Elucidating Technology Layoffs

At GigaOm, Kevin Kelleher recently wrote a blog post that attempted to answer the following question: “Why are tech layoffs rising in a recovery?

Although I think the question is skewed — you call this a recovery? — what follows are my replies, enumerated for the convenience of the reader.

1) The alleged recovery isn’t really a recovery in the traditional sense. Without jobs or income security — and mired in crushing personal debt — many American consumers can’t and won’t spend at their formerly shop-till-you-drop pace. The American consumer accounts for as much as 70 percent of national GDP (though some economists energetically debate the exact percentage).

2) What happens in the stock market has a tenuous connection to what happens in the real world. Stocks rise and fall, based on perceived valuations, but don’t make the mistake of thinking those fluctuations are always related to what’s happening in the underlying economy.

3) Much of information technology is being commodified. Yes, there are areas that still require advanced R&D conducted by brainy PhDs, but they’re not as prevalent as they were.

4) IT is a mature industry. It’s been around nearly 40 years. Like other industries that preceded it, IT will exhibit the telltale signs of maturity: slow growth, consolidation, commodification, an increased focus on reduced operating expenditures, etc.

5) Whenever possible, IT companies are shifting jobs to low-cost geographies, such as China, India, Eastern Europe, Latin America, and even the Philippines. This phenomenon is tied to points 3 and 4.

There doubtless are others reasons, too, but those are the main ones.

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