In the information technology (IT) sector, some companies make software, hardware, or semiconductor equipment and offer internet or other IT-related services.
In 2023, the IT Services market is expected to bring in $440.20 billion in revenue.
IT Outsourcing is the biggest part of the market, which is expected to be worth US$156.20bn in 2023.
The revenue is expected to grow at a compound annual growth rate (CAGR) of 6.25 percent from 2023 to 2027. This will bring the market size to US$561 billion by 2027.
The broad picture: layoffs have become the new normal in the IT industry.
- Now that the COVID-19 epidemic is over, the industry is beginning to suffer the effects of the broader economy, which caused it to experience tremendous expansion during the pandemic.
- According to a professor at the University of Washington, Axios in the past, the COVID-19 pandemic and the behaviors it nurtured, such as remote work and buying groceries online, pushed internet businesses to hire swiftly and aggressively.
- The Federal Reserve hiked interest rates in response to severe inflation in the United States, which slowed the economy’s growth. After that point, development came to a standstill.
- This occurred as people returned to their routines from before the outbreak.
- Because the IT business had previously invested in prevalent ways and practices during the epidemic, it was negatively impacted.
- According to one recruiter who spoke with Axios, the “battle for talent” that took place during the boom period caused businesses to hire too quickly, spend too much money doing so, and demonstrate “sloppy” behavior.
- To put this in perspective, since 2022, more than one thousand different technology companies have collectively fired over one hundred and fifty thousand employees.
A throwback to the year 2000?
In response to the impending economic downturn, businesses initially responded by lowering payroll and laying off employees.
Yes, but the large tech corporations of today are still bringing in a significant amount of revenue.
There is no indication that the economy is in peril due to the layoffs; instead, they represent a stock problem.
What’s next for the tech industry’s layoffs?
Corporations will likely continue restructuring and reducing their payroll to appease investors and increase profits. This will undoubtedly result in further layoffs.
The main issue is that, as Axios pointed out, technology businesses plan for the future, but layoffs occur when the end does not arrive.
Why are there so many layoffs in the technology industry, and why should we be concerned about this?
Research conducted at the Stanford Graduate School of Business – by him and others – has shown that the stress caused by layoffs takes a devastating toll on behavioral and physical health and significantly increases mortality and morbidity.
This research comes as the number of layoffs in the technology sector continues to rise. According to him, layoffs endanger people’s lives.
In recent months, numerous IT corporations have laid off thousands of employees.
It is estimated that over 120,000 people have been fired from their jobs at some of the most prominent players in the technology industry, such as Meta, Amazon, Netflix.
This number does not include the number of people who lost their jobs at smaller firms and start-ups. There has been announcement after announcement of layoffs.
Recent layoffs in the technology industry are an example of “social contagion,” which describes a situation in which corporations lay off people because everyone else is doing it.
Why are so many businesses laying off such enormous numbers of their employees, and what factors contribute to this trend?
- A Stanford Graduate School of Business professor provided a straightforward explanation for the phenomenon: copycat behavior.
- In this conversation between Stanford News and Pfeffer, Pfeffer discusses how worker size reductions that occur throughout the tech industry primarily the effect of “social contagion”:
- Companies almost unthinkingly imitate the actions of their competitors, which results in the spread of behavior throughout a network.
- When some companies lay off employees, more will likely follow suit. The problem is made worse because it is a behavior that kills people.
- For instance, studies have shown that layoffs can raise the likelihood of suicide by a factor of two or more.
- In addition, according to Pfeffer, layoffs do not function to increase a company’s performance.
- Academic studies have demonstrated, over and again, that reductions in the workforce contribute little to cost savings.
- There is a financial cost associated with severance packages, an increase in the number of people claiming unemployment insurance due to layoffs, and a decline in workplace morale and productivity due to employees being left wondering what their future holds.
- Pfeffer of Organizational Behavior has been researching the processes of recruiting and firing employees in firms worldwide for more than forty years.
- To better understand what does and does not constitute efficient, evidence-based management, he conferred with senior executives and staff members of some of the most successful businesses in the country.
- His most recent book, published by Harper Business in 2018, is titled “Dying for a Paycheck: How Modern Management Harms Employee Health and Company Performance–And What We Can Do About It,” in which he delves into how management decisions like layoffs harm and even kill employees.
Why are there so many layoffs happening right now at IT companies?
