Only 29% Of Companies Laid Off IT Staff In 2023, Reveals Linux Foundation Study


Only 29% Of Companies Laid Off IT Staff In 2023, Reveals Linux Foundation Study

While mass layoffs at large tech companies dominated the headlines throughout 2023, a new report suggests that they actually represented a minority. The 2024 State of Tech Talent Report from the Linux Foundation revealed that just 29% of organizations reduced their technical headcount last year (Figure A).

By surveying 418 global professionals who hire or recruit IT professionals as part of their current role, the report uncovered some other trends amongst current talent management practices in the IT sector. For example, businesses are now focusing more on upskilling their existing IT teams to address the tech talent shortage.

In addition, the generative AI boom is having a tangible impact on the IT roles available and the cost of hiring for them. Automation is eliminating the need for low-skilled positions, meaning that open positions tend to be high-salaried and take longer to fill. Furthermore, while 27% of organizations intend to reduce their headcount due to AI automation, 23% plan to increase it so they have staff dedicated to its implementation.

Figure A

Figure A: Percentage of organizations that changed or planned to change their technical headcount during 2022 or 2023. Image: 2024 State of Tech Talent Report/Linux Foundation

1. Companies are hiring more than firing in IT sector

While the report found that 29% of organizations did make IT layoffs in 2023, 34% didn’t make any changes to their technical headcount and 37% actually increased it.

Large organisations with 5,000 or more employees were most likely to reduce their technical headcount, with 33% reporting cuts in 2023. Hilary Carter, senior vice president for Research and Communication at the Linux Foundation, told TechRepublic in an email, “Large organisations in the tech sector were heavily recruiting during the pandemic to accommodate the rapid shift to virtual and digital-first/work-from-home requirements.

“Then, as the world emerged from COVID-19 in 2023, we were faced with added pressures that stemmed from the war in Ukraine, high energy prices, high interest rates and the need to adjust the size of their workforce to reflect current market conditions all factored into the layoffs.”

Small organisations with under 250 employees were the least likely to make IT layoffs and, in fact, nearly half of those surveyed actually increased their workforce. This reflects the ongoing small business boom 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

Figure B: Percentage of organizations more or less concerned about the economy in 2024 compared to 2023. Image: 2024 State of Tech Talent Report/Linux Foundation

2. IT skills shortage sees new focus on skills development

Interest in upskilling and cross-skilling

Managers appear to be shifting their focus from hiring new IT talent to nurturing their existing workforce. The Linux Foundation survey found that 47% and 43% of organizations are employing cross-skilling and upskilling, respectively, to ensure their staff have the skills to fulfill their technological needs. The top four technology domains that are being prioritized for upskilling and cross-skilling are cloud, DevOps, cybersecurity and AI/ML.

Cross-skilling involves diversifying skill sets so IT staff can take on different tasks, while upskilling enhances their proficiency in the tasks they are already responsible for. Both cross-skilling and upskilling require investing in the development of existing employees through additional training, certifications or technologies.

DOWNLOAD: Cross-Training Tool Kit from TechRepublic Premium

Furthermore, the report revealed that, on average, 48% of organizations would prioritize upskilling or cross-skilling existing staff over hiring new employees or engaging consultants in 2024 (Figure C). Nearly three-quarters of all those surveyed consider upskilling at least very important, compared to 54% for hiring.

Figure C

Figure C: Percentage of organizations that would prioritize different approaches to meet technical needs. Image: 2024 State of Tech Talent Report/Linux Foundation

Carter told TechRepublic, “On one hand, upskilling is much more cost effective than hiring. Going through the hiring process is incredibly time consuming, and doesn’t always result in the desired outcomes as the sought-after skill sets might relate to a niche field or emerging technology domain, and the pool of qualified candidates may be correspondingly small. On the other hand, there’s also business value to be gained by investing in existing staff.”

The most cited benefits of upskilling are its ability to diversify employee skill sets for redeployment, advancing careers and developing the potential of junior staff.

While business leaders may wish to focus on developing the skills of their existing employees rather than hiring, learning and development budgets are often the first to be cut in the face of economic uncertainty. Such cuts could have had an impact this year, as with every training opportunity the survey respondents were asked about, the percentage of organizations that offer them in 2024 is less than in 2023.

