Triumph or Trouble? What Tech Industry Trends to Expect in 2023
A chill runs through Silicon Valley as stock and cryptocurrency prices sink and anxiety rises. Each day brings news of tech giants like Tesla, Microsoft, Uber, Coinbase, Gemini, Robinhood, and Netflix announcing layoffs and hiring freezes—some even rescinding job offers—as top executives hunker down in the midst of a looming recession. Will this ice age freeze investor enthusiasm, or can business leaders expect the industry to warm up in the coming months?
Unfortunately, the forecast looks grim. Persistent supply chain issues, geo-political tension, steady inflation, and lingering effects of the pandemic all point toward continued economic slowdown. Senior business leaders around the globe are finding it difficult to navigate 2023 planning and budgeting with dizzying hiring trends and inflation cutting consumer spending. In fact, many leaders believe there will be a recession in the coming year, or that we’ve already entered one.
All of this is to say, while no one can predict the future, we can learn from the past. Tech leaders need to prepare to guide their organizations through this period of economic downturn without losing sight of their long-term growth goals. Here’s what the IT industry can expect as we move into 2023, and how we recommend you set your business up for success.
Expect More Layoffs
After the Federal Reserve Bank and the U.S. government pumped trillions of dollars into the marketplace to help government agencies and companies weather the storm. Additionally, venture capitalists invested in tech startups and we saw the prices of stocks and cryptocurrencies soar. But as we all know, what goes up, must come down.
As inflation made goods and services more expensive, the aforementioned layoffs began in earnest. In 2022 alone, over 80,000 employees lost their jobs at tech startups. And layoffs and freezes aren’t just happening at tech startups that grew too fast. Tech world veterans like Oracle and Apple, as well as retail giant Walmart, are among the enterprise leaders that announced cutbacks in recent weeks.
In addition, a survey from PwC, which last month polled more than 700 US executives and board members across a range of industries shows:
- 50% of respondents are reducing overall headcount
- 52% have implemented hiring freezes
- 44% are rescinding job offers
- 46% are reducing or eliminating sign-on bonuses
As of now, this feels counterintuitive. Tech talent can name their compensation and terms, and companies have no shortage of business plans and IT projects in mind. For the time being, the layoffs are signs the market is growing skittish. Companies audacious enough to scoop up candidates in flux can capitalize on that uncertainty. Plus, any slowdown in hires offers a reminder that candidates won’t always have the upper hand.
Speaking of which, there are experts who believe the unemployment rate will need as a countermeasure to inflation. Lawrence Summers, former U.S. treasury secretary, said the U.S. jobless rate would need to rise above 5% for an extended period to curb runaway inflation. Summers predicted, “We need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment.”
However, there are ways to come out on top during periods of high unemployment. With more people looking for jobs, your business has access to an expanded talent pool. Additionally, there’s potential for your company to acquire businesses with raw potential that were ill-prepared for the recession. As the competition slows hiring or even shuts doors, use this time to plant a deeper foothold in the market and capture the attention of a wider audience.
Expect Continued Supply Shortages
Though supply chains are working hard to find balance amidst geo-political issues and lingering effects caused by the pandemic, these issues won’t be resolved any time soon. Intel CEO Pat Gelsinger expects the semiconductor industry to suffer supply shortages until at least 2024. He also mentioned the shortages have now hit the equipment needed to build these chips, so some of those factory ramp ups will be more challenging.
Issues within the semiconductor and microchip industries are thanks in part to shortages in neon (an element necessary for manufacturing both technologies) caused by the Russo-Ukrainian war. This shortage will ultimately lead to higher prices, delivery delays, and shortages of critical technology, such as cars, computers, and smartphones.
A lack of these vital products can attenuate the performance, production, and growth of hardware manufacturers to tech companies with robust computing capacity needs. As a result, more tech professionals will be in play on the job market soon. Keep up with layoff announcements, so your business is ready to catch top talent that just dropped into the marketplace.
Expect Higher Demand for Tech Workers
The overall market skepticism is starkly contrasted by a still-hot labor market here and now. The tech industry has added 175,700 jobs so far this year, a 46% increase since 2021. Not to mention, tech unemployment rates dropped to a historically low 1.7% in August of 2022. Because there are still so many open positions available, and IT professionals with certain skills and titles like cloud architects or security analysts are in such high demand, laid-off workers can bounce back easily.
The IT market is going through a vicious cycle of companies wanting to hire, but not being able to due to skillset gaps. At the same time, companies that froze hiring due to the pandemic want to catch up, and businesses that hired too boldly post-pandemic are cutting back on workers.
The trickiest part of the game is, with every massive layoff announcement there are companies ready to take advantage of those hiring opportunities. Will your business be ready?
How to Compete for Top Tech Talent in 2023
In such a contradictory job market as the one we find ourselves in now, it might take rethinking your approach to hiring to successfully compete for top tech talent. We recommend company leaders take the steps below to combat the current trends in the tech industry.
- Invest in the best technology. This way, you can uncover inefficiencies in processes and increase business agility, preparing your team to handle new risks in the IT job market. Investing in tools that allow your team to do their jobs well is one major step towards creating a work environment that nurtures talent and encourages their growth within your organization.
- Trim unnecessary spending. Ditch older technology, including any software that underperforms or hinders employee growth. Combine activities like training days and celebrations into single events. Ensure your leadership team and staff are using their time on business-driving activities and automate any tasks that don’t truly require human intervention.
- Work with a staffing company. Keep an eye out for future layoffs, and pounce on the candidates who are now new on the market with the help of a staffing partner like KORE1. Together we’ll build a clear understanding of you talent gaps and a plan to fill them that’s centered on an exceptional candidate experience.