Are Big Tech hiring or firing?
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Despite large swathes of layoffs in Big Tech, E&T finds that the number of job cuts doesn’t show the full picture.
Redundancies are an inevitable consequence of tough economic times. Some 70 per cent of business costs are typically spent on staff, so it makes sense that people are the first to go when cutbacks are being made. It came as no surprise, then, that as the current economic crisis came starkly into view, news of layoffs began trickling in.
What was surprising, and somewhat unprecedented, was just how far those mass layoffs would spread. And how even the likes of Big Tech would not be immune to this trend.
At the time of writing, the number of tech job cuts worldwide in 2022 has exceeded 142,000, and 85,000 of those have come from the US, according to layoffs.fyi and Crunchbase figures. Facebook, Apple, Amazon, Netflix and Google, known under the acronym FAANG, have each responded to the downturn with varying severity, yet the bulk of those 85,000 have come from a small number of big firms such as these.
Yet, analysis from the US Bureau of Labor Statistics (BLS) has found that the number of open positions across the entire US tech sector has been increasing month-on-month, equating to a total rise in tech employment of 55 per cent year-on-year.
At the same time, Huawei has experienced the opposite to its US-based counterparts. In the wake of plummeting stocks, the Chinese tech giant announced a huge investment drive to train one million ICT professionals worldwide over the next two years.
This stark contrast between what’s happening with US Big Tech compared to the wider sector suggests there’s more to the layoffs than may meet the eye. So, what’s really happening when it comes to hiring and firing, and what does it mean for the future?
The seemingly worst hit FAANG member has been Meta, the parent company of Facebook, WhatsApp and Instagram. In a letter to staff, CEO Mark Zuckerberg blamed the “macroeconomic downturn, increased competition and ads signal loss” for Meta missing its revenue forecasts, with the result that the group would need to lay off 11,000 people – or 13 per cent of its workforce – in response.
Amazon is similarly making plans to lay off around 18,000 staff members as it goes through its “annual operating planning review”. In a memo to staff, Amazon CEO Andy Jassy, like Zuckerberg, laid blame on the challenging economic climate, as well as Amazon’s “rapid” hiring spree of recent years.
Apple has, so far, taken a different route. Instead of mass layoffs, the world’s most valuable company has announced a hiring freeze across “certain departments”. Meanwhile Alphabet – Google’s parent company – has refrained from redundancies, as it stands. In September, executives said there were likely to be small cuts, and that revenue from Google’s advertising platform was down year-on-year, but they stopped short of announcing anywhere near the kind of action seen elsewhere in Big Tech. However, more recent reports have speculated the company could lay off as many as 10,000 employees next year as it rolls-out its new performance scheme across the company.
Rounding off the Big Five, Netflix has also made cuts but it’s a slight anomaly in the sense that these cuts came earlier. Earnings suggest Netflix was already stuttering before the recent economic downturn, due to slow growth in subscriber numbers and large debts reportedly in the region of $14.5bn. In May, the streaming service announced it was cutting 150 jobs and in late June, a further 300 were announced. These later layoffs coincided with the subscription service reporting its first subscriber loss in a decade.
Then there’s Twitter. Ahead of Elon Musk acquiring the company in October for $44bn, there were few signs of impending cuts. Following the takeover, Musk let go of 3,500 people. This figure has since risen to a reported 7,500+. While these layoffs coincided with the wider cuts being seen at Meta, Amazon et al, Twitter – like Netflix – was already facing financial struggles. Its debts have been exacerbated by falling ad revenue since the takeover – a loss of “around $4m a day” – and the recent layoffs are therefore said to be an attempt to make Twitter profitable as quickly as possible, rather than a direct reaction to the market.
All of these companies have declined to comment on exactly what types of roles are affected. Amazon said that its cuts centred on “corporate and technology roles”. Apple said it is still hiring but is being “very deliberate” with where these hires are taking place. Roles working on “future devices and long-term initiatives” are said to remain a priority, while those in corporate functions and standard hardware and software engineering are not. That said, Apple job boards show there are still hundreds of open positions globally across departments.
Facebook said its new structure would be set up to focus on “high-priority growth areas” such as its “AI discovery engine, its ads and business platforms, and the metaverse”. Google, Netflix and Twitter wouldn’t comment on their respective plans.
The comments made by Apple and Facebook, which point to strategic shifts, are interesting. While the economic downturn has undoubtedly impacted their plans, there are likely to be wider factors at play when it comes to their respective narrowings of focus, beyond just a squeezing of budgets.
This is because, as Hywel Carver, CEO at deep coaching company Skiller Whale, explains, “it’s harder for Big Tech to spin on a dime”.
“No-one is solely trying to cut costs,” says Carver. “They’re trying to cut costs while also hitting their strategic goals. This means changes are often less to do with direct savings, and more about finding the most efficient and effective way of hitting those goals.” Such changes aren’t, therefore, just a knee-jerk reaction to the current economic climate, but are shifts linked to wider trends and longer-term strategies.
“For Facebook, or any company cutting down on future-focused projects, it makes sense they’re going to cut back on people in the AI and machine-learning space. There’s been a lot of froth around that space for the last five years or so (as much as 10-12 years when you include the concept of Big Data) and this cycle is coming to an end. Companies now need to focus on the immediate stuff that’s actually going to generate profits sooner, rather than areas high in experimentation and exploration.”
The findings of the 2022 Nash Squared Digital Leadership Report appear to support this. They show investment in AI, automation and Big Data has dropped this year. Cloud has remained strong, and cyber-security is on the rise. In the wake of political tensions and advanced digitisation, cyber is one of the most sought-after technology skills in the UK.
Thus, the shifts in staffing and strategy being seen across Big Tech may have already been on the cards. The economic downturn has simply accelerated this move.
