What’s behind the wave of big tech layoffs in 2023?

Graphic of scissors cutting away the floor from an employee, to represent layoffs

It can be easy to feel like tech workers are dropping like flies, in the midst of economic turmoil and surging inflation. At the start of the year, Amazon and Salesforce announced 26,000 job losses between them, with layoffs at Alphabet and Microsoft pushing this number ever higher. Twitter, too, has seen mass redundancies and resignations, but that’s something of a special case. There’s something of a contagion effect underway, and the once impenetrable sector is showing the dents in its armour. This is especially apparent now the effects of surging inflation and the cost of living crisis have taken hold.

As a result, in the UK, more than half of tech workers are applying for new roles in anticipation of being let go. The sentiment is highest in London, with a stagging 63% of employees pre-emptively applying for new jobs. Given the success of big tech companies in recent years, particularly during the pandemic, certainly at the sight of other sectors in the economy, it might seem bizarre that profitable giants in the field like Amazon and Google feel the need to cut staff. Despite the negativity, though, these layoffs might pose an opportunity for workers being let go, as well as other businesses hoping to plug skills gaps.

Why are big tech companies shedding staff?

There are three key arguments for shedding staff, industry insiders tell IT Pro. Firstly, businesses are undergoing a course correction after a period of over-hiring and endless optimism about market conditions. Secondly, the prospect of an economic downturn provides cover for companies to reorganise without denting their reputations catastrophically. Finally, the direction of innovation and the emergence of tools – such as generative artificial intelligence (AI) – have sparked companies into questioning the skill sets of some workers.

For Chris Federspiel, CEO and co-founder at Blackthorn.io, a company that develops Salesforce-native apps, it’s a question of the bottom line, with venture capital investors tightening purse strings. Larger companies are also looking to drastically cut payroll – their biggest expense. “Because all of this debt is now expensive, you can't raise, you can't get access to capital, you have to be forced to reduce your costs,” he says. “So, because all these things are shaping up in the industry, it's now an excuse to drop your much higher-paid individuals.”

Michael Gibbs, CEO of tech training platform Go Cloud Careers and a longtime employee of Cisco before, says he’s noticed that companies are heavily leveraged, staff-wise, towards roles focused on making money when layoffs like these happen. “In tough economic times, organisations fight for revenue,” he says, adding salespeople alongside cloud architects and sales engineers are the last to go. “But the back-end people, HR, even if they're great, they get laid off,” he continues. “Software developers get laid off because it doesn't matter if you're coding in Cameroon, Cambodia, China, or California, the only difference is the salary that people get paid.”

Tim Rowley, CTO and COO of PeopleCaddie, has a different take. He argues these layoffs, particularly at massive companies, have more to do with C-suite executives capitalising on an opportunity for a reshuffle than it does any real or perceived economic uncertainty. For him, these layoffs are in large part the result of business leaders who know they won’t be judged as harshly for making such sweeping cuts now.

“If you look at the balance sheets of these big tech companies, and you see that, in some cases, they have billions of dollars in cash stacked up, they clearly have the financial resources to weather the storm,” he tells IT Pro. “I would posit that the CEOs, in particular, and the leadership teams at these big tech companies are being opportunistic. What I mean by that is, occasionally the markets present you with an opportunity to both right size expenses and realign expenses with your current priorities.”

Losing your job isn’t a moral failing

Identity is so often conflated with employment in modern society, especially in the US where the majority of the job losses are being sustained, co-founder and partner in investment firm Zelkova Ventures, Jay Levy, says. It’s important, therefore, that workers who’ve been recently let go don’t see their exit as the result of some sort of moral failing.

“Most of these layoffs, not all, but most of these layoffs are not a reflection on your ability,” he advises former employees. “These are corporate layoffs to impact the bottom line, as companies may have gotten too bloated. And the marketplace realises that.” Levy adds, unlike 18 months ago at the height of the sector’s upward trend, other tech companies are unlikely to see a layoff as a red flag related to performance.

