In 2018 we heard all kinds of hype from the technology sector; 5G autonomous vehicles, smart “X”, edge computing, various renditions of low-power platforms, and so much more. It is now 2019 and there is some interesting data that may suggest we are in for a bit of a struggle living up to what we have promised.
My thinking behind this is that I have seen some interesting data around a number of global metrics. I may be off base here but let us throw out some facts and talk about them.
One of the metrics that catches my attention is workforce adjustment. If all that is expected to come to pass in 2019 why are so many companies tightening their employee belts?
For example, Verizon is going to lay off at least 800 workers in its AOL and Yahoo group. That may not sound like much considering how many Verizon employs, globally. However, under the sheets, they are also “enticing” an additional 10,000+ workers with an separation offer effective by the end of March 2019. Verizon claims this is to “better positions itself for future growth.”
And, that is not all. Late last year, Verizon confirmed offering a “voluntary severance package (VSP)” to about 44,000 employees and transfer 2,500 to 5,000 IT staff to India-based Infosys as part of a $700 million outsourcing deal. This is part of their strategy to cut $10 billion in expenses by 2021. Such a sum is not pocket change, and in spite of all the outward commitment to 5G, behind the scenes perhaps they are seeing something out there that frightens them. This could be their way of hedging against a train wreck, if projections for 5G and other platforms fall short.
This is in the wireless space. Looking at the autonomous vehicle space, Apple’s bid to enter the autonomous vehicle space has just suffered another setback. They have downsized Project Titan by 200 employees and are restructuring that space as well as changing the leadership.
And, just about a year ago IBM underwent a rash of layoffs, including Watson, cloud and sales staff in both the United States and Europe. This, following a similar scenario in 2017.
SpaceX is laying off 10 percent of its workforce, some of it in their satellite Internet venture, citing the need to conserve resources in light of the many challenges in this and the rocket segment. As well, Tesla will be laying off seven percent of its workforce. This is explained by Elon Musk as being a pullback from expectations from 2017 and 2018 that did not occur.
Ericsson and Qualcomm are a couple of more companies laying off workers. Ericsson is struggling with a turnaround and part of that was a 10,000 employee reduction late in 2018. Qualcomm, also struggling with legal and takeover issues, is saying it will lay off a total of 1,500 employees across its San Diego and Bay Area locations to help meet a cost-cutting target of $1 billion.
And of course, let us not forget AT&T. After hiring 17,000 employees in 2017 and 20,000 in 2018 (of which 10,000 other jobs were cut in 2018), they are cutting at least 16,000 call center jobs this year.
So, what does all this mean? While I am not an economist, I have been around long enough to understand basic economics. What this tells me is what I have said all along; projections for emerging technologies have been overstated and now the realities are sinking in, for a number of reasons.
Consider; China’s economy hitting the brakes, Brexit woes, the unpredictable actions of the U.S. government, instability in countries like Venezuela, the volatility of stock markets, coupled with a general slowdown in global smartphone sales, setbacks in the next set of 5G standards and autonomous vehicles, etc. It is probable that the lofty technology predictions of 2018 may not materialize quite as expected.
For example, and there are many like this, Nvidia said it expects Q4 2018 revenue to be $2.2 billion instead of its previous guidance of $2.7 billion, a downgrade of around 20 percent. They point at deteriorating macroeconomic conditions, particularly in China. And, Apple reported just under $52 billion in revenue from its iPhone business, a 15 percent drop from the year-ago quarter.
To aggravate that, for five consecutive quarters now, the global smartphone market has registered year-on-year decline, marking the first time it has shrunk on annual basis since the first iPhone defined the category in 2007. Another case has Nokia reporting only 3 percent revenue growth in Q4 of 2018. It is also pessimistic about 5G’s rollout in the near future.
Granted, deploying new technologies is always costly and there are bumps in the road. Companies are willing to spend the money if they are confident things will progress, somewhat, as predicted. However, they will also pull back if they sense real progress consternation. Therefore, I believe we are seeing organizations pulling back because they are not as confident as they were, in 2018, that these emerging platforms will move as quickly as some predicted.
On top of all that, while the U.S. economy seems to keep going gangbusters, some warn that this is due for some adjustment as we have been given a taste of, recently. Consumer confidence is showing some signs of slipping after the holiday season and the unusually long bull market is also being questioned by some as to how much longer it can continue.
All of these elements affect emerging technologies. If everything is going smoothly and there are no hiccups, things generally progress as predicted. But the last couple of years’ worth of hype in 5G, edge computing, autonomous vehicles, and other segments may have been overreachingand reality is setting in. It will be interesting to see how 2019 will bring into perspective.