After seeing two years of post-pandemic economic downturn and massive layoffs in the tech sector, mainly in the US, recovery seemed to be on the radar for 2024. However, jobs continue to be impacted. In February, both Cisco and Docusign announced cuts of around 5 percent to their workforce. Earlier, in January, Microsoft let go of 8 percent of its Gaming Division and eBay axed 1,000 jobs, while SAP announced a large restructuring program impacting 8,000 jobs in the company.

Massive layoffs are not new for employees in the industry. Big Tech firms are known for their ability to adapt quickly to changing market dynamics. In beneficial economic times, firms will hire – or overhire – as much talent as possible, but they are just as quick to let those talents go at the first sight of a downturn.

While the tech industry performed well during the pandemic years, performance dropped in 2022 and 2023. A large part of the downturn can be attributed to the macroeconomic and global uncertainties, contributing to a fall in consumer spending, Deloitte noted in its industry outlook. In addition, high inflation, elevated interest rates, lower product demand, and falling market capitalizations caused tech companies to reduce their workforce.

These factors also had a massive impact on cybersecurity firms. Layoffs happened at a large scale in 2023 and continued in the first weeks of 2024 with companies such as Citrix, Orca, Veeam, and Trend Micro announcing cuts.

Reallocations

The job cuts of January and February might be the remnants of the 2023 restructurings, some analysts have noted, and companies are now focusing on reallocating teams to match the fast-moving developments in the industry.

While macroeconomic and global uncertainties still play a role, Big Tech’s main driver for change seems to be artificial intelligence. Instead of spending money on human resources, companies spend billions to build AI technology, expecting a huge return on investment.

Yet, the number of AI job openings at tech’s biggest companies has also increased largely, the NY Times noted. Axios pointed out, “The new trend in tech company layoffs could be less about replacing workers with AI, and more about replacing workers with a smaller number of workers who are more skilled in AI, for now.”

Cybersecurity

While certain responsibilities of cybersecurity jobs might be replaced with AI in the future, security teams are often stretched thin as it is already. In an uncertain environment, teams might also not have the resources to make new investments and will have to take on more burdens themselves, which ultimately means taking on more risk as well.

Especially with the shift to the cloud and AI, cybersecurity roles become more important as more vulnerabilities emerge and new ways of protecting data must be found. Considering this, cybersecurity “shows no sign of losing its place as a top business priority”, SC Media noted.

It is therefore no surprise that a large number of cybersecurity/AI startups have popped up in the last couple of years. The shift to AI, together with low interest rates that facilitate finding capital, have led to an increase in hiring in an otherwise contracting sector.

Outlook

As noted above, the current wave of layoffs in the tech sector is no new phenomenon, and an equilibrium will be found sooner or later. However, while AI and automation offer efficiency gains, there is a growing awareness of the need to balance technological advancements with the preservation of human capital.

In addition, with the pandemic having reshaped the way we work, new possibilities for companies have opened up. By embracing remote work, tech firms can access diverse skill sets and perspectives, fostering innovation and potentially reducing the need for widespread layoffs.

For now, however, the recent job cuts will leave their mark on the already fragile confidence in the tech industry, and employees, companies, and investors alike will need time to find their balance again. As the developments in the United States trickle down to Europe, the European tech sector will undoubtedly stagger before it finds solid ground again.