Layoffs at tech companies signal a shift in IT spending
Layoffs at tech companies signal a shift in IT spending
Salesforce, the cloud-based customer management company, said this week in a regulatory filing that it’s reducing office space and laying off about ten percent of its workforce.
The move comes after the firm drastically increased its headcount in the past few years. At the start of the pandemic, many businesses that had resisted using cloud-based software suddenly found themselves needing to use it.
“Applications that were running in their private data centers, they could not access because these physical locations were closed down,” said Sid Nag, vice president of research at Gartner.
So, they turned to companies like Salesforce and moved operations to the cloud. According to Dan Ives with Wedbush Securities, “Salesforce had to spend like a 1980s Rockstar to keep up with the demand.”
But now, we’re in the equivalent of the grunge period where people are having angst about the economic future — and those companies that spent a lot of money moving to the cloud are starting to slow their IT spending.
“Companies don’t need as many bells and whistles. And if you start to have a glut of software, that’s where you start to see a much different environment,” said Ives.
Ives says Salesforce’s restructuring plan is a sign the company is maturing and learning that even the most raucous afterparties can’t go on forever.
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