped to less than 299. This threat of recession is what companies fear the most at the present time, since it poses important dilemmas for employers. Entrepreneurs, and even giants like Google, one of the few that at the moment does not seem to resort to massive layoffs, advises its employees that productivity rates must be improved to maintain jobs. The thing does not look like it will be fixed soon, as Bill Gates says, warning that hard years are coming.

Perhaps it is that we have already forgotten about the Dot.com Bubble, which cost 100,000 layoffs, but in this new wave we already have more than 120,000, and it adds up and goes on. If we look at the causes of layoffs from company to company, these are very diverse. From inefficient companies that have never been profitable and have only enjoyed enormous financial viability thanks to the support of investors (Twitter), in the aforementioned excess hiring present in most of them, very high interest rates and uncontrolled inflation that is affecting the markets, some transitions carried out at the worst moment and in a crazy way like that of Meta, a company embarking on a great transition towards a faltering metaverse. Zuckerberg has already invested €13,000 million in his particular project, without the results (aesthetic, reputational or technical) being too astonishing for the moment. The big tech companies have wanted to do everything in a very short time (autonomous cars, VR, advertising, mobile phones, software, cloud, payments) and the crisis has rescaled their approach.

But the matter does not end here. Today Meta, the parent company of Facebook, Instagram and WhatsApp, has just announced the layoff of 11,000 employees, 13% of its workforce worldwide. In an open letter to his employees and investors, Meta Founder and CEO Mark Zuckerberg said, “I have decided to reduce the size of our team by approximately 13% and lay off more than 11,000 of our talented employees”, and adds: “I want to take responsibility for these decisions and how we got here. I know this is difficult for everyone, and I am especially sorry for those affected”, Zuckerberg acknowledged.

The latest Meta results, published on October 26, have already set off alarm bells. The company collapsed more than 20% on the stock market after announcing a profit in the third quarter that was 52% lower, up to 4,395 million dollars. Revenues stood at 27,714 million dollars, a figure that improved the 27,380 million anticipated by the market. However, compared to the same period in 2021, they were 4% lower (29,010 million dollars).

As we can see, there is a bit of everything, like in Big Store, and CEOs have to put their companies in order so as not to compromise their future. It is therefore time to take stock today and rethink tomorrow.

Source: Xataka, Visual Capitalist,