“While it’s true the layoffs have been mostly an economic decision, there has also been a shift in the types of roles and skills needed today,” says Lu Hayward-Graham, global client services director at Cielo. “The skills we need now didn’t exist 10 years ago and with this ongoing skills shortage in the tech sector, successful firms have been looking to hire based on soft skills – remote leadership, communication, dealing with change etc – rather than traditional, technical hard skills.”
To widen the talent pool while also responding to market shifts, companies are less inclined to hire, or more inclined to fire, people with very specific and niche skills and instead opt for people with wider, more transferable skill sets.
This could explain the reduction in technical talent across Big Tech and more widely, and signals a new approach being used to finally solve the skills gap after years of current methods failing to shift the dial. In this way, companies are seeing the value – in terms of time and cost – in hiring people that fit the culture and upskilling them, rather than employing people for skills alone.
On the subject of cost, for more than a decade the tech giants have hoovered up the best in technical talent and paid vast sums for their skills. Facebook alone reportedly hired 9,000 staff across all departments, including tech, between January and September 2022 (a hiring spree that is being wiped out in one fell swoop with the latest layoffs). At the same time, data has shown that senior engineers, data architects and software designers across such Big Tech firms can earn around $300,000 a year.
These high salaries are, in part, a side-effect of the hype that has surrounded tech in recent years. But they’re also a result of the significant supply-demand problem. Those with the most in-demand skills have been able to charge higher rates, while Big Tech firms used their competitive advantage to price smaller companies, and even their rivals, out of the talent market. This has seen Big Tech become awash with expensive talent to the point where it’s become bloated. This is likely to be another driver of the recent layoffs.
“Tech firms pre-emptively hired ahead of a predicted growth that now hasn’t materialised and are now downsizing to combat the massive overspend,” continues Lu. “This has always been a problem in the tech sector because of its ‘grow, grow, grow’ mentality, which often translates to ‘hire, hire, hire’. Recent challenges at some of the tech giants have really been down to incorrect business evaluation and/or demand planning, which has translated to workforce plans that don’t add up.”
Of course, Silicon Valley’s Big Tech firms only make up a proportion of the wider tech industry. It’s a large proportion, granted, but the changes they’re making are not being seen to the same extent elsewhere. Huawei is a case in point.
Having made relatively small cuts to its staff in 2020 – estimated to be around 1 per cent of its workforce, or 2,000 people, and with the effects being largely felt in India – Huawei has avoided more recent changes. In fact, its senior vice president Vincent Peng said, while speaking at the Unesco World Higher Education Conference, that his firm is actively investing in talent. It has committed to training one million ICT professionals and experts by 2024 through its global Huawei ICT Academies.
Since 2013, Huawei has partnered with universities to offer technical certifications to students globally. More than 400,000 students have passed Huawei’s certifications to date, and Peng wants to more than double this in the next two years. Within this scheme are three certifications – Huawei Certified ICT Associate (HCIA), Huawei Certified ICT Professional (HCIP) and Huawei Certified ICT Expert (HCIE). Each one is designed to be the equivalent to an engineer, senior engineer and expert level qualification offered elsewhere.
Huawei wouldn’t comment on whether the firm directly employs these graduates, instead stating that “more than 17,000 HCIE graduates have entered the global job market” since the academies launched. It also stressed that the scheme forms part of its wider mission to address the social inequalities caused by the digital divide and to “promote sustainable social development”. That said, it is common for companies to launch such initiatives to get the added benefit of creating a strong pipeline of talent.
The reason these plans are notable is that they go against those seen in Big Tech. Not just because they show signs of growth against a sea of US shrinkage, but because they demonstrate Huawei’s commitment to the types of engineering roles and skills Big Tech is seemingly shedding. Equally, the apparent reduction in technical, engineering roles in Big Tech, coupled with initiatives like Huawei’s, could end up being a boon for the wider market, rather than a concern.
Analysts and experts have called the mass layoffs a rare opportunity for start-ups to hire scarce tech talent. “There’s still a systemic shortage of tech talent globally, but particularly in the UK, and so you don’t get these windows of opportunity very often,” says Logan Naidu, founder of Kernel Group. The Nash Squared report found that tech spend is set to grow at its third fastest rate in over 15 years, while consulting firm BCG has reported that 60 per cent of companies plan to increase tech and digital transformation investments in 2023.
“Each week we hear of tech companies making major adjustments to their headcount. This seems dramatic, but much of this reduction is right-sizing for the over-hiring of the past 18 months,” says Hayward-Graham. “It’s not impacting the whole industry in the same way. Other organisations are barely affected by this downturn; some are even benefiting from the influx of talent to build their own teams.”
“It’s important to remember that almost every company you can think of, whatever its core business, is now itself a tech company as well,” adds Runar Reistrup, CEO of YunoJuno. “Businesses all need software talent and that isn’t going to change – the demand is huge and growing.”
Which roles are in, which are out?
According to Liam Reynolds, CEO of Silicon Milkroundabout, tech talent and tech recruiter roles are in decline. As companies are slowing down hiring, the people whose job it is to find new talent are often the first to go.
There has also been a shift in data science roles. A combination of layoffs, and an over-saturation of new, junior data scientists entering the job market, has left few appropriate job roles for their level.
Elsewhere, there has been a significant uptake in applications from people in e-commerce. With the post-pandemic bubble bursting for e-commerce and well-reported issues for the likes of Made.com, ASOS, Klarna and Shopify, there’s been a significant influx of experienced talent onto the job market.
On the plus side for job-hunters, areas that are still popular are tech product managers and software engineers. “Despite all the turbulence, there still seem to be plenty of companies currently hiring for these roles,” says Reynolds.
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