A year on from the the tech slowdown that led to a tsunami of cuts
Tech multinationals cut more than around 320,000 jobs globally from the end of 2022 to the third quarter of this year, with most of these lay-offs occurring in the first half of 2023. File picture: AP Photo/Nick Wass
The global tech sector prospered during the pandemic. Hiring boomed as remote work gained popularity and e-commerce benefitted from the mandatory closure of physical retail.
However, the industry was plagued by misfortune at the end of 2022 and throughout the first half of 2023. A high interest rate environment and inflationary pressures weighed on bloated companies.
Tech multinationals cut more than around 320,000 jobs globally from the end of 2022 to the third quarter of this year, with most of these lay-offs occurring in the first half of 2023, according to data gathering site Statista.
In February, Minister for Enterprise Trade and Employment Simon Coveney said that Ireland was “over the worst" of tech job losses.
Shortly after, Facebook-owner Meta announced it would slim down the company by 10,000 jobs, the largest round of lay-offs made by a tech firm since the start of the global slowdown in the sector.
In Ireland alone, the number of tech workers declined by almost 5,000 in the past year, according to recent payroll data from the Central Statistics Office (CSO). Plus, the IDA said it also marked the first time there has been a net loss of foreign direct investment jobs since 2009 after the banking crash.
The data, which showed jobs figures for the tech industry up to October, highlighted that the information and communication sector recorded a 3.7% drop in workers to 120,700 compared to 125,300 working in the sector in October 2022.
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Mr Coveney’s assumptions may have been premature but they seem to have come true towards the end of the year, although there were still some shocks in the later months of 2023 including an announcement by Cork-based company VMWare in November that it will cut staff in the New Year.
Around 360 Irish employees are at risk of losing their job with the firm following US semiconductor company Broadcom's recent $69bn (€63bn) takeover of the global cloud computing firm.
However, the IDA is optimistic about the multinational sector in the upcoming year following the publication of its annual results. The State body said it secured 248 investments this year, a 2.5% increase, enabling the creation of almost 19,000 jobs. This is across the entire multinational sector though and not entirely localised to tech.
It seems like Big Tech firms have more-or-less finalised the staffing numbers they want to achieve so the tsunami of lay-offs witnessed in 2023 may not happen again in 2024.
The cuts will have lasting effects for the tech industry and global economies as large-scale hiring may not happen again for some time, especially with the focus now on funnelling money into artificial intelligence.
Competition is heating up among companies to build AI systems to grow profitability and provide larger offerings and services, pitting Microsoft and OpenAI against Google and Amazon.
The emergence of AI has often been linked to job losses. A 2019 report by the OECD on Well-being in the Digital Age noted that 14% of all jobs are at high risk of being lost due to automation, with another 32% at risk of significant change over the next 10 to 20 years.
This means that nearly half of the labour force will be impacted by changes to their jobs because of automation by 2040.
However, there will also be a need for skilled tech workers to build these AI models in tech companies.
Many firms said they would not pause hiring in some departments despite announcing cuts this year.
Although hiring is expected to be slower in tech, the level of cuts witnessed this year is likely to be avoided in 2024 due to the reputational damage associated with the job cuts.
Irish human resource tech company Workhuman was among the firms put in the spotlight for how they handled the redundancy process.
In a press statement released after the cuts announcement to staff, Mr Mosley took a swing at some other tech firms and how they have handled lay-offs.
"We’ve heard horror stories of people suddenly being shut out of all communications and facilities. I trust our people, so there is no need for such unhelpful measures," said Workhuman chief executive Eric Mosley.
However, an source also said internal Slack channels were blocked shortly after staff were notified about the lay-offs so that colleagues couldn’t post and could only read what was posted.
Another source said “some people joked that the reasons invoked might as well have been written by ChatGPT. Vague reasons, nothing specific. Infuriating.”
Irish workers were somewhat more protected than tech staff in the US though due to EU redundancy rules.
Fergus Condon, partner and head of the technology sector with professional services firm Grant Thornton, which has advised tech firms through the current downturn, previously spoke to the during the tech slowdown and said that many multinationals are “a little surprised” by the lengthier process needed to lay off employees in the EU.
“When you’re strategically making decisions about how many of your global headcount you need reduce, you’re working with numbers, not the regulations,” he said.
“In the US, they have this thing in their employment contracts which is called an 'At Will Clause' which allows, in the US labour market, for an employee to be dismissed or made redundant almost instantaneously.” Mr Condon suggested that this lengthier process can be a double-edged sword when firms decide to slash their headcount in European markets.
“Because it takes longer to go through the process, that means it probably takes longer to name the people or the sections where you’re going to make redundant and as a result, in sections who are not impacted, fear and uncertainty bleeds into those teams and that has its own knock-on effects for productivity and morale,” he said.
The downturn in tech is predicted by many analysts to be temporary, but once the economy bounces back, there are some concerns that many firms have left themselves too exposed with a low headcount.
“I think some of them have gone very slim. Even when they bounce back, if the labour is available, their own hiring processes will take time,” said Mr Condon.
The tech slowdown is familiar territory for Chris Horn, who was the co-founder and CEO of Ireland's first NASDAQ-listed company, IONA Technologies.
During the dotcom crash in 2001, Mr Horn carried out a single round of cuts worldwide. The company had 22 offices and about 1,200 staff at the time.
“I thought it would be far worse to do a series of cuts, with people never knowing would there be yet even more cuts to come. We didn’t want death by a thousand cuts,” Mr Horn previously told the .
Meanwhile, the tech lay-offs that occurred this year have already impacted other sectors such as commercial property.
Appetite for commercial leases has been lowered by changes within the tech sector including the slowdown this year. Between 2017 and 2020, tech firms accounted for 53% of Dublin office take-up, incorporating over 610,000 sq m of space. However, a downward trend is occurring, as in the second quarter of this year less than 5,000 sq m was let to technology operators, accounting for just 12.6% of take-up, according to a report by BNP Paribas.
Separately, BNP Paribas released its purchasing managers index for November which showed an “unsurprising” decline in commercial property despite a “record year” for Dublin warehouse completions and “significant development in Cork".
Developers have become increasingly cautious as demand dampens among some multinationals for office space, while interest rates and construction costs remain stubborn.
However, the European Central Bank is expected to cut interest rates in the first half of 2024.
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