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.
LLM prices will continue to rise and they’ll be stuck holding the bag
This is the part I’m waiting to see. My prediction; once AI providers have other companies by the nuts watch them hike prices and then we’ll hear CEO’s squealing about the unfairness of it even though they were the ones calling the shots.
Yup. And costs right now are rising while they’re still in the “get everybody hooked” stage of things, in no small part because they can’t survive at current prices. Anthropic is desperate to get to their IPO so they can have the warchest they need to actually become an established integral part of development pipelines and not just a fad.
This isn’t new. Even before AI, failing companies would use layoffs as a sort of loan on their quarterly numbers. If you lay off your employees, you’re really profitable for as long as you can continue collecting money for the work the employees had already done.
I don’t think it is just failing companies that are doing this.
COVID fundamentally broke the relationship of cost of living to the salary of certain jobs. You don’t need to pay salaries for people to live in Silicon Valley or Seattle if everyone in the department is full remote. So, if you are going to keep the job as full remote, you can base the salary on a more average cost of living and cut wages. You can use AI as an excuse for senior staff layoffs for investors, then quietly hire workers in more parts of the world with lower salaries.
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.
Exactly what’s happening. Job postings specifically exclude larger cities now and low ball the shit out of the offer
Yep. Place I’m at is in some sort of “hiring freeze”. They’re not replacing people who left. They also told the many (probably not strictly legal) contractors that they won’t be renewing them. It’s absurd.
Same at my place. They expect AI to pick up the slack but all that’s accelerating is incidents
le gasp
