It’s safe to say that 2023 has been an annus horribilis when it comes to layoffs across the technology sector. As business slowed after the COVID-19 pandemic, tech companies started bowing to investor pressure by correcting for recent over-hiring and cutting their biggest cost base: headcount. 

This initiated a devastating domino effect that has shown little sign of slowing down. At the time of writing, a massive 217,633 tech employees have been laid off this year by 857 companies, according to Layoffs.fyi, a website that tracks industry layoffs.

According to data from the technical interviewing specialist Karat, the majority of those layoffs have come from the biggest tech companies, otherwise known as MAMAA: Meta, Alphabet, Microsoft, Amazon, and Apple. When tracking the candidates interviewed by Karat from organizations experiencing mass departures, 66% came from Amazon, Google, or Meta. Pair that with a major lull in startup funding, and you get a squeezed jobs market unlike anything a lot of developers will have seen before.

The current tech landscape 

While some hiring managers will be skeptical of the quality of recently laid-off engineers, others might see a pool of previously inaccessible talent to dive into. One beneficiary of the big tech layoff wave has been the UK-based travel booking app Trainline. “There's been a number of Meta and Twitter hires that we've been able to make,” Gary Stevens, director of engineering at Trainline says, where he aims to give these engineers plenty of opportunities to continue to grow.

Trainline’s CTO Milena Nikolic joined in 2021 after spending 12 years at Google. “She was very clear on wanting to be in a fundamentally new environment,” Stevens says. “Somewhere where you can begin to flex that muscle when you’ve been in an organization that big for so long. Do you want to go and be a cog somewhere again? Probably not.”

Some companies don’t have this luxury, as hiring freezes are still common, making it more difficult than ever to justify hiring talent without a clear gap to backfill.

Karat data tells a different story, however. “We can see that the speed of hiring has accelerated in 2023 compared to previous years. Layoffs and the general economic climate are driving candidates to interview much faster,” says Patrick Wu, a senior insights analyst at Karat. So far this year, candidates are taking just five days on average to complete their interview, compared to seven days in 2022, as companies look to quickly hoover up talent.

Even in this climate, developers aren’t getting desperate. According to Karat, a 61% majority are staying at the same level when targeting new roles and 27% of candidates are looking to level up to senior job titles by moving to smaller organizations. That leaves just 12% who are willing to interview at lower rungs on the career ladder than before. 

Where are these candidates going?

Candidates who have recently been laid off are typically looking to stay in tech. Karat reports that 70% of engineers are going on to interview at other tech companies, particularly software-as-a-service (SaaS) or internet marketplace companies.

That being said, “right now is an excellent opportunity for non-tech companies to uplevel their engineering quality.” Wu at Karat says.

The close rates for these candidates in non-tech industries “are at their highest since COVID and average coding scores are high as the scores of laid-off big tech engineers seek their next roles,” he says.

However, just 30% of the candidates coming from companies impacted by layoffs have interviewed with non-tech companies, “indicating an opportunity for industries such as financial services and retail to improve their outreach to top candidates,” he says.

Miguel Baltazar, VP of Developers at the low-code developer platform OutSystems is seeing some travel in that direction. “In recent months, we have seen more software developers diversify into other industries such as finance, healthcare, and manufacturing – all of which are increasingly looking for ways to digitize and adopt new technologies,” he says. “The software engineer skill set is lucrative and not confined to traditional tech companies anymore.”

Tech hiring marketplace Hired reports that 78% of jobseekers with experience at big tech companies are currently targeting roles at a mid-sized company of 51-500 employees, 69% are targeting traditional enterprise roles, and 66% want to stay in big tech, where the size of total compensation packages will still be a big draw. The ones who miss out here appear to be smaller and startup-sized companies. 

Stevens at Trainline is seeing a tough landscape for startups right now. “The financing has become so difficult and the risk appetite so low, that at the moment, there aren't those startups out there taking big risks with tons of financing behind them,” he says.

