Layoffs Hit Some Big IT Services Firms: What's the Cause? -

Layoffs continue to spread across the IT services industry as multiple IT consulting firms implement job cuts. Some pundits -- including famed blogger Robert X. Cringely -- blame the layoffs on automation, and the accelerated shift from on-premises IT deployments toward cloud services.

But frankly, the layoff conversation isn't quite so simple, ChannelE2E asserts.

Among those making job cuts:

Deloitte is cutting 5 percent of its staff, or 2,500 workers, Bloomberg reports.
DXC Technology plans to eliminate 4,500 jobs, CEO Mike Salvino disclosed on the company's May 28 earnings call.
IBM is allegedly cutting thousands of jobs, including headcount reductions in the IBM Global Services business unit. IBM confirmed layoffs but did not disclose the number of jobs that have been eliminated.

The IT services layoff trend was first reported by Network World. The publication partially blamed the shift towards automation and cloud services for the job cuts. Dig a little deeper, and the famed Robert X. Cringely column predicts the end of IT contractors amid a never-ending trend toward more automation.

Why IT Contractors, MSPs Won't Go Away

I respectfully disagree with Cringely's view. IT contractors -- particularly the best-managed MSPs -- will march forward for decades to come. Sure, their service catalogs will change each time a new technology wave disrupts a previous wave. As automation commoditizes some basic IT services, MSPs will shift their focus to address their customers' latest innovation needs.

Of course, I must admit that cloud services have impacted some IT consulting jobs. But multiple variables are prompting the cuts, ChannelE2E believes.

In many cases, IT consulting firms and service providers are striving to maintain profitability during the coronavirus pandemic. That means closely managing expenses through at least late 2020 or perhaps even 2021. Even healthy technology giants like Dell Technologies, OpenText and VMware have confirmed various executive-level pay cuts and other cost management steps to maintain profit margins.

Actually, Public Cloud MSPs Are Hiring

Amid those talent and compensation challenges, there are bright spots in the IT consulting market. Indeed, many IT consulting firms -- particularly companies within our Top 200 Public Cloud MSP list -- remain in hiring mode precisely because they bet their business on monthly recurring revenues and IT project work aligned directly with cloud services.

Bottom line: On-premises IT project work will continue to feel the squeeze. Long live remote IT services that further accelerate automation and cloud services.