Gibbs, meanwhile, says that while the collective sadness of this shakeup can be disheartening, it’s important for tech workers to focus on what they can do – like update their CVs and invest in new training and skills. “A layoff is not a death sentence,” he says. “It's just a small setback and a chance to get something even better.”

People who have been laid off from roles they needed to maintain their US immigration status are in a particularly difficult spot. Dr Kyle Elliot, a California-based career coach, says people who need to quickly regain employment should focus on what they can control, like how often they apply and to which companies, but that it’s okay to sit with the fact that the experience can be deeply alienating. “Find your community and connect with people because then it feels less lonely,” Elliot says. “The job search is lonely for anyone. It can be particularly lonely if you're facing possible deportation.”

What can employees do if they’re let go?


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Elliot, who holds a graduate degree in education and is a member of Forbes’ Coaches Council, a career coach with expertise with tech sector clients, says that these layoffs are “a wake-up call”. He adds: “This allowed a lot of employees to recognise that really, no company is safe, and they really need to keep thinking about their backup plan and their backup to their backup plan.”

Elliot says the key for employees looking for new work is to broaden their horizons outside of certain technology hotspots like Silicon Valley and to identify what they want out of their next role, what they need, what they don’t want, and what they don’t need. For instance, many roles across the industry are compatible with remote or hybrid work, with some companies also really pushing the boat on hybrid work.

“Then, use those parameters as guardrails or GPS directions, as I like to call them,” he continues, “so that when an industry or a specific company comes up – and when you receive a job offer – you can then compare it to those four quadrants.” In his experience, he’s found that to be really helpful for people who feel lost.

There’s another opportunity at play here, too. Levy says employees being laid off from big companies, especially those with a little bit of capital, are in a really good spot to try to build their own companies, even if valuations of startups are trending lower and lower.

“These layoffs are freeing up resources – people mostly – for startups,” Levy says. “I think we're going to see better startups, And I think we're also going to see more startups because a lot of these people will look at this as an opportunity to take risks. I think, ultimately, this will help fuel innovation.”

Can SMBs exploit the wave of job losses to plug skills shortages?

Levy says with small and medium-sized businesses (SMBs) being priced out of talent, these layoffs will even out the market. With that, though, will come a baseline compensation drop for those switching companies. It’s a shift that Blackthorn.io’s Chris Federspiel says will be difficult for those used to the level of resources and company culture at an enterprise.

“It sucks, but it's not the worst thing because they can still get a job,” says Federspiel. “It's not like they're farmers and we're facing a ten-year drought and there's nothing to do. If you have a skill where you can still land a job pretty quickly, just get something a bit lesser paid for a year or two and see what happens.”

For small businesses and startups, who’ve traditionally lost out on top talent because they haven’t been able to boast the lure of huge benefits or salaries, they can lean on the situation to attract the talent they’re seeking. The company culture at smaller companies, for example, tends to be warmer and more favourable and, now more than ever, employees might value the feeling of being valued, rather than a higher salary. Some of the biggest companies, too, are turning back the clock on hybrid work, with SMBs and startups more inclined to be forward-thinking on reimagining the structure of work.

Gibbs adds that while the industry may be aflutter with the tech that could conceivably replace workers across various roles, it’s important to focus on what these tools just can’t do. “[Generative AI] can't be human; it can't lead a team, it can't connect with others with other areas of expertise, it can't bring out the best in others, it can't build a business case,” he points out. “That's what I think organisations should look for. People that have extremely good tech skills, people that are wanting to work very hard to solve a problem, people that are bought into the mission, and people that are not just techs, they're well rounded.”

John Loeppky is a British-Canadian disabled freelance writer based in Regina, Saskatchewan. His work has appeared for the CBC, FiveThirtyEight, Defector, and a multitude of others. John most often writes about disability, sport, media, technology, and art. His goal in life is to have an entertaining obituary to read.