The global wave of layoffs has hit US tech companies like Meta, Amazon, and Twitter and is finally breaking out in Southeast Asia.
Southeast Asian technology firms are now conducting widespread layoffs, following the lead of the major US technology giants. The most recent companies to decide on major layoffs in the last 30 days are GoTo Group, Glints, and Carousell. Over the previous six months, Sea Group has experienced the largest layoffs in the area, laying off more than 7,000 workers.
“Founders are being cautious by managing costs in this environment to ensure they can afford to last through the end of 2024. There are signs that we are entering a recession. As a result, customer demand is likely to be slower in 2023,” said Jia Jih Chai, Co-Founder and CEO of Singapore-based e-commerce brand aggregator Rainforest.
In a note to Carousell employees, CEO Quek Siu Rui admitted to making “serious mistakes”. He said he was “too optimistic” about the post-COVID-19 recovery and underestimated the impact of growing his team too quickly.
What raises the raging wave of layoffs?
The majority of the businesses that are experiencing mass layoffs, according to Bhima Yudhistira Adhinegara, director of the Center for Economic and Legal Studies (Celios), are “pandemic beloved children”.
Their overconfidence in upcoming growth has led to an overstaffing problem. Industry executives assert that even if COVID-19 regulations are relaxed, customers won’t go back to offline retailers. But it did turn out that way.
The pandemic-induced growth boom for tech corporations has now abruptly ended. Early this year, US-based venture capital firms were forced to change course and put profitability before quick development as a result of the recession. This produces a domino effect that prompts unexpected cost-cutting initiatives.
Companies are pooling their resources to restructure and create a more suited workforce as they struggle to obtain financing due to rising interest rates and high inflation at the moment.
Chris Kaptein, the managing partner of Singapore-based venture capital company Integra Partners, claimed that this year’s skyrocketing capital costs had forced businesses to focus on sustainable growth rather than spending money recklessly.
Why is Southeast Asia being impacted by such huge layoffs
First off, following several boom years, the global technology sector in general and Southeast Asia, in particular, are in a challenging position because of dim global development prospects as well as complicated geopolitical and legislative situations.
According to Chai, the founders are being careful given the current circumstances, so they must control and restructure their operations and business endeavours to secure development in the future. There are numerous indications that the local technology sector is about to suffer a downturn, and 2023 customer demand may decline as a result.
Journalist Alex Kantrowitz of Silicon Valley said, “I find it surprising that businesses believe the COVID-19 pandemic-related alterations in human behaviour would never go away. Because it seems to reason that as soon as you’re allowed to eat at restaurants and hang out with pals outside, you’ll use Netflix, Facebook, Shopify, and Amazon less frequently.” The error of “it’s going to be forever,” thinking has been made by tech companies.
Third, Southeast Asian technology firms reduce workforces for sustainable growth as opposed to “burning cash to grab market share,” freeing up funds to restructure and cultivate a more qualified workforce.
When will the layoffs “wave” subside?
The majority of the leading tech firms in Southeast Asia are still in the red, and even those that are predicted to turn a profit will take some time. This suggests that cost-cutting measures will be maintained in the foreseeable future by Southeast Asian technology enterprises.
Yanjun Wang, the corporate director for Sea, said the most recent personnel reductions were a part of an “ongoing effort,” indicating Sea may make additional reductions. The cost-cutting initiative is “a continuing initiative that management is focused on,” according to Grab’s CFO, Oey.
People anticipate that the pattern of tech job losses in Southeast Asia will persist as rising inflation continues to put pressure on world economies and weaken the financial environment.
Opportunities or challenges?
Many in the IT industry think this is not necessarily negative news because large layoffs will aid in choosing the best team, encouraging long-term sustainable growth. Additionally, the majority of the recently reduced staff is “non-technical” workers. This change will enable high-tech workers to earn more money.
Also Read: How to support startups to survive the ‘tech-winter’
According to economists, the majority of the major tech firms in Southeast Asia are still in the red, and it will take one to two years for them to break even. Also, the weakening financial environment is a result of underdeveloped economies and growing prices. As a result, staffing and expense reductions will keep happening. Analysts determined that the current wave of layoffs in technology is just temporary because this is an adjustment period.
According to Kaptein, there is also a chance for software entrepreneurs to recruit and keep people, as they did only a few months ago.
Overall though, computer expertise in the area is still hard to come by, so many businesses are turning to telecommute to cut costs. To make it simpler to handle if the financial situation is uncertain, they also prefer to sign labour contracts with technology workers with a fixed duration, often one year.
Prospects since layoffs happening
A new report by Glints (Singapore), one of the biggest job marketplaces in Southeast Asia, claims that technology businesses are looking to Vietnam and Indonesia for top tech expertise. They want to create a decentralised, superior workforce that boosts productivity and reduces costs.
Southeast Asian technology companies have had to cut costs and lay off employees as a result of the reduction in the money that has been mobilised and the dangers associated with the global economic downturn.
Further waves of layoffs and plans for restructuring will follow this initial round. Technology companies are in an adjustment period where they can reorganise their personnel and define long-term business and development goals rather than quickly but unstably chasing market share.
Global and regional macroeconomic headwinds are expected to continue to develop in the short term, making 2023 another challenging year for tech businesses. Nevertheless, this situation is expected to pass quickly as the region is projected to witness growth in the medium and long term.
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