The world’s tech giants continue mass layoffs. What awaits IT specialists from Ukraine?

January 17, evening, the Swiss city of Davos. A car drives up to one of the local establishments, from which the world-famous musician and singer Sting gets out.

He arrived here to speak at a closed party for top managers of the Microsoft technology corporation who are participating in the World Economic Forum.

Such parties are the norm for the forum. At them, managers of various businesses discuss strategic issues of further development and prospects both on the market and within the company.

And, of course, such events cannot do without the appropriate level of stars. Therefore, Sting, whose performance fee is estimated at half a million dollars, is an ideal option for this.

However, a few hours after the singer finished his performance in another part of the world, the CEO of Microsoft Satya Nadella will announce the intention to lay off 10,000 employees.

The announcement of large-scale cuts was not the first, as from the second half of 2022 the largest technology companies began the policy of mass dismissals.

However, the story of Microsoft has become an illustration of the level of cynicism and indifference with which the top managers of tech giants say goodbye to their subordinates, regardless of the level of their professional success.

Scales of cuts

By 2022, about a thousand technology companies around the world released more than 160 thousand of its employees. And it looks like it was just the beginning. In January-February 2023, the scale of layoffs has already crossed the mark of 100,000 people.

The data on the layoffs of IT companies raises many questions, especially if you consider the fact that the unemployment rate in the United States, where most of the tech giants are located, is the lowest in the last 50 years.

Virtually every major technology company, in particular Google, Meta, Twitter, Amazonannounced the dismissal of tens of thousands of their employees.

Yes, CEO of Google and parent company Alphabet Sundar Pichai this January reported, that the company will lay off 12,000 people. Google added that it will offer 16 weeks of severance pay plus two weeks for each additional year of service.

A similar situation is occurring at Amazon and Meta, where they plan to cut 18,000 and 11,000 employees, respectively. For Meta, the reduction in this number of employees is 13% of the staff.

Billionaire Elon Musk, who bought Twitter at the end of October, decided to lay off half of the company’s staff – 3,700 employees.

And this is only part of the overall picture of how one of the most promising industries in development is beginning to take a more pragmatic approach to its own opportunities. Unfortunately, one of the first links of this realization was the understanding of the need to optimize the process by reducing one’s own staff.[BANNER1]

They fired through the mail or simply blocked the laptop

The number of laid-off employees in companies that were just expanding before this is only one side of the coin. The flip side is how often these cuts happen.

Practically no personal conversations and explanations. Only emails, locked work laptops and passes. And what is most impressive, the length of service in the company, competence does not protect against potential dismissal at all.

Email – the most common way to find out about a layoff. In the post-Covid world, where most are accustomed to working outside the office, dismissals via corporate mail have become commonplace.

To receive such a letter without the possibility of return communication or a more detailed explanation of the situation is a strong emotional shock.

A message in the corporate messenger Slack or in the mail simply puts a person in front of the fact that his work in this company is finished. And all she gets as an explanation is a story about the period of making difficult decisions in the company.

interesting history happened in the New York office of Google. When the employees started coming to work in the morning, some of them had their pass cards stop working. As it turned out, before the start of the working day, all of them simply did not have time to read the letters in which they were informed about their dismissal.

However, for example, Charlotte Cucchiaro, who worked for this company for 11 years, assertsthat she never received such a letter.

The champion of choosing bad ways to fire subordinates is undoubtedly Elon Musk. After his arrival at Twitter, Musk launched the process of dismissals precisely through e-mail. However, not all employees received such letters – some found that they had been denied access to work laptops and messaging channels by accident.

No less controversial is the selection of candidates for dismissal. On the network, hundreds of people who have been cut are complaining about the completely random selection.

“Although they issued good severance pay, the layoff process itself was dishonest, and the way they communicated it was even worse: information about the upcoming layoffs had been leaked before, but no one warned that they would also affect high-performing employees.” , – says a software developer from New York.

Also interesting is the fact that among those who fell under mass reductions, a significant number of representatives of generation Y and Z. These are people who were born between 1981-2012.

They started their careers in the IT industry when large companies were just at the beginning of their formation. In those days, the number of vacancies prevailed over the number of specialists looking for work.

It was a period of constant growth and conquest of the global market. Therefore, the fear of losing a job was unknown for workers entering the tech giants.