Life after Shopify

LeadDev spoke to two engineers from Shopify about their experiences after being laid off in May. Though by no means the only company whose employee's have been hit by this wave, these cases provide a window into the wider challenges laid-off engineers are facing today.

Eric Xiao was laid off from his role as a Senior Product Engineer at Shopify in May and is still looking for work. “I am looking for a place I can stay for at least 3-5 years, where I can hopefully make more impact through others, that means maybe stepping into a staff, manager or above role,” he says. “The market is definitely slower, especially when you're the one applying to roles, versus when recruiters would reach out to you.”

Joel Davis was also laid off from his role as a Development Manager at Shopify in May. “I feel like the job market is tighter now,” Davis says. “I joined Shopify in 2021 when the job market was fantastic. Now I am having a much harder time even getting to the interview stage.”

Shopify gave laid-off employees a generous severance package and offered career counseling, which Davis took up. He has also continued to get support from some peers at Shopify and old managers from previous jobs, as he continues to look for work. “That has been really important to me,” he says.

Now, Davis has a pretty firm idea of where his next role will be. He doesn’t want to go back to being an individual contributor, as “that would be a big step back. My skill set has changed,” he says. Then, in terms of industry, he isn’t interested in staying in the tech sector. “It doesn’t excite me that much, I want job security, and big tech is easy come, easy go,” he says. That means targeting other industry sectors and smaller, mid-sized companies. 

The big sticking point is salary, where Davis has had to halve his expectations in response to the current job market. “I would rather be working at a lower number than not be working. Even with 30 years experience, the market just isn’t paying [what I expect].”

Become your own boss

While the data doesn’t show a mass migration to startups and smaller companies, there are still plenty of laid-off tech workers taking the plunge and starting their own businesses. 

According to an analysis by BizReport, 13 of every 100 people who recently lost their jobs have started their own companies, with ex-Meta employees being the most likely to go down this route, at a 1:3 ratio. Other firms with a strong laid-off-to-founder pipeline include:

• DoorDash at 30%
• Amazon 25%
• Flexport 24%
• Twitter 16%
• Shopify 15%

Notably, of those founders, software engineers were the most likely category of laid-off employees to start their own companies, with nine out of 100 startups being established by former software engineers.

On reflection

As with any attempt to put a group as diverse as software engineers into a single bucket, it’s difficult to draw any firm conclusions from this data. What is clear is that the job market is being squeezed at both ends: with big tech cutting headcount and startup funding drying up, there are fewer attractive landing spots for developers than there were this time last year.

Also, personal circumstances factor heavily in deciding where an engineer moves to. An engineer who walked away from their big tech role with a significant payout may have the luxury of taking their time to decide on their next move. Alternatively, someone later in their career may be less willing to start all over again in a different industry sector or at a smaller company, which might not be such an issue for a more junior developer.

“It’s about time of life,” ex-Shopify engineer Davis says. “I am ten years away from retirement and need to be socking money away for retirement, not burning through my savings.”

“I think anyone who is senior or above and with four or more years of experience should be fine in this job market. I see a lot of staff postings and a fair amount of senior postings, but very few, if any, junior postings,” his old colleague Xiao says.

What is clear is that demand for software engineers hasn’t suddenly gone away, despite the constant stream of bad news. "Even in a challenging economic climate, there is high demand across tech and non-tech companies for software developers and not enough to keep pace with it,” Baltazar at OutSystems says. “As the demand continues, IT decision-makers won’t be able to simply hire their way out of a talent gap. They will need to invest in technologies that optimize development productivity and reduce the workload strain on their teams.”

This means talented developers are mostly able to wait for a similar level of role to come up before deciding on their next stop, or have the luxury to decide for themselves if they want to join a smaller company, or even start one themselves.

Of course, that's a privilege not everyone has exposure to, especially if you are reliant on your employer to keep you in the country, but rest assured that software development skills are still in hot demand.