Layoffs at tech companies: "Talents are being sucked up by Asian or European companies"

The news about layoffs in the US tech industry does not stop.

Layoffs at tech companies: "Talents are being sucked up by Asian or European companies"

The news about layoffs in the US tech industry does not stop. In Europe, SAP was the first major company to announce that it would cut jobs. Personnel consultant Maren Freyberg explains whether the wave of layoffs will continue and how the job market in the tech industry has changed.

More and more tech companies are laying off employees: Microsoft, Meta, Alphabet - and now SAP has also announced that it will cut 3,000 jobs. Why is that? The numbers aren't that bad for many tech companies...

Maren Freyberg: In recent years, the companies have developed extremely well and, in my opinion, far too quickly. It was always about growth and opening up even more topics and fields. And the pandemic has given many people confirmation that their issues will grow even more.

So were the companies too optimistic?

Yes many. Tech companies in particular and those who have benefited from Covid - delivery services, e-commerce etc. - are currently having to adjust their expectations downwards. This is due to many factors, but above all to the macroeconomically volatile situation from the Ukraine war, the risk of inflation and recession. Many companies need to improve results, beautify them or reduce debt.

Nevertheless, many layoffs are based primarily on prospects: If there was too much recruitment before, is the number of layoffs now exaggerated?

It's not just about views. For many, the numbers are already such that they actually have to save. However, many companies are now primarily focusing on this. The best example of this is Alphabet: It is an extremely broad company with an incredibly large development department. Alphabet is now also focusing more, especially on the area of ​​​​AI. The entire development apparatus - as it was set up, sometimes at very expensive locations - is too expensive in the long run. So even at Alphabet, it's a combination of cost and outlook.

Why do these mass layoffs keep happening in waves?

It's all about announcements, forecasts and financial years - it's not from January to December for every company. But just before the turn of the year, the forecasts are looked at very closely and the investors feel them out. That should be one reason for the current wave.

Are we already over the hill with the layoffs that have already been announced - or do we have to prepare for more?

I think there will be more to come. But it also depends on how the macro situation changes. And above all in Europe, this also depends on the Ukraine war. SAP is now the first known European tech company to lay off employees on a large scale.

SAP has hired comparatively few staff since Corona - only twelve percent. So what are the reasons here?

SAP is actually different from the other tech layoffs. In contrast to the others, SAP is a tech group that has its origins and headquarters in Germany and therefore also has its development and future-oriented roles largely in Europe. From Meta, Microsoft or Alphabet, only the sales and business development units for the region are located here. The development is mainly taking place in the USA - and it is here that the workforce has been severely reduced. But these are teams that ensure innovations and promise long-term success. In this respect, it is problematic for companies in the long term if cuts are made in development.

Are we in Europe just lagging behind the wave of layoffs or are we actually more resilient?

No, we're lagging behind. This is due, for example, to the fact that we have better protection against dismissal here than in the USA. It takes a few months longer for employees to actually leave the company. Overall, however, it will probably not be as bad as in the USA. In Europe there are rather smaller teams that are needed for the expansion of the existing business models - even if you focus. The large affected development departments are located elsewhere.

It means we have a skills shortage. Are the laid-off employees of SAP, Alphabet and Co. really so easily absorbed by the market? And if so, where are they going?

Many companies are currently sensing their chance to recruit extremely large numbers of experienced and talented people. Rightly so. In recent years, many employees have been hired for future-oriented projects without great cost awareness - to think about new topics and build new spaces like the Metaverse or AI applications. That will probably be channeled a little more, more towards: How can I further optimize my current solution?

Many of these developers have made very good money on Google or Meta. Who is even willing to pay these salaries?

Since many companies now offer remote work, talent can be distributed very widely. For example, it is hardly a problem to work for an Asian company from the USA. That's exactly what I'm expecting: in the USA, a lot of talented people are flooded into the market, who are then absorbed by Asian or European companies. The companies that have understood this can benefit greatly from this overall. They just have to be prepared to pay well for talent.

There is also the thesis that well-earning developers set up their own company after they leave, in order to possibly earn even more later. What do you make of it?

I don't believe that in general. This may be a consideration for some, but the vast majority are not founder types. Some will start up, but of the large number that will now come into the market, this is not a relevant proportion. The only thing we have seen over the past decade is that many are becoming self-employed and developing selected projects instead of being hired by a company.

On the other hand, are there also areas that are increasingly hiring in this phase?

Yes, in any case. If you look at the financial sector, for example, there have been many layoffs in recent months - but at the same time the banks are building up newer business areas from scratch. Many branches are closing, but at the same time more specialists are needed for cybersecurity or the digitization of processes and applications. The same applies to trade or logistics. The Port of Hamburg simply needs different people than it did a few years ago.

What requirements will be placed on applicants in the coming years?

New hires will be much more skill- and value-based and less experience-driven, although this development will take some time. While experience helps in expert roles and leadership, too, in times of ever-changing business models and job descriptions, how people are made ready for it is what matters. And fortunately, many companies have now understood this.

Jannik Tillar spoke to Maren Freyberg

The interview first appeared on Capital.de