What Do Cloud Layoffs, Hiring Freezes Mean for the Channel?

Public cloud provider Amazon Web Services (AWS) is eying minor staff cuts as its parent company and many big-name technology vendors announce layoffs in the thousands.

Fortune reported on Wednesday that AWS tasked its managers with identifying underperforming employees that belong to teams “that have grown too fast.” AWS remains in a hiring freeze, and it has prematurely ended many contractor contracts. However, the Amazon subsidiary is not currently planning layoffs.

In a meeting this week, an AWS executive said he’d be “shocked and flabbergasted” if there were any layoffs on the AWS side, and that there was no way for the company to execute layoffs inside the product teams without having a detrimental impact on AWS. https://t.co/qWAeAT33YS

— Kylie Robison (@kyliebytes) November 16, 2022

The report comes amid a layoff of approximately 10,000 Amazon people, including those in its retail and human resources units as in addition to its services division that runs Alexa. Moreover, rival hyperscaler Microsoft Azure cut job openings earlier this year, and Oracle Cloud has slashed about 200 jobs.

Channel Impact

But what does this news mean for the channel, in particular the MSP and agent sides of the market?

Dave Sobel

For MSP Radio founder Dave Sobel, the news certainly doesn’t spell devastation for partners. He said all projections point to IT services spending increasing in 2023.

“If I put my IT services/MSP hat on for a second, I’m much more concerned about whether or not my customers are trimming up than I’m worried about my vendors two levels back trimming up,” Sobel told Channel Futures. “Consumption from the end customer does not look like it’s going to be impacted.”

Opex’s Courtney Humphrey

Opex Technologies CEO Courtney Humphrey said news of hiring freezes and layoffs in the technology industry doesn’t come as a surprise to him and his team.

“Keep in mind, the industry experienced explosive growth throughout the ‘COVID years’ in regards to headcount, revenue and stock prices. We have been expecting layoffs, as many of these firms’ stocks prices are down over 50%. This being said, we are still bullish on the industry and our ability to help our clients leverage the technology solutions they require in order to drive transformation and cost savings within their organizations,” Humphrey told Channel Futures.

Pumping the Brakes on Recession Talk

Layoffs in the tech industry have dominated news headlines in November. Meta laid off 11,000, and other household names like Salesforce and Intel are shedding workers. And for many of these stories, the news carries the somber undertone – or overtone – of a looming recession that will ripple throughout the channel ecosystem.

Sobel said many of these layoffs reflect more on businesses correcting course than an actual macroeconomic trend. Take for instance, Meta. CEO Mark Zuckerberg told employees that their 13% workforce reduction came from a missed forecast on his part.

“At the start of COVID, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended,” Zuckerberg wrote in a public letter. “I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected.”

Opkalla’s Jim Campbell

Sobel added that many of the “tech companies” making the headlines for layoffs aren’t truly tech companies in a way that matters to the channel. For example, Meta does social media, and Uber does transportation. He added that in the case some of these layoffs – Meta for example – take the companies back to where they were in the summer in terms of headcount.

“We’re just talking about a handful of Silicon Valley companies that got ahead of themselves. But I don’t spend my time worrying if Zuck, Jeff Bezos or someone like that made a correct call. I spend my time worrying about IT services companies,” Sobel said.

Jim Campbell, managing partner at technology advisory firm Opkalla, said large technology vendors “absolutely overspent” during the last two years. But Campbell said he’s taking note of where these providers are making their cuts.

“A lot of their cuts are in the staffing or HR departments which indicate …