CNA – Tech companies have slashed jobs this year amid increasing economic uncertainty but analysts said that redundancies are healthy for the industry.
Big names headquartered in the United States (US) like Netflix, PayPal, and Tesla have trimmed headcount and cooled on offers this year, while in Singapore, e-commerce giant Shopee has conducted a series of layoffs, citing widening losses and slower revenue growth.
However, mobility in the tech space can be beneficial for the growth of both businesses and workers as this creates an ever-changing environment where perspectives are challenged and new ideas are conceived, said experts.
“Labour mobility is a necessary part of the tech ecology. The start-up space even more so. The flow of talents to and fro tech companies and institutions like universities or other think tanks – it’s crucial because you’re growing,” Assistant Professor Ng Weiyi told CNA’s Heart of the Matter podcast.
Assistant Prof Ng, of the National University of Singapore (NUS) Business School, said that in his research, he found that some 90 per cent of start-ups never find venture funding.
“If you’re working in one of those start-ups, what happens is, you get fired. You join another tech company, and that in a way is how tech keeps innovating,” he said.
“Companies absorb ideas, people meet different people … such mobility is macroscopically healthy.”
Similarly, chief operating officer of venture outfit Momentum Works Yorlin Ng said that tech is ultimately an iterative industry, where people learn fast, fail fast, and learn again.
“Even if the current company doesn’t work out, you as an individual, you picked up skills, knowledge, experience. And when you join another company, you take along what you’ve learned, then you enrich the ecosystem,” she said.
Among the firms that have cut manpower is Shopee’s parent company Sea Limited.
Sea secured about USD6 billion through the sale of shares and bonds in September last year, the largest fundraising in Southeast Asia.
However, the conglomerate made headlines last month, about a year later, when it rescinded some job offers just days before new hires were due to begin work.
While Sea could have handled the situation differently, layoffs and restructuring are corrective mechanisms for firms to cope with economic circumstances and strategic planning, and Sea is taking the right step by stopping the bleeding sooner rather than later, said Ng.
“I think Sea has been growing really, really fast the last few years, they were going for growth versus efficiency. And as what we’ve seen in Chinese tech companies, (restructuring) is something that happens every year,” she noted.
“Sea is taking steps to make sure that they have enough buffer. If Sea had waited two or three more years, the restructuring would have been a lot more painful than now.”
The layoffs in the tech industry come following pandemic-fuelled growth in the sector.
Many tech companies expanded rapidly during the pandemic as consumer behaviour changed drastically with the lockdowns.
Consumers who could no longer shop in physical stores turned to e-commerce; movies at cinemas were replaced by streaming services; and companies en masse swapped boardrooms for video conferencing solutions.
“So there’s the whole tech boom that’s sort of unique to the pandemic. Tech companies had a ‘growth at all costs’ mindset which resulted in mass hiring and spending,” said Assistant Prof Ng.
However, geopolitical tensions fuelling higher prices and consumers gradually returning to brick-and-mortar retailers following the easing of pandemic restrictions changed the environment to one that no longer supports the “growth at all cost” strategy, he said.
Companies now have to grow with profits, he said.
This era of economic uncertainty has led to tech companies becoming more cautious and rethinking their strategies, said Ng.
With the escalating war in Ukraine and looming fears of a global recession, firms need to brace for a longer impact on drying funds, rising costs, and dwindling consumption power.
“I believe that companies like Grab and Sea, they still have quite a healthy runway – a few years more of cash burn to go. But I think now they are actually becoming more prudent. I think they are thinking, ‘Well, I have one or two years of runway, I don’t know what will happen, so let’s do something now’,” she said.
While volatility is expected to remain high in the tech sector, job seekers with relevant skills are highly sought after as demand for tech talents exceeds supply in Asia, according to consulting firm Mercer.
Hiring trends continue to be focussed around technology, according to a report by recruitment agency Robert Walters. It showed that there is a high demand for talents in artificial intelligence (AI), machine learning, cyber security and e-commerce.
There is an increasing appetite for technology and innovation courses, and heightened interest for entrepreneurship among the young, said Assistant Prof Ng.
The enthusiasm, especially in those whose specialisations are not in business, is encouraging, he said.
“Based on my observations, at NUS at least, the increasing demand for classes, courses, networking opportunities for entrepreneurship, cross-faculty collaborations … are increasing on a scale which we haven’t seen before,” he said.
“Interestingly enough, it’s the engineering students, science students who want to reach out beyond their hard skills, to dabble in something else. And I think that kind of inquisitiveness is great.”