Intel recently announced that as part of a restructuring initiative, it will be taking the focus away from the PC biz – an industry the tech giant practically gave birth to, and concentrate on building on cloud computing capabilities with microchips that power datacenters and Internet-connected devices. While the initiative has its heart in the right place, CEO Brian Krzanich, in his letter to employees pointed out the grim reality that this evolutionary measure will wipe out up to 11 percent of its workforce – that’s about 12,000 positions. Reading through the letter, one can’t help but notice the use of words like ‘transformation’ and ‘productive’ or ‘sharper execution’ all of which indicate a much deeper reason than saving costs, as the primary reason to lay off.
The tech industry, as a whole, seems to be doing just fine. There is no major upheaval there. But the past year saw very big names step up on the chopping block and take huge job cuts. HP cut 30,000 jobs or about 10 percent of its total workforce, as it prepared to spin off its enterprise business into a new company HP Enterprise. The much celebrated Nokia-Microsoft partnership also saw newly anointed CEO Satya Nadella take the decision to axe 7,800 jobs in addition to 18,000 that were already announced in 2014. Yahoo has seen a particularly tumultuous year and has shut down several of its businesses. The number of casualties is pegged at around 15 percent of the workforce ‘as part of strategy to revamp its core Internet business’.
A strong factor here, among others, seems to be the underlying revolution that the startup brigade is bringing in and the ‘old-guard’ firms are simply scrambling to retrench and restructure aging businesses and lose people in the process. Khosla Ventures partner Keith Rabois said companies have too many employees for their own good. Rabois feels that tech companies have over-hired over the last four years and says that that the average technology company is between 25 to 50 percent bloated.
This year, find analysts, is going to be no different. In fact, it might just get worse. Boutique research house Global Equities Research’s Trip Chowdhry predicts there will be at least 333,000 layoffs in the next twelve months, in part because of developments such as cloud computing. Chowdhry believes that the shift to cloud computing eliminates a lot of IT talent that has been classically devoted to ‘back-end’ operations of IT. He believes that 70 percent of work done is IT is for such back-end tasks and the remaining 30 percent is the more rewarding ‘domain-specific’ tasks. Now with cloud coming in to the picture, working models change and as infrastructure can be outsourced to a Web service like Amazon, the IT boat is violently rocked. Suddenly there’s a surge in demand for domain experts and the need for traditional back-end staff dwindles. Tech companies are also at cross-roads because neither do they know what to do with outdated talent and how they can plug in the gaps that the new roles demand. As Chowdhry puts it, “Sadly, the new jobs in Functional/Customer Domain will not be immediately filled, as those skills are scarce and the educational system is behind the curve.”
So what’s the way forward for these tech Goliaths? As this Bloomberg report explains, the ideas that startups have championed and built businesses around will live on, such as cloud computing, software-as-a-service and peer-to-peer networks. And the bigger and older companies will need to adapt and acquire those disruptive startups. They’ll have to create a host of innovative products in-house or do the right deals at the right price. It rightly adds that “the tech industry isn’t doing terribly. But a big part of the industry is trying to revamp, catch-up and keep the market healthy – and they’re cutting jobs to get there.”
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