Google downsizes its workforce: A boon for startups?

Alphabet, parent of the Google search engine, will cut 12,000 jobs, the group said on Friday, marking the latest announcement in a long string of layoffs in the US technology sector. In an internal memo to staff, and shared with Reuters, chief executive Sundar Pichai explained that the company has rapidly grown its workforce in recent years “for an economic reality different from the one we face today”. “I take full responsibility for the decisions that brought us here,” he said. The layoffs at Alphabet, first reported by Reuters, will affect the entire company globally, including human resources and some support functions, as well as engineering and product teams.

These dismissals take place a few days after competitor Microsoft announced the loss of 10,000 jobs. The Redwood (Washington state) company had already carried out two rounds of layoffs, one of them in July, which it said involved less than 1% of the workforce. The second took place in October and reached fewer than 1,000 people, according to the Axios news website. Currently, Microsoft has 221,000 employees, including 122,000 in the United States, according to the company’s website.

Third round of layoffs at Microsoft

In his blog, the leader cites three significant changes that are driving this economy. First, customer behavior. “While we’ve seen consumers accelerate their digital spending during the pandemic, we’re now seeing them optimize their digital spending to do more with less,” he explains. Then the deterioration of macroeconomic prospects. “We see organizations across industries and geographies moving cautiously as some parts of the world are in a recession and others are anticipating one,” writes Satya Nadella. Finally, the need to create greater financial slack. “The next big wave of computing investment is coming with advances in artificial intelligence, as we transform the world’s most advanced models into a new computing platform,” he said. The company wants to invest 10 billion dollars in OpenAI, the editor of ChatGPT, a software that will later be integrated into the Bing search engine. Microsoft is due to report its quarterly results on Jan. 24. The expectation is that its billing will increase only 2.7% in a year, a very slow pace for the IT giant used to growing in double digits.

250,000 fewer jobs in high tech

Several major tech groups have already made major layoffs, including Amazon, which announced in early January the loss of just over 18,000 jobs. Twitter, Meta, Cisco… In total, more than 250,000 jobs have disappeared since the start of the Covid crisis in March 2020, according to the website layoffs.fyi. The vast majority of those job cuts, around 150,000, took place in 2022, including at least 50,000 in Silicon Valley alone. And since 1er In November, more than 30,000 tech workers were laid off in the region.

With anecdotal announcements – like these 200 Oracle job cuts – for the media savvy, Twitter of course (5,200 or more depending on Elon Musk’s mood) or Meta (11,000) and other Valley darlings like Hewlett- Packard (between 4,000 and 6,000), Cisco (4,165), Stripe (1,000), Salesforce (999), Lyft (743) and even Intel (200). What is striking about this list is that all technology sectors are affected. Cryptocurrencies, of course, but also health, entertainment, real estate, infrastructure, artificial intelligence, transport, autonomous cars…

But these announcements aren’t necessarily bad news for everyone. They could benefit Silicon Valley startups that typically can’t compete with the pay and perks offered by their superiors — the median salary for a Google or Meta engineer is over $300,000 a year.

Talent finally accessible to startups

As with previous challenges that have rocked the Valley, we know who will benefit from all the talent these well-established companies have dropped: will they join or create the start-ups that will compete with them tomorrow. These typically can’t compete with the pay and benefits offered by their elders – the average salary for a Google or Meta engineer is over $300,000 a year. They will finally be able to afford the services of experienced workers who are just waiting to share their experience with these young shoots, where their contributions will be even better displayed. And even if it is more difficult to raise funds from somewhat burned out investors, these engineers, designers or product managers will finally be able to dedicate themselves to projects that until then were just dreams for the big technology companies that did not dare to enter this.

The context lends itself even more to a certain frugality as we grapple with fundamental problems like an energy crisis and accelerating global warming. History shows that it is in these difficult times that innovative ideas develop. Some of these start-ups are the mammoths of tomorrow that will, in turn, be forced to scale back in the next big crisis.

Leave a Comment