You’ve probably listened to songs or podcasts on Spotify and used Google services more than once a day. Microsoft lets you work through word processors or presentation-creation programs, and of course, packages come to your home from Amazon every week. With some of the most important companies and one of the most successful businesses in the world, the digital channel, At the start of the year, they surprised them with an endless series of layoffs..
Social networks like Twitter or Meta were the first to announce staff adjustments at the end of 2022. The company founded by Mark Zuckerberg (Aim, formerly Facebook), announced the largest mass layoff in the history of the group, with 11,000 employees leaving at the beginning of November. Acquired by the owner of Tesla (the bird’s social network, bought by Elon Musk), the company laid off about 4,000 workers on its behalf. In addition to the departures of these token firms, other lesser-known firms have been added, but equally strong, such as 3,400 layoffs. Cisco at the end of 2022. In just three months, some of the most powerful and well-known tech companies have accumulated 108,750 layoffs in the last three months. What went wrong? Could the adjustment have been avoided and how long will it last?
The main reason that can be pointed out is a calculation error. The pandemic has accelerated digitalization processes and for several months hundreds of millions of people around the world have been glued to their screens. They were activities that had to be carried out through electronic devices, from entertainment to meetings to purchases. During his first prison sentences in Spain, operators saw a 40% increase in the use of IP networks required to connect to the internetTraffic from instant messaging tools like WhatsApp has increased fivefold. Operators came to demand that “rational use of Internet data consumption” be made and that the use of watching TV shows and video games be limited.
“The investments made to meet the demand at that time are not compatible with the current situation. These companies have made large investments because they think that the changes experienced during the pandemic period will continue over time.”He points to Juan Jung, professor of Economics at Comillas Pontifical University and an expert in digital economy and information and communication technologies.
A study conducted by Telefónica Tech in August 2022 revealed that many large technology companies continued with the intention of strengthening their ICT (Information and Communication Technology) investments last year, but many were already aware of the difficulty of allocating more budget for these investments. Moreover, 81% agreed to make urgent ICT purchases adapt to pandemic conditions, even if they do not provide long-term strategic value.
Google came to invest $7,000 million in 2021 to expand its offices in the United States and hired 10,000 new employees. zoom inIn 2020, the videoconferencing platform reached revenues of 2,206 million euros, 326% more than the previous year, with most of the world completely closed.
All this crystallized in the increase in employment. In 2019 Google had around 119,000 employees, a year later the numbers rose to 150,000 and reached 187,000 in 2021. The same happened with Microsoft, which increased from 144,000 in 2019 to 221,000 in 2022. Amazon also jumped into the pool. 630,000 in 2019, reached 840,000 a year later and doubled that figure in 2021. In this case, Apple was the only one who tried to resist, without success, by increasing its workforce. It had 137,000 employees in 2019, and that number increased to 164,000 in 2022.
“We are recruiting for a different economic reality than the one we face today”. These were the words Sundar Pichai, CEO of Google’s parent company Alphabet, used to justify the employment arrangement. The search giant will lay off 12,000 jobs, about 6% of the total, to address weakening economic conditions.
Josep Capell, CEO of Ceinsa, a professor of Human Resources at the Autonomous University of Barcelona and a consultant specializing in labor relations, draws attention to the following points: the bulk of the payment of salaries in certain positions. “A “bubble” has formed in salaries in recent years. They have risen and risen even for low-skilled people. This is because growth in the industry was so great during the pandemic and money was injected into the economy by governments to avoid a recession.
“The tech companies got some of that funding so they could afford the high salaries,” he says. The process will continue until the fee becomes consistent again according to the market situation.”
Some examples: Google’s 140,000 employees in 70 countries earned a median annual salary of $118,000 (EUR 97,000) in 2021. and also received an additional bonus of $1,600 (€1,400) to encourage the return to offices and the gradual elimination of remote work. Glovo’s leadership and employees received 115 million bonuses in 2021 after the company was sold to Delivery Hero, according to financial sources.
In the case of MicrosoftSalaries for employees working in their offices can range from 50,000 to 60,000 euros gross annually, while salaries for the ‘accounting manager’ position can range from. between 70,000 and 94,000 euros gross per year.
