With large tech and online businesses suffering on physical economy opening up and the funding hard to come by for startups along with a growing pressure to turn profitable, job cuts and hiring freezes may continue across businesses in 2023.
Job freezes, pink slips, and emails from HR or CXOs explaining the numbers on the target list and reasons to downsize their workforce have been in the news and discussions lately. It is now gradually becoming a routine rather than news, but employees are facing uncertain days ahead and some impatiently waiting for their turn.
While the pandemic hit some sectors badly and it did rain windfalls for yet some others. While traditional sectors and SMEs suffered a lot during the pandemic, the large players as well as startups in the new age sectors like IT, e-commerce, online services, social media, and SaaS model businesses, benefitted exponentially. The pandemic has subsided and the physical economy opened up impacting new-age sectors negatively. The traditional sectors which benefitted during the pandemic are getting back to normal, that is the level they were before the pandemic disrupted the then economy.
When Byju’s of India laid off a few thousand employees recently post their financials showed huge losses and cash flow woes, everyone raised eyebrows and pointed fingers at them for burning cash on ‘uncontrolled’ acquisitions. The main reason for the setback is that people who opted for online tuition during the pandemic started going back to physical institutions. The misstep was the inability of Byju’s to foresee that the unprecedented growth was not sustainable and frivolous expansion without considering this fact could be risky.
Then we heard Meta skimming their workforce, followed by Twitter under its new owner Elon Musk and now Amazon is in the news for the same reason. The other companies that fired their employees included Intel, Snap, Robinhood, and Shopify. Microsoft, Google, and Apple cut the workforce without anyone noticing much, they have plans for more which is in the news. Back in India, Zomoto is planning to reduce its employee count. Amidst all this, have you noticed that while Musk made a cut in Twitter, he did not do so in Telsa, which belongs to conventional business?
Why did this happen? It is simple. Disruptions during Covid time triggered the need for remote working, online shopping, and other transactions remotely, wherever possible. These shifts needed technology adoptions and innovations to operate. Businesses that were already online and on the cloud or have taken initiatives to transform to these modes benefitted from the situation, while those in traditional business models in the physical economy and those who did not shift, found it difficult to survive and grow.
A similar layoff happened in those industries during the Covid-19 days but they did not catch the attention of many other than those affected because those sectors and jobs in those sectors were not as glamorous as the new-age industries and jobs in them. In addition to tech companies and online businesses, social media houses also experienced a high boost in online advertising revenue but plummeted when the physical economy opened up after the pandemic subsided. In other words, the reverse is happening now.
Add to it the high valuation of tech startups during the pandemic and they're getting back to the pre-pandemic normal. Funds are hard to come in as VCs are cautious about the present and future valuation. Take the case of Zoom which got a high valuation that pushed its price to $559 at the peak, and then dived down to the pre-pandemic level of around $80.
The trend is likely to continue into 2023 till the time the profitability of the companies gets back to the pre-pandemic level and reaches a stage ideal for them to scale and grow. It is about finding the ground where they can pursue normal growth. The current recessionary trend in certain sectors will affect not only companies and investors but also consumers.
To tide over the recessionary trends that can lead to layoffs, enterprises and startups might consider relooking at the prices and introducing newer tariffs. However, this strategy may see only limited success or maybe failure unless they enjoy a monopoly in their businesses, as they will be afraid of their customers shifting loyalty to lower-priced competitors.
The future may see companies and the workforce saying goodbye to full-time payroll jobs. The company-workforce relationship will become similar to users subscribing and using XaaS applications, services, and infrastructure. Pay-as-you-go or on-demand service models will be the future in most possible areas, particularly services. The human resource services will naturally become part of the XaaS ecosystem, providing a win-win situation for both businesses and talents.
Instead of organizations engaging with recruiters and job portals to find the best talents for the projects under planning, they have already started considering Task as a Service (TaaS) platforms to source resources or teams to get the tasks or projects getting executed in a simple and agile manner. This model allows flexibility to both stakeholders without a long-term commitment.