Understanding the Causes of Tech Industry Layoffs

🛑 Let’s Talk About the Real Reason Behind the AWS Layoffs There’s been a lot of talk recently about Amazon’s layoffs in the AWS division, and some of the statements coming out of leadership have been… well, let’s call them “interesting.” CEO Andy Jassy suggested that generative AI and workplace automation could lead to a smaller workforce. While that may be true in the long-term, let’s not sugarcoat the real story here. The elephant in the room is overhiring and a slowing cloud market. AWS has been one of the most dominant players in cloud computing, but like every company in this sector, it isn’t immune to market realities. Growth is leveling off, competition is stiffer than ever, and enterprise customers are scrutinizing spending as they optimize their cloud deployments. Let’s not forget: AWS missed its last three quarterly revenue targets. That’s not a signal of a business on a rapid growth trajectory—it’s one steering into headwinds. Businesses have cycles, and expansions should align with sustainable, long-term demand. Yet, during an earlier surge in cloud adoption and pandemic-driven tech investments, we saw an unsustainable pace of hiring that went unchecked. Now, as the market matures, organizations (AWS included) are starting to feel the pinch as growth slows. That’s the real driver here. Blaming workforce reductions on generative AI feels like a bit of a copout. Sure, AI is revolutionary—it’s going to reshape industries and streamline certain roles. But what’s really happening is recalibration: a course correction from overhiring, combined with the realities of a marketplace adjusting to slower growth and increasing competition. Let’s stick to the facts and stop spinning layoffs as part of the “tech evolution.” Behind every layoff is a human being whose life is impacted, and they deserve transparency and honesty about what’s happening. Looking at the bigger picture, AWS and other cloud providers still dominate the tech landscape, but that doesn’t mean every day will be smooth sailing. For those impacted: my heart goes out to you, and I hope you find new opportunities to contribute your talents. What do you think? Are we being too lenient on leadership’s messaging, or do we need a sharper focus on market realities? Let’s have an honest conversation. #AWS #CloudComputing #BusinessRealities #Leadership #AI

AI took the blame for mass layoffs in tech. But there's another culprit. Quietly baked into a tax law years ago. For years, Section 174 of the U.S. tax code let companies fully deduct R&D expenses the year they were incurred. That meant engineering hires, cloud infrastructure, and experiments all came with a tax break. So tech giants invested aggressively. Then came the 2018 Tax Cuts and Jobs Act (TCJA). Part of TCJA changed Section 174. Companies had to spread deductions out over five or even 15-year periods. The timing was brutal. Salaries and software no longer offered the same tax benefit, right when venture funding tightened and interest rates climbed. The change kicked in by 2022. The wave of mass tech layoffs began to surge. Became particularly prominent in 2023. Meta cut 25% of its workforce. Microsoft slashed thousands of product and engineering roles. Startups, without Big Tech’s cushion, slashed headcounts. Yes, AI may have played a role and might become the main driver in the years ahead. But tax policy quietly set the stage long before the pink slips started flying. Now, with a new tax bill in motion, I’m curious What changes are coming next… and which industries will be caught off guard? *Original image by Shravan Tickoo Really sharp visual and a solid list! 🙌 I adjusted the title to highlight the tax side of the story. The original point still absolutely holds. #tax #layoff #ai #entrepreneur #tech ____ P.S. My newsletter (Join 20,000+ subscribers): https://t2m.io/OUvcJ5gL

As the tech landscape rapidly evolves, a significant trend is emerging: major tech companies are increasingly pivoting towards Artificial Intelligence (AI), leading to a reshaping of their workforce. This strategic shift is not just about adopting new technologies; it's also about redefining roles and, unfortunately, results in substantial job cuts. SAP's recent announcement of investing over $2 billion in AI and restructuring 8,000 roles is a prime example of this trend. While some employees face layoffs, others are being retrained for AI-centric roles. This pattern is echoed across the industry, with giants like Google and Microsoft also realigning their focus towards AI, accompanied by workforce reductions. However, it's crucial to understand this shift in context. As AI becomes a central part of business operations, new job opportunities emerge, even as others become obsolete. The transition to AI doesn't necessarily mean the end of employment opportunities but rather a transformation of the job landscape. As professionals in the tech industry, we need to stay adaptable, continually upskill, and be prepared for the evolving demands of our field. The AI revolution is not just a challenge; it's an opportunity for growth and innovation. #TechIndustry #AIRevolution #WorkforceTransformation #CareerAdaptability #FutureOfWork

