Google announced 12.000 layoffs, mostly in America, while their offices around the world were also ordered to prepare for this move. The wave of workforce reductions in technology firms began a few months ago due to a global crisis caused by inflation, the likes of which the world has not seen since the beginning of the eighties of the last century. This is a kind of shock for generations of IT experts who did not have the opportunity to encounter mass layoffs in their working life.
Amazon announced the layoff of 18.000 workers, while Microsoft announced that 10.000 professionals would lose their jobs. These three companies alone are sending home 40.000 employees without much explanation other than that inflationary times are a big problem for their business. They also note that in the last couple of years they have hired additional staff in order to provide full support to clients. Not even the corona virus shook this powerful industry, so this new trend left many in awe.
Research firm Gartner estimates that spending on IT services will increase in 2023 by some 2.4% compared to last year. The forecast was reduced from the previous 5.1% because hardware is sold less, so the overall growth of that economic branch has slowed down. People are choosing not to change their gadgets as often as before, indicating that innovation in gadgets has slowed down. This trend is worrying because innovation is what drives the IT industry forward.
Despite the slight growth, most companies decide to cut costs, so even smaller companies are laying off their workforce. It's even more difficult for them because financing becomes expensive as times change - there is no more cheap money. The IT industry, like the rest of the economy, easily found profitable projects because interest rates were extremely low. In such circumstances, a project that brings only a 10% return per year is justified because the money costs you a few percent. Those times are behind us, which will lead to a further slowdown in the development of the IT industry.
The covid-19 pandemic further complicated the situation and while many parts of the economic system were collapsing, IT continued to flourish. Salesforce, a San Francisco firm then bought the app Slack for $28 billion. Of that sum, they borrowed $10 billion and now they are struggling to repay that loan. The other day they announced the layoff of 8.000 workers – a good portion of them working at Slack. The loan has to be paid, and the money that went to salaries will now be redirected to paying back the money.
Many who have received notices are surprised because they are used to HR firms chasing them with offers. People who have been at Google for over 20 years thought they would retire there. They were not in the situation of other industries where there is no secure job and where productivity is the only measure of success. They asked for ping-pong tables, special diets and various other benefits so that they could not lose their jobs.
The situation in Serbia and the region is not so drastic, but a similar trend is felt. One major startup has laid off 20% of its workforce in the last few months. The director, who wishes to remain anonymous, says that another 5% of people left on their own initiative, which surprised them even more. Nikola Mijailović, general manager of the company Joberty, which deals with HR affairs in the IT industry, says that the last quarter of 2022 was the first when they felt a drop in demand for personnel. He expects improvement only in the middle of this year, when he believes that companies will get used to the new business conditions.
It remains to be seen if this is just a temporary trend or if the IT industry will face the same breakdowns as other parts of the economy. There is no prospect that the situation will improve in the first quarter of this year. Inflation in the US has been falling for several months, which is the only hope that the IT market will recover. Yesterday, a report was published where total unemployment in America is at 3.4%, which is the lowest rate in the last 50 years.
It is clear from this that we live in a time of paradox, when inflation is high, IT is laying off workers, and unemployment is falling in other economic sectors. We definitely live in interesting economic times.
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