Pandemic-prompted vendor layoffs, pay cuts set to continue

Pandemic-prompted vendor layoffs, pay cuts set to continue

There could be more economic pain on the horizon

Credit: Christopher Alzati

At the end of May, the number of active jobs in the technology and telecommunications field was down 36.2 per cent, compared with the same time last year, a trend that is unlikely to let up just yet, according to new analysis.

Research by data and analytics company Global Data suggests that while there has already been widespread evidence of layoffs, pay cuts and furloughs among IT vendors as a result of market disruptions caused by the ongoing coronavirus pandemic, there is more economic pain on the horizon.

“Times are tough for enterprise IT vendors,” Global Data principal analyst Steven Schuchart said. “The economic downturn as a result of the COVID-19 pandemic has hit them hard. 

“Some IT vendors, particularly the ones involved in cloud or collaboration, have seen great increases in business, but the traditional vendors and startups are taking a beating,” he added. 

Indeed, while Microsoft, Cisco, Google and others have touted a rapid increase in uptake and usage of their unified collaboration platforms since remote work has become the norm for many employees, other vendors, especially those playing in the hardware space, have faced headwinds. 

In May, for example, Hewlett Packard Enterprise (HPE) detailed the implementation of a major cost savings plan, following a move by the company to file a notice to withdraw its fiscal year 2020 financial guidance. 

HPE’s step to withdraw its full year guidance, which mirrors similar actions by several other large vendors, was taken due to the increased level of uncertainty in which the global COVID-19 pandemic may adversely impact its business operations, financial performance and results of operations.

Global Data also points out that although vendors have been taking precautionary measures, with some engaging in furloughs, pay reductions and layoffs, the same has been happening at many of their partner organisations, the value added resellers that in most cases deal directly with customers.

“Job losses represent not only a loss of institutional knowledge at vendors and partner organisations, but also a loss of capability and capacity,” Schuchart said. “Sales and productivity will suffer more than it already has as adjustments are made, work redistributed or discontinued entirely.”

However, Global Data notes that although economic data has been grim, the stock market seems to be hanging tough, with the technology industry’s equity index recovering since its lowest point in April. 

As of May 29, the equity index year-to-date is down 1.4 per cent, but up 4.7 per cent month-over-month, according to the analysis firm. 

But the industry should remain somewhat wary, Schuchart suggests. 

“Pandemics typically have a second wave and there are more challenges from COVID-19, which may include more shutdowns and further economic damage,” he said.

Tags Global Data

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