SaaS Layoffs - A Dive Into Why We See So Many👇 Tech layoffs are more than just numbers on a spreadsheet. They represent real people, their careers, and their livelihoods. For those outside of the SaaS industry there’s often a lot of questions about why organizations that seem to be doing really well suddenly announce layoffs. To have a clearer picture of why layoffs seem to frequently happen within SaaS, it's crucial to understand the underlying mechanics of such decisions within the SaaS industry. The core of many tech ventures is a SaaS model, where steady subscriptions generate ARR (annual recurring revenue). The durability of ARR means that even when a chunk of the workforce is affected, the revenue remains relatively stable, so long as retention is at a decent level. This isn't to downplay the human impact, but to highlight the business dynamics. Product is built, revenue is earned, and the investments made are often made at a loss for a significant amount of time. There are organizations that have bootstrapped their way through and those organizations may well take a different strategy, here we are mainly talking about externally invested, fast growth orgs. Here's the deeper dive: - In the race for ARR, companies might scale rapidly, even if it means operating at a loss. - It's a competitive sprint, with the goal of getting market domination as fast as possible. - When hiring cools, major costs wane, making way for regular profits. - If markets suddenly lean towards profitability, SaaS entities could face tough decisions to present appealing metrics to stakeholders. - High-speed growth without fresh capital during difficult investment and financial markets might necessitate austerity measures for a company's survival. When these decisions are made it is always difficult see. They are often the outcome of a complex matrix of factors. For those affected, it can be devastating. Knowing what organizations at specific stages within specific industries have done previously, can support you to make the right career decisions. Often tech roles provide good wages, flexibility and great benefits. But, layoffs have happened before and business cycles do exist. Join The Tips for Founders Newsletter 📩 Follow for updates: Sam Johnston Sign up for the Founders Tips free newsletter: https://lnkd.in/gQJExPFr If you would like to explore how I can support your organization please reach out directly: Sam Johnston #leadership #ceo #founder #manager #venturecapital #layoffs #startups #UnderstandingSaaS #EmpathyInTech #entrepreneur #servantleaders #startup #growth #venture #lab #accelerator #incubator #studio #venturestudio #marketing #growth #sales #b2b #innovation #innovationlab #corporatelab #corporatestrategy #saas #b2bsaas #newproductdevelopment #npd #productdevelopment #ceo #coo #tech #saas #ai #ml #venturelab #MarketingDesign #DesignTips #VisualHierarchy #MarketingTips #socialmarketing #marketing #DesignPrinciples #ContentStrategy

ICYMI: Last Thursday, we learned that job cuts in January increased to their highest level in 10 months and more than doubled from the previous month. But then, the very next day, the Labor Department announced that the US added an eye-popping 353,000 jobs, almost doubling expectations. So what gives? It’s an undeniable sector shift, a change in labor demand, and both job seekers and employers are navigating this reality. Most of the job shedding is coming from the tech sector. Post-pandemic overhiring, a tight market for investment capital and the proliferation of AI have led to a record number of lay-offs in an otherwise good job market. And the sectors adding jobs? Professional and business services, health care, retail, government, social assistance and manufacturing. So what does this mean for employers that are hiring and talent who are looking? A lot, actually. Job seekers with experience in tech companies must consider what may be different about employers in a new sector. While job roles may look similar, hiring practices and processes may differ. Where do these industries typically post jobs? Where do people in these industries typically network? How may the culture and values of these companies differ? How does one find out? Employers in these industries, like manufacturing and healthcare, looking for candidates in a job market filled with talented tech job seekers must ensure they attract and hire the best. Job seekers list progressive cultures and benefits as key reasons they previously worked at tech companies. They seek to understand an employer's complete package before they choose where to apply. Many tech companies have evolved recruitment marketing and employer brand strategies that have helped them attract and retain top talent over the last few years. The most coveted candidates will expect the same from an employer in a new sector.  Successful talent acquisition requires candidates and employers to align not only on skills and experience but also on culture and values. As candidates and employers consider recruitment across new sectors, it will be interesting to see how both sides rise to the occasion. If you’re a hiring manager or looking for a role, I’d love to hear your thoughts. What do you look for when it comes to crossing sectors?

