Technology

The technology sector was hit hard by the economic downturn


Falling stocks, failed startups, tech giants previously seemingly untouchable, are reeling from the risk from a gloomy outlook on macroeconomic factors. An economic crisis would have dire consequences for companies and their workforces.

“Along with the great recession of 2008-2009 and the dot-com bubble of 2000, this drop will be the three biggest market corrections in 20 years,” said David Sacks, co-founder and partner at Craft Ventures said.

Workers also need to prepare for the upheavals to come. The shortage of technology workers, combined with the Great Resignation trend, used to give them an edge in negotiating with companies. However, they will face staff cuts and salary adjustments in the coming time.

Still, some companies will prove to be “recession-resistant” when their technology is essential to the infrastructure of many others.

Climbing high and falling pain

Cloud companies are often said to be well-positioned amid market turmoil. But tens of billions of dollars have evaporated, even at the largest companies in this field such as: Snowflake, Salesforce or even Amazon are not immune to inflation.

Montana-based data company Snowflake has lost half of its market value since the beginning of 2022. Its problem lies in its very business model based on the use of customers’ computing. When the market goes down, companies are forced to cut costs and improve internal efficiency, leading to fewer people using outsourced services.

Meanwhile, Amazon CEO Andy Jassy said that by the end of 2021, Amazon will face higher costs due to supply chain shortages, labor and pressure from inflation. The Russia-Ukraine war pushed up gasoline prices, sending the cost of all global goods skyrocketing.

“The company has faced a number of irregularities over the past few years, some of which are beyond our control. Inflation is such a thing, the costs of road, sea and air transport and fuel go up a lot.”

Start-up milk is exhausted

Startups recorded record capital inflows in 2021, with more than $621 billion, but attracting investment cash flow is becoming increasingly difficult. Even the field of M&A (acquisitions and mergers) is in an unprecedented situation in recent history.

Acquiring companies, mainly Internet giants, are cautious because they are under close government supervision. Meanwhile, other “young masters” are also being affected with stocks falling in line with the general market trend.

Sequoia Capital, the investment fund behind Google, Apple and Airbnb has warned founders who are funded not to expect the current market to recover quickly.

Technology personnel struggling

There was a time when the tech workforce had a lot to do with asking for a guaranteed, high-paying job. However, the balance has shifted as hiring freezes and layoffs hit every company regardless of size.

In early May, Facebook’s parent company, Meta Platform, said it would cut hiring to reduce costs. Meanwhile, the Twitter social platform, which has just been acquired by billionaire Elon Musk, is also facing personnel restructuring in the near future. “Twitter has 8,000 employees, but no one knows what they’re all doing,” said David Sacks, a technology investor and longtime friend of Musk. He predicts that the Tesla CEO will cut more than a quarter of the staff here.

Although market demand is still high, electric car company Tesla has just announced that it is temporarily suspending global recruitment. CEO Elon Musk has asked employees to return to the office full-time or quit, a move said to be a “disguised” layoff.

In addition, the compensation system for technology employees was also heavily affected by the economic downturn. At some companies, stock drops by 50% in value, directly impacting employees who are rewarded with shares. Besides, paying high salaries for new employees is also not an option for technology companies that are “bleeding” cash.

“Seeing earnings drop every day in the stock market is distracting for employees,” said Will Hunsinger, former founder and CEO of research firm Riviera Partners.

Vinh Ngo

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