In the world of technology companies, there is blood on the streets. And plenty of tears too.
A few months ago, Shamoli (name changed) from Mumbai put in her papers at a firm she was working in, to join a Bengaluru-based insure-tech startup, which had been chasing her for a while and had finally convinced her to move cities.
A month later, the company revoked the offer because of a “change in the organisational roadmap”, shocking her. Meanwhile, across the ocean, Shreya Agrawal started working a few months ago as a product manager at Amazon in Sunnyvale, California.
A 2019 IIT Madras graduate, she had moved to the US to study for her Masters from Columbia University and, after a few internships and short gigs, finally “arrived” at Amazon. But the arrival was followed by a quick departure. CEO Andy Jassy warned workers this month that the company will fire more people in the coming year too. The bloodbath continues.
A wasteland of talent
According to available data, at least 5,000 people in large tech companies and startups in India lost their jobs in October. Twitter’s new maverick owner Elon Musk fired almost his entire Indian team, now down to 10-15 employees from a staff of between 230 and 250 before he took over.
Facebook’s parent company Meta Platforms Inc sacked over 11,000 employees and has a hiring freeze in place. The 2,500 employees sacked by ed-tech unicorn Byju are part of the dismal roll call of 17,590 unfortunate men and women dismissed in 52 startups in 2022.
Apart from Byju, other Indian tech companies handing out pink slips are Chargebee, Ola, OYO, Meesho, MPL, Innovaccer, Unacademy and Vedantu, among others. Most of the job losses were in the ed-tech sector, followed by consumer services and e-commerce. Softbank-backed ed-tech company Unacademy has let go of 350 of its staff after funding began to dry up.
E-commerce company Udaan, too, let go of 350 staff despite having raised USD 120 million in October. Intel dropped 20 per cent of its staff; Netflix has rendered jobless around 150 employees; Lido Learning between 150 and 200; Cars24 has 600 employees. Mortgage startup Better.com’s third mass layoff happened in April 2022, affecting between 1,200 and 1,500 employees.
The purge, however, didn’t begin all of a sudden: Vedantu fired 424 full-time and contractual staff in its second layoff wave, although it bagged nearly USD 900 million in funding and achieved unicorn status. Microsoft sacked about 1,000 of its 1,80,000-strong workforce for the third time since July this year. In August, 200 employees from its research and development division were fired. 150 employees of e-commerce player Meesho lost their jobs in April 2022 and healthcare firm Novartis India (NIL) fired around 400 people. Snap, which owns Snapchat, laid off 1,200 people.
Mumbai-based Hardik Shah was one of them. It was in August this year that Snap fired him, ironically on the festive day of Ganesh Chaturthi. Shah was part of a global team responsible for working on strategies to grow the AR (augmented reality) developer community for India and the Asia-Pacific region. While any unplanned exit is disappointing, Shah is glad it happened at the time it did. The deeper crisis became apparent as the major technology corporations started declaring earning reports for the third quarter this year. Shah had by then fortunately secured his next job. Bummed by the hiring freeze at some of the companies that aligned with his professional skill set, he had to, however, switch industries. Gaurav Munjal, the CEO and co-founder of Unacademy, tweeted that 2023 would be even worse for tech companies. According to Layoffs.fyi, a website that tracks layoffs in the tech sector, close to 144,584 people have been laid off across 917 tech companies globally.
Indians, considered naturals in the startup universe, were fired in droves, especially in the US. Laid off just two days after relocating to Canada for Meta, software engineer Himanshu V posted on LinkedIn: “What’s next for me? Honestly, I have no idea. I am looking forward to whatever comes next. Let me know if you know of any position or hiring for a software engineer (Canada or India).”
The trauma of unexpected job loss is exacerbated by HR insensitivity. The human face of misfortune is represented by professionals like Arti Saxena (name changed) who joined an Indian startup six months ago. One fine day, she was told over a joint call with her company’s HR and Marketing VP that she was among the 50 per cent of the workforce to be fired. “The communication was one-sided.
