Economic slowdown raising concerns

Today, Digital technologies are a key enabler to drive transformation of most of the business houses. Big Tech companies have announced plans to go slow on hiring amid recession concerns in the US and Europe, and slowing growth elsewhere including India amid quickening inflation, rising interest rates and continuing the Russia-Ukraine war. Many technology companies that expanded during the pandemic are now pulling back, laying off workers and retracting job offers as the U.S. economy slows.

A report says, 50% of companies expect operational data to grow by 15% or more over next 12 months. At the same time, the layoff news is making tech workers across several industries feel skittish, especially those in e-commerce, real estate and businesses tied closely to the stock market, which saw a boom during Covid recovery in 2021 but massive volatility in today’s economy.

We can’t deny the fact that there could be a 20-30% Productivity gain achieved through digital collaboration. In line with global trends, growth in job openings at Big Tech companies like Facebook, Apple, Amazon, Microsoft, Netflix, Google has steadily slowed reflecting a larger economic slowdown. While most of the layoff news has come from tech companies, the mortgage industry, too, has been slashing away as higher interest rates crush mortgage volume.

Secondly, the continuing effects of Covid-19 around the world have dampened the outlook for the rest of the year. Venture capitalists are warning their portfolio companies to prepare for darker times, and some start-ups are laying people off or closing shops.

Mark Zuckerberg, CEO of Meta Platforms, has said the social media company will cut back on fresh hiring. Sundar Pichai, CEO of Alphabet, the parent of Google, said it will go slow on hiring for the rest of the year. Apple and Microsoft are following suit. Netflix has seen multiple rounds of layoffs after it reported a subscriber loss in Q1.

With the value of bitcoin, ethereum and other popular currencies dropping sharply, startups in the risky cryptocurrency space are at the forefront of layoffs. But the tech downturn is broad — the Nasdaq composite index has lost 30% of its value since January, it shows the biggest drop in the tech-heavy stock index.

Many technology startups that saw tremendous growth in 2020, particularly in the real estate, financial and delivery sectors, are beginning to see a slowdown in users," An expert says. There is rising concern on the rising interest rates and inflation are spurring many of them to cut costs and shore up capital.

However, IT service providers have baked these concerns into their existing outlook and even in case of a recession, digital transformation spending is expected to continue. In the event if there is a recession, there could be some slowdown of transformation work which will actually give system integrators some relief from the high demand environment, attrition and wage inflation.

Tech has been signalling the investors for months that the boom times are ending. As for the future of tech jobs, “every company is a tech company,” Experts say there is a need for programmers and data scientists and product folks to create digital products and services.

Dr. Deepak Kumar Sahu, President & CEO, VARINDIA