January's Tech Layoff Scourge: Deep Dive Into Channel Impact
We break down the seemingly daily layoffs impacting various companies doing business in the channel.
February 2, 2023
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By James Anderson
Layoffs have hit the vendor side of the technology services distributor and advisor channel hard, prompting tough reflections on the state of the ecosystem.
The maxim often goes that layoffs are “good for the channel,” but most agents beg to differ. Perhaps a vendor eliminating its SMB or enterprise sales team means it will lean more on partners, but in a broker model that requires a balanced collaboration from both parties, this bloodletting is only grim news.
“These aren’t minor layoffs anymore. These are really deep and impactful, and it’s got to hurt,” said Hilary Gadda, who joined Nextiva its head of partner development just a few months before Nextiva slashed 14%, including her. “These are families that have given eight years to a company to help them grow and help them be where they are.”
Nextiva is one of many cloud communications providers that have announced mass layoffs. Publicly traded UCaaS giants RingCentral and 8×8 have both cut large swoths of their employee bases – many of them channel folks. The contact center pure-players, including a host of Talkdesk employees – consisting of partner marketing personnel and customer success managers – recently announced job losses. The employers have cited overhiring that occurred in the years leading up to the current recession.
The mass layoffs might surprise industry outsiders, considering how UCaaS exploded during 2020 and 2021 in response to the rise of hybrid work. Even for partners who enjoyed skyrocketing SPIFFs in the last two years, the news may not align with their lived experience with the vendors.
But on closer inspection, the numbers add up. This isn’t a case like Salesforce, where an already profitable software company laid off people to get more profitable. For these cloud communication providers, profitability wasn’t the goal. UCaaS suppliers were scrambling over each other for customer acquisition.
“I think there was a real marathon to get the most market share. I don’t think there are many that are profitable,” Gadda told Channel Futures.
From a go-to-market perspective, the race to corner the market meant big upfront sales incentives to partners and falling prices for end customers. And neither the the ludicrously high SPIFFs nor ludicrously low costs per seat could be sustained.
“It’s not bad pricing practices. It’s dealing with the competitive landscape with Teams and Direct Connect,” Mejeticks CEO Rob Devita told Channel Futures. “You’ve got vendors out there giving one year free of service to customers. You want to stay competitive in your offers to customers, but I don’t know how you can sustain that while still giving an eight-times SPIFF to people and having to pay up and down the channel and the direct side.”
By James Anderson
The job cuts have also opened up fresh (yet timeless) conversations about what channel investment should look like. Seeing a peer post on LinkedIn about the whiskey they received from a layoff-happy vendor can no doubt spark such thoughts.
Partners and suppliers alike have publicly voiced long-veiled frustrations about the way vendors are spending in the TSD channel. Namely, many feel that vendors are spending money exorbitantly on activities that don’t generate ROI. Gadda said in 2021 she witnessed a crescendo of marketing-related expenses from suppliers as they vied for the attention of partners at TSD events and through gifts. And often, the collective spending escalated as suppliers suffered from FOMO.
Now the voices calling for the end of those excesses is rising louder. Partners and consultants have called for fewer holiday parties. Others, like Rob Devita, have called for a partner boycott of swag.
“I would much rather have a channel manager who’s very very good than have an OK channel manager and a Patagonia vest,” he said.
And it appears that the tide was already turning on many fronts when it comes to vendor spending in the TSD channel.
“Almost every vendor I talked to is reducing spend this year from a marketing perspective, whether that’s events, swag or MDF funds,” Devita said. I haven’t talked to one who says, ‘Hey, we’re dumping more money into marketing this year.’ They’re dealing with less money. They’re going to be more pointed and direct with it.”
Although layoffs have brought some of the advisory channel’s long-held frustrations to the fore, it has also brought up the best side of the industry: its deep sense of interconnected community. Members of suppliers, TSD and technology advisor firms alike have offered their help to affected people.
“I think we’ve seen a surge of humanity,” Gadda said. “The amount of people who are trying to support the folks that are being laid off by opening their networks or trying to leverage interviews for people, is heartwarming.”
