Having to wake up with a message that says: “Unfortunately, you were included in the X% selected for our layoff” is something you would never wish on anyone. Yet, in the US, more than 90K workers from the IT sector have been affected by the tech company layoffs in 2022. From Meta, Twitter, Netflix, Adobe, and Cisco, to Robinhood, UiPath, and BeyondMeat, companies of different sizes and in different verticals have announced layoffs. In Central and Eastern Europe, too, companies haven’t been bulletproofed against the economic downturn, and had to react against increasing costs. Nearly 20% of Czech employers are preparing for layoffs until the end of the year, especially in more energy-dependent industries.
Understanding what drives this particular wave of tech company layoffs in 2022 is essential to determine what’s next for the tech ecosystem, and in particular to that of Central and Eastern Europe, our neck of the woods.
To gather insights for this piece, The Recursive talked to:
• Matei Dumitrescu, General Partner of Roca X VC, founder for several acceleration programs, and board member of the ANIS, the Employers’ Association of the Software and Services Industry in Romania;
• Lavinia Mehedintu, Co-Founder & Learning Architect of Offbeat, the platform where L&D professionals gather to accelerate their career growth through practice and knowledge sharing;
Why are we seeing a growing wave of tech company layoffs?
The professionals I interviewed agree that this is mostly the result of over-hiring in recent years.
“The past few years have brought unprecedented demand for digital products, services and, above all, those that create them, for a variety of reasons, including the rise of remote work, exceptionally high demand due the paradigm shift in the way industries operate in the era of COVID-19, amplifying the already high rate of digitization of our economy and society in general of the past fifteen or so years. Many of the layoffs that we’ve seen in late 2022 are the result of overhiring by companies in earlier years, not a generalized trend,” says Dimosthenis Kaponis.
On top of that, “companies have become increasingly cautious with their budgets for the months and possible years ahead”, Lavinia Mehedintu adds.
Furthermore, layoffs haven’t impacted all departments in tech companies equally. Sales, for instance, was more impacted than IT.
“In early October, Interviewing.io conducted an analysis of the data available on layoffs.io, a website tracking layoffs worldwide. Their conclusion was that although yes, engineers have been laid off, they aren’t even by far the most affected function of the business. Out of all the layoffs in a company, only 5% constituted people in the IT department. For comparison, layoffs in the Sales department were 20% out of the total.
How will layoffs impact the tech talent in Central and Eastern Europe?
“The CEE countries have seen accelerated economic growth in the past few years and we also have a huge deficit of human resources,” Matei Dumitrescu tells The Recursive.
That is not to say that there haven’t been and won’t be any layoffs in IT companies in the region. However, historical data indicates a fast-growing and dynamic IT market, with a broken balance of supply and demand that will likely continue to drive up the need for IT specialists in the following years.
Let’s take Romania as an example. A study conducted by ANIS Romania shows that the local IT market kept evolving, even throughout the pandemic years (2020-2021), when it registered an increase of EUR 1.1 billion. The IT segment’s annual growth rate is three times higher, 15-17% per year, compared to other industries in Romania. There are currently 147.000 employees in the IT services and this number is increasing steadily with approximately 10.000 people per annum.
“Yet the demand for specialists is almost double. The lack of specialists is the main barrier for a more accelerated growth of the industry. The talent gap is over 15,000 professionals per year and could reach an alarming proportion of up to 24% of the needed IT workforce in the following 3 years,” Matei Dumitrescu explains.
Elsewhere in Bulgaria, the sourcing sector had a share of 2.1% of the total turnover generated by private companies in 2021, according to AIBEST, The Association for Innovation, Business Excellence, Services and Technology. The operating revenue of sourcing companies is projected to exceed €8.9 billion by 2025, more than double vs. 2021. Bulgarian sourcing companies employed 89,165 full time employees (FTEs) in 2021, a figure that is expected to jump to more than 120,000 by 2025.
Meanwhile, Bulgarian employers, too, indicated scarcity of talent as one of the most pressing risks for the industry, with demand for highly skilled employees severely outpacing supply.
“There will continue to be critical demand for and a shortage of qualified professionals capable of building the products and services of the future, and the market is much more contested today than it was before the pandemic,” Dimosthenis Kaponis adds.
Despite the discouraging aspect of tech layoff announcements, and the threatening signs of an economic downturn, interest in an IT career is expected to stay high.
“I think people will still be jumping into IT from other departments, and starting IT careers as students. In the end, it is still one of the top in-demand industries in the world, changing very fast, and with opportunities at every corner. So although we might see a natural decrease in interest for some roles and technologies, as the chatter of Web3 intensifies, new tech will open a fresh hiring market,” says Lavinia Mehedintu.
But the most recent wave of tech layoffs may also open new doors to tech professionals, such as going solo. If having a 9-5 job in a big tech company is not so risk-free anymore, why not follow the risky path of a starting your own project instead? And if the economy starts to recover, this tendency may further accelerate, fuelled also by a restart of the Big Resignation trend we saw rise during the pandemic, Lavinia Mehedintu reflects.
“Looking at the bright side, we should be proud to see Romanian tech companies rising up and opening jobs in such hard times. To mention a few: UiPath, Bitdefender, FintechOS, Zitec, Fortech, and so on. And just add on top of that the potential future IT jobs needed by the startups we, as VCs, are investing in,” Matei Dumitrescu adds.
For those considering opportunities in Central and Eastern Europe, it’s worth noting a few benefits of working in countries in the region:
- Competitive cost of living compared to Western countries – up to 50% lower
- An abundance of coworking spaces in the capital cities
- Stable and fast Internet connection in the capital cities
- Rich history and culture, including the presence of diverse ethnic groups
- Landscape diversity, from high peak mountains to sandy beaches, and four-season climate