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May 3, 2024

Linux Foundation Study Discloses: Just 29% of Companies Downsized IT Staff in 2023


Throughout 2023, the majority of news headlines were focused on mass layoffs in big tech firms, however, according to a recent report, they were actually in the minority. The 2024 State of Tech Talent Report issued by the Linux Foundation disclosed that only 29% of firms decreased their tech workforce last year.

The report further demonstrates additional trends in current talent management approaches in the IT field, after carrying out surveys with 418 international professionals in roles involving the hiring or recruitment of IT professionals. It has been observed that companies are now putting more emphasis on upskilling their existing IT teams to tackle the tech talent scarcity.

Moreover, the outbreak of generative AI is having a noticeable impact on IT roles availability and the associated recruitment costs. With automation replacing the need for low-skilled jobs, the available vacancies require high pay and are more time-consuming to fill. Interestingly, while 27% of firms aim to downsize due to AI automation, there’s a 23% who wish to expand their workforce for the dedicated implementation of AI.

The above findings are illustrated in detail in the diagram below.

According to the report, while 29% of organizations had to lay off IT personnel in 2023, 34% didn’t alter their technical workforce and 37% boosted it.

Large organizations with a workforce exceeding 5,000 were most probable to cut down their technical manpower, with 33% admitting to layoffs in 2023. As the Linux Foundation’s Senior Vice President for Research and Communication, Hilary Carter expressed to TechRepublic via an email. “Major tech sector organizations were heavily recruitment-focused during the pandemic to keep up with the swift transition to digital-first and remote working conditions.”

“However, as we moved on from the COVID-19 pandemic in 2023, we encountered additional stressors caused by the conflict in Ukraine, high energy costs, increased interest rates, and the necessity to downsize their workforce to mirror the existing market conditions, all played a part in the layoffs.”

The least likely to lay off IT staff were small organizations with fewer than 250 employees, and nearly half of those polled actually expanded their workforce. This is evident in the ongoing small business surge in the U.S. and the U.K.

Layoffs escalated through 2022 as tech companies dealt with deflating demand for their products post-pandemic, which was exacerbated by a challenging global economy. But since peaking in Q1 2023, they have stabilized at a moderate level.

Last year’s State of Tech Talent Report revealed that 19% of organizations made tech layoffs, so this figure has increased year-over-year; however, Carter relates this to unemployment, high interest rates and economic recessions in at least two of the G7 members (U.K. and E.U.) in 2023.

While technical headcount reductions were relatively scarce last year, business leaders are less optimistic about the rest of 2024. According to the survey, 46% of organisations feel similar levels of concern about the economy now that they did in 2023, and 34% report heightened concerns (Figure B). The International Monetary Fund recently announced that “medium-term growth is projected to fall well below pre-pandemic levels.”

Figure B

There seems to be a new trend among managers to foster the growth of their current IT workforce rather than hiring new members. Based on a survey by The Linux Foundation, 47% and 43% of companies respectively are focusing on cross-skilling and upskilling to meet their technology requirements. The main four tech fields being targeted for these upskilling and cross-skilling processes include cloud, DevOps, cybersecurity, and AI/ML.

The concept of cross-skilling refers to the broadening of skill sets allowing IT personnel to handle various tasks, while upskilling serves to improve the proficiency in tasks they normally handle. Both of these practices necessitate an investment in the growth of current workers either via added training, accreditations, or technologies.

DOWNLOAD: Cross-Training Tool Kit from TechRepublic Premium

In addition, the study indicated that in 2024, about 48% of organizations would prioritize upskilling or cross-skilling existing staff members over employing new workers or consulting professionals (Figure C). Almost three-quarters of those surveyed view upskilling as highly important, in contrast to the 54% who say the same about hiring new personnel.

Figure C

Carter shared with TechRepublic, “On the one hand, upskilling is much more cost effective than hiring. The hiring process is highly time consuming, and it doesn’t always lead to the anticipated outcomes because the required skill sets may be related to a niche field or emerging technology area, and the number of competent applicants may be correspondingly small. On the other hand, there’s significant business value to be found in investing in existing staff.”

The top benefits of upskilling frequently mentioned include its capability to widen employee skill sets for redeployment, propel careers forward and develop the potential of junior staff.

Despite business leaders possibly wanting to concentrate on growing the skills of their existing employees rather than hiring, learning and development budgets are often the first to face reductions when economic uncertainty arises. These reductions could have brought about an impact this year, since for every training opportunity the survey participants were asked about, the ratio of organizations that offer them in 2024 is lower than in 2023.

SEE: Indeed’s 10 Highest-Paid Tech Skills: Generative AI Tops the List

A 2023 report from the MIT Technology Review found that 64% of tech leaders say candidates for their IT and tech jobs lack necessary skills or experience. Staffing shortages brought on by the pandemic and so-called Great Resignation are now coupled with the rising demand for tech talent in this era of digitization, the analysts claimed.

