The ripple effect the tech sector layoffs could have on the industry

I think the layoffs are a bit of a knee-jerk reaction. Most of those that have done the big layoffs are companies that have experienced phenomenal growth during COVID-19, which led to an increase in the demand for online services. Now, a confluence of number of factors is behind the situation, which includes over hiring during the pandemic, a decline in demand post-COVID, rising inflation and interest rates, and an uncertain economic landscape.

What these layoffs mean for the industry?

From a longer-term perspective, the fundamentals of the tech sector needing more workers remain sound. This is because we are likely to see the tech talent from these large tech firms move to start-ups and ‘traditional’ businesses that once struggled to attract tech talent.

For instance, many younger people may have been drawn to the larger tech firms because they want to work at the cutting edge of innovation. But there are a good number of innovations that are driven by smaller tech start-ups, which have traditionally found it hard to compete for talent as there are constraints on the material and pay incentives they can offer.

At the same time, with all the innovations that have emerged in recent years, traditional businesses – for example, companies that have never defined themselves as ‘tech’ companies – also need talent to harness those innovations to enhance what they do.

What do they mean for the tech talent market?

These traditional businesses have typically struggled to attract tech talent. So, to me, it is not that the market for tech talents is shrinking, but just a period of adjustment where those organisations that were more attractive to tech talents and had the resources to hire almost indiscriminately during a period of boom, are now finding that they have to let them go.

The impact on Australia of all this is likely to be minimal because we still have many large businesses that have been crying out for tech talent. If anything, this global development may see a greater availability of tech talent for Australia as the talents displaced from the United States, Europe and the United Kingdom may now be forced to move.

Professor Barney Tan, Head of the School of Information Systems and Technology Management at UNSW Business School.