Big Tech's 'hiring spree' will leave many behind

If only all companies were tech companies, US officials must sometimes think. As jobless claims last week topped 20 million – enough people to fill up a couple of mid-tier European countries – about the only companies that still seemed to be hiring, outside a few critical sectors, were technology ones. Amazon wants another 100,000 people during the coronavirus crisis, it announced in mid-March. Facebook needs 10,000 this year for product and engineering jobs, according to CNBC.

Technology firms will certainly extend their influence during this pandemic. Words like Zoom and Houseparty have entered the lexicon of baby boomers who previously struggled with email and thought themselves too old for all that digital nonsense. Netflix is a late-evening ritual for more than 180 million worshippers. Weekly groceries are picked off a smartphone screen instead of a supermarket shelf and delivered by masked strangers to the doorstep. Most conversations are converted into digital signals before they are heard. And jobs, crucially, are shifting online.

Those not disappearing, that is. Big Tech, the designation for a handful of uber-powerful firms, cannot possibly provide alternative work for the millions on the dole. Nor is it immune to COVID-19 – simply more resilient than other sectors. The pain it feels will temper any recruitment activity this year. In the meantime, numerous smaller and more old-fashioned technology companies, some born in the pre-Internet era, will struggle to avoid layoffs.

An important thing to note is that reports of a Big Tech hiring spree have been massively overstated. Amazon, Facebook and others may be hiring, but that is nothing new. In 2019, the Jeff Bezos empire gained another 150,000 employees and it has grown from fewer than a quarter of a million to nearly 800,000 in just four years. Facebook, similarly, hired more than 9,000 workers in 2019. It had nearly 45,000 at the end of the year, up from around 12,700 in 2015.

Sustaining the rate of jobs growth will be tough for some of the tech giants. Last month, Facebook warned investors of a "weakening in our ads business in countries taking aggressive actions to reduce the spread of COVID-19." While usage has soared, advertisers hurt badly by the coronavirus pandemic have cut their marketing budgets. If sales growth slows at Facebook, recruitment activity will squeeze profit margins. Twitter faces a similar predicament.

Outside this Big Tech enclave, there is uncertainty about younger Internet firms, too. Before COVID-19's arrival, Snap, a social networking site popular with youngsters, was on course for sales growth of 40% this year, according to analysts at Wells Fargo. They are now forecasting a 27% increase and say this could affect hiring. "We anticipate that the company may seek to invest more modestly amid uncertainty and that hiring/onboarding procedures may be slowed by practical considerations of social distancing and travel," says Wells Fargo in a research note.

Yet more uncertainty surrounds older companies such as IBM and HPE. The monster that is IBM's workforce has already sloughed off about 28,000 roles in the last three years but was still bristling with 352,600 employees last year. Today, the company withdrew guidance as it revealed a coronavirus hit to software sales during the first quarter. Generating about $220,000 in annual sales per employee, it looks bloated and inefficient next to other technology firms. HPE's workforce has also shriveled, from 66,000 employees in 2017 to about 61,600 last year, and sales were down 8% year-on-year in its recent first quarter – a decline blamed partly on the shift to cloud computing.

Want to know more about 5G? Check out our dedicated 5G content channel here on
Light Reading.

Companies in the cloud market are in healthier shape. VMware, a virtualization specialist today owned by Dell, has grown from 20,000 to 31,000 employees in the last three years, and its revenues climbed 12% in Dell's recent fourth quarter, to about $3.1 billion. Microsoft, the world's only trillion-dollar company by market value, rediscovered its mojo in the cloud. Reporting to an end-June fiscal year, it added 13,000 employees in its most recent, when annual sales rose 12%, to $125.8 billion.

Worst affected may be the traditional vendors of network equipment. Industry giants including Ericsson, Nokia and ZTE have already dumped thousands of jobs amid years of upheaval in the equipment sector. More pain could be in store for their staff as service provider customers delay network projects while the pandemic rages. Optimists hope a surge in data traffic will force operators to keep spending. But networks have generally withstood the rush, and sales will be on the slide as cash-strapped consumers ditch products and downgrade to low-cost deals. Even where improvements are needed, supply chain constraints could force operators to look elsewhere for equipment – to local companies selling used parts, for instance.

Unfortunately, many jobs across the broader economy are being automated out of existence – a trend the current pandemic will accelerate. Controversial during healthier times, layoffs will be justified by companies on health-and-safety grounds. Drones will check on site equipment or deliver packages. Chatbots will empty call centers of disease-ridden staff. Amazon's robotized delivery service will rid town centers of plague-spreading locals and the shopkeepers who served them. Once gone, many of these roles will simply not return. And no amount of hiring by tech firms will make up the difference.

Related posts:

— Iain Morris, International Editor, Light Reading