Tech Layoffs: It's Not All Bad

The recent spate of big tech layoffs (that we know of) brings the 12-month tally of jobs lost to over 300,000. It really is cause for celebration, especially here in Australia.

Before you rush to judge me, this isn’t about a decline of dominant technology firms. It’s about resources being released onto the market at a time when they are desperately needed. And, by the way, those losing their jobs are among the most educated an in-demand type of employees — the majority will be just fine.

I spend a great deal of my time consulting to some Australia’s largest companies. As a futurist my main area of focus is emergent revenue streams, disruptions, and having a future-proof structure. This inevitably involves corporate infrastructure and human capital. While it has been well documented that it is difficult to get frontline and operational staff since COVID, what is less spoken about is the limited number of software developers and the price they demand.

Software as Power

Today every business is a software business; it really is the electricity of the modern era, a fundamental factor of production. As I’ve written in the past, we’ve now added data to land, labour and capital. And while we are more than 20 years into this, you’d be surprised at how many large and successful firms are still very behind where they need to be on the digitization process.

I work with an Australian firm in the electricity sector, and finding software developers is not only difficult, some cost more than double what the equivalent would be in sales, logistics, finance or marketing. The good ones can cost more than many C-suite employees, not to mention the inhouse benefits they’ve come to expect (free food, laundry, daycare, you name it) working for top tier technology firms.

The Numbers

What we shouldn’t forget is that tech firms went on one of the great hiring sprees during the pandemic. Even though we’ve seen huge layoffs, with three big tech players Alphabet, Microsoft, and Amazon announcing 40,000 job cuts this week, total workforces since the start of the pandemic are still up. It seems hard to believe – but here’s some numbers.

Microsoft: Microsoft brought in an additional 40,000 people from June 2021 to June 2022. Hence, post layoffs, they are still up 30,000 employees. For context, the Commonwealth Bank has less than 50,000 staff in total.

Alphabet: Its recent layoffs of 12,000 staff, while six per cent of their workforce, is only a reduction of 33 per cent of those they’ve hired in the years 2021 & 2022. 

Meta: In 2020 and 2021, Meta hired more than 26,000 employees, many of which work in Zuckerberg’s Metaverse Division known as ‘Reality Labs’ (which I like to call ‘Fantasy Labs’ given that MySpace has three times the daily traffic of Meta’s Horizon Worlds). Meta recently cut 11,000 jobs but is still a net positive of over 20,000 positions.

Amazon: Since the pandemic, Amazon has hired 628,000 staff. This took its post-pandemic payroll tally to 1.4 million. Its recent announcement to let 18,000 people go is barely worth mentioning. Of course, Amazon is a logistics firm and will always require more bodies (or robots) as it grows.

Apple: Now the clear leader when it comes to market capitalisations of big tech, Apple hasn’t really changed its level of employee growth pre- or post-pandemic, seeing it increase at an average of six per cent per annum. 

It seems as though the largest tech firms have realised that the COVID boom times are over. It’s vital their leaders respond to the market and align the decline in share prices, with a relative decline in headcount. Zuckerberg apart, it seems that moon shots are out, economic rationalism is in.

Twitter Provides Cloud Cover

Since Elon Musk’s foray into Twitter, he has fired 75 per cent of its workforce. Sure, the jury is still out on financial performance, but the site is still operational. This has provided what can only be regarded as nice cloud cover for other tech firms to follow suit and thin out the troops.

My view is that this is only the start of tech layoffs, especially for the firms more reliant on software than hardware, namely Alphabet, Microsoft and Meta. All of these firms have revenue of well over a million per employee, while traditional industrials can be as low as $50-100,000 per employee.

What this does is make the market think they are more efficient than they actually are. All you need to do (as I have many times) is spend a few days on some of these technology ‘campuses’ and you’ll see that many corporate roles are there simply because the company can afford it, not because they need it. As the tech sector matures we should not only expect but hope big tech get much leaner when it comes to headcount. They can’t grow forever and their structure ought to reflect reality.

The Road Ahead

In 1996 Bill Gates published his extraordinary book ‘The Road Ahead’. In it he predicted much of what we see today, including the smart phone. One part I never forget was his reference to a positive spiral effect high growth firms can benefit from with human capital. The most successful firms, with the best names, attract the most talented staff, which them makes them more successful, which attracts more talent, and which provides financial capital to get more of the best and so on…. This occurs until some kind of circuit breaker emerges.

This well describes the past decade for big tech who have been the beneficiaries of a truly halcyon period. With growth flattening, we are about to see a re-distribution of tech talent.

Back to the Good News

This economic period is akin to the emergence of the TV Industrial complex and brand era. There was no such thing as a marketing department and now every business over a certain size has teams of brand managers taking on categories within the business. This ethic needs to be translated into tech – with software development teams.

Here’s where Australian firms can get innovative, and chase some of the tech talent who’ve been released. The innovative part is that these staff don’t necessarily need to be expatriated. As Gates mentioned in his book, the future was going to be the ‘Information Super Highway’ – and maybe one of the best ways to attract talent is to let them live wherever they want to, even if that is across a vast ocean.

In any case, the market seems to be normalising. The core skills of the future will continue to leak from big tech over the coming years, and smart industrial-era firms should try and get their hands on talent which can reframe their entire business.