What Big Tech layoffs mean for the UK’s IT contractors
With many global big technology names making lay-offs in January, it would be fair to assume that the UK IT jobs market and those working in the technology industry, will suffer from a lack of new opportunities and heightened job insecurity in 2023. That seems an even fairer assumption to make when you factor in the IMF announcing that the UK economy will contract by 0.6% in 2023.
But I would say that the outlook for IT in 2023 – specifically its freelance contractors in the UK -- is quite the opposite to the gloom from heads rolling in Big Tech, writes Matt Collingwood, managing director of IT recruitment company VIQU.
70,000 eliminations is indeed unsettling
Yes, Google letting go of 12,000 Googlers, Microsoft culling 10,000 employees; Amazon expecting to eventually shed 18,000 staff, and Facebook-parent Meta saying further lay-offs on top of its 11,000-announced eliminations are imminent, is massively unsettling news for IT professionals. Especially full-timers. Especially full-timers in Big Tech.
The reality is that these mammoth technology company lay-offs are not a fair indicator of the entire UK IT industry, even if by most reports those layoffs seem to number upwards of 70,000.
Let’s first look at Big Tech, which has ballooned in recent years (in the pandemic alone, Meta expanded its headcount by some 60 per cent).
Big Tech has been paying four times over the average for software developers
Companies in the big tech space want the very (very) best talent, and that costs a lot. Actually, I’ve known big tech brands to pay up to four time the average rate for a software developer!
And due to the supercharging effects of the pandemic I alluded to, above, the majority of Big Tech players have increased their people numbers significantly since 2020 (notably Microsoft and Amazon, as well as Meta). The upshot? Big Tech has been carrying on its shoulders some very big and expensive salaries.
As a recruiter of nearly three decades, I understand big tech’s approach to attracting talent. Heck; you might do the same if you had the same deep pockets! But if you were a big tech brand in Britain today, how sustainable is that approach -- forking out four times over for the crème de la crème? With the UK potentially entering a recession in 2023, the cost-of-living crisis, and the Ukraine-Russia war, I’d suggest it’s not very sustainable at all.
Just look at Zoom
And big tech knows this. Growth has slowed and so the big tech names have had to adjust their strategies. Their hope was that increased and different consumer needs from the pandemic would be their new baseline for success. But that hasn’t happened.
The technology industry, overall, loves to keep its practitioners and corporates on its toes. Just go back to covid. We saw unprecedented growth in tech usage when lockdown hit. Zoom’s share price, for example, grew from $75 in Jan 2020 -- to $550 just 10 months later in November. But since then, Zoom’s share price has dropped to exactly where it was pre-covid.
Since the end of lockdown(s) and the UK workforce returning to the office (at least in part), demand for some technology has reduced. If you were Zoom, and you saw your share price rocket eight-fold, you too would likely throw money around on the labour market, in the hope additional talent could aid the growth further, or even refire it. But in tech, when demand changes, you need to adjust your payroll costs -- quickly and without half-measures.
Apple, LinkedIn, and techies falling on their feet
Before I am bombarded with letters to ContractorUK’s Editor, I am aware that Apple is the big exception. Their hiring numbers have remained largely consistent since 2016. And they are one of the only Big Tech giants not to announce any lay-offs. Yet.
What about those individuals who have sadly found themselves let go by Big Tech? Recruiters have been struggling for years to source niche candidates, so when there was talk of redundancies, I’m sure more LinkedIn connection-requests and messages were sent than ever before!
But check your own feed, because I think you’ll find that these former big tech employees are not signing onto Universal Credit. It’s quite the opposite. Of the Meta and Microsoft people I have spoken with, all accepted new jobs prior to the end of their notice.
Meet my Meta contact with five offers
A contact of mine from Meta secured five job offers -- not bad considering they attended five interviews. The only difference has been the salaries on offer. Most candidates I’ve spoken with are accepting that they will secure ‘market rate’ pay or rate offers, not the dizzy numbers previously thrown around by Big Tech.
Businesses and organisations outside of Big Tech are capitalising on this wave of top talent. Most had, and still have, openings for skilled resource and have welcomed those individuals that Big Tech booted out with open arms. I’m already seeing instances where Big Tech’s ‘hand-me-downs’ are injecting much-needed innovation, and are even behind escalated growth plans.
It's actually all quite reassuring. There was a fear that if Big Tech sneezes, smaller tech companies and other end-user businesses would catch a cold.
Mass redundancies? No, but more cautious hirers is already a thing
But with so many tech jobs at mid-level and with smaller businesses’s posts remaining unfilled, I do not see IT redundancies on mass. Not in the UK at least, and in the US, LinkedIn data reported by the Financial Times shows employers posted 26% more contract opportunities between May and November, compared to the same period in 2021.
In the UK, the only real change I’m noticing from clients since Big Tech’s cull is their reluctance to share long-term talent acquisition plans with me. Six months ago, I would’ve told you that most clients were pretty open about their hiring plans for the next six-12 months. Now, I’m finding clients are only revealing their immediate resource needs or plans for the next three months. So Big Tech players getting caught out has perhaps made the others now clearing up on the tech talent table keep their cards closer to their chest.
Impact on IT contractors
Some companies may go further and actually apply recruitment freezes if their revenue figures decline. Such hiring freezes showed up in the UK in September-November 2022. But in my experience, recruitment freezes mean that companies simply cannot hire FTEs -- so they bring on contractors instead! Chiming with that, remember that in the recession of 2008-2010, we saw growth in skilled IT contractor demand.
But right now, are Big Tech’s lay-offs hitting IT contractors? Big tech companies tend to focus on permanent employees, so it’ll be permanent employees hitting the market. And then, with Big Tech comes ‘big brand’. So companies with hiring budget that swoop in will want to secure these Big Tech ex-employees for the long term. That invariably means they’ll be taken on as permanent members of staff. On that basis, we will not see, and indeed we have not seen, a tidal wave of new IT contractors entering the market, causing established computer contractors to be between assignments.
My final advice to contractors? Be aware of what’s happening in Big Tech, but take it with an equally sizeable pinch of salt.
If you want to get granular about your prospects, speak with both fellow individuals working in technology in your region and recruiters working in technology you specialise in. That’s how you’ll be able to gain a clear and concise picture of the current market and what to expect moving forward, even if you are worried nobody will be left to run your contract-search through the servers of Bing or Google!
If you have a question about contracting please feel free to ask us!