These are unfortunately “interesting times” indeed for the global tech industry. Rising energy costs; component shortages; social media giants Twitter and Meta reeling from turmoil; and a sudden realisation that business must make money as well as spend it. Cryptocurrencies are facing a crisis of confidence and the need for regulation after the latest disaster of FTX. Amazon, ‘the general store of the world’ during the pandemic, has struggled in the last twelve months with supply chain issues, a slowdown in consumer spending and a return to the high street all resulting in falling profits and negative numbers for the colossus. Bezos timed his departure well.
Amazon now plans to lay off 10,000 people, while Facebook/Meta announced the first major job cuts in its 18-year history with 11,000 or 13% of its workforce leaving, and the Layoffs.fyi website now shows 120,000 tech jobs lost worldwide. Stripe, Salesforce, Lyft and many others have announced significant redundancies. Google has a hiring freeze in place. Twitter, perhaps the most high-profile case, with very personal online disputes between workers (Tweeps) and the new boss (Musk is either Tony Stark or Ernst Blofeld depending on your point of view) played out over its own platform. After being shut out of their offices, one source (quoted on the BBC) suggested that 88% of Twitter staff are expected to have left post acquisition, either involuntarily or voluntarily.
This is a very sharp turnaround for an industry where less than a year ago, labour shortages, the Great Resignation (the Big Quit as it was known in tech) and rocketing wage inflation were a nightmare scenario for every tech company management team. CFOs were having to recalibrate salary budgets every few months while CEOs found their planned and promised product development, regional expansion, and sales & marketing efforts, curtailed and delayed by not being able to hire the right people at the right price. How quickly things change.
The UK investor’s approach to a typically two-year horizon to achieve cash generation has always contrasted dramatically with the build-it-and-they-will-come approach of the Americans. The discipline that UK companies have therefore been forced to abide by, often causing grumbling that their investment pace is holding them back (albeit often true, but if they use the market then they surely have to abide by market expectations), will hold UK tech companies in good stead during these months or years of recession. And there will be lots of former Twitter, Meta and Amazon staff to employ, in a much more competitive labour market. Here’s to seeing the brighter side to a grey day.