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Facing the 2023 Tech Layoffs and Planning for the Future

As of May 15, 2023, the tech sector has seen a staggering 194k layoffs across 675 companies in just 4.5 months, a drastic increase compared to 164k layoffs in the entirety of 2022. Tech giants like Amazon, Meta, Microsoft, Google, IBM, SAP, Salesforce, along with many smaller tech firms, have been reducing their workforce. Let's look into this and explore how companies and employees are adjusting.

What's Behind the Extreme Rise in Tech Layoffs?

Back in 2020, lockdowns triggered a tech-buying frenzy to facilitate remote work and boost e-commerce. Tech was a lucrative investment avenue, and the sector thrived, leading to a hiring spree, which in hindsight, one may see as overhiring.

However, 2023 is seeing an economic downturn, influenced by inflation, fear of recession, the war in Ukraine, and the disruptive effect of new AI tools. All this has resulted in the devaluation of tech companies, which investors no longer view as an optimal surplus allocation strategy. As a result, corporations are shutting down risky, innovative projects with an uncertain future, and investors are cautious with new investments in the sector.

This overall deceleration not only stunts innovative tech projects but also constrains the growth of infrastructural and ecosystem services like data centers, computing power, and communication services. Predictions even suggest a downturn in hardware sales. As a response to these developments, companies began a wave of layoffs in 2022, aimed at curbing expenses and lowering costs in anticipation of a recession.
The current wave of layoffs began in Q2, 2022 (https://layoffs.fyi/)
Investors, too, are pressing companies to cut expenses as revenues taper off, and VCs are worried about likely profit dips after a growth period. The closing months of 2022 and the start of 2023 have witnessed the largest layoffs since the onset of COVID-19. Notably, Accenture laid off a total of 19,000 employees (2.5% of its workforce), and Twitter, under Musk's leadership, laid off approximately 6,500 employees (81% of its workforce).
Top 10 tech layoffs since COVID-19. All but one occurred in 2023, accounting for 44% of the year's layoffs (https://layoffs.fyi/)
The massive layoffs have undoubtedly disrupted the workforce market. However, the sudden availability of talent can also make it easier for startups to hire. I expect fields like education and AI to grow despite the overall stagnation. These sectors can potentially empower the recently unemployed to regain their professional footing.

How Employees Adapt

For those who have lost their jobs, as well as those still employed, enhancing their technical skill set to future-proof their careers is a wise move. I believe that the following improvements will be essential to accelerate one's career:

  • AI proficiency: Becoming adept with prompts, APIs, and the general AI tools is essential. AI is the new "digital." Understanding how to apply the emerging toolkit will be as fundamental as today's common knowledge of text processors, spreadsheets, or browsers.
  • Soft skills: As AI gradually replaces routine tasks, cultural awareness, communication skills, trust-building, motivation, partnership, mindfulness, and a holistic understanding of team dynamics will set successful employees apart.
  • Proficiency with super-fast prototyping: Familiarity with no-code, low-code, and "AI-code" as the means to test the market fast.
  • T-shaped skill set: A deep expertise in one area, combined with a touch of product acumen, a hint of marketing/sales insight, and a dose of all-round understanding of the whole business always make a difference.

Like any crisis, the current wave of layoffs requires everyone—employees, companies, and investors—to adapt and evolve.