It seems like every decade or so, we are facing a perfect storm of economic conditions that leave companies across industries bleeding and, ultimately – closing. Over 53,600 workers from more than 360 tech startups globally were laid off in 2022 - this might be the most significant number of lost jobs in the IT sector since the COVID-19 pandemic. Layoffs range from small ones - a dozen employees or so, to mass layoffs that end up on the cover page of business websites or on LinkedIn profiles where former employees are looking for new opportunities.
Like everyone, you probably wonder why IT companies, especially those with high valuations - which should be the most propulsive and recession-resistant - lay off employees?
Are the layoffs at tech companies a common issue, or is it something that has accelerated just recently?
In this article, we will address these questions and examine the options you have on the table if you are facing the pressure to reduce your company's number of employees.
For a long time, tech companies have showered their employees with exuberant salaries and unbelievable benefits to attract and retain talent in one of the most competitive industries – IT. Hyper-competitive companies often hired more people than they needed just to keep up with the Joneses of the startup world.
However, after the pandemic-fueled 2020 and 2021, which were one of the most optimistic years we've witnessed in the IT industry, the situation started to cool down rapidly as the broader economy was hit by the perfect storm - a combination of high inflation, a possible recession, and war in Ukraine. And the tech sector is one of the first ones to take the blow. This happened because the valuation of the growth companies is reduced as the present value of future earnings is lower due to inflation and the possible recession lowered the earning projections creating the double whammy.
The memory of the dot-com bubble as well as the recession of 2008 is still fresh. Tech companies have rapidly kicked into a lower gear — they started to cut costs and save the capital from the investment rounds to prepare for the "Winter is coming" scenario. Across the board, hiring has slowed down for specific mid-level and senior-level roles. However, the recruiting is constant for the entry-level engineers, which might indicate that companies want to pull back on the hefty salaries in the hope that they can educate talent internally and put them on a fast track.
Yes, IT people are still the most sought after despite the layoffs and hiring freezes. Many global companies also have development centers and innovation hubs across the globe - some companies are rethinking the need for them while also discussing how to address the need for experienced IT personnel while staying within the affordability range.
If your company is facing pressure from investors, high monthly operational costs, or changing market circumstances that deeply affect it, let's examine what you can do about it.Even though consumers are pessimistic and are cutting down on non-essential costs, you have to remember two things - first, we are still not in a recession, and you have a business to run.
One of such reliable nearshore partners could be a software and product development company Vega IT. We built our business model during the 2008 recession, so we completely understand the things you're going through. Our comprehensive experience gathered over the years allows us to be a reliable partner to our clients and provide them with all the technical expertise and domain knowledge they need.
Besides offering unparalleled service, we are proud to provide you with a flexible and no commitments approach – you control the team composition and allocation and can scale the team according to your needs – when you need to grow faster, just add more engineers to your core team. And when you need to take a break - you can easily downsize without any hassle.
Sounds too good to be true? In the last 15 years, our highly trained engineers have successfully delivered over 1.000 projects in Europe, the UK, UAE, and UA, and our 750+ engineers have experience in FinTech, PharmaTech, HealthTech, and transportation & logistics, FoodTech, enterprise blockchain, and others. We have more cards up our sleeve, so continue reading.
Over the years, we have sourced only the highest quality talent. Today, we employ Software Architects and Engineers, Product Owners, Business Analysts, Project Managers/Scrum Masters, DevOps and QA Engineers, and Data Scientists whose passion for work, innovative thinking, and deep domain expertise help our clients achieve exceptional business outcomes. You can read about our and our clients’ success stories in our blogs.
We completely understand that there is no "one-size-fits-all" solution for software development, or business in general. This is why we'll first want to learn more about your project or commitments you need to make, and afterward, we'll select the right people who are a perfect fit for the challenges you need to solve. So, yes, the perfect storm might be on the horizon, but so is a potentially ideal solution.
Strategic. Creative. Practical. Sasa is the supervisor for every project that the company takes on.