I was told that it was my last day. My IDs and access to internal portals were revoked with immediate effect. The laid-off staff was offered no severance. The leadership was nowhere in the picture while all this was happening. The founders did not reply to our emails,” says the 34-year-old, adding she does not plan to reveal her setback to her family since they are dependent on her and she has loans to pay off.
Re-arranging vectors
While most employees of the tech firms saw the layoffs coming, the sector’s overall health has them worried. “The exit timing from Twitter could not have been worse. One would expect working in big tech would give you some edge, but it is then that the reality of the job market hits you,” says Tina Gurnaney, former conversation lead at Twitter India, who was asked to leave a few weeks ago.
Having recently completed a year at the micro-blogging platform, Gurnaney felt she had peaked at Twitter. “If it were up to me, I’d retire from this place. You can try hard, get far, but sometimes a billionaire can change the trajectory of your life and there’s nothing you can do about it,” she tweeted last month.
Tina is looking for the next opportunity. Thankfully, a robust alumni support system is helping Tina and others like her to navigate through the mess. Shah too says how his manager went the extra mile to arrange potential job opportunities for him to cushion the news of the exit.
Raju Kadam, formerly a senior technical programme manager at Meta, took to LinkedIn to seek help from his network after he was laid off from Meta. Kadam has been in the US for 16 years and did not want to disrupt the life of his family, including his two sons, Arjun and Yash, who are US citizens.
While his American or immigrant colleagues can live off the severance pay for a few months, it’s not the same for him. “My clock to leave the US has started today,” he remarked in his November post, which saw over 1,600 comments with people offering support, extending reach, and sharing leads.
Harsh financial winter has set in not just on the titans, but across the digital spectrum.
“I have been in the US for 16 years and have seen 2008, 2015 (oil), and 2020 downturns, but never lost my job. My two sons Arjun and Yash are US citizens, and their lives will be impacted. I will do whatever in my power to give them the best opportunity to succeed in the US,” says Raju Kadam.
Two years ago, 23-year-old Rahul Varma (name changed) joined a crypto exchange after sensing a huge potential in the industry. But a few months ago, he was one of the many who were asked to leave a leading exchange in India.
“It came as a bolt out of the blue as business was going on as usual. We were given no prior intimation. Just a few months ago, we had an all-hands meeting, including the CEO. Since Coinbase (a leading crypto-currency company) announced layoffs at that time, we were reassured that our company had enough resources to keep paying us,” says Varma, adding that many had even been promoted and trained on processes.
“We were even getting constant intimation from the HR to refer our friends for the job openings,” he says. Recalling the day he was terminated with many of his colleagues, Varma says, “As soon as the call ended, they revoked access to all our login details. I had saved all the documents in Google Drives and everything got locked out.”
The sudden layoff has left him shaken financially. “I had to get another job within 30 days to keep paying my EMIs. Recession and the rough patch in the crypto industry forced me to settle with anything I could get my hands on,” he says.
The Covid boom and doom
How did it all start? Millions of people died in the pandemic, and millions of businesses went under. Historically low-interest rates in the US and the Covid-19 pandemic saw many businesses boom and some wane. Netflix and Peloton grew fast, and Uber, though affected by the pandemic, had been experiencing growth from a decade of low-interest rates and huge investments.
As fears of recession loomed, there was carnage on Wall Street after hundreds of billions of dollars were wiped from the market values of many tech firms. Meta, Amazon, Microsoft, Alphabet (Google’s parent company), Apple and Netflix have already lost a combined market value of over USD 2.5 trillion so far this year. The valuation of Musk-owned Tesla was $1 trillion in 2021; now it is just over USD 700 billion.
The massive fall in stock prices is a sign of course correction in the market, analysts believe. Peloton, which makes exercise machines, boomed during the pandemic and lost over 90 per cent of its value. Some businesses expanded during Covid-19 only to lose this year; Zoom’s valuation came down from USD 54 billion to USD 27 billion since the beginning of 2022.
