Is this the end of the fantasy ride of tech companies? | The Financial Express

 Is this the end of the fantasy ride of tech companies?

In the third quarter of 2022, the number of employees who had been laid off by tech startups peaked at 62,296 worldwide.

 Is this the end of the fantasy ride of tech companies?
Byju's, Unacademy, Messho, Udaan and Ola among others have cut hundreds of jobs. (Representational Image/IE)

By Rajesh Mehta & Prerna Mishra

Whether it’s this morning at Twitter, yesterday at Amazon, Microsoft, Meta, and Stripe or earlier this year at Snap, Salesforce, Lyft, Netflix or any other bellwether company everyone is plagued with layoffs. For more than two decades, the tech industry has been a reliable source of booming stocks and cushy, high-paid jobs but as it looks like in the last couple of months, the sheen has faded and the axe has fallen. In the third quarter of 2022, the number of employees who had been laid off by tech startups peaked at 62,296 worldwide. November has seen some of the largest layoffs of the year and it isn’t over yet!

Global companies are undergoing a corporate bloodbath. And sadly, India is not immune to it. Twitter has laid off more than half of its staff in India. Indians are also among those most affected after Meta shaved off 13% of its workforce. But this is not just a case in the tech industry, seems like Startups and even unicorns are also following the “trend”. As per estimates, about 16,000 Indians lost their jobs at Indian startups in 2022. Byju’s, Unacademy, Messho, Udaan and Ola among others have cut hundreds of jobs. And the Indian food tech giant Zomato also joined the list recently.

But what could be the reasons behind these surging layoffs? 

Overzealous pandemic hiring practices: Surging layoffs are linked to the tech sector overshooting its growth potential during the pandemic when it saw a huge demand. Hence companies went on a hiring spree anticipating the boom to continue even after the pandemic. But unfortunately, as normalcy was restored the companies got a reality check. And they started laying off employees.

The Holy Trinity: Slowing economy, Fed rate hikes, and the looming fear of recession. As people went back to their normal lives demand was slow. This was in addition to the skyrocketing inflation that the US was already experiencing. But there’s another piece of the puzzle, which is interest rates. As Fed increased interest rates the idea that future growth didn’t seem as promising as it used to be at such high-interest rates. So suddenly companies were facing investor issues, concerns and a big question mark about the future of their companies.

Russia-Ukraine war: The Russia-Ukraine War has further exacerbated the decrease in the consumers’ demands by making the market more volatile because of the ripple effect across the globe

While everyone has been impacted by these mass layoffs in some or the other way there are some segments that have been clearly affected more than others. When companies downsize, diversity takes a pause — even if it was something that was treated as a priority previously. We all have heard stories of women who are now getting laid off simply because they were on maternity leave. 

Another segment that we need to consider is the people laid off by Facebook, who holds H-1B visa holders. As they only have a 60-day grace period before they need to find a new job. Facebook is known as H-1B “dependent,” as 15% or more of its workforce is on the H-1B visa. When visa holders lose their job, they may have to leave the US if they don’t quickly find a job. People who have recently shifted abroad and hear the news about getting laid off after only 2 days haven’t been quite seen to watch out.

The Added Ruthlessness

Well, there is no denying that it’s soul-crushing to see so many people losing their jobs. But what seems more unvarying is the way these layoffs have been handled. As it seems a bit ironic when such companies claim to be a “family” or make statements like “We’re all in this together.”  There’s nothing but no set process as to how people have been laid off in the last couple of weeks. For instance, Elon Musk when he took over Twitter, laid off half of the employees by doing a mass email and some employees were informed via Google password rejection which you know is not pretty. It never is!

But what makes the skin crawl more is the hypocrisy of some of these tech giants. Amazon fired over 3000 employees but its founder apparently decided to donate most of his wealth to charities. Byjus sacked over 2500 employees as part of “restructuring its business” but hires the sports icon, Lionel Messi, as the global brand ambassador. Seriously?

What should be done?

Times may be hard, but company reactions needn’t be. It’s imperative for businesses to consider all the options before taking any drastic action. In cases like these, higher management people should use their network to help laid-off employees find new jobs. Lastly, Layoffs are not always bad, they’re just a fact of life, and often we simply need them but this process should be as respectful and as compassionate as possible.

(Rajesh Mehta is a leading International Consultant in the field of Market Entry, Innovation & Public policy; Prerna Mishra is an intern at Invest India and a researcher. Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.)

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First published on: 25-11-2022 at 12:50 IST