About viewThe firm, which has the official record of the average salary received, will have an average of each employee in 2021. 63,700 Euros per employee18% more than in 2020
Large-scale layoffs accelerated at the start of the year, with layoff announcements coming week after week. The last of the major companies to officially join this wave is International Business Machines (IBM). On January 26, it announced it would cut 3,900 jobs, representing about 1.5% of its workforce.. It will cost the company approximately $300 million.
last week spotify this added to the wave of layoffs. In this case, the layoff affects 6% of the workforce and will mean 600 of the 9,800 people currently employed by the platform leave, according to the company’s chief content and advertising chief Dawn Ostroff. , will also leave the group. The layoff comes after the Scandinavian company’s stock plunged 66% last year after investors doubted the platform’s transition to the podcast format.
Giant Microsoft it also announced a series of measures in response to macroeconomic conditions on January 18, including laying off around 10,000 people, who make up just under 5% of the workforce. On the same day, e-commerce giant Amazon began reporting that it would be allocated to workers affected by the new layoffs added to the regulation at the end of last year, and will reach 18,000 jobs, according to US media.
The latest case, though not yet official, is the case of tech company Dell, which is preparing to lay off 6,650 jobs, as Bloomberg reports. The company is experiencing market conditions “continuing to erode with an uncertain future”said CoO Jeff Clarke.
All these successive exits show that companies are in for a complete storm. Adding to the cited reasons for overdoing it in the pandemic are the following: “On the one hand, it stems from the context of the crisis and the drop in sales. Integration of new technologies like Artificial Intelligence will mean giving up jobs. Companies are changing the way they work and will generally tend to have fewer employees in the future to increase the turnover each generates,” explains Juan Merodio, digital marketing and online commerce expert.
Nasdaq, thermometer
The blow to technology also affected the Nasdaq. LIn the last six months, Microsoft’s shares have lost 12.50%, Google’s 15%, Amazon’s 25% or Zoom’s 28%.. The Nasdaq, the index that brings together United States technology companies, has abandoned more than 7% of its value during this time. Compared to a year ago, this index has depreciated by about 20%.
Last week, the presentation of the financial reports of the mega-techs (Amazon, Apple and Google) disappointed and negatively impacted the market Wall Street, which has accumulated a greater slowdown due to the declines these companies have experienced.
In Apple’s case, Cupertino-based firm reports 5% decrease in saleshighlights the slump in the billing of one of its best-known products, the iPhone. The company recorded its first revenue decline since 2019. iPhone sales fell 8.1%, while Mac computer sales fell 28.7%. Following the presentation of these accounts, the company posted a 1.28% drop on Monday.
In the case of Google, the company reported weaker revenue due to a decline in the advertising industry. Alphabet, the parent company of the company, earned €54,673 million in 2022, 21% less. Over the past year as a whole, Alphabet, income up to 9.8% 257,846 million euros, expenses and costs were 16.2% more, totaling 189,617 million euros. It’s up 1.5 percent in Monday’s session.
“The context these market sentiment results leave us is, The economic prospects of these technology mega-companies, which anticipate a decline in consumption and commercial activities“, say XTB analysts in a recent report.
Artificial intelligence, the new bet
It is paradoxical that at the same time as staffing is being adjusted, big tech companies are announcing significant investments in Artificial Intelligence (AI). Microsoft to increase investment in OpenAI by $10,000 million, the company that launched its artificial intelligence tool ChatGPT. In addition, Microsoft Spain president Alberto Granados announced this Monday that the company plans to recruit one hundred new employees to its artificial intelligence “centre” in Barcelona to strengthen its ChatGPT commitment.
Google founders Larry Page and Sergey Brin Due to the concern created by the ‘chatbot’, they recently reviewed the company’s artificial intelligence strategy and contributed to its development Its use in OpenAI, ChatGPT and search engines. The technology behind the OpenAI ChatGPT chatbot has alarmed Google about posing a risk to the company’s core business, given its potential application in search engines.
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Other companies, such as IBM, also market artificial intelligence solutions. One of them, according to a virtual agent and computer company named Anna, which uses Dutch bank ABN Amro, this ‘chat bot’ exchanges a million with the organization’s customers to settle matters. Amazon uses similar technologies for domestic consumption and sells them to other companies.
“This isn’t a digital business crisis, it’s a change in model. Meta recommends strong investments in the metaverse and it won’t pay off in the short term. Investors have demanded to stop and rethink its growth strategy, and this requires the templates to be adjusted“, concludes economist Juan Jung.