Bosses betting on AI to slash headcount and boost margins are discovering an uncomfortable truth: the strategy isn’t working.
New research from Gartner lays out the problem in stark terms. The analyst firm surveyed 350 global businesses - all with annual revenues above $1 billion, all piloting or deploying intelligent automation - and found that around 80 percent had cut staff as a result.
The returns? Elusive. Companies that reduced their workforces were just as likely to see negative outcomes or marginal gains as they were to generate any meaningful return on investment (ROI).
The conclusion? Layoffs don’t create returns, they just create vacancies.
“Many CEOs turn to layoffs to demonstrate quick AI returns; however, this disposition is misplaced,” said distinguished VP analyst Helen Poitevin and lead researcher on the study. “Workforce reductions may create budget room, but they do not create return. Organizations that improve ROI are not those that eliminate the need for people, but those that amplify them,” she added.
Those of us around for the days when off-shoring was some kind of magic pill will remember how it wasn’t. Outsourcing to some guy in Delhi, Ohio, doesn’t seem so different; apart from time zone, maybe.
Ai isn’t the cause for this but it certainly was the enabler.
Part of the issue with off-shoring was that a lot of the work was contracted to different companies. Nowadays, large companies own the satellite offices so they have better control over the work.