Tech Industry Hit By Massive Job Cuts as Firms Replace Workers with AI

Tech Industry Hit By Massive Job Cuts as Firms Replace Workers with AI

Some employees are already feeling the effects of the significant investments made by tech companies in artificial intelligence.

Several tech companies are making drastic changes to their workforce. This follows the rapid adoption of artificial intelligence (AI). Some employees, as a result, feel the effects of this adoption, as these tech companies are investing significantly in AI.

SAP, in addition, has joined the list of tech companies making changes to their workforce following AI adoption.

SAP Joins Tech Companies as it Drops Workers

SAP is the latest tech company to cut jobs as it makes investments in AI. The German software company made the announcement this week that it is investing about $2 billion to integrate AI into its business. This is part of what is called a “transformation program.”

The German company, additionally, said it plans to restructure 8,000 roles. Some of the workers will be trained to work with AI, while others will be laid off.

At the end of 2023, SAP had 107,600 employees. This means that the restructuring will affect about 7% of the workforce. The company, however, said it expects to employ about the same number of workers at the end of the year as it does now.

Significantly, SAP is known for producing cloud products. The company said the changes were necessary to ensure that ‘SAP’s skillset and resources continue to meet future business needs.”

According to the CEO, Christian Klein, SAP is opening the next chapter. With the planned transformation, they are intensifying the shift of investments to strategic growth areas, above all, Business AI.

Following the restructuring, the company projected that operating profit would rise to about 10 billion euros ($10.9 billion) by 2025. The company, however, did not detail what new services would be developed.

Other Tech Companies Cutting Down on Workers

Google laid off hundreds of workers from its ad sales team as it further invested in AI concurrently. The announcement was made last week. In a memo to affected employees, Google’s chief business officer, Philipp Schindler, referred to the “profound moment we’re in with AI” in announcing the cuts. Google, however, did not directly attribute the layoffs to AI.

Additionally, Microsoft is slashing jobs as it invests billions in ChatGPT maker OpenAI. Duolingo’s language learning platform, similarly, acknowledged a 10% decrease in its contractor workforce at the end of 2023. They, however, denied that all of the cuts were related to an increase in AI usage. Duolingo also added that it uses AI to generate sentences and translations. They also acknowledged that AI can help contractors work faster.

Several other companies are redirecting their investments into AI while cutting spending in other areas. This has led to many workers being laid off.

A Columbia University business professor, Oded Netzer, warned against linking rising corporate investment in AI to worker layoffs. According to the professor, 2023 was the year of generative AI, and companies invested heavily in it.

He continued by saying that there are some jobs they’ve decided to invest less in, and they may be laying off workers. But it also means the jobs they’re hiring are related to AI. That’s not to say AI replaces jobs.

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