The mass layoffs in the technology sector that started last year do not seem to be letting up any time soon. In 2022 alone, the industry saw a total of 97,171 employees who were made redundant. This figure is a 649% increase y-o-y from 2021’s 12,975 layoffs, according to The Challenger Report.
This year, tech companies seem to be keeping up with the momentum in layoffs. TechCrunch reported that over 100,000 employees have been laid off based on full months as of April 7.
Kevin Samuelson, CEO of New York-headquartered cloud software company Infor, believes the mass layoffs occurred due to a few factors. “One is so much hiring way ahead of the curve when markets were really strong and companies overhired. On that front, we’re extremely lucky that we’re [a] private [company], and we have a very long-term view. So, we haven’t had to make layoffs and have been pretty prudent while still being able to grow really quickly,” he tells DigitalEdge.
He adds: “The other factor is that lots of new companies crop up whenever there are significant amounts of capital and valuations are very high. It always takes a bit of adversity to see which companies shake out — and I think we’re certainly going through a period like that.
“I would say we’re also lucky to be in operational software. We help run plants, build things and manage supply chains. These tend to hold up very well regardless of the economic situation because there’s such clear value add and importance of what we do. So I certainly think the shake-out will continue; I don’t think we’re at the end. But for all those reasons, we’re extremely fortunate to be in the position that we’re in.”
His views were echoed by Fiona Mark, principal analyst at Forrester, in her blog post on Dec 1, 2022, where she highlights that the “great bubble indicator” within the tech industry was that there were more job postings for tech recruiters than software engineers in 2021.
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That said, Mark notes that the signs in December 2022 were “a little less doom and gloom” looking beyond the tech industry and the overall labour market for the industry itself.
“The tech industry actually created 193,000 jobs in 2022, and there are currently 317,000 open job listings for technology roles, although this is down from a peak of approximately 400,000 open roles at the height of the labour crunch in spring of this year. The most popular open role? Software engineer, with over 80,000 open roles,” she writes.
Fellow principal analyst at Forrester Christopher Gilchrist notes in a Feb 3 blog post that the layoffs are a result of “increased industry maturity”. “Companies that once focused single-mindedly on growth (even through the financial crisis) now must seek profitability for the first time due to shareholder pressures,” he writes.
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He continues: “Margins are the leading indicator for Big Tech — not earnings — as evidenced by the higher-profile layoffs over the last 12 months. For Big Tech, the excess built through the pandemic was protected by high valuations. Now that the market is more accurately pricing risk amid the downturn and Big Tech is being priced like other industries, they must respond like their more traditional peers. For instance, Salesforce hit record earnings but announced layoffs as its stock price continued to fall.”
At the same time, Gilchrist sees the layoffs in the tech industry as an indicator of “something much more than a downturn”. He explains: “As Fed-driven demand destruction picks up pace, weaker earnings will begin to spill over into more sectors, precipitating more cutbacks. More layoffs are likely, but we should know by the summer if the market will have a soft landing.”
However, he is also quick to add that tech leaders should not be “too aggressive” with the short-term cuts, which will lead them to “play catch-up” in the long run. Instead, he advises them to aggressively reposition their workforce to expand core business growth and strengthen the durability of their advantage in the market.
The need to rethink tech
In the midst of the tech layoffs, Infor’s Samuelson thinks there will be a “material rethinking” of technology and that there will be fewer new things launched.
On the previous status quo within the industry, he notes that “when there’s as much capital as there was… there’s really no gravity, so you can do lots of things that probably don’t necessarily make much economic sense. [But this changes] once you enter a world with high interest rates and when demands are not as strong. This is where that rethinking will need to come in as companies need to raise [more] capital and build [a proper] business.”
Unlike its competitors in the space, which includes cloud giants, Samuelson points out that Infor serves only select industries. “A lot of companies that are very large build one software package, and they serve every company in every industry in every country. This means customers will ultimately have to do a lot of the work to make this single piece of software functional across the different use cases,” he says.
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He continues: “We’ve taken a very different approach. We only focus on manufacturing and distribution, the public sector and healthcare. And we have separate multi-tenant software as a service (SaaS) platforms for each of those areas. So, the products are purpose-built, and our teams are experts in those areas. This approach has certainly served us well when the markets have been strong. But it’s also much more resilient because it allows our software to be deployed for less capital [by around 30% to 50% less than the alternatives in the market] over a shorter period of time and carries less risk.
“Moreover, the pace of innovation is much faster because our copyright is all dedicated to the industries that we’re in. For all these reasons, I believe we have a very strong business strategy [that has helped us] take market share from our larger competitors.”
On whether the world will continue to see innovation from the tech industry moving forward, Samuelson — who was already working during the dotcom bubble and when it burst — believes there is “no question” about it. “We started our business in 2002, right on the hills of the tech bubble [and] lived through the Global Financial Crisis. This is not remotely as challenging as those periods. Even through those, more innovation occurred. When capital was scarce, many great companies [like Google] came up,” he says.
Bright spots ahead
To Samuelson, there’s still a lot of opportunity in the tech market, with Asia Pacific being an area of “extraordinary growth” in terms of the markets Infor serves in manufacturing. “So much of the world’s manufacturing takes place all over Asia Pacific, which is why the region is a very important market to us. We’ve been in this region for around 20 years, and today almost half of our 18,000 employees are in this market. We’re optimistic and confident that we will continue to see success here,” he says.
He also shares that the company plans to capture the opportunities in Asia Pacific by continuing to focus its innovations on specific functions or use cases and ensure the ease of use of its solutions.
“We also tried doing things quite differently in terms of how we support our customers because the products can be complex [to deploy and use], and customers are often not well taken care of in the enterprise resource planning market. When a customer has an issue, it is common for them to get pushed around to different partners [as they seek a solution. To counter that headache,] our accountable customer lead programme provides customers with a single resource who ensures that the right person [is in] the right place to solve their issues.”
Best practices, he adds, are built into Infor’s software too. As such, Infor can see exactly how its customers are using its software, which allows them to quickly identify the underlying cause of an issue and solve the problem.
“These are the strategic areas that we think will make the biggest difference over time, so we’re pouring the majority of our R&D dollars and our internal focus on them,” says Samuelson.
Embedding AI moving forward
Samuelson believes that there is “no question that artificial intelligence (AI) is going to play a significant role in all sorts of different areas” in the future.
“We are still in the very early stage, so it’s probably more of a novelty now than having many practical use cases. But that will change very quickly, which is why we’re already spending a lot of time working with a number of generative AI products that are in the market and coming to market. [I think it’ll be beneficial to our operations,] such as eliminating a lot of the manual administrative elements of work,” he says.
As such, Infor will use AI in its operations and embed it into its solutions moving forward. “Our software helps companies be more efficient, such as allowing them to better manage their supply chains and manufacture more quickly and efficiently. With AI, companies can be further assured that they have the right products in the right place at the right time and price. We, therefore, offer a number of different capabilities that deploy AI and predictive analytics to help companies become more effective,” he adds.
