Every week seems to bring an announcement of a new round of layoffs, especially in the tech sector.
Recently, the publicly traded company N-able announced a significant number of layoffs – CEO John Pagliuca said the layoffs were “imperative” but didn’t give more details. While the actual number of people who lost their job was not made public, it was substantial enough to create a wave of social media posts and articles, with many saying, “It came out of nowhere.”
Sadly, N-able is far from alone.
Lenovo, currently the world’s biggest PC manufacturer, is said to have laid off 10% of its workforce (to be clear, 10% was not officially confirmed but the number rumored). Nextiva reported a 14% layoff of its workforce. HP, which saw a decline in sales, announced it would lay off 4,000 to 6,000 employees. Cisco, despite solid growth in revenue, is also laying off 4,100 employees, roughly 5% of its workforce, as a way of removing millions of dollars in expenses. Just a few months ago, Liongard’s CEO made what he called a “most difficult decision” to lay off a significant number of loyal, long-term employees. And the company we’ve all come to recognize for their pink flamingos, Gradient, also laid off a significant number of employees (we estimate better than 50%, although this is not confirmed) earlier this year.
While recessions happen, it’s shocking that channel companies are announcing layoffs while the demand for outsourced IT services and cyber security solutions continues to rise, not to mention the higher-than-average growth for MSPs over this last year. So, what’s going on?
When we spent a day at Shark Tank star Robert Herjavec’s office back in November, he said that his $1.2 billion MSSP, Cyderes, is expected to grow 65% YOY, stating that the demand for cyber security services is at an all-time high. This growth is GOOD news for our MSPs out there. However, he said his investors are warning all companies in their portfolio to brace for a very tough recession coming.
I believe there are a few things at work here.
First, when bigger companies get into trouble, they shrink and cut costs. They don’t try to double down on sales and hiring as a way out of a tough financial spot. That’s not to say that’s what’s going on with all the companies conducting layoffs, but it definitely is for some, since a few of the companies mentioned have cited “challenging economic times” as a reason for cutting back on their workforce.
It’s also likely that some of the tech companies laying off US-based workers are moving those jobs overseas, where cheaper labor can be secured. It’s no secret that salary costs are through the roof as the labor shortage continues, and certain skill sets, particularly technical talent, continue to be in high demand.
Many CEOs are preparing for a hard recession coming, some already seeing sales slowing. And finally, dumping costs could be a sign that the company is getting ready to sell or there’s a significant change in leadership happening. It’s obviously difficult to know which of these is causing each company’s decision to lay off workers. It could be a combination of all the above.
But is this tech layoff trend consistent across the entire channel?
Definitely not. Some channel companies are thriving and hiring like crazy. ThreatLocker has nearly tripled their head count over the last 12 months. Tairi Perez, ThreatLocker’s senior event coordinator, has confirmed that they’ve gone from 70 employees to over 225 in the last year.
Datto has reported they have added well over 100 employees since the acquisition, in addition to any replacements they’ve hired. Their parent company, Kaseya, has nearly doubled their head count in the last 12 months (48%, according to LinkedIn). Xavier Gonzalez, EVP of MarComm, has confirmed that they are looking to hire an additional 1,500 new employees in the company due to anticipated growth.
Another channel favorite, Galactic Advisors, led by CEO Bruce McCully, is continuing to grow in leaps and bounds and is also aggressively hiring and looking for talent, showing a 200% growth in head count over the last year.
Ultimately, the demand for cyber security, compliance and co-managed IT will continue to rise, providing massive opportunities for MSPs who are prepared to capitalize on it, with the right marketing and service offerings to align with what the marketplace is buying and will continue to have demand for.
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