By Claudia Adrien
The number has exceeded 150,000. That’s the tally of employees the world’s largest tech companies laid off in recent months. The reasons are varied, and the people affected come from a variety of departments. For example, human resource professionals accounted for 28% of the tech industry layoffs. There’s not as much need for HR when companies are choosing to recruit less. At other tech companies such as Google and Twitter, software engineers took the brunt of the layoffs.
Technology companies within the channel mirror other tech firms in some respects. Layoffs at channel-based organizations are also affecting multiple divisions, whether it’s channel sales managers or more technical staff. No one department seems to be hit harder than the rest.
However, the reasons for layoffs within unified communications companies, for example, may differ from those within the greater tech community. Many of the tech giants were trying to right-size due to overhiring during the initial years of the pandemic. Although that could also be said for UC companies, there’s one factor that overshadows organizations in the space. Consolidation. Analysts predict that mergers and acquisitions in upcoming years will significantly reduce the number of UC companies that exist. Whereas layoffs might be seasonal for tech giants, they may be ongoing for UC employees in the years to come.
By Kelly Teal
The bloodbath of layoffs took a little while to hit the cloud computing sector (not to be confused with cloud communications). And, at first, it seemed the likes of Amazon Web Services, Microsoft Azure and Google Cloud, among others, might get through the crushing macroeconomic pressures without having to shed jobs.
Any such hopes would turn out to be a pipe dream. When that bloodbath hit, it hit hard, starting in January.
Many cloud companies overhired during COVID-19 and into 2022. Alphabet, parent company to Google Cloud, might serve as the most glaring example of that. The corporation brought on more than 50,000 new people over the past two years.
Turns out, that level of growth is unsustainable amid slowing demand, still-high inflation and recession fears. As such, Alphabet, for one, has cut 12,000 jobs already. It’s not clear how many have affected Google Cloud, the world’s third-largest cloud computing provider. And a key activist investor is pushing for more. Chris Hohn wants employee rolls down to around 150,000 people.
Over at behemoth retailer Amazon, layoffs so far have amounted to 18,000 people. Some of those have fallen within AWS, the world’s largest provider of cloud computing infrastructure and associated services.
Microsoft Azure, too, is feeling the pain. Microsoft overall has axed 10,000 employees, with Azure software engineers and cloud solutions architects reporting they’re part of the fallout.
Other big-name cloud companies are feeling the layoffs pain, too. Just a few days into 2023, customer relationship management vendor Salesforce dumped nearly 7,500 positions. And it did so largely over email and Slack, creating uproar. That action came about three months after Salesforce implemented a first major round of layoffs. Now, notoriously aggressive hedge fund Elliott Management has purchased a large stake in Salesforce with the intent of helping it to “realize the value befitting a company of its stature.”
Meantime, Oracle Cloud also has featured in the activity. Starting late last summer, the company, which has achieved hyperscaler status, eliminated jobs in marketing and customer experience. Then, last October, it cut 201 roles from its Redwood Bay campus. So far this year, Oracle Cloud itself has remained out of the firing line, even as Oracle Advertising, which handles advertising for the company’s cloud software, jettisoned an unknown number of workers earlier this month.
By Jeffrey Schwartz
The layoffs at Microsoft announced on January 18 will impact 10,000 employees. While that’s a lot of people who will be losing their jobs, amounting to 5% of its workforce, it comes after a massive hiring spree of 57,000 people since 2020.
But as Microsoft and other tech companies were expanding for growth, the company didn’t anticipate last year’s sudden shift in the economy, sparked by surging interest rates, the war in Ukraine, a sharp drop in demand for PCs and swiftly slowing cloud services growth.
“We will align our cost structure with our revenues and where we see customer demand,” chairman and CEO Satya Nadella wrote in an email to employees announcing the layoffs. “We will continue to invest in strategic areas for our future, meaning we are allocating both our capital and talent to areas of secular growth and long-term competitiveness for the company, while divesting in other areas.”
Microsoft reportedly has made major cuts in its mixed reality business. According to various reports, the company is cutting its mixed reality toolkit team and those working on AltspaceVR virtual reality workspace project.
However, the Microsoft Mesh metaverse project appears to be safe, as the company showcased it earlier this month at the World Economic Forum in Davos.
A sharp 39% year-over-year decline in devices revenue has fueled reports that employees in Microsoft’s Surface business may be affected. CFO Amy Hood said during Microsoft’s earnings call that the Surface business underperformed due to execution issues. According to reports, Microsoft may be putting the brakes on the Surface Hub business and its small Surface Duo device.
