Tech firms rebalance scale with lay-offs, 176,240 jobs go in Q1

By Alexander Chiejina

• Over-hiring, decreased investors spend, impending recession seen as drivers for this challenge. 

Technology businesses have increased the rate of layoffs in 2023 due to a sluggish global economy and weak revenue growth.

The overall number of staff reductions is currently more than the number of jobs lost by all IT companies combined in 2018. Despite the fact that tech companies made significant layoffs last year, the year 2023 has been much worse as tech giants like Amazon, Meta, Microsoft, Google, Yahoo, Meta, Zoom IBM, SAP, and Salesforce announce significant job cuts, including cryptocurrency and enterprise SaaS firms.

Tech startup firms in Nigeria are not insulated from this global impasse currently impacting global tech firms including Alerzo, Quidax, Kuda, and others. 

Latest figures released by Layoffs.fyi, the online tracker keeping tabs on job losses in the technology sector, reveal that over 176, 240 employees have been laid off. 

A breakdown of employee layoff figures from January to April 2023 reveal the following – January (84,714); February (36,491); March (37,109) and April (17,926). These figures within a four month window are high compared to 164,411 employee layoffs in 2022.

Experts have identified a number of causes for this unsettling trend. Leaders may be starting these big layoffs in advance of the coming recession, according to a Personnel Search Services Group analysis. Even though some nations and, to a lesser extent, some industries may be more vulnerable to a recession than others, all sectors appear to be taking precautions to prepare for this possibility. 

“As revenues decline, investors want businesses to cut costs. Investors may have objected to corporations like Meta and Microsoft due to their huge headcount in comparison to other businesses. Even while there doesn’t seem to be much proof that layoffs can be the panacea for a company’s problems, they have still evolved into the short-term default option. Therefore, firms continue to use layoffs as a justification to increase profits, regardless of an organisation’s true profitability, the report said.

There is a current revenue decline, despite the fact that most tech companies went on a hiring boom during the Covid-19 epidemic when lockdown spurred a tech buying spree to support remote labour and an increase in e-commerce. According to market research firm Gartner, even while corporate software and IT services are likely to expand the fastest in 2023, overall IT spending growth will still be modest, with data centre systems and communications services expected to grow by less than 1%. Meanwhile, a drop in hardware sales is anticipated.

Nigeria has recently had the weakest funding season thus far in 2023. The entire investment for companies in Africa, which included debt and equity deals spanning 764 rounds, was estimated at $6.5 billion in the 2022 fundraising report by the venture capital firm Partech. 693 deals totaling $4.9 billion were equity transactions. 

However, the data showed that from $5.2 billion in 681 rounds in 2021, the overall equity funding in the region decreased by six percent.

Some industry analysts see the huge layoffs, which they predict will continue, as a chance to establish the market on a solid foundation rather than one that is fueled by hype. It is stated that many tech businesses that received a lot of money hired more staff than they could support. As a result, firms are using layoffs as a tactic to rebalance the scales. Along with over-hiring, several tech firms also abruptly increased compensation to prevent their top employees from being lured away by much higher offers from larger firms. As a result of the fierce rivalry for elite talent, salaries reached historic highs. 

Adedeji Olowe, the founder of Lendsqr, stated that the COVID-19 saw a rise in digital and technological services. However, this resulted in a rise in the demand for IT services because many individuals believed that the need would continue to rise and that tech companies would over-staff as a result.

Additionally, monies were raised at premium valuations. Things are more tranquil now that everything has returned to normal, and reality is starting to reset things. Exuberance surrounding COVID-19 led to an increase in over-hiring. People are now losing extra weight. The truth is that technology is still fantastic, but both interest and the economy are returning to normal. Everyone will move on after the market resets, Olowe continued.

The fact that many of the layoffs affect non-technical employees is good news for those in the IT industry. In truth, corporations have been increasing IT professional compensation due to a dearth of skilled tech talent. According to consultant Janco Associates, raises for IT experts may increase by 8% in 2023.