Warning sign or temporary image?

At the beginning of this year, the biggest employment problem facing Ireland’s tech sector was a talent shortage.

The demand for IT professionals was high which led to competition among employers to hire employees.

“I overpay for very ordinary candidates,” I remember the Irish president of a large multinational technology company telling me a few months ago.

But during the summer things started to change.

High inflation, geopolitical turmoil, rising energy costs, fears of a global recession and a sell-off in the stock markets have caused many tech companies to rein in their spending and announce big plans to cut costs in preparation for the uncertainty ahead.

In May, it was announced that PayPal was planning to cut 300 jobs in Dublin and Dundalk with the company saying the decision was made to help it expand its business and get it ready for the next chapter of growth.

Other tech companies followed and announced their plans for “The Next Chapter.”

In August, US payment processing company Yapstone warned of potential job losses among its 65 workers at the company’s international headquarters in Drogheda.

A few weeks later, Canadian investment firm Clearco said it was closing its Irish operations, with 50 jobs lost. Just six months ago, it announced plans to create 125 jobs in Ireland.

Earlier this month, Ireland-based software company Intercom announced 49 job losses, 23 of them in Ireland, as it prepares for a “low-growth market environment”.

On Tuesday, Patreon, the membership and payment platform for independent artists, said it was closing its Dublin office and offering relocation packages for nine Dublin employees to join its US-based teams.

The company said that over the past nine months, the technology industry and the entire economy have changed dramatically.

Also in recent days, US cloud communications company Twilio has announced plans to cut 11% of its global workforce in a bid to cut costs.

260 people work at the company’s European headquarters in Dublin and it is feared that some of them may be affected by the job cuts.

Although no major redundancies have been announced, some of the major tech companies headquartered here have paused plans to expand their office space.

In July, Facebook owner Meta said it was halting completion of its new Dublin base in Ballsbridge because it was reviewing its real estate needs globally.

Also that month, Twitter said it was resizing its Dublin office, which houses the company’s European headquarters. This move saw the transfer of the fourth floor of the office building and subletting it to another tenant.

Globally, several major tech companies have announced hiring freezes while reassessing their future plans.

A new study released on Tuesday revealed a sharp drop in hiring intentions in Ireland’s technology, ICT and media sector.

The ManpowerGroup Employment Prospects Survey showed that the sector’s net employment outlook for the fourth quarter was down 25 percentage points from the previous quarter.

“Companies that have boosted hiring confidence in the technology and information technology sector over the past year need to cut staff rather than hire new staff to achieve growth,” said John Galvin, Managing Director, ManpowerGroup Ireland.

“Layoffs in the tech and IT sector became more prominent in the last quarter, a shift driven by big tech companies that may have over-hired to get out of the pandemic as their markets reopened and now find themselves with a surplus of staff, which is now forcing them to Withdraw new employees and withdraw some job offers.”

Overstaffing during the Covid-19 pandemic appears to have become a problem for some companies.

Business has boomed while the world was in lockdown and people were forced to do everything online but now that things have reopened some companies are realizing that they have too many employees.

In July, Canadian e-commerce company Shopify announced a 10% cut in its global workforce and acknowledged that its rapid expansion, spurred by the Covid boom in the business, had not worked.

“Ireland was the largest Shopify base outside of Canada, and in 2021 the company announced plans to hire more than 2,000 engineers globally,” said Elaine Burke, editor of Silicon Republic magazine.

“This decision was made when Shopify was reporting pandemic-driven e-commerce growth, but when they laid off ten percent of their workforce, the CEO blamed it on a false bet that growth would continue to accelerate,” she added.

In the technology sector, hiring slowdowns and layoffs seem to affect some job categories more than others.

“I don’t think you will see major job cuts across engineering and cybersecurity because at the end of the day, the program and cybersecurity are still underskilled but what we are seeing are reductions in the sales, marketing, supervisor, support and human resources teams,” said Ms. Burke.

Technology Ireland, the Ibec group that represents the technology industry, warned this week of signs of a further slowdown in hiring.

The group called on the government to use the 2023 budget to focus on attractors such as talent and skills, taxation and improved infrastructure and to make Ireland Europe the global regulatory centre.

“Ireland remains the heart of Europe’s tech industry, but we can’t be complacent and must continue to focus on increasing our attractiveness, especially at a time when companies are reviewing hiring and, in some cases, slowing down the hiring process,” said Una Fitzpatrick, Director of Technology Ireland .

“While inflation and infrastructure pressures are affecting the economy, there are signs of a deepening slowdown in employment.”

“The 2023 budget should address issues of inflation and infrastructure gaps with the potential to further weaken growth. This budget should enhance our ability to thrive in the future, by investing in skills, focusing on research and innovation and strengthening our organizational capabilities,” said Ms. Fitzpatrick. added.

IDA Ireland says a technological reset is underway amid an uncertain global landscape, but despite this, hiring and staffing at Ireland’s largest tech companies has remained strong so far.

The agency notes recent announcements of new investments and job growth at companies such as Intel in Kildare, Analog Devices in Limerick, Ericsson in Athlone, Diligent in Galway, Kaseya in Dundalk and IBM in Dublin, Cork and Galway.

“Rising interest rates and challenges in global energy markets are cause for concern, and there have been limited job losses in some companies, as a result of increased caution in the face of increasing global uncertainty; however, IDA remains cautiously optimistic regarding the pipeline,” a spokesperson said. IDA Ireland “Technology Investments in the Coming Months”.

“This is driven by a number of trends including the increasing pace of digitization which has led to a corresponding increase in demand for IT hardware and software.”

“The sustainability agenda is also a strong trend that will continue into the future,” the spokesperson added.

So is the current slowdown a temporary indicator or a sign of dark days ahead for Ireland’s all-important tech industry?

Silcon Republic’s Eileen Burke thinks what’s happening now is a correction, especially for those companies that have over-expanded.

“Many companies are preparing for a more difficult work environment, so it makes sense for them to reduce the number of employees. It is very difficult for people who have lost their jobs but the companies do not seem to be doing anything dramatic, rather they are responding in the current economic environment.”

While there has been a slowdown in hiring in the technology sector, there is still employment growth, driven mostly by smaller companies taking advantage of the fact that the big players have rolled back their hiring plans.

This means that startups and startups may now find it easier to attract employees and grow their businesses.

It’s all about the cloud when it comes to the IT industry, and this particular sector probably has a positive side.