The valuation of buy-now-pay-later Swedish fintech company Klarna nosedived by 85 per cent. Funding is cooling: having raised USD 45.6 billion last year, it could secure only USD 800 million in 2022 from investors. Such seismic shocks have led to a drop in investor confidence in high-growth tech stocks.
Some companies like the US crypto lender Celsius went bankrupt after claiming it just had USD 167 million “in cash on hand,” from an asset worth USD 25 billion in October 2021. Although many tech giants like Amazon had bloated their staff strength to meet surging online demand for services, the return to normalcy proved deadly for workers. Apart from the expected cost cuts, the primary response to economic headwinds was ‘restructuring’—read shutting down business divisions that aren’t growing, killing product lines that aren’t finding an audience and, well, layoffs.
Amazon shut down three of its Indian businesses: ed-tech platform Amazon Academy, food delivery service Amazon Food, and wholesale eCommerce platform Amazon Distribution. This closure will also lead to a few hundred job cuts, according to some reports. Upheavals obey no pin codes.
Is it a bust?
Apart from the dotcom bubble and the subsequent crash, there was another frenzy in 2011 when a small group of cutting-edge tech companies became unicorns with valuations exceeding USD 1 billion. Facebook’s 2012 public offering was the largest in US history at USD 100 billion, although its revenues were just USD 4 billion. An investment storm followed, with private equity firms and mutual funds opening their deep pockets to new firms and newer ideas.
Now, has the tech bubble, like the dotcom bubble, burst?
Yes and no. A bubble is created when excess capital looks for its peak. A disproportionate rise in the value of tech companies led to the bubble. But when bloated valuations coincide with failing IPOs, investors lose confidence and the market crashes. Stocks once worth millions would become trash as a fall in investor confidence leads to a bear run. Companies go under. Thousands lose jobs.
The market rise in tech stocks of this decade, massive but unsustainable, led to high speculation.
“Rapid share price growth and high valuations based on standard metrics, such as price/earnings ratio or price/sales, normally characterise a tech bubble. The dot-com tech bubble, like most bubbles, ended with a crash once investors awoke to the reality that heightened expectations would not be met and rushed to exit en masse,” according to Somer Anderson, a finance professor with over 20 years of experience in the US accounting and finance industries.
The dot-com burst was caused when the telecom hardware giants, who supplied tech startups and dotcoms with hardware, experienced a drastic fall in revenues. The ripple spread through markets leading to a recession in 2001. The crash wiped out about USD 5 trillion in investments. But the tech scenario is different.
Though workers are losing jobs, the companies today are real, not just on-paper firms of the dot-com era, which launched IPOs. Though revenues and valuations have fallen in tech, the big players are very much in the business. Meanwhile, significant hiring in India continues in banking, development centres of global retail companies, industrial tech majors, cloud services providers and large fintech players.
Many early-stage firms are looking to recruit from the vast pool of skilled tech talent suddenly made available. Gurnaney, though, believes that in an ideal market, one would move from Twitter to another big tech company, but given the hiring freeze, it is tough to find a workplace with similar credentials. The capitalistic corporation might seem cold and bitter. Still, as the going gets tough, employee networks and local communities are witnessing the emergence of the best of friends in the worst of times.
Captains of calamity
After the 2008 global financial crisis, Big Tech became the torchbearer of the market rally, riding on a societal transformation in the way consumers and businesses interacted by connected devices across diverse form factors, software subscriptions and cloud services.
As a result, the five biggest constituents of the S&P 500—Microsoft, Apple, Amazon, Alphabet and Meta—accounted for 20 per cent of the entire index’s market capitalisation. That is five companies making one-fifth of the market cap of the top 500 companies. Their stocks, in a way, represented a major health check for the state of the global economy. In the last few years, four of these (Apple, Microsoft, Amazon and Alphabet) transformed into megacorps and rose to the top four in the world with over a trillion dollars of market capitalisation.