Employees with Microsoft’s Web Experience Team, known as WebXT, were among those affected, according to Business Insider. The WebXT, which includes Bing search and the Edge browser, includes the group that is working in integrating OpenAI’s ChatGPT technology into Bing, according to the report.
Meanwhile, Microsoft is all in on AI. During the earnings call, Nadella touted the release of Microsoft’s new Azure OpenAI Service and the forthcoming release of ChatGPT in Azure “enabling customers to use it in their own applications for the first time.”
By Edward Gately
While not at the volume of other tech sectors, cybersecurity has been shedding workers amid ongoing economic uncertainty. Sophos recently slashed 10% of its global workforce, and just this week OpenText declared 8% cuts. These followed layoffs at Cybereason, Aqua Security and more.
However, demand for cybersecurity professionals remains high, according to the latest data from CyberSeek in partnership with the National Initiative for Cybersecurity Education at NIST, CompTIA and Lightcast. The total number of employed cybersecurity workers held fairly steady in 2022 at around 1.1 million, while the number of online job postings edged down to 755,743, from 769,736 in the 12-month period ending in December 2021.
Will Markow is Lightcast’s vice president of allied research-talent.
“Despite concerns about a slowing economy, demand for cybersecurity workers remains historically high,” he said. “Companies know cyber crime won’t pause for a market downturn. So employers can’t afford to pause their cybersecurity hiring.”
Eric Parizo is managing principal analyst at Omdia, which shares a parent company with Channel Futures (Informa). He said cybersecurity employment is a “mixed bag.”
“To varying degrees, every organization is retrenching due to economic uncertainty, and cybersecurity is not immune from that,” he said. “The worst-case scenario for each company will differ widely; hence, the proactive measures we’re seeing to trim costs by cutting staff are also varied. Because it’s unclear when economic conditions will improve, this ‘wait and see’ period will likely continue, with more vendors and companies conducting cybersecurity-related staff reductions for some time to come.”
By Christine Horton
When questioned about the impact of tech vendor layoffs, European channel partners are pragmatic. They describe a “frenzy of recruitment” undertaken by vendors during the pandemic – and the subsequent wage inflation. Many partners simply couldn’t match what the vendors were offering and saw many employees jump the fence.
But the layoffs have put a stop to vendors poaching employees from their partners – for now.
“We experienced manufacturers recruiting our people from the channel in first half of 2022. In calendar Q3 that completely stopped, and it’s not returned,” explained James Hardy, managing director at CCS Media.
Hardy also believes that the layoffs “further the case for the attractiveness of the channel to manufacturers.”
He said: “It’s not nice to see anyone losing their jobs. But from a cost and efficiency model, a channel strategy should be attractive to any manufacturer. We will expect some unease within manufacturers because they’re going through a period of uncertainty internally, but we don’t see any adverse effect on our organization.”
Rob Mackle, director and co-founder at Assured Data Protection (ADP), also said that the layoffs enable the firm “to get much needed talent which has been hard get until now.
“Our white-labelled, channel-first model enables our vendors and partners to reduce their cost of sale and increase margins, by leveraging our expertise and delivery model. This mutual success may prove to be sustainable long-term for vendors and channel partners, streamlining operations without negatively impacting growth.”
To many in the channel, the layoffs are vendors “rebalancing the books.” Gordon McKenna, VP, cloud evangelist and alliances at Ensono, described “a realignment in Big Tech, with the negative economic climate forcing difficult decisions about headcount.
“For the channel, this means a wave of talented and experienced individuals are flooding the job market, fresh with experience at some of the most innovative tech firms around.
“The channel players that thrive in this moment will not see this period as a crisis, but an opportunity – a moment to seize the initiative and take bold action to attract the best talent.”
Adam Clark, chief revenue officer at SCC, agreed that many vendors are preparing for the long-term impact of a declining global economy. But again, channel partners can now benefit from the availability of talent back in the market.
“Clearly, redundancies are never a good thing. However, one of the common challenges we all face is attracting and retaining the very best talent. Canalys is correct to suggest that many talented technology specialists entering the market represents a significant opportunity for those channel businesses in a position to hire, to snap up some of the best tech talent. Though vendor cutbacks are a cause for concern, SCC and its peers will no doubt feel some benefit on staff retention as vendors continue to shed people.”