The tech industry is at a crossroads, with over 720,000 jobs cut in the last year. We explore this shift, focusing on the economic and technological forces reshaping the sector's future. This analysis delves into the dynamics behind the recent tech industry layoffs. We examine the impacts of post-pandemic hiring trends, the rise of AI, and economic pressures. We uncover the multifaceted nature of these corporate decisions and what they mean for the future of technology and its workforce through insights from experts and economic data. 🌐 #TechJobCuts: A significant shift with over 720,000 roles eliminated. 💼 #PostPandemicRebalance: Companies adjusting after pandemic hiring excesses. 🤖 #AIRise: AI's growing influence on workforce and investment strategies. 💲 #EconomicDrivers: Inflation and profitability shaping tough decisions. 🔄 #WorkforceResilience: A tight labor market offers hope for displaced tech

Tech layoffs... Do we have to panic? If we dig into the data, in the last years, we only saw 4 months with a higher number of laid-off people. But do not forget the December effect. Companies usually avoid layoffs in that month because it may affect the brand and wait for January. This is why January often sees the highest numbers. The FED decided to keep rates steady therefore the job market in tech cannot recover. Most likely, the FED will keep the rates at the current level even in the next meeting. -> This may mean at least 6 more months with a very tight US job market in tech. If we check the historic number of white-collar jobs, we are significantly above the long-term average (currently 33.5 million jobs). I do not think the level of these jobs is sustainable. Even if rates go down, hiring in most white-collar jobs may be very slow for years. I won't panic, we will see what will happen in February. If layoffs go up, it is a dangerous trend and a strong indicator of a recession. If they go down, it is just a "normal" January spike. #jobmarket

Does 2024 hold promise for the average worker, or layoffs resulting from economic malaise and displacement from AI? Let's dive in. 🔍 A recent survey of ~900 companies by Resume Builder paints a concerning picture for the job market in 2024, suggesting that mass layoffs are on the horizon, potentially impacting almost half of these companies. 🔻 Survey Results: - Roughly 40% of companies anticipate layoffs in 2024, with fears of an impending recession as a primary driver. - Over half plan to implement hiring freezes next year. - A significant factor in these concerns of layoffs is the expectation of adopting AI to replace human workers. - Google's reported plan to lay off 30,000 employees in favor of AI ad tech signals a larger trend. 📉 2023 to 2024: A Labor Market Shift - In 2023, 65% of business leaders reported layoffs, with 25% cutting 30% or more of their workforce. - 2024 might see even more drastic cuts, with 22% of companies planning to lay off 30% or more of their staff. 👷♂️ Who's Most at Risk? - Midsize and large companies are more likely to conduct layoffs compared to small businesses. - Industries like construction and software face the highest risk, with over 60% anticipating layoffs. - AI's role in the workforce is increasingly significant, with nearly 40% of business leaders citing it as a reason for layoffs. 🛠️ Thriving in 2024 - Focus on performance: AI, especially right now, rarely comes close to beating human performers in most jobs. Yes, they can excel in certain tasks, but overall humans win by a longshot if their work is done with excellence. - Learn AI: Understanding and leveraging AI could make employees indispensable. The greatest potential is in the complementarity of people + AI! - Network and update LinkedIn profiles: Build relationships with others; trust and personal experience matter increasingly more in a world filled with so much noise. 💡 Surveys are a dime a dozen, so it's hard to say whether the predictions in this latest one are fully representative or accurate. But what's clear is that 2024 is shaping up to be a year of significant changes in the labor market! #FutureOfWork #AI #2024trends #TechLayoffs #EconomicForecast #CareerAdaptation #BusinessTrends https://lnkd.in/d27A_hTp