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May 4, 2024

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


According to the latest updates in 2023, despite the significant headline coverage of significant tech company redundancies, a fresh study indicates that this actually comprised a minority. The 2024 State of Tech Talent Report released by the Linux Foundation showed that a mere 29% of companies trimmed their tech staff last year.

The extensive survey of 418 global professionals who are engaged in hiring or recruiting IT professionals for their current positions has uncovered certain ongoing trends in IT sector talent management practices. As an instance, more emphasis is being given presently to upgrading the skills of the pre-existing IT teams in businesses to cope with the tech talent deficit.

Moreover, the generative AI expansion is noticeably impacting the availability of IT roles and their hiring cost. Manual, less-skilled positions are being phased out due to automation, which means that vacancies now are generally higher-paying and take a longer time to be filled. Interestingly, while AI automation has led 27% of organizations to plan a headcount reduction, 23% are planning to increase it so as to have a dedicated team for its implementation.

Figure A

According to a recent report, 29% of companies carried out IT layoffs in 2023. However, 34% didn’t make any alterations to their IT personnel numbers, and 37% actually expanded their IT teams.

Large companies with at least 5,000 employees were the most probable to downsize their tech teams, with 33% indicating layoffs in 2023. Hilary Carter, a senior vice president for Research and Communication at the Linux Foundation, disclosed in an email to TechRepublic that “Big corporations in the tech sector aggressively scouted talent during the pandemic due to the dramatic transition to virtual, digital-first, and work-from-home necessities.

“As the world transitioned out of the COVID-19 situation in 2023, added pressures sprang from the Ukrainian conflict, high energy costs, high interest rates, and the need to reshuffle the workforce size to mirror current market trends, which subsequently led to the layoffs.”

Small companies with 250 employees or fewer were least likely to implement IT layoffs, and nearly 50% of the surveyed ones actually expanded their workforce. This mirrors the continuous explosion of small businesses 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

Organizational leaders are increasingly prioritizing the development of their existing workforce over recruiting new IT talent. A report from the Linux Foundation indicates that multiple organizations, 47% and 43% respectively, are promoting both cross-skilling and upskilling initiatives to meet their technological needs. The most critical tech domains identified for these initiatives include cloud, DevOps, cybersecurity and AI/ML.

Through cross-skilling efforts, IT personnel broaden their skill sets, enabling them to handle a variety of tasks, while upskilling focuses on enhancing their proficiency in their current roles. Investment is key for both cross-skilling and upskilling, with leaders committing resources to additional training, certifications, or introducing new technologies.

DOWNLOAD: TechRepublic Premium offers a Cross-Training Tool Kit

The study further reveals that approximately 48% of organizations plans to prioritize upskilling or cross-skilling their current staff in 2024, rather than hiring new personnel or enlisting consultants (Figure C). An overwhelming 74% of the respondents view upskilling as at least very important, in contrast to the 54% who placed the same significance on hiring.

Figure C

Carter revealed to TechRepublic, “Rotating internal talent is far more budget-friendly than ushering in new personnel. The recruitment exercise can be a draining saga, with no promise of suitable results. Mostly, the desired competencies correspond to specialized or burgeoning tech sectors, yielding a shrunken supply of skilled applicants. Conversely, pouring resources into existing employees rewards you with added business value.”

The highly lauded benefits of upskilling encompass broadening the area of competence for employee reassignment, career progression, and discovery of junior staff potential.

Although business heads could opt to hone the skills of current staff instead of recruiting, training, and development provisions are typically the prime targets for slicing when economic stability wavers. Potential fallout from such reductions could have been observed this year, considering every skill enhancement program surveyed showed a decreased organizational offering in 2024 as opposed to 2023.

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.

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

Presently, the average time to fill an open tech role has extended to 5.4 months, an increase of 0.8 months from 2023. A significant 33% of companies report taking over seven months to do so. The time required for a new recruit to complete onboarding and reach regular productivity levels is approximately 4.8 months. These issues result in a domino effect, with 38% of organizations experiencing delays in projects due to them.

