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Focused cuts and fewer layers: Tech layoffs enter a new phase| GuyWhoKnowsThings

Last year, Mark Zuckerberg declared 2023 will be a “year of efficiency.His company, Meta, soon laid off a third of its employees. Amazon, Google and microsoft It also laid off tens of thousands of workers.

Their worlds did not stop. Not only that, the companies were rewarded. Their stock prices soared. Some divisions were more productive. And companies – including xformerly known as Twitter, which has eliminated nearly 80 percent of its staff since the end of 2022, continued operating.

Other CEOs took notice. And one month away from 2024, technology companies have entered a new phase of cost reduction.

After widespread layoffs last year, larger companies (including Amazon, Google and microsoft – have made smaller, more targeted job cuts in recent weeks, while focusing on fewer projects and shifting resources to key products like artificial intelligence. Some tech startups, such as Flexport, Bolt and Brex, have made deeper cuts to avoid potential extinction. The mandate from above is the same: do more with less.

“We're seeing three basic groups of layoffs,” said Nabeel Hyatt, general partner at venture capital firm Spark Capital, which invests in technology companies. “The big, fat technology oligopolies are looking for more growth and profits; there are the medium-sized companies that hired excessively during boom times; and there are the smaller startups that are simply trying to gain traction to survive.”

The new layoffs are the latest correction to years of a booming global economy and near-zero interest rates, which gave technology companies the ability to spend large amounts of cash to attract top talent during the pandemic. Many of the companies hired tens of thousands of new workers during that time to keep up with digital demand.

The past few years have forced technology executives to think differently. After lockdowns were lifted and people ventured back into the world, the use of technology products fell compared to pandemic highs. More than 1,000 technology companies will eliminate more than 260,000 jobs in 2023, according to data compiled by Layoffs.fyiwhich catalogs job cuts in the tech industry.

Drastically cutting the tech workforce would have been anathema in Silicon Valley just a few years ago. Tech culture has long been one in which a manager's status was determined by the number of people who reported to him or her and how effectively a company countered competitors' recruiting efforts. Tech executives often viewed attracting the next generation of computer scientists as a full-contact sport.

But now the stigma of layoffs has dissipated. More tech company executives have admitted to overhiring during the pandemic. Larger companies are making strategic cuts in areas where they plan to invest less and where certain types of jobs are no longer needed. Smaller companies that could easily raise capital just a few years ago are cutting back to stay afloat.

In the first 30 days of this year, there were 25,000 layoffs at roughly 100 tech companies, according to Layoffs.fyi. Microsoft, Google, Apple, Meta and Amazon will provide more insight into the state of the industry when they release their quarterly financial statements this week.

Waves of job losses tend to happen suddenly and all at the same time, said Sheel Mohnot, a partner at venture capital firm Better Tomorrow Ventures. “When a company in your space or nearby does it, it gives you air cover to do it,” he said. “It becomes easier for a company to say, 'It's not us, it's the industry.'”

Meta, owner of Facebook and Instagram, exemplifies the arc of layoffs.

Last year, Zuckerberg eliminated what he called “managers managing managers.” This year, the company has been more specific with its adjustments, specifically reducing the number of “technical program manager” roles at Instagram, according to two people familiar with the company's plans. A technical program manager, or TPM, oversees different projects within a department and is responsible for keeping teams on track—exactly the type of middle manager role Zuckerberg intended to eliminate.

Business Insider before reported about Meta's decision to reduce paper. Meta declined to comment.

Amazon too eliminate hundreds of jobs this month across its streaming arm, including Prime Video, MGM Studios and Twitch. Google made thousands of cuts in several areas, including YouTube and the hardware division that makes the Pixel phone, Fitbit watches and the Nest thermostat. In an internal memo obtained by The New York Times, Sundar Pichai, Google's chief executive, suggested that there had There is no imminent end to continued layoffs.and that the company would remove more “layers to simplify execution and drive speed in some areas” of the business.

“Many of these changes have already been announced, although to be honest, some teams will continue to make specific resource allocation decisions throughout the year when necessary, and some functions may be affected,” Pichai wrote.

Mid-sized startups with hundreds of employees are also downsizing. Some are facing the prospect of an initial public offering, which has forced them to take a hard look at their finances. These companies “know they need to get their balance sheets in order,” Mohnot said. “The market values ​​profits.”

Certain areas have been particularly hard hit this month, particularly the video game industry. Companies like Unity Software, Riot Games, Eidos-Montréal and Activision Blizzard and Microsoft's Xbox have downsized in recent weeks.

Those cuts are partly due to a consolidation of game studios, said Joost van Dreunen, an analyst who watches the sector. After several blockbuster game releases last year, a relatively slim slate of titles is expected this year, with fewer workers needed to release those games, he said. Consumers and developers are also awaiting new consoles like Nintendo's Switch 2, leading to a more immediate reduction in customer spending and the development of new titles.

Discord, the social networking and group chat app popular with gamers, this month It cut 17 percent of its staff.or 170 jobs, after quintupling its workforce since 2020.

“We took on more projects and became less efficient in how we operate,” Discord CEO Jason Citron wrote in a memo to employees.

Few expect the wave of consolidation to slow any time soon. Those who work in the tech industry now joke about ZIRP companies — short for Zero Interest Rate Phenomenon, which describes startups that would not have been able to raise capital if they did not have access to cheap, free-flowing venture dollars.

Many of these emerging companies, unable to attract more risk investments As interest rates have risen, they are cutting staff and focusing on fewer products.

“They may have just tried a bunch of things to find a business model that works,” Mohnot said. “But now is the time to settle the score.”

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