Importantly, Clark doesn’t think the cutbacks will have an adverse effect on the firm’s business performance.
“We are continuing to invest and grow, both acquisitively and organically, and our model is such that the value we are bringing to our customers justifies the spend they are making,” he said. Technology is a key differentiator, and our job is to deliver solutions based on positive business outcomes and exceptional customer experiences that will help companies thrive despite economic hardship. We will keep doing this, keep innovating, and keep growing.”
By Buffy Naylor
The boom-and-bust cycle is not unfamiliar to the tech industry. The “surge and purge” in the tech workforce, however, is a new phenomenon. Like many of the other wrinkles currently in the fabric of our lives, it is largely an aftermath of the pandemic — but one with complications.
When reliance on technology boomed during the pandemic, tech companies and other players in the channel went on a hiring spree. At the same time, the deaths of Ahmaud Arbery, Breonna Taylor and George Floyd spurred a worldwide resolve to confront systemic racism. In the tech industry, more than 200 companies pledged to embrace DE&I in their organizations. But intentions aren’t actions, and two years later, while the U.S. Bureau of Labor Statistics showed the tech sector growing 10 times faster than the rest of the economy, the professional, managerial and executive population in tech was still predominantly white and male.
And it’s likely to stay that way as tech companies begin unprecedented job cuts as part of their strategies to become lean in the face of an impending recession.
Layoffs.fyi shows that nearly 160,000 employees were laid off from 1,040 tech companies in 2022. While women and Latino workers make up roughly 300% and 10%, respectively, of the tech industry workforce, they represent 46.6% and 11.5%, respectively, of those laid off between September and December 2022. In most tech companies, ancillary departments — marketing, customer service, communications, etc. — are staffed largely by women and ethnic minorities. As such, these individuals are more likely to be caught in layoffs, since they are considered less essential than those involved in developing and maintaining products.
Black and Asian employees — especially males, sadly — are more likely to be working in technical areas and, therefore, less susceptible to job cuts. But a number of women working in those areas are there because of newer, more inclusive hiring practices. And if they’re working for a company that has a last in/first out tenet in their layoff procedures, they could be affected.
The lesson here: Now more than ever, DE&I is essential. Diverse teams are more innovative, flexible and productive. Clients want to do business with organizations that look like them. And up-and-coming talent want to work in a diverse environment. It’s a top priority for most. DE&I must be a pillar in every business plan. Without it, even the best plans can come tumbling down.
By Buffy Naylor
The boom-and-bust cycle is not unfamiliar to the tech industry. The “surge and purge” in the tech workforce, however, is a new phenomenon. Like many of the other wrinkles currently in the fabric of our lives, it is largely an aftermath of the pandemic — but one with complications.
When reliance on technology boomed during the pandemic, tech companies and other players in the channel went on a hiring spree. At the same time, the deaths of Ahmaud Arbery, Breonna Taylor and George Floyd spurred a worldwide resolve to confront systemic racism. In the tech industry, more than 200 companies pledged to embrace DE&I in their organizations. But intentions aren’t actions, and two years later, while the U.S. Bureau of Labor Statistics showed the tech sector growing 10 times faster than the rest of the economy, the professional, managerial and executive population in tech was still predominantly white and male.
And it’s likely to stay that way as tech companies begin unprecedented job cuts as part of their strategies to become lean in the face of an impending recession.
Layoffs.fyi shows that nearly 160,000 employees were laid off from 1,040 tech companies in 2022. While women and Latino workers make up roughly 300% and 10%, respectively, of the tech industry workforce, they represent 46.6% and 11.5%, respectively, of those laid off between September and December 2022. In most tech companies, ancillary departments — marketing, customer service, communications, etc. — are staffed largely by women and ethnic minorities. As such, these individuals are more likely to be caught in layoffs, since they are considered less essential than those involved in developing and maintaining products.
Black and Asian employees — especially males, sadly — are more likely to be working in technical areas and, therefore, less susceptible to job cuts. But a number of women working in those areas are there because of newer, more inclusive hiring practices. And if they’re working for a company that has a last in/first out tenet in their layoff procedures, they could be affected.
