Is the tech industry levelling out after Covid?

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The tech industry has been on an upward trajectory over the last few years. The shift to virtual remote working during the Covid-19 pandemic led to tech firms rapidly scaling up their operations. That meant mass hiring and huge growth in a short space of time.

But over the last few months, large-scale layoffs at tech companies have led to speculation that the big tech boom is over, compounded by the recent run on Silicon Valley Bank.

Just in the last week, Meta announced 10,000 job cuts, following a cull of 11,000 jobs in November 2022. Amazon, Twitter, and many other big tech companies have all slashed their workforces in recent months. 

Silicon Valley Bank, which almost half of all venture-backed US startups use as their sole account, also collapsed this week. As the second-largest bank failure in US history, this has exposed the financial vulnerability of many young tech companies.

So what’s really going on here? Is this the end of big tech? Or simply a levelling out after the heady highs of the last few years?

The end of big tech’s high risk, high growth strategy

Perhaps due to the speed and scale of their success, tech companies are often seen as scrappy, disruptive risk-takers. This still applies to many tech startups, and it’s one of the reasons investors panic when there’s a hint of uncertainty, as Silicon Valley Bank found out this week.

The bank collapse has caused alarm in the tech sector, especially for smaller firms and startups. But despite the fallout for these companies, it’s the finance industry that should come under scrutiny. The problems that led to the 2008 financial crisis haven’t been resolved, and SVB buckled as a result.

It’s inherently more risky to back a startup than a big tech company. Big tech is now big business. Companies like Meta and Alphabet belong to a stable industry that provides utilities to billions of people around the world. So the high risk, high growth strategy that characterises these companies can’t apply any more. They have a responsibility to their investors, customers, and staff to carefully consider where they’re going.

Sometimes consolidation is the best path. So while mass layoffs are never a good sign — especially for the thousands of people affected — it does signal that big tech may finally be growing up.

A business case for building your tech stack

Technology is now a fundamental utility. It’s fully embedded in our lives, and there’s no going back. So don’t let the headlines stop you from investing in your business’s tech stack.

Technology is essential for growing your business. Investing in the right software is no different from investing in your staff or your workplace. You need it to perform, to compete, and to get results.

At Speakers Corner, we recently decided to invest in a CRM to give our team more visibility of upcoming events. By investing in an automated platform, we’ve enabled our team leaders to share the important information with senior managers, and to make better informed decisions. As a business, we’re already seeing significant improvements based on this investment.

As business owners, we need to relook at the benefits technology actually brings. Time is one of our most important and least understood resources. Implementing the right software helps you claw back the valuable time your staff spend on manual processes that don’t utilise their skillset. So they can get back to doing what they’re really good at.

Building your tech stack during a recession

22% of business owners don’t feel their company is ready for the looming recession. So it can be tempting to hunker down for the economic winter and keep a close eye on your purse strings. And yes, you need to look after your business in the short term. But if you don’t look forward, you’ll end up stagnating in the long term.

The ability to push yourself and look critically at your spending is the foundation of any successful business. As a business owner, you need a strong business case to make any significant investment, and technology is no exception. But recession shouldn’t be an excuse to stop or stand still. 

Technology can help businesses push forward through difficult economic times. Companies like Netflix, Airbnb, and Uber grew out of recession. So it’s important for all businesses to look beyond the next few months and consider how you can capitalise when you’re eventually on the other side.

The risks of playing it safe

While the media focuses on large-scale layoffs at the world’s biggest tech companies, it’s important to remember that these firms are far from failing. In 2022, Meta made profits of more than $23 billion. Alphabet made approximately $60 billion in the same period. And despite SVB’s crash, many smaller tech companies are thriving, too.

After a period of high growth driven by a shift to online working and communication, these companies are returning to business as usual. So investing in tech isn’t a risk for your business. The risk lies in playing it safe, and allowing your business to stagnate.

While it’s essential to have a business case for your investment, don’t let fear stop you from becoming a thriving, forward-looking company.

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Nick Gold

Nick Gold, MD, Speakers Corner

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