The Light At The End Of The Tech Downturn
The tech industry has been rocked with layoffs over the last six months. Over 150,000 tech workers were laid off as tech companies trimmed the extra workers they hired during the pandemic to handle current and future needs.
Many tech companies felt the demand for technology would remain strong after the pandemic wound down. They assumed more work would shift to the home and the need for more digital tools would rise.
While this is partly true, and more people are working from home, many companies have instituted in-office work at least three times a week. To a degree, it has diluted the need for additional demand for PCs in the home and other digital resources optimized for in-home work.
Add to that the threat of a recession, a slowdown in tech purchasing in the enterprise and consumer markets, and the threat of more layoffs linger. Indeed, as I write this column, Paypal has just laid off hundreds of workers this week.
And given the economic environment and especially IT buyers who are cutting back corporate purchases currently, 2023 will be a challenging year for tech in general.
I have been asked recently if our research shows any light at the end of the 2023 tunnel. This is a tricky question given the weekly changing threat of a recession and how the markets will develop over the next 11 months.
Some economic reports suggest a soft landing for the economy and that we may avoid a full recession. For example, a few recent reports indicate we could end the year with only a 2% inflation rate, but that forecast seems too optimistic.
However, regardless of the economic threats, the tech market is still strong and, as it has during the last two major recessionary climates, has become even stronger.
For example, the first big tech earthquake came in 2001 during the Dot.Com bust, where thousands of tech workers lost their jobs, and many said the tech market was dead.
The good news is that during the dot.com purge, thousands of companies born during that time on a business plan without any legs and just a website, died.
What followed was hundreds of new businesses with solid business plans that powered the new demand in tech for most of 2002-2010. This included the introduction of the iPod, the iPhone, Facebook, and social media, more advanced servers, and thinner and lighter laptops.
The second big recessionary challenge came with the housing crises in 2007-2008. This recession hit all industries, and needed a government bailout to survive. Ironically demand for PCs was relatively strong during this time. While tech demand did take a hit, we saw high usage of social media and growth of smartphones, while housing, auto, and other industries took the biggest impact.
The strongest decade of tech followed, with explosive growth in smartphones, high-end servers, laptops, PCs, advances in encryption, and tools to thwart nefarious characters. We also saw an expansion in e-commerce, social media, and innovation in technology designs. According to multiple telecom reports, the last decade also saw more people worldwide join the digital revolution, as over 1.5 billion new users got smartphones in the previous decade.
Once we get past this current economic problem and tech companies are back on a proper footing, we will see another extraordinary decade of tech growth. Most likely led by advancements in AI, new levels of processing power within the server and PC markets, demand for more powerful security technology, and by the end of the decade, advancements in quantum computing that gain a foothold in enterprise solutions.
We will also see new form factors introduced in mobile that could revitalize the demand for smartphones again. And while the metaverse market is clouded, most still believe that there is something to a market where new 3D interfaces, gestures, and Web3 will play a more significant role in tech by the mid to end of our current decade.
On the layoff front, there is good news here too. If you are a skilled programmer, engineer, or with special technical skills, your prospect for a new job is relatively good.
A new ZipRecruiter survey "previously found that about 80% of recently laid-off tech company workers found a new job within three months of starting their search."
We also hear that many companies are still strategically hiring while planning for more efficient growth. However, they are also preserving cash with the knowledge that things will turn around and there will be more demand in the future, and they need to be ready for this when it happens.
I know of at least a dozen people I am acquainted with who were laid off and got new jobs with better pay and benefits within 60 days of firing.
One interesting twist in some of their cases is that many new jobs are not with traditional tech firms but rather in more mainstream companies involved in digital transformation. These companies had a problem hiring skilled programmers and engineers to help with this transition and are glad to see so much talent available to them now.
I have often been accused of having an overly optimistic outlook about tech's growth in light of its current woes. Of course, I am not blind to the tough times tech is having now. But when I look at what happens to tech when the markets turn upward, I am bolstered by the historical pattern of how tech rebounds after downturns.
I look at the expanded R&D that is going on now in AI, security, high-speed processors, advanced server technology where AI will play a more significant role, and even quantum computing. So I only see an upside in tech as this decade proceeds.
I learned early in my career to never underestimate demand for tech and instead look deeper at what's ahead. This gives me confidence in saying just as we saw great strides in the last two decades after recessions; it is bound to happen again.
SOURCE: Forbes.com - By Contributor, Tim Bajarin (Chairman at Creative Strategies, Inc)