Tech Layoffs & Hiring Trends
The initial surge of tech layoffs, particularly in the US and India, has subsided since the beginning of the year. Industry experts believe that the era of extensive layoffs, apart from those driven by funding challenges in startups, is largely in the past.
However, most experts agree that companies will continue to focus on how best to utilize existing capacity and go slow on hiring, save for niche skills, as demand constraints and lack of visibility continue to weigh on the entire tech crony of services, products, and tech-enabled startups.
Sangeeta Gupta, Senior VP of Nasscom, points out that while technology demand persists, the pace of decision-making and business growth has slowed, indicating that the majority of layoffs arising from market uncertainties are receding.
“The good news is that demand for technology still exists, but decision-making is slow, and consequently, so is business growth. The environment for layoffs, except those happening because of funding issues in startups, is largely behind us,”.
Deloitte India’s Partner, Anandorup Ghose, echoes this sentiment, stating that the stabilization of global economies and decreasing recession risks have contributed to the decline in layoffs.
“Virtually all companies are running reskilling and redeployment initiatives to best utilize existing capacity and align supply with demand,” he added.
For the most part, companies have already right-sized their workforces as needed, and a significant shift has occurred towards reskilling and redeployment initiatives aimed at optimizing existing capacities and aligning supply with demand. Even enterprises like Cisco, which recently underwent another round of layoffs, attributed it to pre-announced restructuring plans.
However, as the industry charts its path forward, it’s anticipated that the surge in hiring witnessed during FY21 and FY22 might not be replicated. Future hiring, if undertaken, will primarily revolve around replacing positions or acquiring specialized skills. Hiring decisions remain cautious with continued uncertainty surrounding project timelines, cancellations, and the variable pace of project ramp-ups.
According to Bhatt, an industry observer, the tech sector will exercise prudence and close scrutiny in its hiring strategies for the latter half of the year. If the persisting uncertainties around project conversions and market dynamics persist, there’s a possibility that net hiring in the second half might turn negative for the industry.
Sachchidanand Shukla, Group Chief Economist at Larsen & Toubro, adds that the tech sector will grapple with pressures until there’s more clarity about the interest rate trajectory in the Western economies. The open-ended approach of the US Federal Reserve and potential rate hikes by the European Central Bank post-July to control inflation introduce additional variables that can impact hiring decisions.
The Wave Of Layoffs
In recent months, a wave of layoffs has swept across the globe, impacting thousands of individuals employed by both large corporations and small businesses. The unprecedented trend of workforce reduction has been driven by many factors, revealing the complex interplay of economic, technological, and organizational dynamics.
One significant catalyst for these layoffs has been the persistent disruption caused by the COVID-19 pandemic. The pandemic led to widespread economic uncertainty, supply chain disruptions, and shifting consumer behavior.
Businesses across various sectors have grappled with reduced demand for their products and services, prompting them to reevaluate their workforce requirements. The pandemic-induced lockdowns and restrictions forced many industries, such as hospitality, tourism, and retail, to drastically scale back operations or temporarily shut down, worsening the need for workforce reductions.
Moreover, changing market dynamics and industry trends have influenced these layoffs. Companies that were already grappling with financial challenges or facing stiff competition before the pandemic were particularly vulnerable.
Global trade tensions, supply chain disruptions, and geopolitical uncertainties have added additional layers of complexity to the situation. Businesses that heavily relied on global supply chains faced logistical hurdles and cost fluctuations, compelling them to rethink their operational models and, in some cases, downsize their workforce to mitigate risks.
In this context, both big corporations and small enterprises have been compelled to make difficult decisions regarding their staffing levels. Large corporations, despite their financial clout, have not been immune to the challenges posed by these unprecedented circumstances. The imperative to remain agile and resilient in an uncertain market has driven some of these organizations to streamline their operations and reduce workforce numbers.
At the same time, small businesses, often lacking the resources and robust financial buffers of their larger counterparts, have faced even greater challenges. Many small enterprises operate on slim margins and were disproportionately impacted by lockdowns and reduced foot traffic. As a result, they faced the difficult choice of laying off employees to sustain their businesses in the face of dwindling revenues.
The Last Bit, While the era of extensive tech layoffs appears to be waning, the industry’s focus is shifting towards the efficient use of existing resources. The uncertain demand environment, coupled with global economic factors, is prompting a cautious stance on hiring decisions.
As tech companies continue to reevaluate their strategies, navigating the delicate balance between capacity utilization and measured hiring will be crucial in shaping the industry’s employment landscape in the coming months.
