Targeted Job Trims and Focus on Key Products
After the widespread layoffs of the past year, major tech firms like Amazon, Google, and Microsoft are now resorting to smaller, targeted job cuts. Simultaneously, they are shifting their focus to key products, particularly artificial intelligence. Some startups, such as Flexport, Bolt, and Brex, have had to make deeper cuts to avoid going out of business.
Nabeel Hyatt, a general partner at Spark Capital, a venture capital firm specializing in tech investments, explains that there are three main categories of layoffs being observed. These layoffs mark a correction after years of a booming global economy and near-zero interest rates, which allowed tech companies to attract top talent, thanks to their financial strength during the pandemic.
In 2023, more than 1,000 tech companies eliminated over 260,000 jobs as the use of tech products decreased compared to pandemic levels. This was a result of lockdowns being lifted and people returning to pre-pandemic activities.
Strategic Cuts and A Look at Job Losses
Tech culture has traditionally placed significance on a manager’s status based on the number of subordinates and their ability to counter recruitment efforts from competitors. To adapt to changing circumstances, major companies are now making strategic cuts in areas where they plan to invest less, eliminating roles that are no longer necessary.
In the first month of 2024, approximately 25,000 layoffs occurred across about 100 tech companies. Microsoft, Google, Apple, Meta, and Amazon are expected to provide further insights into the industry’s current state with the release of their quarterly financial statements this week.
Sheel Mohnot, a partner at Better Tomorrow Ventures, a venture capital firm, notes that waves of job losses in the industry usually occur all at once, prompted by another company’s layoffs. For instance, Meta, the parent company of Facebook and Instagram, has been curbing its workforce. After cutting “managers managing managers” last year, Meta is now narrowing down certain roles, such as “technical program manager,” to streamline operations.
To cite another example, this month Amazon cut hundreds of jobs within its streaming arm, affecting Prime Video, MGM Studios, and Twitch. Google has made thousands of job cuts in several departments, including YouTube and the hardware division responsible for producing the Pixel phone, Fitbit watches, and Nest thermostat.
Joost van Dreunen, a gaming industry analyst, states that the video game industry has been hit particularly hard in recent weeks due to studio consolidation. With fewer major game releases expected this year, fewer workers are needed for game development. Additionally, the impending launch of new consoles, like Nintendo’s Switch 2, has led to a decrease in customer spending and a delay in the development of new titles.
Challenges for Start-ups and Business Consolidation
Several start-ups in the tech industry face the challenge of going public and thus need to reassess their finances. Recognizing this, many companies are focusing on getting their balance sheets in order, resulting in staff reductions and a narrowed product portfolio.
As interest rates rise, some start-ups find it challenging to secure further venture capital investment. Consequently, they are making cuts and narrowing their focus to find a sustainable business model.
Mr. Mohnot emphasizes that these start-ups may have experimented with various ideas to find what works for them.