In 2020 and 2021, it appeared that technology firms will be the driving force behind post-pandemic recovery: Their expansion seemed unstoppable, and their leadership made bold plans to expand. Demand for internet services and goods skyrocketed across the board, with US tech behemoths Facebook, Amazon, Apple, Netflix, and Google, together known as FAANG, benefiting from a parabolic surge in share prices. while the grocery platform BigBasket achieved a 73% rise in operating income.
Then the tides changed. Layoffs began to ripple across the IT sector in the second quarter of 2022, with 16 lakh personnel put off in 2022 and another 10 lahks laid off this year. We’ve all heard the headlines: Google lay off 6% of its personnel last month, Twitter laid off an estimated 50% of its workforce, and Meta reduced its employment by 13%. In India, 67 firms, including unicorns like BYJU’S, Ola, OYO, Unacademy, and Vedantu, laid off 21,532 people. “It was the third-worst year for IT after 2008 and the dot-com bubble bust in 2000,” one analyst adds.
What is causing this sudden drop? A coming recession that has left investors nervous, inflation, supply chain concerns, and semiconductor shortages, among other factors, all played a role in 2022. These system-wide issues have rendered expansion unsustainable for businesses like Uber, BYJU’s, and Zomato, which run in the red. Ad sales were also down: Meta, for example, lost USD 10 billion in ad income last year. For years, FAANG stocks (or MAMAA, due to certain tech giant rebranding and market value revisions) have been sure bet investments, but most market experts believe the current negative trend will continue in the near future.
In general, layoffs are neither beneficial nor negative in and of themselves. Layoffs may help businesses save expenses and perhaps develop by being more competitive in their marketplaces. On the other side, layoffs increase long-term costs: IT firms recruit personnel with large sign-on incentives. A significant number of layoffs affect relatively recent workers who were brought on board during the epidemic, resulting in sunk costs and the loss of great talent, which can have a severe influence on a company’s capacity to innovate. Layoffs can also cause employee confusion, which can lead to a loss of faith in the company’s leadership and stability.
Lastly, and probably most importantly, there are reputational costs to consider: because word of layoffs spreads rapidly, it may make it more difficult for the organisation to attract new talent or retain existing personnel.
Yet, there is no need to panic and sell all of your investments. The digital behemoths will continue to expand, and as cliche as “too big to fail” is, experts, consider their long-term prospects as generally favourable, and the current reduction, both in terms of staff and valuation, is a rejigging that takes them closer to the current realities of post-pandemic growth. When demand grew during the epidemic, most businesses embarked on hiring binges, and values were equally inflated.
Tech layoffs, and our reaction to them, are a symptom, not a sign. Large internet businesses have become some of the world’s wealthiest corporations, outstripping whole countries’ GDPs. As a result, they have great power in economics, politics, and society. Around them has grown a huge ecosystem of suppliers, small companies, and entrepreneurs: Apple’s supply chain, for example, covers 52 countries and employs an estimated three million people.
Even as technology pervades our lives, there is a growing techlash—a cynicism about tech behemoths in particular and technology solutions in general, and layoffs provide a human face to this perceptible shift in mood. For years, we celebrated Silicon Valley’s “move fast and break things” ethos, until we realised the overwhelming power of these firms and how much might be shattered. Therefore, even as layoffs resonate throughout the digital industry, the question is not whether big tech is dead (it isn’t), but whether we have allowed these firms to have far too much control over how we work, communicate, and live.
