Griffin on Tech: AI and local casualties in the 'year of efficiency'
Big Tech’s ‘year of efficiency’ employee cull seems to be working, with the share prices of Google, Microsoft, and Meta experiencing a bump in the wake of their latest quarterly earnings announcements.
It’s sad that mass layoffs are the grounds for such shareholder optimism, though it is also true that these companies expanded too rapidly during the pandemic, expecting the new normal of remote working and widespread digital transformation to continue at pace.
Instead we largely went back to the old 2019 version of normal and the pandemic spend-up created an inflation bubble that has eaten into budgets everywhere. This week we saw the tech giants extend their cutbacks to Aotearoa with modest headcount reductions at Microsoft and AWS.
It is particularly sad to see the demise of Microsoft’s local Azure Fast Track team, a crack squad of cloud engineers who had advised Microsoft partners in the early stages of Azure projects.
Fast Track exists
As Reseller News reported, that team of six is now looking for new jobs. AWS headcount is also taking a trim as a consequence of Amazon’s global cost-cutting, as the Herald reported. With both Microsoft and AWS gearing up to launch their local cloud computing regions next year, this will likely be a small blip rather than an enduring trend of consolidation. Other multinationals appear to be making similar, limited culls or deciding not to replace departing employees.
Some skilled and experienced software engineers and cloud architects have now landed on the market, which is great news for those desperately in need of tech talent in what is still a tight labour market.
Meta pleasantly surprised the market with a 3% increase in its quarterly revenue (even if profit was down as a result of restructuring costs), suggesting the painful bloodletting is paying off. Mark Zuckerberg’s metaverse adventure continues and is expected to cost the company US$4 billion in the next quarter alone. That continues to fill sharemarket analysts with dread. But Zuckerberg’s sudden interest in generative artificial intelligence promises to be more productive.
“We see an opportunity to introduce AI agents to billions of people in ways that will be useful and meaningful,” Zuckerberg told investors this week. The social media giant built its empire on the back of clever algorithms but sat on the sidelines as OpenAI and ChatGPT collaborated to develop their intelligent chatbots.
Still, other than Microsoft, Facebook is perhaps the best-placed tech company to benefit from integrating generative AI into its products.
AI everything
“We’re exploring chat experiences in WhatsApp and Messenger, visual creation tools for posts in Facebook and Instagram and ads, and over time video and multi-modal experiences as well,” Zuckerberg said. Anything that keeps the fires of the attention economy burning is good for Zuck and his investors.
Microsoft had a very good quarter and the market loves the momentum it has gained at the head of the pack when it comes to AI.
“We will continue to invest in our cloud infrastructure, particularly AI-related spend, as we scale to the growing demand driven by customer transformation. And we expect the resulting revenue to grow over time,” chief executive Satya Nadella said this week.
Amid the continuing gloom and uncertainty, AI is the shiny new hope for the tech industry in general. It promises to boost engagement with existing products and services and open up new lines of business, most of which haven't been dreamt up yet.
AI will also be applied to the task of containing costs within these tech companies as the economy returns to growth. These tech executives know, better than anyone, the ability of the tools they are creating to boost productivity. They will increasingly automate their operations, reducing headcount in admin and low-level coding and tech support roles in the process. That's not something to fear, but also something that will have profound consequences in the next few years, many of which aren't yet obvious.