Tech layoffs exceed 15,000 in Feb 2024, SAP, Cisco, others in firing spree

Tech layoffs have been disrupting the industry for the last few years. However, it was in 2023 that we saw large corporations lay off staff by the thousands. The spate of layoffs seems to be continuing in 2024, with Google asking its staff to brace for more layoffs. In the first few weeks, the Alphabet Inc. company laid off thousands of its staff across departments. So far, 186 tech companies have laid off as many as 49,386 employees.

While there is a slight decline in the number of layoffs in February compared to January, considering the economic scenario, it seems like the rest of the year could be precarious for workers in the industry.

In the US, the ongoing spate of layoffs can be attributed to a variety of factors at play. However, these are mainly driven by economic instability and rapidly changing priorities of businesses.

Restructuring and strategic shifts
At this point in time, a lot of companies in the US and worldwide are undergoing some form of internal restructuring. There is an evident shift in their business priorities. And this is one reason that can lead to the elimination of certain departments or projects that may lead to many job cuts. The German software company SAP announced its restructuring plan in January this year, adding that it will affect over 7 per cent of its staff, that totals to 1,08,000. The company is looking to accelerate its growth partly through AI as it aims to become cloud-centric. Similarly, Expedia Group announced to lay off 1500 employees in a bid to streamline its cost structure.

Economic uncertainty
Another important reason to consider is the widespread fears of a recession and a general decline in tech stock prices. This has made investors cautious, and it has influenced companies to become more cost-conscious, leading to layoffs. In February, IT company Cisco announced that it is laying off as many as 5 per cent of its workforce, which is about 4,250, due to a variety of factors that include an uncertain business environment, and sluggish demand in telecommunications. However, Cisco has also cited a longer-than-expected deployment time for products shipped to customers in recent quarters.

Improving financial performance
It is known that layoffs can directly improve a company’s profit margin, considering the reduced payroll expenses. Investors usually favour companies that have higher profit margins, in this case, such job cuts can potentially increase a company’s value. There is also increased cash flow as saved expenses become available for investment in growth areas. London-based luxury etailer Farfetch on February 16 announced that it is laying off as many as 2000 of its staff. The company justified the move by saying it was needed “to streamline the business to allow us to operate from a position of financial strength”

Some of the other common issues cited include:
Overstaffing during the pandemic
This is a common reason for many tech companies that recently laid off its staff, including Amazon and Meta. The surge in demand for services, especially those related to e-commerce, led to companies going on a hiring spree. However, the rapidly changing economic climate and consumer patterns made many organisations realise that the surplus of staff was proving to be redundant. This has led to a situation where some tech companies cut jobs

Push from investors
Following the post-pandemic surge, many investors seemed to demand greater efficiency from companies. As a result, companies came under pressure to implement cost-cutting strategies to optimise operations and enhance financial performance. Consequently, widespread job cuts have become a prevalent tactic, aimed at meeting investor expectations and enhancing overall effectiveness of companies.

Rise of AI and automation
In the last two years, we saw the rapid growth of AI-powered technologies that are capable of automating tasks that were earlier performed by humans. While some companies have explicitly cited this as a reason, many have refrained. The AI boom indeed has impacted layoffs especially in areas with routine and repetitive tasks. While the number of AI-related layoffs in February was relatively small, it represents a growing trend that may become more significant in the future.

In January, 121 companies laid off 34,007 employees, while February 2024 saw 74 companies laying off 15,379 of their staff. While the number of employees and their companies halved in February, there is no clarity on what’s ahead for tech companies and millions of employees worldwide. While Google dominated 2023 with its astounding 12,000 job cuts, SAP laid off 8,000 of its employees in January 2024, owing to its restructuring programme for 2024. In February 2024, Cisco announced that it is laying off over 4,000 of its employees. (Figures from: layoffs.fyi)

At the moment, the tech industry’s landscape is fraught with uncertainty as layoffs continue. Be it driven by economic instability, strategic shifts, or pressure from investors, the consequences of these job cuts are far-reaching. As the industry navigates through multitudes of challenges, it is imperative for stakeholders to prioritise sustainable solutions that not only enhance financial performance, but also uphold the well-being of their employees. While the path ahead seems uncertain, the only way to move forward is embracing adaptability and resilience to face new challenges. Indian Express