Aug 2016

Downsizing – Techastrophy or Technaissance?

Written by Paul Maher

Downsizing – Techastrophy or Technaissance?

Tech giant Cisco recently announced it will cut 5,500 jobs, about 7% of its global workforce.

The multinational corporation is joining a long list of other tech companies who have recently made “job cut” announcements. HPE, HP Inc., Yahoo and Oracle are cutting up to 30% of their staff while IBM is letting  25% (95,000 employees) of its workforce go.

What is behind this mega-cull? Why is the “Old Guard”, which turns over billions of dollars every year, suddenly struggling? Perhaps it’s just routine ‘house cleaning’. Eminem referred to “Cleanin’ Out My Closet”, replacing his turbulent recent past with, he hopes, a better future.

Transformation, transformation, transformation…

Change can be positive. By reducing their workforce, tech giants can increase their investments in new markets or develop new products to gain competitive advantage. Locally, Cisco is ploughing $150m into the UK’s ‘Internet of Everything’ start-ups to step into the flourishing IoT sector. Cisco hopes its move to a new business model selling software and high-value services is the right one.
Transformation can be exciting at the beginning, although less so for those who are about to lose their jobs. But what are the chances of success in a range of new markets? HP, for instance, didn’t get there, despite previously trying to ‘transform’ with acquisitions (Autonomy and EDS). The result? Thousands of employees paid the price and lost their positions in the last few years.
Looking on the bright side
When it comes to people and profits, less can be more. Intel expects to end its job reductions by mid-2017 gaining $1.4bn in savings. As the job-cuts “techastrophy” continues, tech’s ‘oldies’ pursue software and services revenues with fewer staff. But, there are some companies who are growing their IT workforce.

Lloyds Bank has recently opened its doors to dozens of senior technology roles, a shift caused by customers preferring banking online. After announcing thousands of job cuts. Nokia created a programme that has contributed to the creation of about 400 startups in Finland. Meanwhile PwC has just announced the firm will add 1000 technology specialists to its UK risk assurance practice by 2020.             

“New tech guards” and startup boost
The layoffs in the tech industry are expected to change 370,000 lives in the US alone. So far this year, 63,000 people lost their jobs at the US tech giants. Highly qualified H1B’s, the type of visa many ‘foreign workers’ hold when coming to work for many American technology companies, have traditionally replenished the US technology workforce and freeing others to become entrepreneurs. However this time it could be different.

Reduced headcounts may mean ‘cheaper’ countries like India, Poland or Belarus pick up more outsourced work. This may have doubly negative effects, less talent in the US and fewer start-ups emerging.

Worrying as it sounds, on the tech side of things, a changing of the guard makes the future look very interesting. Who knows from which ‘Old guards’ will become the avantgarde. Now is a golden era for tech startups all over the world. Perhaps the senior tech talents, who have just lost their jobs, will be like Ben’s character (Robert De Niro) in “The Intern” and the “new tech guards” will benefit from the experience of those let go by the Old Guard.

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