In 2022 and 2023, the IT industry saw significant upheaval as the largest global Big Tech companies laid off over 300,000 employees. The pandemic-induced bubble of mass and excessive hiring burst. As a consequence, technology companies have had to make strategic choices to meet their most critical needs. Are we already witnessing a crisis in the Polish IT industry? Agata Miller – Business Unit Manager, responsible for IT recruitment at recruitment agency Devire – answers this and many other questions.
Layoffs in Big Tech
In recent years, major technology corporations (including Amazon, Meta, Microsoft, Twitter, Salesforce, and Shopify) have laid off hundreds of thousands of employees worldwide. According to data from the layoffs.fyi portal, in 2022, layoffs affected nearly 165,000 people, and in 2023, this number increased to over 225,000.
This comes just a year after Silicon Valley reached its peak, with Big Tech companies being valued in the trillions of dollars, and employee salaries soaring.
This global trend has brought about significant changes not only in North America but also in Europe. Can we already speak of a crisis in the Polish IT industry?
Pandemic-Induced overstaffing takes its toll
At the peak of the pandemic, we witnessed a significant surge in technology adoption, as almost all aspects of our lives moved online. This sudden shift created an immense and immediate demand for IT solutions.
The rapid increase in online activity resulted in record profits for technology companies and sparked overstaffing as they struggled to keep up with the growing demand.
“In 2021 alone, twice as many people were hired compared to previous years. Technology firms believed this would be the new normal, so they expanded their teams and hoped to sustain this growth pace,” says Agata Miller, Business Unit Manager at Devire.
Cooling off in the Polish IT Industry
However, with the easing of restrictions, many people have returned (at least partially) to their previous way of life. As the situation normalized, the enormous demand for IT services slowed down. Subsequent years brought about reductions following the excessive hiring in the technology industry during the pandemic.
It’s important to consider that these mass layoffs didn’t occur out of nowhere. They took place during a period of economic slowdown, higher interest rates, inflation, and an impending recession.
“In practice, this is market adjustment rather than a crisis. The changing conditions in the IT industry can be seen as a form of normalization. It’s a correction resulting from earlier excessive and unplanned hiring in the technology sector. This will lead to the long-awaited stability after a rapid and unforeseen growth,” says Agata.
This situation is also driven by a decrease in the number of new investments. Due to the suspension of some projects that would ensure full employee utilization, organizational changes within companies become necessary.
“Compared to the situation two years ago, there is a noticeable decline in the number of new clients interested in undertaking complex IT projects. The current socio-economic situation and changes in energy, raw material, component, service, and labor costs mean that companies, if they decide to invest in new technologies, do so very cautiously,” Agata adds.
Redirecting expenditure toward AI
Companies are reducing spending on new projects while simultaneously redirecting it towards innovations related to artificial intelligence, which is taking the entire industry to a whole new level. The hyperdynamic development of AI generates the need for specialized personnel capable of harnessing the potential of these solutions. Nearly every organization must have a qualified IT team capable of not only developing these tools but also ensuring their secure utilization.
Software houses respond to Big Tech layoffs
Companies specializing in custom software development for clients, known as software houses, are also experiencing losses due to the crisis in Big Tech. Faced with more cautious business decisions, these entities are focusing on cost optimization, which may result in the freezing of many investment decisions.
“Some technology firms operate in a situation of considerable uncertainty regarding expected profits. Therefore, some of them are planning new hires and team expansion cautiously. They are closely monitoring the situation and concentrating on maintaining key positions,” comments Agata Miller.
New Trends in the Polish IT Job Market
The question remains, what impact do layoffs from across the ocean have on the Polish IT industry?
Stabilization of salaries in the IT Industry
Currently, we are witnessing a correction in the salaries of IT professionals. The first half of 2023 has brought stability to wage levels in the Polish IT job market. However, the most experienced employees can still expect an average salary increase of around 8 percent.
Fewer job offers for junior IT professionals
The most noticeable change is the reduced demand for entry-level and junior IT specialists. Unfortunately, finding employment for recent engineering graduates will be significantly more challenging than before.
“New technologies like artificial intelligence also contribute to these changes. AI tools influence programming methods, especially those performed by younger programmers. Many employees may have to accept lower salaries or seek positions below their level of experience,” says Agata.
Recruitment for expert positions remains unchanged
However, it can still be argued that the IT market remains in fairly good shape. There are companies actively recruiting new specialists for higher-level and expert positions, which still have high demand.
“It is safe to assume that there will be a return to employment growth in the IT industry soon, although it may be less intensive than in 2021 or 2022,” says Agata.
End of wage pressure
The changes currently taking place in the IT industry are likely to put an end to inflated salaries in the field.
“In recent years, the IT industry, more than any other, faced wage pressure due to a shortage of specialists and high demand for IT solutions. As a result, wage costs were rising disproportionately to the generated revenues. Employers hope that the current situation in the industry will contribute to reducing wage pressure. However, candidates, due to inflation, are reluctant to revise their salary expectations,” says Agata.
Growing need for stability
In times of uncertainty, employees are beginning to value stability. As a result, employment based on employment contracts is gaining many new supporters. However, this does not mean that the popularity of other forms of employment is waning. Currently, approximately half of IT specialists in Poland opt for a B2B contract.
End of remote work?
Interestingly, there is also a noticeable decrease in the number of job offers for fully remote work. Employers increasingly want to see their employees in the office. Currently, a hybrid mode dominates. This is an optimal way of working, combining office work with remote work.
Companies that offer only office-based work will continue to struggle to find qualified employees.
“IT Salaries in Poland – The first half of 2023” is essential reading for HR experts who want to learn about current IT salaries and stay up-to-date with the changes in this dynamic sector. Download now our IT salary report.