By Siddharth Pai
During the pandemic, corporations the world over accelerated their ‘digital first’ efforts. As a result, Big Tech firms such as Facebook and Google, as well IT services firms like Infosys, TCS, Wipro et al in our own backyard stepped up their hiring operations to meet this sudden surge in demand.
Things are changing, and fast. The tech sector has seen an unprecedented slowdown over 2022. Gone are the days when Silicon Valley seemed immune to ups and downs in the larger market. This was borne out right through for a full decade until as late as 2021, when America’s five largest tech companies saw their revenues and profits grow at the astronomical rate of five times that of America’s GDP growth, per The Economist. This ability to weather the storm seemed to be underlined during the pandemic lockdowns, when these firms continued to post record earnings even as the rest of the economy was in a shambles.
2022, however, was a different kettle of fish. While the S&P 500, a broader measure of America’s stock market has fallen by 20% since the beginning of the year, tech firms have been hit much harder. The NASDAQ composite, which is a very tech heavy index, has fallen by 33%. The 5 largest BigTech firms – Netflix, Meta (Facebook), Amazon, Alphabet (Google) and Microsoft have seen their market capitalisation fall by a jaw-dropping $ 3 trillion.
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In Meta’s case, the loss was even steeper– almost 66% of its value has been wiped out. This fall has several causes–one the penetration of digital advertising (which is where the bulk of revenue lies for these firms) has probably reached it maximum point. Large amount of advertising budget has already moved from newspapers and television to digital; evidently about two-thirds of all advertising spending in the US is now already digital.
In addition, these companies have now started muscling in on each other’s key markets. Amazon Cloud is slowing down as Google Cloud, headed by my classmate Thomas Kurian, is making aggressive moves in the business, much like Microsoft’s Azure is increasing its market share by innovative and strong positioning with start-ups. The fact that Microsoft owns such a large proportion of the enterprise corporate market allows them to facilitate joint go-to-market plays for start-ups, which is not something either Amazon or Google can easily do since their penetration in the enterprise space is lower. Meanwhile, Apple is quietly entering the advertising space, and the controversial rise of TikTok is battering Facebook as a social media leader.
In November, Meta announced that it was laying off 11,000 employees, right around the time that Elon Musk slashed almost 75% of Twitter’s workforce. Microsoft has laid off 1800. Amazon hasn’t released an official number, but it is believed to be over 10,000. Cisco has laid off 4000. The value of Bitcoin has plunged by two-thirds this year, dragging several start-ups down with it. Google has announced a hiring freeze and is likely preparing its own layoff plans. While these have not been made public yet, analysts find that Google hiring 30,000 workers over the Covid years to bring its total to 185,000 plus is highly unusual and that layoffs would be a natural result as Google begins to streamline. According to The Information (bit.ly/3jzBQyK), 10,000 Google employees could be rated low performers and hence be in danger of being axed.
Here in India, edtech majors Byjus has laid off 2,500 employees, Unacademy has laid off 1,500, and Vedantu has laid off 1,100. (bit.ly/3i9RCjB) . The Indian startup sector is believed to have retrenched 17,000 employees this year.
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The days of frenzied hiring of low- and mid-level employees in India and other parts of the globe has stopped. These are now the same tiers who are being most impacted as demand slows. Rumour has it that new and mid-level employees as the worst hit, since they were the ones commanding out of turn promotions and unheard-of compensation package increases to switch jobs.
As usual, the weak suffer what they must. The New York Times reports, “Over the last decade, the prospect of six-figure starting salaries, perks like free food and the chance to work on apps used by billions led young people to stampede toward computer science—the study of computer programming and processes like algorithms—on college campuses across the United States. The number of undergraduates majoring in the subject more than tripled from 2011 to 2021, to nearly 136,000 students, according to the Computing Research Association, which tracks computing degrees at about 200 universities. Tech giants like Facebook, Google and Microsoft encouraged the computing education boom, promoting software jobs to students as a route to lucrative careers and the power to change the world.
But now, layoffs, hiring freezes and planned recruiting slowdowns at Meta, Twitter, Alphabet, Amazon are sending shock waves through a generation of computer and data science students who spent years honing themselves for careers at the largest tech companies. The cutbacks have not only sent recent graduates scrambling to find new jobs but also created uncertainty for college students seeking high-paying summer internships at large consumer tech companies. In the past, tech companies used their internship programs to recruit promising job candidates, extending offers to many students to return as full-time employees after graduation. But those opportunities are shrinking.
We can expect to see a large reshuffle worldwide among the youngest aspirants as well as those who are in the mid-level of their careers. India is not immune. Brace for impact.
The writer is technology consultant and venture capitalist
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