Massive layoffs impacting the tech industry: What can companies do?

November 23, 2022

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Massive layoff announcements are starting to pile up across the US economy: Meta laid off around 11,000 workers, Twitter cut about 3,700 employees, Amazon about 10,000, and the list goes on. This is a side effect of the upcoming severe US recession.
As the Fed keeps raising interest rates to combat 40-year high inflation, many market observers anticipate a recession in 2023. The US GDP has decreased for two straight quarters: 1.6% in the first quarter of 2022 and 0.6% in the second. That is a recession in most nations.

Massive Tech Layoffs Context

Layoffs in the IT industry have dominated the news in recent weeks as businesses struggle with inflation-driven cost increases and dwindling income from fearful consumers cutting back ahead of a recession.

 This year’s overall number of layoffs in the United States has reached 120,000, surpassing the amount of IT professionals fired in 2001 during the Dot Com bubble.

Although there are common elements, there are various reasons why different businesses reduce staff:

1. Market Shifts

Many tech companies rely heavily on online advertisements for revenue, but the advertising industry’s future is looking bleak. Businesses are now dealing with more pushback to their invasive advertising tactics. For instance, Apple makes it more difficult to track users’ internet activities and sell that information to marketers.

2. Cutting Expenses

Investors have increased the pressure on companies to reduce expenses by claiming that they are bloated and reluctant to act when there are signs of a slowdown.

3. No More Blue Skies

There is less tolerance for large investments in high-tech bets, such as virtual reality or autonomous automobiles, that could not pay off in the near future.

Investors believe that some of the sector’s lucrative benefits and high pay are unsustainable.

In summary, companies all around the US are substantially cutting back on employment as part of its restructuring efforts to get ready for a potential economic downturn brought on by the crisis in Ukraine and the U.S. Federal Reserve’s battle against inflation. It’s concerning that this is just the beginning. Which arises the question: What can we expect from the US Recession in 2023 and how can we keep our businesses up and running?

What can companies do about the Massive Layoffs and Recession landscape?

For businesses that wish to survive the volatility and keep their investors, employees, and clients protected, economic downturn measures become essential in this situation.

IT executives are emphasizing on remote work, acquiring in-demand tech talent, and utilizing AI and analytics tools to manage supply chain capacity and optimize efficiency gains in order to recession-proof their organizations.

Furthermore, what would be a good way to prevent negative effects of the 2023 recession on your tech company? Consider nearshoring. A nearshoring strategy allows companies to stay competitive by hiring qualified talent in the same time zone, but living in a lower-cost location. In fact, by building competent teams, saving businesses valuable time and recruiting resources, and establishing sizable, high-performance centers for software engineering, ITJ supports rapidly expanding and high-value industry areas.

Now, where to look?

Mexico. The Cali-Baja MegaRegion, which is brimming with possibilities, would be a great place to start your search. Find a good and close location. The strategic location of Tijuana, which is about 35 minutes south of downtown San Diego, enables enterprises to operate in the thriving border economy and enhances contacts between Mexican and American industries. One of the biggest population densities along the US-Mexico border is in Cali-Baja. The region has remarkable qualities for moving global and binational corporate investments due to its unique cross-border integration and IT/Software development, as well as its transnational culture and high-end binational talent pool.

Nearshoring is the solution for maintaining control in the unpredictable environment the US is going through. We recommend reading about How to choose your nearshore provider, to continue your research.

About ITJ

ITJ is devoted to serving fast-growing and high-value market sectors, particularly the Internet of Medical Things (IoMT), working with innovative medical device companies looking to improve people’s lives. With a unique BOT (build, operate, and transfer) model that sources only the best digital talent available, ITJ enables companies in the US to create technology centers of excellence in Mexico. For more information, visit www.itj.com.