Latest Jobs Report Details Grim Times for Tech

2016 was not a hallmark year for tech industry jobs. According to the latest report by outplacement firm Challenger, Gray & Christmas, 18 percent of all jobs lost last year were in the tech industry. All told, tech layoffs were up 21 percent from the year before, but here's the kicker: job cuts were down 21 percent in 2015. That means there was a 42 percent change in the last two years.

What the what?

It seems that as companies scramble to navigate the digital transformation, throwing spaghetti on the business model wall to see what sticks, job cuts are an inevitability no matter what strategy they take. Dell cut thousands of jobs when it acquired EMC last year, proving that becoming the biggest tech behemoth in history doesn't actually lead to a correspondingly big workforce. Companies like HP, on the other hand, have shed business units in order to stay nimble and maintain a laser focus on core capabilities, also resulting in thousands of layoffs.  

“Thousands more are still to come, especially as companies shift focus to cloud-based computing and smartphones. Last year, we saw significant cuts from traditional equipment and hardware manufacturers,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas, Inc.

To those of us in the channel who have been first-hand witnesses to the havoc wreaked by these paradigm shifts, the figures are unsurprising. Intel alone laid off 12,000 workers in 2016, a full 11 percent of its workforce. Cisco cut 5,500 jobs, Microsoft eliminated 4,700 positions and HP announced plans to lay off between 3,000 and 4,000 employees over the next three years.

As the rise of mobile and cloud computing continue to clash with the decreased demand for PCs and other computing hardware, we likely haven't seen the last announcement of massive job cuts as companies restructure. But there are new technologies and emergent trends on the horizon that will pick up at least some of the slack. After all, tech is by far the most valuable of industries. Last year, the top five most valued companies on the stock market were all tech companies. And more and more non-traditional companies are rebranding themselves as technology enterprises in industries from manufacturing to healthcare.

Things may get worse before they get better, and we'll likely need some massive re-education and placement efforts to bring the newly unemployed tech workforce and the tech skills gap into alignment. Challenger also highlighted the impact of the Trump administration's policy toward immigrants and H1-B visa-holders will have on this issue.

“It is likely this kind of job cutting will continue in 2017, as new technologies cause tech giants to shift and pivot. The challenge for these companies, as it has always been, will be finding the skilled labor to keep up with the pace of change. The president’s plan to reform access to work visas may significantly impact how tech companies recruit and retain talent,” said Challenger.

Indian engineers, coders, and other tech workers received about 70 percent of H1-B visas issued in 2015, and according to the Brookings Institute, 27,000 H1-B visa holders work in Silicon Valley.

“If any industry in the United States suddenly lost thousands of skilled laborers, it would have an immediate impact on operations and innovation. If this occurs in the tech sector, where innovation is the lifeblood of the industry, it could not only disrupt normal processes, but also significantly threaten the industry as a whole,” said Challenger.