The tech roles that prove to be most time-consuming to fill are primarily executive management, followed by AI/ML engineers and site reliability/platform engineers, which can be attributed to their high demand. Carter, in his conversation with TechRepublic, emphasized that the need for talent directly corresponds to market trends and the ever-evolving technology landscape.

He further pointed out that due to the rising demand for AI/ML engineers, the recent advent and influence of generative AI has brought a broader focus on all aspects of the AI domain. This includes large language models, machine learning and data, as well as conversations around how open and reliable they are.

The State of Tech Talent Report established that 27% of businesses are planning to reduce their technical staffing due to AI in the coming year 2024. Interestingly, 38% of new tech hires are leaving their jobs within the first half-year (Figure E) — a number which has seen an increase from the previous figure of 29% back in 2023. The report attribues this drift to the influence of generative AI (GenAI) automation which may be resulting in new staffers being asked to leave their jobs.

Figure E

Carter, in a dialogue with TechRepublic, shared that “In situations where businesses are using GenAI as a tool to improve productivity and efficiency for certain tasks, it may have contributed to the increased attrition of new hires, particularly those whose tasks could be undertaken by the GenAI tools.”

It’s noteworthy that only 5.3% of the businesses that participated in the survey mentioned that they had taken or are intending to take steps in 2024 to reduce their staff due to GenAI. This percentage has remained unchanged since 2023. The researchers concluded in their report, “It implies that GenAI has not yet achieved a potential to cause consistent yearly reductions in organizational staffing.”

The evolution of GenAI tools integration in various industries and positions has severely influenced the competitive landscape of tech talent. Several basic roles have disappeared as many of their responsibilities taken over by the technology. Between May 2023 and January 2024, about 4,628 job losses were reportedly caused by AI. Still, this could potentially be a conservative estimate. Professionals at the outplacement company Challenger, Gray & Christmas suggest that several businesses would decide to remain “under the radar” than openly declare such contentious alterations.

SEE: Impact of AI on Jobs in the UK: 10-30% of Jobs Could be Automated with AI

A survey by the Linux Foundation shows that 23% of institutions in fact are planning to grow their team due to generative AI after understanding that employing new tools need specialised technical skills. The top three uses that the companies surveyed aim to put GenAI into service for are data analysis and reporting, IT infrastructure management and software creation.

Figure F

“GenAI is a developing area that necessitates a matching set of skills for its management, utilization, and enhancement within a company,” Carter informed TechRepublic. “Companies eager to utilize the advantages of GenAI to boost business value will require assessing if they possess the suitable in-house skills to develop and establish their GenAI strategy, then execute it.”

Interestingly, 43% of the organizations participated in the survey already have dedicated staff for AI, ML, data, and analytics. This field is now the fourth largest recipient of technical workforce allocation, escalating from the sixth spot in 2023.

SEE: ChatGPT is headed for your occupation. Why it’s a positive thing

Despite these preliminary adjustments, the BCG AI Radar survey discovered that 46% of tech leaders think their workforce will need upskilling in the approaching three years to keep pace with, or outdo, developments in generative AI. The Linux Foundation report advises IT personnel that they must assure they are “providing value beyond what GenAI can offer,” but Carter suggests that managers bear some responsibility for assisting their teams in doing so.

Carter expressed, “GenAI is not a cure-all solution, indeed, improper application can lead to more issues than it resolves. It’s crucial for supervisors to express the boundaries of GenAI to their teams and endorse its judicious use for the sake of their team’s triumph.”

“Though GenAI has the potential to generate code and content, does it always perceive the right context? This is where human involvement and leadership are essential.”

“They can also persuade their teams to highlight their unique human skills, their distinctiveness, and steer attention towards the ‘method’ of their work, rather than just the ‘result’.”

As indicated by the report, the spreading of AI has furthermore impacted the average cost of the recruitment process in an institution. The report’s authors penned, “This pattern might be worsened by the consequences of GenAI automation, which is lessening the requirement for entry-level roles and causing an amplified demand for top-level technical personnel.” The recruitment of senior technical personnel usually consumes more time and demands greater salaries, resulting in an increased hiring cost in general.

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

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