The recent layoffs in the technology industry exemplify social contagion, which occurs when businesses follow what others are doing.
If you’re looking for reasons why corporations lay off employees, the answer is simple: everyone else is doing it too.
- Laying off employees is often the outcome of imitative conduct and is not primarily evidence-based.
- People argue that they know that layoffs are destructive to the well-being of companies, much alone the well-being of people and that they don’t accomplish much.
- Yet, everyone else is doing layoffs, and their board is asking them why they aren’t also conducting layoffs.
What are some misconceptions or fallacies concerning layoffs?
Frequently, layoffs do not reduce expenses, as laid-off employees are frequently rehired as contractors, with the company paying the contractor.
Typically, layoffs do not improve stock values, in part because layoffs can indicate a company’s difficulties. Layoffs have little effect on production.
- The fundamental problem, which is frequently an inefficient strategy, a decline in market share, or insufficient money, is rarely resolved by layoffs. Reductions in force may be a preferable option.
- Occasionally, companies lay off newly-hired employees, frequently with monetary recruitment bonuses.
- When the economy recovers in the next 12, 14, or 18 months, they will compete with the same corporations for talent.
- They are purchasing labor at a premium and selling it at a discount. Not the wisest choice.
You wrote about the negative health effects of unemployment. Can you discuss any of the studies you and others have conducted on this topic?
- They kill individuals in several ways. Reductions in force raise the likelihood of suicide by 1.5 times.
- This is also the case even in countries with better social safety nets than the United States, such as New Zealand.
- Over the following 20 years, layoffs increase mortality by 15-20%.
- There are also health and attitude effects for managers who lay off workers and the remaining personnel.
- Layoffs heighten people’s anxiety. Like many other attitudes and emotions, stress is contagious.
- Depression is contagious, and layoffs exacerbate anxiety and depression, both of which are detrimental to one’s health.
- Unhealthy stress results in behaviors such as increased smoking and drinking, drug use, and overeating. Addiction is also associated with concentration, and layoffs increase pressure.
- What was your reaction to recent reports of major layoffs, such as Meta’s dismissal of 11,000 workers?
- Recent research focuses on the impact of the job on human health and the detrimental effects of economic uncertainty on individuals.
- This follows the COVID pandemic and the resulting social isolation, which was similarly detrimental to people.
- We should place a greater emphasis on human life.
- If layoffs are contagious within an industry, may they spread to other industries and lead to layoffs in other sectors?
- It already has. The spread of layoffs is contagious across and within industries. The statement supports this illogical argument, “If everyone else is doing it, then why aren’t we?”
Even though final demand is unpredictable, retailers are laying off employees early. Numerous firms would exchange a poorer customer experience for lower personnel expenses, despite the well-established fact that acquiring new customers is often considerably more expensive than retaining existing ones.
Were there cases of similar infectious layoffs in the past, and what lessons were learned?
After the terrorist attacks of September 11, 2001, every airline except Southwest conducted layoffs.
Southwest had increased market share by the conclusion of that year despite not conducting any product releases.
According to former CEO A.G. Lafley, the ideal time to gain ground on your rival is when they are retreating—eliminating services and product innovation due to layoffs.
CEO of the software giant SAS Institute, has likewise never experienced layoffs; he was employed during the last two recessions because, according to him, that was the perfect moment to hire talent.
Any suggestions for workers who have been terminated?
When a laid-off person finds employment with a firm that identifies people as its most valuable asset, they verify that the organization demonstrates this value when circumstances are difficult.
If layoffs do not work, what is a better approach for organizations that feel layoffs will address a problem?
A well-known maker of arc welding equipment, avoided laying off 10% of its workforce by instituting a 10% wage cut for all employees, except for senior management, who took a larger pay cut.
- Therefore, instead of giving 100% of the agony to 10% of the population, they provide 10% of the pain to the entire population.
- As Goodnight at the SAS Institute did in the 2008 and 2000 tech recessions, companies may view economic hardships as an opportunity.
- He took advantage of the economic slump to update his workforce’s abilities when competitors reduced jobs, ultimately throwing talented individuals out of work.
- He was hired during the recession of 2000 because he saw it as a chance to gain ground on the competition and market share when everyone else stopped developing and cutting employment.
- And this presents an opportunity. Social media will not disappear. The artificial intelligence, statistical software, and online services sectors will not cease to exist.