Even during the pandemic, as businesses across sectors struggled to survive, the big five saw a combined revenue growth of over a trillion dollars. As the revenues skyrocketed, so did their headcount.
Amazon hired more and more people to grow its delivery operations and cloud computing services to support the increasing online businesses. But once the pandemic eased out, people were no longer stuck inside.
Netflix, for example, saw a drop in its subscribers for the first time in over a decade. It seemed like the tech companies overplayed their ‘new normal’ and revenues started to stall post the pandemic. While a lot of these companies are still growing, the progress is slow, often back to the pre-pandemic levels.
Apart from the waning virus wave, the Russia-Ukraine war, and macroeconomic factors causing inflation, what is ailing the tech firms is the flagging demand for digital advertising, the softer growth in cloud-computing divisions, and the shrinking market for personal computers.
Digital ad-focused businesses like Meta and Google were equally hit by Apple’s new privacy rules, requiring user permission for personal targeting as well. Alphabet reported its fifth consecutive quarter of slowing sales growth—YouTube revenue fell for the first time since it began reporting the unit’s performance in 2020.
Meta reported its second revenue decline in a row amid worries about the company’s huge investments to pursue Zuckerberg’s Meta vision as well as competition from TikTok, which has taken away viewership from other social media platforms. In October this year, the company’s market cap fell to $300 billion from its $1 trillion peak last year.
It’s not just about online businesses; there’s also growth deceleration in the cloud business. Microsoft reported that its net income fell by 14 per cent, its worst decline in two years and revenue degrowth
in more than five years. The earnings reports of Amazon and Alphabet suggest similar challenges
in their cloud division.
The Teflon coating of Big Tech seems to be eroding, as they move from growth to profitability. This has, of course, forced them to reexamine their business strategies, operations, and employee headcount. Some of the layoffs though could well be proactive since analysts aren’t sure if the tech stocks will rebound to the bull market of the previous decade.
Several companies have issued guidance to warn about profitability through 2023, which many experts believe will be similar to—or even exceed—the recession of 2008. Some estimates suggest that about 65,000 tech jobs were lost each year in 2008 and 2009. It will likely not reach the levels of the dotcom bust of 2001 and 2002 where almost three lakh tech jobs were lost over two years.
Past shock
What’s happening in the tech sector right now is reminiscent of the dot-com bust at the turn of
the millennium. The late 1990s saw a period of massive growth in the adoption of the internet and the rise of companies that aimed to revolutionise commerce and communications.
Between 1995 and 2000, NASDAQ, the tech-heavy stock market index, rose 400 per cent. In March 2000, NASDAQ hit an all-time high of 5,048.62—double its value just a year before. A month later, however, it fell by one-third, kicking off a spree of mass layoffs across the Bay Area.
And that was when the bubble burst.
During the dotcom crash from 2000 to 2002 hundreds of internet companies shut down after burning through their venture and IPO capital while failing to carve out a profitable business model. Many organisations that survived the bust did go on to become large businesses in the following decade, like Amazon, but lost a large part of their market capitalisation at the time.
The dot-com bust led to the technology industry giving up all its gains during the bubble. The NASDAQ didn’t touch 5,000 for another 15 years.
Layoffs in India in 2022
- 2,500 Byju’s
- 1,200 OLA
- 1,000 Unacademy
- 600 Cars24
- 624 Vedantu
Exit report: job losses in US so far
- 11,000 Meta
- 10,000 Amazon
- 3,700 Twitter
- 1,000 Microsoft
- 1,200 Snap
- 1,000 Salesforce
While many tech giants like Amazon bloated their staff strength to meet surging online demand for services during the pandemic, the return to normalcy proved deadly for workers. Apart from cost
cuts, the primary response to economic headwinds was ‘restructuring’—shutting down business divisions, killing product lines and, well, layoffs.
Snap, which owns Snapchat, laid off 1,200 people. Mumbai-based Hardik Shah was one of them. He was part of a global team responsible for working on strategies to grow the augmented reality developer community for India and the Asia-Pacific region.
(with inputs from Uma Kannan)