The lesson here: Now more than ever, DE&I is essential. Diverse teams are more innovative, flexible and productive. Clients want to do business with organizations that look like them. And up-and-coming talent want to work in a diverse environment. It’s a top priority for most. DE&I must be a pillar in every business plan. Without it, even the best plans can come tumbling down.
Layoffs dominated technology headlines in the first month of the year, and they haven’t spared the channel.
Channel Futures reported on no fewer than 15 companies slashing their workforces in January. TBI, Talkdesk and 8×8 were among those that specifically cut channel positions for one reason or another.
Tech giants Amazon, Google and Microsoft were among the biggest layoffs in pure numbers. Furthermore, layoffs significantly impacted most of their cloud units, where the channel plays prominently.
Channel to Benefit in Long Run?
While channel partners have rallied to support their colleagues to help them find new positions, here’s a contrarian view that actually provides some hope: The channel will benefit from the current spate of tech layoffs, according to analyst firm Canalys.
Canalys predicts that in 2023, the top 25 vendors will cut their collective headcount by 9% worldwide. This equates to 190,000 people. However, with so much potential talent opening up, channel partners could be able to take advantage. In particular, it might help them with recruiting and retaining much-needed employees.
In a recent LinkedIn post, Canalys CEO Steve Brazier noted: “Channel partners will be relieved that vendors will be poaching far fewer of their staff in 2023. Indeed, the relative stability of the channel makes them attractive places to work right now.”
Alex Smith, VP channels at Canalys, agrees a benefit of the tech layoffs for partners is less employee-poaching by vendors.
Canalys’ Alex Smith
“Anecdotally, it is one of the biggest challenges that partners faced during what was otherwise an excellent period (2021-2022). Vendor recruitment exploded during this time and that meant looking to both partners and customers for talent. Vendors can see those individuals that are certified on their products — and they are obvious targets. That activity will be far less this year,” Smith told Channel Futures.
Smith also agreed that with downsizing their sales teams, vendors will lean more on the channel in 2023. This, he said, was “another side benefit of vendor layoffs.”
“It will prove harder to build new momentum and partnerships, but those vendors that have already invested in partners, programs and other channel resources will have a strong platform to lean on those relationships.”
Behind the November 2022 projection of 190,000 people losing their jobs, Canalys said Amazon, Microsoft, Salesforce and Google would account for a combined 43,000 redundancies.
“The actual number is 48,000, so I think our projection is right on track,” said Smith.
New Pool of Technology Talent
The tech layoffs do create significant opportunities for channel firms, agreed Bev Markland, chief people officer at UK channel firm Agilitas.
Agilitas’ Bev Markland
“It opens up a pool of specialist technology talent that is normally very hard to find,” she said.
Keep up with our telecom-IT layoff tracker to see which companies are cutting jobs and the ensuing channel impact. |
However, Markland said that to attract and retain the right candidates laid off from tech vendors, the channel must offer rewards that go beyond financial considerations and job security.
“Culture, progression, and training,” she said, “are quickly becoming vital factors for those seeking new job opportunities. She added that flexible working is a former “nice-to-have” which employees now expect.
“Additionally, for those people with sought-after digital skills, becoming part of the channel during its period of change will create a sense of purpose…They can see the contribution and change they are making to the company’s strategy and future.”
History Repeats Itself?
Once through this cycle, the key might be history not repeating itself, says Jim Campbell. Campbell is managing partner at Charlotte, North Carolina-based Opkalla, a technology advisor.
Opkalla’s Jim Campbell
“The 200,000-plus IT layoffs we’ve seen over the last year are not surprising considering the vast amount of hiring done during the pandemic. A lot of people in our space would argue the hiring was irresponsible, but the reality is the big tech players were fighting for the rare IT talent in the space. The talent gap is still very real, and in most cases the industry has more open roles than the current talent could fill. Every day we see another company announcing layoffs, and we expect to see some impact to our relationships.”
“What I fear,” Campbell added, “is the industry will have a short memory and in the not distant future we will see a major hiring push with inflated salary requirements.”
We asked Channel Futures editors to drill down on how layoffs are impacting their specific beats. The slideshow above offers a deep dive on job cuts among technology advisors (agents), cybersecurity vendors, the hyperscalers, EMEA and more.
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