Global IT Companies Tighten Belts Amid Economic Recession

Photo by AP Yonhap

[Asia Economy Reporter Kang Nahum] Amid ongoing concerns about a global economic recession, global IT companies are responding by introducing new HR programs or reducing staff to cut costs and improve productivity. Domestic IT companies facing a slowdown in performance have also tightened their belts by reducing hiring in line with this global trend.

According to major foreign media such as CNBC on the 7th, Fiona Cicconi, Chief People Officer (CPO) of Google, recently held a meeting with all employees and said, "It is true that there is anxiety about layoffs throughout Silicon Valley, and we fully understand employees' concerns," adding, "We cannot be certain about the future economic outlook, but currently, there are no plans for workforce reductions." This statement drew a clear line against the large-scale layoff rumors that had been circulating.

However, instead of reducing staff, Google decided to introduce a new program called the ‘Simplicity Sprint’ to enhance employee focus and improve efficiency. A sprint is a term used in tech companies to describe a short, intensive push toward a common goal. Google’s judgment is that distractions should be minimized and focus should be placed on product output and company growth.

Sundar Pichai, CEO of Google, also urged, "There is a realistic concern that productivity is low because employees are not in the right places where they are most needed," and asked employees to "keep individual tasks in mind, focus more on products, and help create a customer-centric culture."

Google’s policy is a response to the slowdown in performance linked to the global economic recession, including interest rate hikes and weakened consumer sentiment. In fact, Google’s parent company Alphabet recorded its lowest quarterly revenue growth rate in two years due to a contraction in the online advertising market. Its Q2 revenue this year was $69.69 billion (about 91.3 trillion KRW), a 13% increase year-over-year, but below the market forecast of $69.9 billion (about 91.55 trillion KRW).

Not only Google but other global big tech companies are deeply concerned about cost reduction. Most are navigating the situation through workforce reductions. Global cloud company Oracle has begun laying off thousands of employees, Microsoft plans to reduce 1% of its total 181,000 employees, and Meta, which initially planned to hire about 10,000 software engineers this year, has lowered that number to 6,000?7,000.

Domestic IT companies such as Kakao and Naver are no exception. According to the Financial Supervisory Service’s electronic disclosure system, Kakao recorded sales of 1.8223 trillion KRW and operating profit of 171 billion KRW in Q2 this year, while Naver posted sales of 2.0458 trillion KRW and operating profit of 336.2 billion KRW. Both companies fell short of market expectations, with advertising and e-commerce market slowdowns and rising labor costs seen as factors hindering profitability improvement.

Naver is expected to reduce new hiring by about 30% compared to last year. Kim Nam-sun, Naver’s Chief Financial Officer (CFO), previously stated, "Going forward, hiring will decrease significantly compared to the increases seen over the past few years and will return to levels similar to those before COVID-19." Kakao is also likely to scale back its recruitment.