After reading the news headlines over the last month lamenting over the pending layoffs from the large ERP, enterprise resource planning, and enterprise systems vendors like Oracle, SAP and the other tech giants such as IBM, HP, and Intel, you get the impression that if you look out the window you will see hordes of unemployed waiting in the bread lines, or flooding the tables at the local Starbucks checking emails and current job posting from tech job site.  In reality, the tech sector is not as grim as most people and the media portray it to be. 

After reading the news headlines over the last month lamenting over the pending layoffs from the large ERP, enterprise resource planning, and enterprise systems vendors like Oracle, SAP and the other tech giants such as IBM, HP, and Intel, you get the impression that if you look out the window you will see hordes of unemployed waiting in the bread lines, or flooding the tables at the local Starbucks checking emails and current job posting from tech job site.  In reality, the tech sector is not as grim as most people and the media portray it to be. 

Over the last several years, companies in general have been very frugal on their IT spending budgets and this has had a buffering affect on tech layoffs in the economic recession.  Most companies were quick to respond to the downturn a year ago, so a good percentage of reduction in employees already happened a while ago.  The fact is, the hundreds of thousands of layoffs that are predicted to happen in the next 12 month are not realistic and significantly over estimated.  The reality is that most  tech workers who feared they would lose their jobs are still gainfully employed, while those hi tech employees who did get let go are significantly less that forecasted.

The state of the economy is quite sobering, for sure, and companies are cutting back. Last month underscored this gloomy climate by announcement from leading tech companies like Microsoft, IBM and others that they plan to reduce headcount by a combined 35,000 jobs.  Forecasts by some analysts predict the job cutback to reach as high as 200,000 in the tech sector, which include the telecom companies, for 2009.   However, in contrast to the 35,000 forecasted layoffs from the tech giants, only one thousand or so actually received their pink slips which is dramatically lower. 

Motivation for High Job Layoff Forecasts

The cause for such a wide discrepancy in high job loss forecast and the dramatically lower number of pink slips is simply motivation not error. Companies are motivated to show shareholders that they are getting tough on cutting costs. If you look at the detail behind layoff projections you will find that companies are including open job requests and vacant positions.  A large company such as IBM can reduce thousands of heads by simply no staffing new divisions and departments originally slated for the hiring road map.  By not filling open positions, and opening up new divisions, large companies can report massive headcount reductions without actually laying off any current employees. 

Although this may seem quite surprising at first, the picture becomes clear when you look at PR motivation and see the actual statistics of pink slips handed out in companies.   No doubt the state of economy is causing layoffs in the tech sector.  The tech sector like most all sectors in business our being adversely affecting by the current economic slump, but cost cuts and the layoffs that companies have made already should set companies in a good position to ride through 2009 and to a growth trajectory in late 2009 and early 2010. 

Lastly, if you are in the tech sector and are thinking about a career or industry switch, you may be interested to know that, surprisingly, several IT management consulting firms report that late 2009 wage increases will happen in the tech sector, and InfoWorld recently reported that the hi-tech sector remains a strong career choice for professionals despite the current state of the economy.

Written by :

rich