Tech Firms Miscalculation: Pandemic Demand and Worker Misery

Layoffs in tech companies

Google's parent company, Alphabet, announced that it would be cutting 6% of its global workforce, which is approximately 12,000 jobs. Subsequently, Microsoft announced that it too would be reducing its workforce by almost 5%, affecting 10,000 employees. In a prior announcement, Amazon revealed that it would be cutting close to 18,000 employees, a number significantly higher than the original estimate.

Meanwhile, Salesforce disclosed that as part of its restructuring plan, it would lay off approximately 8,000 employees, representing around 10% of its workforce, and close some of its offices.

The reason why tech companies are now laying off workers can be traced back to the impact of the pandemic.

During the past two years, the tech industry experienced a boom as people relied on online services for their daily needs, such as shopping on e-commerce platforms like Amazon and conducting their workday on virtual meeting platforms like Zoom, Google Meet, and Microsoft Teams. As a result, these companies saw record-breaking revenues.

The pandemic brought a surge in demand for skilled tech workers, leading to a fierce competition between tech giants and startups to attract top talent. Both offered attractive incentives, such as high salaries and luxurious perks like high-end motorcycles, in an effort to stand out.

Additionally, startups had access to abundant capital, which they used to outbid even the largest global tech companies in the race for skilled talent.

What changed for these companies?

The year 2022 brought a slight easing of the pandemic, but was marked by Russia's invasion of Ukraine and global central banks warning of an impending recession. Unfortunately, the companies' expectations that the pandemic would drive people to fully embrace online lifestyles proved to be misguided.

Google CEO Sundar Pichai cited mismatched hiring for the company's growth in a blog post after laying off 12,000 employees. Months prior, Alphabet's Q3 earnings fell behind revenue and profit expectations. Other tech giants like Amazon and Microsoft also cut roles due to similar reasons, affecting employees from various teams and experience levels.

What’s the job situation for tech workers in India?

India's startups continued to face funding difficulties in 2023, following a year-long "funding winter" that began in 2022. Over 20,000 workers in edtech and e-commerce startups lost their jobs in 2022 as investors pulled back.

Swiggy, which became a decacorn with a $10 billion valuation in January 2023, recently laid off 380 employees, while ShareChat, backed by Google, fired 20% or 400 of its workforce. Cab-hailing firm Ola, which had already let go of over 2,000 workers in 2022, also laid off 200 employees this year.

Swiggy has announced layoffs after their performance cycle ended in October. The company noted that exits were expected based on performance. This came after Jefferies reported that Swiggy's H1 FY23 losses were six times higher than Zomato's during the same period.

ShareChat attributed layoffs to external macro factors affecting capital availability and cost. Co-founders Bhanu Pratap Singh and Farid Ahsan stepped down from their active roles following the announcement.

Ola explained the layoffs as a result of redundant roles.

The company stated that they regularly restructure to improve efficiencies and will continue hiring in key areas such as engineering and design, including senior talent.

Investors increased due diligence after alleged corporate fraud at startups like BharatPe. 2023 has seen a startup committing financial reporting errors to show inflated numbers. GoMechanic's founder admitted to financial reporting errors and announced layoffs and a third-party audit.