SEE: Skills-first hiring can increase talent pools by up to 20x

The State of Tech Talent Report aimed to investigate how this skills shortage is impacting organizations that are attempting to expand their workforce. As reported by 43% of respondents, the biggest issue is that hiring is costly and time-consuming and often does not lead to the right candidate. Additionally, 37% said they struggle to verify technical skills that candidates claim to possess.

Figure D

On average, it now takes 5.4 months to fill an open technical position — 0.8 months longer than in 2023 — and for 33% of organizations, it takes more than seven months. The average amount of time it takes for a new employee to complete onboarding and reach normal levels of productivity is 4.8 months. Such challenges have a knock-on effect on other areas of business, as 38% of organizations report experiencing project delays as a result.

The most time-consuming tech positions to fill are executive management roles, followed by AI/ML engineers and site reliability/platform engineers, aligning with their high demand. Carter told TechRepublic, “In general, talent needs are driven by market forces and the continuously changing technology landscape.”

“In particular, citing the demand for AI/ML engineers, the recent emergence and impact of generative AI has put all facets of the AI domain broadly into focus, including large language models, machine learning and data, alongside discussions around their openness and trustworthiness.”

The insights from the State of Tech Talent Report disclosed that 27% of entities are proactively planning to curtail their technological workforce due to AI advancements in 2024. In addition, there’s a 38% rate of turnover amongst recent technological enlistments within the initial half-year of their entry (Reference E) — there’s a rise in this percentage, from 29% in the previous year. The contributing authors inferred that this upsurge might be due to GenAI automation, leading to new personnel being relieved from their jobs.

Reference E

As quoted by TechRepublic, Carter stated, “There’s a possibility that GenAI, being utilized as a productive and efficacious tool for particular tasks, might be a contributing factor for the escalated turnover of fresh recruits, whose service could be substituted by such automated tools.”

Only a mere 5.3% of the organisations that were surveyed stated that they either already executed reductions or were actively planning to proceed with them in 2024 due to GenAI — this percentage remains consistent with the figure from 2023. “From the early observations, GenAI is yet to demonstrate capacities that would cause ongoing yearly reductions in the workforce of an organisation,” the researchers elucidated in their published study.

The current trend of GenAI tools being embraced by various companies and professions has significantly influenced the tech talent field. Several low-profile roles have been phased out as the technology takes on most of their tasks. From May 2023 to January 2024, a minimum of 4,628 layoffs can be linked to AI, though this might be an underestimation. Experts from the outplacement firm Challenger, Gray & Christmas note that most businesses would prefer to “stay off the radar” than announce such contentious transitions publicly.

REFER TO: AI’s Influence on Jobs in the UK: AI Could Automate 10-30% of Jobs

A survey by the Linux Foundation discovered that around 23% of companies actually plan to expand their staff due to generative AI (Figure F), understanding that the introduction of new tools necessitates specialized technical knowledge. The top three applications that the businesses surveyed intend to use GenAI for include data analysis and reporting, IT infrastructure monitoring, and software development.

Figure F

“GenAI is a blossoming field necessitating parallel skills for its management, employment, and optimisation within a firm,” said Carter to TechRepublic. “To exploit the advantages of GenAI for business gain, companies must assess if they possess the requisite expertise to delineate and formulate their GenAI approach, and subsequently execute it.”

In fact, 43% of the organisations included in the survey already had personnel who devoted their efforts to AI, ML, data, and analytics. Currently, this domain gets the fourth largest share of technical personnel, moving up from the sixth position in 2023.

SEE: ChatGPT is on its way to replace you. Here’s why this is positive

Although these preliminary adjustments have been made, the BCG AI Radar survey discovered that 46% of tech leaders are of the opinion that their workforce will require upskilling in the ensuing three years to stay abreast of or surpass the progress in generative AI. A warning has been issued by the Linux Foundation report to IT staff that they must warrant that they are “providing value beyond what GenAI can offer”. However, Carter expressed that managers hold some responsibility in assisting their teams achieve this.

Carter commented, “GenAI is not a magical solution, and indeed, if incorrectly used, it can lead to more issues than it addresses. Supervisors can clarify GenAI’s restrictions and promote its appropriate use to guarantee the success of their teams.

“Does GenAI, which is capable of generating code and content, always possess the correct context? This is when human discernment and leadership take precedence.

“They can also urge their teams to leverage their human attributes, their uniqueness, as well as prioritizing the ‘how’ rather than just the ‘what’ of their work.”

According to the study, the widespread use of AI has had an impact on the average recruitment expenditure for businesses. The report authors stated, “This trend might be exacerbated by the influence of GenAI automation, which is diminishing the necessity for entry-level roles and increasing demand for senior technical staff.” These senior technical positions often take longer to fill and command higher wages, resulting in increased total hiring expenses.

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Only 29% of Companies Laid Off IT Staff in 2023, Reveals Linux Foundation Study

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