IT layoffs 2023: As unemployment remains a big problem for the world, it is further intensified by lay-offs by major tech giants. There are chances of more lay-offs in the upcoming days. Although, there are many reasons given to justify them, yet there are other less known facts that need observation.
2023: The start of IT layoffs 2023
Microsoft is laying-off 11,000 employees to reduce its head count. The process of lay-offs began with Twitter when Elon Musk announced it for his newly acquired company. Both, Twitter and Tesla have shown the way out to many of their employees.
Subsequently, Meta also announced to lay-off 11,000 of its workforce. Apart from all these, Alphabet Inc., the parent company of Google, has laid-off 12,000 employees. Amazon’s figure is 18,000 in the same line. While there is a possibility in 2023 of more layoffs, it is estimated that in 2022, as many as 150,000 candidates of big companies were laid off.
The prime reasons for IT layoffs 2023
- Economic slowdown
The prime reason that most of the companies give for lay-offs is the gloomy economy which poses a fear of recession and global economic slowdown. Many economists have predicted that 2023 is the year of global recession.
The soaring inflation and weakening consumer demand has put a lot of pressure on the economies. The IMF projected in October 2022 that global growth will fall to 2.7% in 2023.
- Geo-Political tensions and its effect on economy
The ongoing Russia-Ukraine war and its repercussions have severely impacted the market. America was facing energy issues even before the Russia-Ukraine crisis. As a result of the war, energy prices are increasing and there is a food security crisis as well. The shortage of fertilisers has affected the whole world. The west put sanctions on Russia and eventually, the whole of Europe began facing energy crisis. The war is exhausting a large amount of capital and resources which is affecting not only Europe but the whole world.
- Covid-19 pandemic and over-hiring
The result of geo-political tensions is more impactful because the global economy was already facing challenges while emerging from Covid related lockdowns. But things were different for IT sector. While every sector was ailing, the IT sector was actually booming during the lockdown. This led to over-hiring by major companies.
During 2021-2022, Microsoft hired 40,000 employees. The rise in number of employees was more than 22%. The hiring spree was followed by previous year’s increase of 18,000 employees, an 11% increase. Amazon proved to be the biggest recruiter firm. It’s hiring soared at the maximum rate. With almost 47% rise it grew to 1.1 million in 2021 and with another 37% rise in 2022 it stood at 1.5 million. Meta and Alphabet also increased their workforce during the Covid pandemic.
Covid lockdown led to many changes like the introduction of online classes and work from home culture. From purchasing commodities to entertainment, each and everything was based on technology and internet, precisely hardware, software and data. So, to grasp the increasing scope of the market, tech giants started a recruitment spree. But, as of now Covid is under control and things are going conventional.
- Cost cutting
The companies are laying off their employees in order to reduce the cost of expenditure. For, instance Alphabet’s headcount escalated 20 per cent per year since 2017. The profit of Google declined 27% to $13.9 billion compared to last year. Along with that, reports suggest that there will be drop of revenue from the e-commerce industry for the first time due to weakening demand. This is certainly going to affect several companies.
- Excessive investment in AI
In the capital-intensive race for domination in the feild of Artificial intelligence, Microsoft and Google have invested tremendously in the sector. According to the media reports, while suffering from the financial slowdown, Microsoft is looking to invest a huge amount of $10 billion in AI start-up ChatGPT. On the other hand, Google is also looking to invest in almost 20 new AI innovations. As, Artificial intelligence is cost intensive and future oriented, company employees are becoming the scapegoats.
The effect of Privatisation and globalisation
The hire and fire process in IT sector is never ending. But what is happening currently is the effect of many developments that are local as well as global.
Read more: Indian IT startups are jumping into the world of Metaverse and that can be revolutionary
The web knitted around the economic slowdown, weak demand, company’s interest and geo-political tensions is the prime reasons for the current lay-offs. Ultimately, any organisation works to thrive and become the champion in its field. Although, the human side of these developments can be questioned, the multi-national organisations have to take decisions as per the need of the hour so that they can sustain their growth and future.
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