Does this signals the beginning of the end for the IT industry growth cycle?
Already in 2011 the IT Industry Association expressed substantial doubts about the state of the U.S. economy in general, and the IT industry in specific. According to their press release
IT firms have plans for investing and hiring, but forward-looking expectations tempered by concerns over stalled economic recovery. CompTIA 2011
It seems that the industry was correct, and even way ahead of many of the financial institutions who still today continue to push their customers to buy more stocks in almost anything (just because that’s how they make their money regardless of the actual performance of the stock market). Since the CompTIA press release, we have seen Apple stock drop over 25% of its value in recent months, Cisco has conducted three rounds of layoffs (13,000 in 2011, 1,500 in 2012, and about 1,500 masqueraded as part of their divestment of the Linksys division to Belkin just this week), HP let go over 15,000 employees, and just recently Google announced the first round of layoffs on their Motorola Mobility acquisition.
Why do they do it?
It seems that some of the formerly most respected bellwethers of the technology industry have not found another solution to shore their bottom line than to attempt to become lean and mean by cutting their way to oblivion as it has happened already to many cost-cutting happy people in the past. The danger with massive layoffs is that in conjunction with some dead wood, many of the company executives take advantage of the opportunity to also eliminate any employees that have been identified as politically unacceptable, even if their actual performance exceeds the industry expectations by an order of magnitude. These across the border cuts usually result in a company filled with people with a yes attitude, where no objections are raised for fear of loosing your job. A classical example of what potentially helped the CXOs of Nortel, Enron, and many other companies defraud their investors by implementing questionable plans without anyone able to raise their voice to challenge their decisions.
The impact of the announced layoffs could affect not only the direct employees, their families, and even their communities; but even suppliers and producers across the globe. Projected expansion plans may be put on hold while the companies complete their layoffs processes, and new products may be delayed because even if the designers working on those projects are not directly affected they may be looking for plan “B” since they are not sure if they will have a job once they finish the current project. Companies that outsource services also may be affected since they may temporarily be asked to take on additional responsibilities (but without expectations of additional revenue).
Where is my quarterly bonus?
As I hear before many times by many executives in a company with over $4 billion in annual profits “it’s time to do more with less”. It seems as I used to tell those executives that everybody forgets the basic business principles of “Return on the Investments” and the Maslow’s “motivational needs” pyramid. If employees are threatened on their basic needs (security), they are really not interested in “emotional recognition”, and if companies “do not invest” they should not be expecting an actual return on their “0” investments.
It seems that some companies today are following the examples of Nortel, trying to chase the unrealistic quarterly financial expectations so their CXO’s can get their bonuses, while forgetting the long term viability of the company. At the end this could be nothing but another classic example of “Agency theory” at work, where the people in charge only cares about their own short term interest (since in the long run they know there are no guarantees).
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Massive Cisco Layoffs Coming – web guild.org
Layoffs – techworld.com.au