Editorial: Tech turbulence
The tech industry across the world is in a state of turbulence. Lay-offs and hiring freezes have become buzzwords as technology giants — from Facebook, Twitter and Google to Amazon and Microsoft — have been sacking their employees in large numbers. The plight of Indian workers in the United States on H-1B visas is particularly […]
The tech industry across the world is in a state of turbulence. Lay-offs and hiring freezes have become buzzwords as technology giants — from Facebook, Twitter and Google to Amazon and Microsoft — have been sacking their employees in large numbers. The plight of Indian workers in the United States on H-1B visas is particularly pathetic as they have to find an alternative job within the stipulated 60 days or leave the country. Amazon plans to lay off 10,000 people this month while the maverick billionaire Elon Musk, who took over Twitter recently, is on a ruthless sacking spree, laying off nearly half of the company’s employees. Meta, the new avatar of Facebook, is laying off 11,000 people, constituting about 13% of its workforce. These layoffs come in the midst of a business slowdown as a result of the revenue challenges that the big tech companies are facing. The advertisers have pressed the pause mode amidst recession fears in an extremely uncertain macroeconomic environment. The key cause for the deterioration of the business environment is the Ukraine war which began early in the year. It sent global energy prices sky-high, subjecting the entire world to high inflation. To tackle this, the world’s most important central bankers have raised interest rates, following in the footsteps of the US Federal Reserve. Worldwide, more than 1.20 lakh jobs have been lost, according to the Layoffs.fyi website, which tracks tech job cuts. As our lives moved online during the pandemic, the tech giants’ businesses boomed, leading to aggressive hiring. It has now turned out that the tech industry overestimated the requirement for human resources.
Moreover, as the global macro economy ran into trouble, many firms slashed their online advertising budgets. In the financial technology sector, rising interest rates have also hit companies. On their part, investors have also piled on the pressure to cut costs, accusing tech firms of being bloated and slow to respond to signs of a slowdown. There is less tolerance for big spending on high-tech gambles like virtual reality or driverless cars that may not pay off in the short term. Investors also see the high wages and cushy perks some enjoy in the industry as unsustainable. The sheen associated with the tech industry has been fading. Faced with a revenue growth slowdown, Indian tech companies too have paused hiring. In view of the economic uncertainty, investment funds from across the world have made a beeline for the safety of the US system. As a result, the dollar has strengthened, thus making imports costly, adding to the inflationary pressure exerted by the high fuel prices. The slowdown needs to be seen in the context of the strong growth that tech companies witnessed during the pandemic when businesses across the board sought to enable their systems to handle ‘work from home’ needs.
