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Focused cuts and fewer layers: technical layoffs enter a new phase

Focused cuts and fewer layers: technical layoffs enter a new phase

Last year, Mark Zuckerberg declared 2023 as “”.Year of Efficiency.His company Meta soon laid off a third of its employees. Amazon, Google and Microsoft also cut thousands of workers.

His world did not stop. Not only this, companies were also given rewards. Their stock prices soared. Some divisions were more productive. And companies — including X, formerly known as Twitter, which has cut about 80 percent of its workforce through the end of 2022 — continued operations.

Other CEOs took notice. And a month after 2024, tech companies have entered a new phase of cost cutting.

After last year's widespread layoffs, the biggest companies — including Amazon, Google and Microsoft — have cut jobs in smaller, targeted jobs in recent weeks while focusing on fewer projects and shifting resources to key products like artificial intelligence. Have made the cut. Some tech start-ups – like Flexport, Bolt and Brex – have cut even deeper to stave off potential extinction. The order from above is the same: do more with less.

“We are seeing three basic retrenchment scenarios,” said Nabil Hayat, general partner at Spark Capital, a venture capital firm that invests in tech companies. “The big, fat tech oligopolies are looking for more growth and profits; There are some medium-sized companies that over-hire during boom times; And there are some small start-ups trying to gain runway to survive.

The new layoffs are the latest improvement in years of a booming global economy and near-zero interest rates, which have given tech companies the ability to throw huge amounts of cash into the pandemic to attract top talent. During that time, many companies hired thousands of new employees to meet digital demand.

The past few years have forced tech executives to think differently. After the lockdown was lifted and people returned back to the world, the use of tech products decreased compared to the pandemic. More than 1,000 tech companies eliminated more than 260,000 jobs in 2023, according to data compiled by Layoffs.fyi, which lists job cuts in the tech industry.

Just a few years ago, cuts to the tech workforce in Silicon Valley would have been anathema. Tech culture has long been one in which a manager's status was determined by how many people reported to him or her and how effectively the company countered competitors' recruiting efforts. Tech executives often view attracting the next generation of computer scientists as a full-contact sport.

But now the stigma of retrenchment has been erased. More executives at tech companies have admitted they have overhired during the pandemic. The largest companies are making strategic cutbacks in areas where they plan to invest less and where certain types of jobs are no longer needed. Smaller companies that could easily raise capital a few years ago are now taking steps to survive.

In the first 30 days of this year, there were 25,000 layoffs at nearly 100 tech companies, according to Layoffs.fyi. Microsoft, Google, Apple, Meta and Amazon are set to provide more insight into the state of the industry when they publish quarterly financial statements this week.

Waves of job losses tend to occur suddenly and simultaneously, said Sheel Mohnot, partner at venture capital firm Better Tomorrow Ventures. “When a company does this in or near your location, it gives you air cover to do it,” he said. “It's easy for a company to say, 'It's not us – it's the industry.'”

Meta, which owns Facebook and Instagram, is an example of a round of layoffs.

Last year, Mr. Zuckerberg cut back on what he called “managers managing managers.” The company has been more targeted with its trims this year, specifically reducing the number of “technical program manager” roles at Instagram, according to two people familiar with the company's plans. A technical program manager, or TPM, oversees various projects inside a department and is responsible for keeping teams on schedule — exactly the type of middle-manager role that Mr. Zuckerberg was intent on reducing.

business insider first informed of On Meta's move to shrink the role. Meta declined to comment.

Amazon shed hundreds of jobs this month across its streaming arm, including Prime Video, MGM Studios and Twitch. Google made thousands of cuts across a number of areas, including YouTube and the hardware division that makes Pixel phones, Fitbit watches and Nest thermostats. In an internal memo obtained by The New York Times, Google Chief Executive Sundar Pichai indicated that there was no imminent end to the ongoing layoffs, and that the company would remove more layers “to simplify execution and increase speed in certain areas.” The business.

“Many of these changes have already been announced, although speaking in advance, some teams will continue to make specific resource allocation decisions throughout the year where needed and some roles may be impacted,” Mr. Pichai wrote.

Even medium-sized start-ups with hundreds of employees are reducing work. Some people face the prospect of an initial public offering, causing them to take a closer look at their finances. Such companies “know they need to get their balance sheets together,” Mr. Mohnot said. “The market values ​​profits.”

Some sectors have been hit particularly hard this month, particularly the video game industry. Companies including Unity Software, Riot Games, Eidos-Montreal and Microsoft's Activision Blizzard and Xbox have downsized in recent weeks.

These cuts are partly due to the consolidation of game studios, said Joost van Drunen, an analyst who tracks the sector. After several blockbuster game launches last year, expect a relatively slower slate of titles this year, he said, with fewer workers required to release those games. Consumers and coders are also looking forward to new consoles like Nintendo's Switch 2, allowing for more immediate customer spending and the development of new titles.

Discord, the social networking and group chat app popular among gamers, has cut 17 percent of its workforce, or 170 jobs, this month after increasing its headcount five-fold since 2020.

“We started more projects and became less efficient How we did it,” Discord Chief Executive Jason Citron wrote in a memo to employees.

Some expect the wave of consolidation to slow down soon. People in the tech industry now joke about ZIRP companies – short for Zero Interest Rate Phenomenon, describing start-ups that would not have been able to obtain capital without access to cheap and free-flowing venture dollars.

Many of those start-ups, unable to attract further venture investment due to rising interest rates, are cutting staff and focusing on fewer products.

“They may have tried a lot of things to find a business model that worked,” Mr Mohnot said. “But now, it is time for reckoning.”

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