Unacademy's Cost-Cutting Measures Highlight the Harsh Realities of the Startup World

The startup world is not always sunshine and rainbows, and Unacademy's recent announcement of laying off 12% of its staff is a stark reminder of this fact. Despite the company's rapid growth and popularity, the edtech startup has been forced to make some tough decisions amid turbulent times. With the COVID-19 pandemic wreaking havoc on the economy and changing the way education is delivered, Unacademy's move highlights the challenges that startups face in adapting to a rapidly changing business landscape. In this post, we'll take a closer look at the reasons behind Unacademy's layoffs and explore the broader implications for the tech industry.

Reasons behind Layoffs in Unacademy

The IT sector has been hit hard by a wave of layoffs in the past year, as companies face slowing revenue growth, rising costs, and uncertain market conditions. The latest victim is Unacademy, an online education platform that announced on March 29 that it will lay off 12% of its staff, or about 300+ employees, citing "strategic realignment" and "restructuring". 

According to Gaurav Munjal, the CEO and co-founder, this decision was made in order to improve the profitability of their core business. Employees who are leaving will receive a severance package that is equal to their notice period plus an extra month's salary. Additionally, for those who have been employed at Unacademy for at least one year, their vesting will be accelerated by one year.

Turmoil in IT Sector 

Unacademy is not alone. According to data compiled by Layoffs.fyi, a website that tracks tech layoffs, more than 140,000 tech workers have lost their jobs so far in 2023, across 500 companies. Some of the biggest names in tech, such as Meta, Amazon, Microsoft, Accenture Google, IBM, Disney, GitHub, SAP, and Salesforce, have also announced significant job cuts this year.

Why Layoffs?

Why are layoffs in IT not stopping? What are the factors behind this trend? And what can IT workers do to survive and thrive in this turbulent environment? Here are some possible explanations and suggestions.

1. Social contagion: One reason for the widespread layoffs in IT is that companies tend to imitate what others are doing, especially when they face uncertainty and ambiguity. This phenomenon is known as social contagion, and it can lead to irrational and harmful decisions. For example, Stanford business professor Jeffrey Pfeffer argues that layoffs are often ineffective and counterproductive for improving company performance, as they increase costs, reduce morale and productivity, and damage reputation and customer loyalty. However, many companies still resort to layoffs as a quick fix, because they see others doing it and they want to signal strength and competitiveness to investors and analysts.
2. Technological disruption: Another reason for the layoffs in IT is that technology is constantly evolving and disrupting existing business models and practices. Companies that fail to adapt and innovate quickly can lose their competitive edge and market share to new entrants and challengers. For example, cloud computing, artificial intelligence, blockchain, and 5G are some of the technologies that are transforming various industries and creating new opportunities and threats for IT companies. To survive and thrive in this dynamic environment, IT companies need to invest in research and development, acquire new skills and capabilities, and diversify their products and services.
3. Economic slowdown: A third reason for the layoffs in IT is that the global economy is facing a slowdown due to various factors such as inflation, supply chain issues, trade wars, geopolitical tensions, and the COVID-19 pandemic. These factors have reduced consumer spending and business confidence, leading to lower demand for IT products and services. Moreover, these factors have also increased the operational costs and risks for IT companies, such as higher wages, taxes, tariffs, regulations, and cybersecurity threats. To cope with these challenges, IT companies need to optimize their costs, improve their efficiency and quality, and expand their markets.

What can IT workers do?

The layoffs in IT are not likely to stop anytime soon, as the sector continues to face uncertainty and volatility. Therefore, IT workers need to be prepared for the worst-case scenario and take proactive steps to protect their careers and livelihoods. Here are some suggestions:

1. Update your skills: One of the best ways to increase your employability and value in the IT sector is to update your skills regularly and learn new technologies that are in demand. For example, you can take online courses or certifications on platforms like Coursera or Udemy that offer courses on topics such as cloud computing, artificial intelligence, blockchain, or 5G. You can also join online communities or forums where you can network with other professionals and experts who can offer advice or referrals.
2. Build your portfolio: Another way to showcase your skills and achievements in the IT sector is to build your portfolio of projects or work samples that demonstrate your capabilities and creativity. For example, you can create a website or a blog where you can display your work or share your insights on various topics related to IT. You can also participate in hackathons or competitions where you can solve real-world problems using technology. You can also use platforms like GitHub or LinkedIn where you can upload your code or resume.
3. Expand your network: A third way to improve your chances of finding a job or a new opportunity in the IT sector is to expand your network of contacts who can offer support or guidance. For example, you can attend events or meetups where you can meet other professionals or potential employers who share your interests or goals. You can also join online groups or platforms where you can connect with mentors.

While these decisions can be painful for those affected, they are necessary to ensure the long-term sustainability of the business. It remains to be seen how the tech industry will weather this storm, but one thing is clear - adaptability and resilience will be key in the years to come.