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

Lack of existing IT talent

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 (Figure D). Additionally, 37% said they struggle to verify technical skills that candidates claim to possess.

Figure D

Figure D: Percentage of organizations that experience different challenges when hiring technical staff. Image: 2024 State of Tech Talent Report/Linux Foundation

Longer hiring processes

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.”

3. Generative AI is impacting roles and the cost of hiring

Role elimination

The State of Tech Talent Report found that 27% of organizations actively intend to reduce their technical headcount due to AI in 2024. Furthermore, 38% of new technical hires currently experience turnover within the first six months in their role (Figure E) — a figure that is up from 29% in 2023. The authors wrote that this trend is “possibly influenced” by generative AI (GenAI) automation, as it could lead to new staff being asked to leave.

Figure E

Figure E: Percentage of organizations where a portion of new technical staff resigned or were asked to leave within six months of being onboarded in 2023 or 2024. Image: 2024 State of Tech Talent Report/Linux Foundation

Carter told TechRepublic, “In cases where GenAI is being used as a productivity and efficiency tool for certain tasks, it may have been a factor in increased turnover of new hires whose workloads could be offset by such tools.”

Only 5.3% of surveyed organisations said they had already made reductions or planned to actively reduce staff in 2024 due to GenAI — the same figure as in 2023. “This means that GenAI has not yet reached a capability that is causing persistent annual reductions in organisational headcount,” the researchers wrote in the report.

The ongoing trend of GenAI tools being adapted by different companies and roles has had a pronounced impact on the tech talent landscape. Many low-level roles have been eliminated as the technology takes over the majority of their workload. Between May 2023 and January 2024, at least 4,628 layoffs have been attributed to AI, though this could be an underestimate. Experts at outplacement firm Challenger, Gray & Christmas remark that many companies would still “rather go under the radar” than publicly announce such controversial changes.

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

Creation of AI-related roles

The Linux Foundation survey found that 23% of organizations actually plan to increase their headcount due to generative AI (Figure F) after recognizing that bringing on new tools requires specialist technical expertise. The top three applications that the surveyed businesses plan to use GenAI for are data analysis and reporting, IT infrastructure monitoring and software development.

Figure F

Figure F: Percentage of organizations that have changed or foresee changes in headcount due to generative AI. Image: 2024 State of Tech Talent Report/Linux Foundation

“GenAI is an emerging space which requires a corresponding skill set when it comes to its governance, use and optimisation within an organisation,” Carter told TechRepublic. “For organisations wanting to reap the benefits of GenAI to drive business value, they will need to evaluate whether they have the right skills in house to define and create their GenAI strategy, and then implement it.”

Indeed, 43% of organisations surveyed already had staff dedicated to AI, ML, data and analytics. This area now receives the fourth largest allocations of technical headcount, moving up from sixth place in 2023.

SEE: ChatGPT is coming for your job. Why that’s a good thing

Despite making these early changes, the BCG AI Radar survey found that 46% of tech leaders believe their workforce will need to undergo upskilling in the next three years to keep up with, or exceed, advancements in generative AI. The Linux Foundation report cautions IT staff that they must ensure they are “delivering value beyond what GenAI can provide,” but Carter says that managers are at least partially responsible for helping their teams do so.

Carter added, “GenAI is by no means a panacea, and in fact, misuse can create more problems than it solves. Managers can communicate the limits of GenAI and encourage responsible use of it to ensure their teams are successful.

“Where GenAI can create code and content, does it always have the right context? That’s where human thoughtfulness and leadership comes into the equation.

“They can also encourage their teams to play to their human strengths, their differentiation, and doing things like focusing on the ‘how’ of their work, not just the ‘what.’”

Hiring is more expensive

The proliferation of AI has also influenced how much the hiring process costs an organization, on average, according to the report. Its authors wrote, “This trend is possibly aggravated by the impact of GenAI automation, which is reducing the need for lower-level positions and leading to a higher demand for senior technical staff.” Senior tech staff tend to take longer to hire and require higher salaries, resulting in a higher overall hiring cost.

While mass layoffs at large tech companies dominated the headlines throughout 2023, a new report suggests that they actually represented a minority. The 2024 State of Tech Talent Report from the Linux Foundation revealed that just 29% of organizations reduced their technical headcount last year (Figure A). By surveying 418 global professionals who hire or…