Traditional services are losing ground to emerging cloud computing and mobile telephony related services. This trend is across Silicon Valley.
Analysts and recruiters have opined that Cisco Systems’ laying off of 5,500 employees is unlikely to be the last round of distribution of pink slips in Silicon Valley, since hardware companies are struggling to keep up with the rapid strides made by technology shifts.
According to analysts, traditional players whose bread and butter is selling chips, servers, computers, routers and such equipment are especially vulnerable since cloud computing and mobile apps are increasingly becoming popular.
This announcement by Cisco comes in the wake of Intel’s announcement in April wherein it said it would lay off 12,000 workers. In January Dell Inc has also said it would shed 10,000 employees and will make further such cuts after its acquisition of the data storage company, EMC Corp.
According to Challenger, Gray & Christmas Inc., an outplacement consultant, so far technology companies have laid off 63,000 jobs.
“The hi-tech industry is going through a serious deconstruction,” said Trip Chowdhry, an analyst at Global Equities Research. “There is more pain to come.”
As per Chowdhry, more job cuts can be expected as companies continue to subscribe to “super cloud” services from the likes of Microsoft Corp and Amazon.com Inc.
These services manage databases, software, hardware and networks and eliminate the very need for workers to manage various technology layers, said Chowdhry.
As per analysts, Hewlett Packard Enterprise Co, IBM Corp, Dell Inc. and Oracle Corp could be the next to shed workers.
“Tech incumbents are all bracing for the tremors of change. We fully expect a lot of collateral damage as this plays out – not just with Cisco,” said Glenn O’Donnell, an analyst at Forrester Research.
Software services typically command higher margins in comparison to hardware since they bring in recurring revenues and there are “fewer people involved on the cost side,” said Roger Kay, an analyst at Endpoint Technologies Associates.
“Nobody wants to be laid off but if job elimination is going to happen, 2016 is not a bad time for it to happen,” said John Reed, Senior Executive Director of the tech recruitment firm Robert Half Technologies.
Hardware engineers are on the firing line.
“Nobody wants hardware designers and engineers. There was a moment in time when devices were hot and (action-camera maker) GoPro made everyone excited about devices, but a lot of those types of companies died on the vine,” said Andy Price of executive search firm SPMB.
He went on to add, currently “hardware engineers are probably the least attractive skill set imaginable in the Valley.”
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