“Tech companies seemed to have a lot of opportunities. If you got the job, you did it. It was a stable path,” – tells Kelly Chung, 26, who was laid off at Lyft in November 2022.[BANNER2]

Preduction methods

“At the beginning of the pandemic, the world quickly went online and the surge in e-commerce led to tremendous revenue growth. Many people predicted that this would be a sustained acceleration that would continue even after the pandemic was over. I did too, so I increased our investment significantly. Unfortunately , it didn’t happen as I expected,” – explained the need for cuts Mark Zuckerberg.

In general, there are several reasons for mass layoffs in technology companies.

First, inflation in the US, which after a record high of 9.1% in June 2022, was able to slow down to 6.5% in December. The increase in prices also affected the expenses of companies, which similarly jumped up.

Second, the policy of the Federal Reserve System (Fed) regarding the key rate. In an effort to slow the economy, the Fed in 2022 raised rate to the range of 4.25-4.5%. This influenced the actions of venture capital funds, which became more cautious about investing in technology companies.

Thirdly, the impact of record hiring in the “covid” years. During the pandemic, all work and recreation of people moved to the Internet, which caused the growth of IT companies that actively provided their services.

They believed that a surge of activity on the Internet would become the new norm, so they massively expanded their teams. However, as Zuckerberg has already admitted, they were wrong.

The reality after the pandemic was different. The active use of Internet services has decreased somewhat, and the full-scale invasion of Russia into Ukraine has hit the world economy hard.

In addition, hired workers in the “new” years were not beginners. Accordingly, their salaries accounted for a significant part of the company’s expenses.

In 2022, a large technology business faced a situation in which hopes for a constant increase did not materialize. In addition, investors have started press on companies to reduce staffing and salary costs.

One of the main features of mass layoffs is that IT companies are not in a critical situation where the fate of their future existence is decided.

If you compare the number of dismissed to the total number of all company employees, you can see that in most cases this indicator will be around 10% as a percentage. So in Google and Microsoft this ratio will be – 6%, in Meta and Lyft – 13%.

For smaller companies, the percentage of layoffs will be 20%, and only in Twitter will it reach the mark of 50%.[BANNER3]

What is the situation in Ukraine

For the Ukrainian IT sector, the year 2022 turned out to be much more difficult than for the rest of the world. The war became the main factor in their instability.

According to the data portal Djinni in 2022, the hiring of Ukrainian IT specialists decreased by 13%. In general, 2022 became the first year in the last decade when there were fewer people hired than the year before.

At the end of last year, the number of people looking for work was a record 77,000. Since March, the number of candidates looking for work has steadily increased by 10,000 every three months.

Representatives of Ukrainian IT companies are convinced that the influence of American trends on Ukraine is insignificant. Although we can observe a complete reduction in Ukraine as well, the main reason for this is the war.

However, domestic service and product companies were able to adapt to new challenges and work formats.

“During the year, we had projects that ended or were shortened. This is a normal state of affairs in the service business even in peacetime. At the same time, in 2022 we found new projects for more than 1,000 internal specialists who were without a project for a certain time,” – Andriy Yavorsky, senior vice president of GlobalLogic, said.

In addition, certain industries in 2022 began to develop more actively, for example, artificial intelligence, cyber security and military tech.

However, despite the controlled situation on the labor market, the global recession had a negative impact on the export of computer services.

“The export of computer services from Ukraine in 2022 compared to 2021 grew by 5.8% according to the data of the IT Ukraine association. Drawing a parallel with the usual growth rate of 25-30% annually for the industry, a significant slowdown in growth can be noted” , – noted Andrii Oksenyuk, CFO IT company Ciklum.

What’s next

Currently, it is difficult to accurately predict the situation that awaits large IT companies in 2023, as the first two months continued the trend of mass layoffs. It is obvious that the technological industry, like any other, depends on the general economic situation in the country.

Also, the uncertainty of the situation strengthens the factor of the war of the Russian Federation against Ukraine, the influence of China on supply chains, especially when the country is fighting against the increase in cases of infection with the coronavirus and the lack of medicines.

According Professor of the Ronald Coase School at the London School of Economics John Van Reenen, the entire global economy is becoming increasingly high-tech, so the long-term prospects for companies such as Alphabet, Meta and Microsoft are optimistic.

In addition, the popularity of artificial intelligence and its active implementation in the products of companies gives hope that the previous rates of development of the sector can be restored.

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