Oracle is reportedly the latest tech giant to make large-scale job cuts. The layoffs will number in their “thousands”, according to a report by The Information, as the company seeks to make $1bn in cost savings.
The cuts are the latest in a string of tech industry layoffs. However, Oracle’s new cuts are reportedly focused on its customer experience (CX) division, and the company is “cutting off an underperforming arm of the business”, an analyst told Tech Monitor, not reducing its capacity across the group.
So far job losses at Oracle have been concentrated in San Francisco and the Bay Area, according to The Information, but further cuts in Canada, India and parts of Europe are predicted. Staff have taken to LinkedIn and Twitter to discuss the layoffs, with almost all citing “organisational restructuring” as the reason their jobs were cut.
Oracle job cuts: CX shortcomings
Oracle’s job cuts reflect the shortcomings of its CX division, says Bola Rotibi, research director for software development at CCS Insight. The division sells systems that allow customers to build customer-facing websites, manage their customer data, and personalise offerings.
“A lot of the commentary is saying that particular business unit hasn’t done as well as Oracle was hoping,” Rotibi says. “It could be because [creating a] customer experience solution is difficult and unless you’ve got the kind of solution that has an integrated story and real push, such as Salesforce, then you’ll struggle and Oracle hasn’t necessarily done well.”
This is not a sign of company-wide failings, Rotibi said. In its most recent financial quarter, Oracle grew revenue by 5% to $11.8bn, bouyed by a 36% increase in cloud infrastructure revenue.
“All the cloud operators are seeing strong numbers and that is because it is where clients are investing,” Rotibi explains. “Customer appetite is geared towards infrastructure and cloud with a focus on digital transformation.”
Nevertheless, economic uncertainty has prompted many tech companies to cut or freeze their employee numbers, Rotibi added.
Last week, e-commerce platform Shopify cut 10% of its workforce, saying that e-commerce demand has fallen back since the pandemic. Many ‘convenience economy‘ start-ups, such as grocery delivery providers Gorillas, have also cut headcount as the cost-of-living crisis weighs on consumer spending.
And while the tech giants have mostly posted revenue growth in their most recent financial reports, “every single one of them has some degree of hiring freeze or layoffs in place,” she said. Their reasons include the strong dollar, economic uncertainty, the impact of the war in Ukraine, the threat of inflation, supply chain issues and China’s continued lockdowns.
Meanwhile, there are signs that IT spending may be slowing. CCS Insight’s own research has found that the proportion of IT managers increasing their budget by 15% or more has fallen from 35% in 2021 to 20% this year. A recent Institute of Directors poll of business leaders found that the majority are pessimistic about the economic outlook and likely to slash investments, including in IT.
As a result, IT providers are likely to look to cut costs by trimming underperforming units, Rotibi says. “When you look at Oracle’s layoffs in customer experience, they are not a surprise.”
As well as driving IT providers to cut costs, inflation is also leading to price increases. Last week, it was reported that Oracle’s prices are expected to rise by 8% in the US, in line with inflation.