We outline four considerations that may be driving the current series of staff layoffs and hiring freezes by US tech companies, which are expected to continue into the foreseeable future.

 

Over the past several weeks, the major players in the United States (US) tech industry have been engaging in a series of staff layoffs and hiring freezes, which is drawing concern from business, tech experts and economists alike. Although social media platforms, such as Facebook, Instagram and Twitter are among the more prominent names, Amazon, Stripe, Lyft, Salesforce, Microsoft, Twilio, DocuSign and HelloFresh among others have also been trimming their workforce.

The staffing challenges that have occurred are being seen as a sign of bigger problems the US tech industry is experiencing. Moreover, predictions are that the situation will get worse before it gets better.

Nevertheless, we in the Caribbean, have an opportunity to examine the situation to determine whether there may be lessons or other insights that could be gleaned that can help us to be more strategic and informed going forward. Below, we outline four considerations that may be driving tech businesses and the decisions they have been making.

 

Renormalising the growth realised due to pandemic

From early to mid-2020 many tech companies experienced unprecedented growth as the world readjusted to the impact of the COVID-19 pandemic, which had a considerable on how we lived and worked. Hence while other industries contracted, many tech companies were able to maintain their staff complement or even increase it to better meet demand.

However, as the world continues to return to some sense of normalcy, the dynamics and imperatives of the last two years have been changing, which is not only being reflected in consumer behaviour and spending habits but also that of organisations and businesses. From a Caribbean perspective, tech companies may find revenues and/or profits lower than in recent years, as was reported by managed IT services firm, tTech, in Jamaica.

 

Inflation and the cost of doing business rising

Without a doubt, the cost of doing business has been increasing, which is reflected in high inflation and continuing supply chain challenges. As individual consumers, we have all noticed that our income is not stretching as much as it used to three months, a year, or even two years ago, and to varying degrees, we have had to cut back our spending – trying to do more with less.

The same is happening in the business space. Operating costs are increasing but revenues may either be about the same or have decreased. Also, with consumer spending declining in many segments, it has been precipitating some tough decisions to keep the bottom line in check. Unfortunately, hiring freezes, staff cuts and layoffs tend to be a casualty of these circumstances.

It is also important to highlight the recent hiring freezes and layoffs are occurring even though the biggest shopping season in the US is imminent: Thanksgiving and Christmas. Businesses are anticipating lower-than-normal sales, and though they might be hiring temporary workers for the holiday shopping season, they are likely to be fewer than in previous years.

 

Being proactive ahead of the anticipated recession

Over the past several months, there have been signs that an economic recession has been imminent. Some pundits had predicted that by now we would have been in the midst of a recession. Though it has not yet occurred, it appears that a recession is still likely in the coming months.

Unlike the recession triggered by the 2008 Global Financial Crisis, many organisations and businesses are being proactive in getting their house in order by, among other things, managing spending and responding to a slowdown in revenue and growth. At this point, and until there are clear signs of a recovery, where interest rates are lower and consumer spending and confidence it is high, businesses are likely to maintain a more conservative posture.

 

Greater reliance on gig workers and the gig economy

Finally, and as was noted previously, although staff cuts and hiring freezes are occurring, there may still be a need to hire individuals on a short-term basis and/or for a specific purpose. Those hiring contracts would be for gig workers, which would offer employers more flexibility and control than traditional staffing arrangements, especially in these uncertain times.

The gig economy has been growing steadily over the past five years and according to Statista, by 2023 the gig economy-related transactions will reach USD 455.2 billion, up from USD 204 billion in 2018. Further, as workers have appreciated the importance of their mental health and of having a greater work-life balance, there are also trends showing employees are prepared to make different choices than they would have pre-pandemic.

 

In summary, Caribbean tech businesses may not have identical experiences to those in the US, but it is likely that they may also need to adopt a more moderate posture, and pay closer attention to demand, supply and operating costs. Ultimately, the objective is to successfully weather imminent challenges and be in a position to recover quickly.\

 

 

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