Enterprise IT giant layoffs happened because 'some CEOs got ahead of their skis'

Spending still rosy despite job loss clouds, market seers say

Some enterprise tech CEOs suffered a degree of over-optimism in their hiring strategies during and coming out of the pandemic, according to a senior Gartner soothsayer.

The market researcher today released figures which continue to portray strong underlying growth in enterprise tech spending from a commercial perspective, despite the picture painted by some enterprise tech vendors — including Salesforce, Oracle and Microsoft — which have announced thousands of job losses in recent times.

Overall, Gartner has lowered its forecasts for 2023 by a staggering $100 billion. Worldwide IT spending is now projected to total $4.5 trillion in 2023, an increase of 2.4 percent from 2022, down from the previous quarter's forecast of 5.1 percent growth.

But the sizeable haircut in estimates was largely down to a 5.1 percent cut in device spending for 2023, as both consumers and enterprises lengthen device refresh cycles.

John-David Lovelock, distinguished VP analyst at Gartner, told The Register: "Consumer spending on devices dropped more in 2022 than we've ever seen in history, including 2009 [the financial crisis] and 2001 [the dotcom crash].

"What ended up happening was that because we've gone through that refresh in 2020 and 2021 to support remote work, remote education and remote entertainment, we had the youngest average life cycle of devices ever, and consumers just held on to them. Without a pressing need to buy — there is no must-have functionality or need for an operating system or security upgrade — consumers left their devices in place."

The same is not true of enterprise spending. Software, which includes cloud spending, and IT services are projected to grow 9.3 percent and 5.5 percent in 2023, respectively. Gartner increased its forecast for these items.

The optimism contrasts with news coming out of the enterprise vendor market though. Salesforce, Oracle and Microsoft have all laid off thousands of staff of the last six months.

"There are some CEOs who got ahead of their skis," Lovelock said.

He explained that Salesforce currently has around 15 percent more employees than before the 2021/2022 financial year. It grew its workforce by around 15 percent in 2021 and then another 30 percent in 2022, while the CRM market as a whole grew at about 15 percent.

"The market wouldn't support 30 percent more employees, but it does support 15 percent. Oracle expanded again, a little bit more than they probably should have. Now they're retracting back in line with their market. There is there is some misalignment from some tech CEOs," he said.

However, IT services have not suffered the same problem, Lovelock pointed out.

"They are still in the position of having contracts that they can't execute on. They still need more people than they have. So, when Microsoft and Oracle people are being laid off, I don't imagine they're going to be out of work for more than a week if they want a job. There are still two jobs out there for everyone looking," he said. ®

 

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