The tech sector has seen its biggest shakedown in recent history, and over 100,000 professionals have lost jobs since the beginning of 2022. Though job cuts are expected to continue into Q1 of 2023, with another 30,000-40,000 people losing their place in tech companies, not everything is bleak in the tech world.
Some of the biggest names in the tech industry, like Meta, Twitter, Snap, Microsoft, and now Amazon, have announced layoffs. At the same time, Apple has said it will slow down hiring, while Google too is thinking of taking some of its staff off the rolls. The IT sector is shaken as it has not maintained the growth momentum it hit during the Covid pandemic years.
The continued Russia-Ukraine war and major tech companies like Amazon and Microsoft missing the analysts’ growth forecast have added to the pain. But, amid all the gloom, there is a silver lining.
Layoffs are Scary, but no Fundamental Change in the Tech Sector
The latest Q3 GDP report in the US showed that the demand for equipment and intellectual property, including tech hardware and software, is rising. This could mean the tech demand would keep growing and that industries would see a change in the use of technology.
Goldman Sachs denied that the big layoffs are a sign of a deep recession approaching. It argued that tech jobs constituted just 0.3% of the total number of workers in the US, and even in the unlikely possibility of all tech workers being laid off, the impact would not take the economy on a recessionary path.
Also, it pointed out that the number of job opportunities in the tech sector is still higher than the pre-pandemic levels and that laid-off tech employees are most likely to find jobs.
Gartner said that CEOs and CFOs are showing no signs of cutting tech spending, and CIOs will continue to look for companies that deliver them last-mile solutions.
The GDP report also predicted strong demand for tech hardware and software. Investment in intellectual property fell 3.6% this year, but it grew at 10% in 2021 and 2022, said Bank of America Merrill Lynch.
The prediction for next year also looks good as tech spending is likely to be 5.1%, compared to 1% this year, states a Gartner report. Also, many tech company heads have acknowledged that they can only partially cut spending on tech. They point to the mistake of many companies after the 2008 economic crisis when they reduced focus on technology but suffered over the next years by not being able to capitalize on big growth opportunities.
The profits of tech companies, overall, will grow 2% this year, and reach 6% next year, stated a report by CFRA Research. Experts said that nothing had changed fundamentally in the tech sector, though companies have to lay off people to remain agile and profitable.
