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Why the technology industry is in crisis and there are so many layoffs

Tech companies are laying off employees and cutting investments for various reasons.

There are many effects that are hitting the technology industry today, including reasons that are outside the spheres of the companies and have to do with issues that affect other sectors of society, generating a tail of ‘ uncertainty’.

Amazon, Meta, Twitter, Lyft, Stripe, Robinhood and Coinbase These are some of the companies that have laid off employees in recent weeks, in a wave of departures that puts the spotlight on this sector and the question mark for what may happen in the future.

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Covid-19, the first trigger

The pandemic was an opportunity for this industry. Nobody expected such great growth in the midst of a global crisis, but the need to work from home, communications, online shopping and entertainment led many companies to make bets and investments, which after the two most critical years and social stabilization, the consequences become apparent.

This is one of the first reasons why the sector is at a time of labor movement, even mark zuckerberg He acknowledged having been wrong in his economic predictions during the pandemic on issues such as electronic commerce, the need for a large workforce and investments, but “this did not turn out as expected,” said the CEO of Goal.

Tech companies are laying off employees and cutting investments for various reasons.
Tech companies are laying off employees and cutting investments for various reasons.

“You have to take into account that there was a hiring boom from 2020 onwards, because there was growth in companies during the pandemic, but that optimism is not being reflected in higher revenues and the impact of the pandemic has already diminished, so It is being seen that there were not so many resources in the future to invest in that large number of workers,” he says. Edgar Medinaexpert in technology and digital marketing.

That is how Goal laid off 11,000 of its workers, Amazon to 10 thousand, Twitter to more than 4 thousand, Stripe to more than a thousand and the list can go on because there was overcontracting, thinking that growth after the pandemic was going to stay the same.

The construction of the metaverse

The next reason is the change in mentality that generated the metaverse. Although it is a subject that has been under construction for some years, the decision ofand Zuckerberg to change your company name to Goal, generated that large, medium and small companies were interested in this topic. But it’s still a long way.

“There is still a lot of ignorance on the subject and many companies threw themselves fully into this, wanting to mature by blows and the result is losses for many of these companies, which can freeze the metaverse issue a bit because there is uncertainty since it is not the right time. to bet on something that is starting”, pointed out Juan Forerotechnology expert and creator of the Instagram account, ‘El profe Jorge’.

Although the problem is not the metaverse itself, the point is in the uncertainty of his bet, in which companies are taking their investments more calmly in the midst of the development of this large-scale project.

Tech companies are laying off employees and cutting investments for various reasons.
Tech companies are laying off employees and cutting investments for various reasons.

“Many of the technological bets are directed to the future, such as the metaverse. They make these investments thinking that they are going to bring them returns, but they work at a loss for a long time, as happened with Amazon for 10 years and now Meta is doing it, but it’s been eight years and it still hasn’t taken off,” he says. Medina.

However, Meta has always made it clear that its metaverse project is something for the future and not something for the short term because it involves a lot of development.

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the global economy

Ultimately, this is a factor that transcends all problems. The industries and countries are in a moment of economic doubts, inflation is affecting each person in a particular way and for the technological ones the blow comes from investment, falls in the stock market and therefore a decrease in income.

“It is not something only in the technology industry, because it is also happening in tourism, in the automotive industry and others. This is partly due to the economic recession and inflation levels not seen for a long time, which represents a decrease in the growth of these companies. An example is Facebook, that it has fewer advertisers and the income decreases”, mentions Forero.

That is why “in the midst of uncertainty due to a threat of global recession, there is less willingness to invest in new technologies that generate certain risks, which is why we see large companies in trouble,” he completes. Edgar Medina.

This is how the progress of technology companies worldwide is being limited by multiple factors, which can undoubtedly affect the final consumer, “because many of their products can increase in price, as has happened with Netflix in several countries” or the bet of Twitter with Twitter Blue. A crisis that for experts puts the future in a “grey” picture.

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