Big Tech continues to wrestle with mass layoffs, most recently with Amazon’s announcement to slash 16,000 jobs. It’s a trend that started long before the AI race: organizational change brought by the arrival of new technology.
Tech giants flourish or falter based on their decisions to overhaul themselves, often leaving tens of thousands of workers to pay the price. The 1990s and 2000s saw a wave of layoffs from industry stalwarts like IBM, Hewlett Packard and Microsoft, which embraced technological advancements like personal computers, mobile devices and the cloud.
Amazon’s staggering jobs cuts this week, the second wave since October, brings the commerce giant’s recent layoffs to roughly 9% of its corporate workforce.
While Amazon’s layoffs aren’t a direct result of AI, they’re tangentially related. Advancements in AI have sparked widespread concern about the future of jobs, as fellow tech giants Microsoft, Meta and Verizon all made layoffs last year.
AI is the “most transformative technology we’ve seen since the internet,” Beth Galetti, senior vice president of people experience and technology at Amazon, said when announcing layoffs in October. She added that the company needs “fewer layers” to “move as quickly as possible.”
In her memo explaining the new round of layoffs, Galetti wrote that Amazon aims to “strengthen” the organization by “reducing layers, increasing ownership, and removing bureaucracy.”
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Companies are likely shifting resources to areas like data, automation and analytics amid the AI race, according to Zeki Pagda, an assistant professor at Rutgers Business School.
“Amazon cannot easily retrain a workforce built for manual logistics or legacy retail systems into one that builds generative AI agents,” Pagda said in an email to CNN.
Amazon pointed CNN to Galetti’s memo when asked for comment. The company also said AI isn’t the reason behind the vast majority of the cuts, and that it will continue hiring in other areas. Galetti also wrote that “broad reductions every few months” are not part of Amazon’s plan.
IBM is one of the most prominent examples of mass layoffs in response to new technology. The company laid off 50,000 people in 1993, when chip technology evolved and the tech industry moved away from large mainframe computers. Dealing with competition from smaller personal computers, IBM’s business model began turning to services and software instead.
“IBM’s challenge is not just to shrink in size but also to remake itself completely into a nimbler and more market-oriented player,” Time magazine correspondent Thomas McCarroll wrote in 1992.
In 2014, Microsoft laid off 18,000 workers a few months into Satya Nadella’s tenure as CEO. Those cuts came just after Microsoft had absorbed Nokia’s mobile business, hoping to catch up to Google and Apple in the smartphone market.
Ahead of those layoffs, Nadella wrote in an essay that the company needed to “flatten the organization” as it increasingly focuses on mobile and the cloud, The New York Times reported at the time.
There are other factors that contribute to layoffs aside from new technology, like overhiring, the state of the economy and a shift in corporate strategy. Cisco, for example, pivoted its business to stay relevant, according to Pagda. The rise of cloud computing in the 2010s forced Cisco to decrease its reliance on hardware networking equipment. It started investing more in areas like cybersecurity, data center technologies and cloud services, Pagda said — although doing so meant slashing thousands of jobs.
However, Amazon — a major player in both digital commerce and cloud infrastructure — isn’t at risk of becoming irrelevant, nor is it struggling financially. It raked in $180.2 billion in net sales in the September quarter alone last year and has a $2.5 trillion market capitalization.
Still, the goal is to make necessary changes before hardship.
“One could argue this is Amazon’s leadership saying, ‘We’ve got to make these changes now because we see where the technology is headed and we see where the market is headed,’” Rob Siegel, lecturer in management at the Stanford Graduate School of Business, told CNN.
