Good morning! Meta announced that it cut 11,000 employees this week and as Protocol first reported, Salesforce is planning for a major round of layoffs as well. Winter has come for the tech industry. And this is just the beginning.
Is it too late now to say sorry?
Mark Zuckerberg and Jack Dorsey recently did something that is, unfortunately, rare in the tech industry: They admitted they were wrong.
After a particularly bruising round of layoffs at Twitter under new overlord Elon Musk, Dorsey acknowledged he was at fault for growing the company too quickly. And as Meta shed 11,000 workers, Zuckerberg used a similar talking point.
The acts of contrition will likely do little to assuage the concerns of the thousands of employees who are now jobless ahead of the holiday season. But Dorsey’s and Zuckerberg’s olive branches at least stand in contrast to some more brutal layoffs elsewhere in the industry.
- At Salesforce, for example, employees who were recently laid off were given two months’ severance, sources told Protocol, a sharp reduction from what the company previously provided and noticeably less generous than Meta’s 16 weeks.
- At Meta, workers were also given additional severance based on their tenure at the company. At Salesforce, employees who’d been there over a decade received the same package as those who had been there a year, the sources said.
- Salesforce did not respond to a request for comment.
It’s startling how fast tech has fallen. For many, particularly younger workers, it’s tough to remember a time when the industry was wounded this badly. Even during the Great Recession, companies like Intel used the down time as a key opportunity to expand.
- For the past decade, capital has flowed into the sector like the mighty Mississippi. It propped up thousands of startups, many with no viable path to profitability. And with seemingly uncapped growth potential, companies added thousands to their workforces to support ever loftier sales goals.
- Meanwhile, vendors like Salesforce and Facebook spent billions over the past two decades to gobble up companies, creating a new wave of business and consumer tech giants. And Amazon, Microsoft, and Google cemented their behemoth status as businesses rushed to adopt the cloud and consumers spent more of their lives on the internet.
It seemed nothing could stop the impenetrable tech industry. Winter would never come in Westeros.
- The pandemic briefly strengthened that mindset given the massive growth of IT vendors like Zoom and DocuSign, as well as the heightened demand for ecommerce and other digital services.
- But investors quickly became nervous about just how much money businesses were spending, as well as how quickly consumers were pivoting back to pre-pandemic behavior. And as sales propelled to historic new heights, it quickly became a question of when, not if, the boom would bust.
- Now, some of those acquisitions, like Salesforce’s $27 billion deal for Slack, are looking like major liabilities as profitability becomes paramount. Burned by huge cloud and software bills, companies are increasingly eager to cut costs. Amid historic inflation, consumers quickly pivoted in their spending habits. And as a result, vendors are shedding workers at an alarming pace.
Winter has arrived with a vengeance. While customers will certainly continue to spend money on IT services, where those dollars are deployed as well as how much those investments will grow remains an open question. That means the growth that many vendors thought would come is likely delayed by years — if not indefinitely.
The end is nowhere near for tech layoffs.
- Meta and Twitter have their own challenges that could take a while to sort out. But for others in Big Tech, like Salesforce, the last few months of the year are often quite lucrative. It’s when many of the largest customers renew, which makes the timing of the layoffs all the more noteworthy.
In fact, some industry insiders expect them to resume with even greater gusto following the upcoming holiday season. Perhaps now all we can ask is for CEOs to follow in the footsteps of Zuckerberg and Dorsey and at least make an effort to show remorse. Then they’re free to jump on their personal jets and head to their private tropical estates to recoup before the next round.
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