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Oct 21, 2008

Tech may not shed so many jobs this time

Ed: In 2000, outsourcing shifted jobs to Asia. Will this be a significant driver in 2008?

Tech may not shed so many jobs this time

With Wall Street teetering and venture capital investment in high tech at its lowest point in more than a decade, few in the technology industry doubt there are scary days ahead.

The bad news is starting to pile up: eBay recently decided to lay off 1,000 workers, a long list of smaller Internet outfits have begun cutting jobs, and most industry watchers expect Yahoo to announce another round of layoffswhen it discusses third-quarter earnings after the close of trading Tuesday.

Now here's the good news: whatever job cuts occur in the technology sector in the coming months, they're unlikely to be as deep or as lasting as the cuts that occurred during the dot-com bust, according to statistics from the U.S. Department of Labor and industry employment experts.

Call it learning from past mistakes: tech companies haven't experienced the hiring binge that occurred in the late 1990s, when a combination of Internet investment, repair work on older computer systems to deal with Y2K transition issues, and massive investment in telecommunications infrastructure teamed to create double-digit tech employment growth through much of the second half of that decade.

By comparison, the Web 2.0 boom during the past few years--led by companies such as Facebook--has been more like a "boomlet." While there are an estimated 5,000 Web 2.0 companies, many of them are tiny garage shops. There are no hard figures on how many people are employed in these little companies, but it's doubtful the total is equal to even a tenth of the 386,000-employee workforce at tech giant IBM.

Despite enthusiasm for social-networking sites and other new technologies, neither Silicon Valley nor other big tech hubs have seen a massive increase in hiring in the past few years. Even well-known Web 2.0 companies like Digg and Slide are relatively sleek little outfits that didn't need a lot of money or a lot of people to get off the ground.

Web 2.0 economy

"We never saw the big run-up in tech hiring in 2004 through 2008, so I don't anticipate a significant change," said Tom Silver, chief marketing officer for Dice Holdings, which operates a tech-specific online job placement site.

Certainly, there are exceptions to the rule. Google has gone from start-up to one of the most powerful companies in tech since the dot-com bust, and its workforce has grown with its influence. Google now has more than 20,000 employees, though most analysts expect Google to withstand all but the worst of economic conditions.

Most big tech companies have hewed to a slow-growth mantra, even as sales have climbed. Apple, for example, increased its workforce 100 percent between October 2003 and October 2007. That may sound like a lot, but in that time frame Apple opened about 100 retail stores, saw revenue increase 286 percent, and profit increase an astonishing 600 percent. (Apple is scheduled to announce its fourth-quarter earnings after the close of trading Tuesday.)...

1 comment:

  1. Fred Wilson on Bulletproof Ad Models
    "The next 12 months may be a period of the 'haves and have nots'. Last night the Spotted Pig was mobbed but the new hot place down the block was not. There are bulletproof restaurants (the pig), bulletproof ad models (paid search) and bulletproof brands (all things apple). In tough times the money will keep flowing to the best companies and will stop flowing to the worst."

    -Fred Wilson, venture capitalist, writing on his blog today.


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