Cloud Layoffs: Job Cuts Hit Indie Provider DigitalOcean

More cloud layoffs have hit the sector, this time at DigitalOcean.

The independent cloud computing provider on Thursday revealed its latest quarterly earnings and, at the same time, announced job cuts to the tune of 11%. The company’s shares had fallen a little more than 1.2% by midday Friday on the news.

The cloud layoffs follow in the footsteps of others at Amazon Web Services, Microsoft Azure, Google Cloud, Oracle Cloud and Salesforce.

In a Feb. 16 press release, DigitalOcean said its board of directors late last month approved a restructuring plan that included the layoffs. The strategy aims to adjust the firm’s cost structure and help it free up cash. As such, New York-based DigitalOcean let go of about 200 employees this week. Impacted roles include account executives, video producers, software and other engineers, recruiters, managers and network developers.

Cloud Layoffs: ‘Didn’t See This Happening,’ ‘Bit of a Surprise’

It seems DigitalOcean’s laid-off workers didn’t see the cuts coming.

“Planning for a new chapter wasn’t what I expected, but I trust that great things can come of it,” wrote one now-former demand-generation manager on LinkedIn.

“Bit of a surprise to me this morning but unfortunately I just found out I was included in the latest rounds of layoffs at DigitalOcean,” wrote a network developer colleague.

“I know that the economy and environment in tech have been tough, but I didn’t see this happening to me,” said another, a human resources expert.

DigitalOcean said it will pay between $25 million and $27 million in one-time charges for severance plans, benefits and stock-based compensation to laid-off workers. According to The Register, DigitalOcean told staff in a Feb. 15 meeting that executives hope to only enact one round of layoffs.

“Our goal was to do this once so we would move forward towards business as usual again,” the publication cited DigitalOcean as saying via a presentation slide from an anonymous DigitalOcean source. “Ongoing reductions are disruptive to the business and more importantly our employees, and we would like to minimize this as much as possible. There is no plan at this moment in time to conduct future reductions in force.”

How Will DigitalOcean’s Layoffs Affect the Channel Program?

DigitalOcean’s Jeff Seifert

The impact of the cuts on DigitalOcean’s channel program remain unclear. Jeff Seifert, vice president of partnerships, appears, via LinkedIn, to still be on staff, as does Ken Wheeler, who manages the company’s global partner program and operations. Channel Futures reached out to DigitalOcean for insight into any changes on the channel side but the company only pointed us to its Securities and Exchange Filing announcing the restructuring. Last October, DigitalOcean launched its second partner initiative in three years.

Why So Many Cloud Layoffs?

Once considered a bit immune to negative economic conditions, cloud computing has proven that it, too, is susceptible to change. Throughout the cloud industry, thousands of people have now lost their jobs. Much of the blame for those cuts, and others across the technology industry, lies at the feet of executives. Across the board — at Google, Microsoft, Amazon Web Services, Salesforce and companies beyond cloud computing — decision makers overhired throughout 2020 and beyond, bringing on excess staff amid COVID-19-driven deployments. Yet rather than planning for a time when the pandemic would wane and demand would level out, they kept adding personnel — everyday people who are now paying the price.

Activist investors, too, are unhappy about the seemingly unregulated volume. One, who’s a key Alphabet (Google parent) stakeholder, is calling for even more job cuts to bring things back in balance. Another, at Salesforce, recently bought a stake so it could help the CRM vendor “realize the value befitting a company of its stature.”

Back to DigitalOcean

Meanwhile, DigitalOcean reported 36% higher year-over-year revenue in the fourth quarter, reaching $163 million, “despite multiple headwinds in 2022,” said CEO Yancey Spruill. Its operating losses came to $15.1 million.

Cloud layoffs are very much a part of the company’s plan for improving its results.

“For 2023, our focus is to deliver on our growth initiatives, utilize the restructuring to accelerate free cash flow margins to 20% or better and increase our share buyback program by up to $500 million,” Spruill added in a press release.

So far, DigitalOcean’s key competitors, Vultr and Linode, now owned by Akamai, appear to be thriving. In fact, Vultr’s channel head, Shane Zide, posted on LinkedIn on Feb. 16 that the company is, in fact, hiring.

“With poor revenue growth results and layoffs rocking the Medium Size, Cloud Hyperscale sector — it’s good to remember Vultr is still extremely profitable, growing and most importantly hiring in the areas of GTM,” he wrote.