[adam_arthur]

Software companies are pretty uniquely positioned such that they have far more employees than are operationally necessary.

Not to say that those employees don't provide value, but the spread between operationally stable employment levels and current headcount is far wider than other industries.

Thus, more potential for large cuts.

[Solvency]

Ok but why?

[adam_arthur]

Because margin on core software products tends to be far higher than other industries.

For example, retailers tend to have single digit margins. Software products often have 50%+ and sometimes 70%+.

Thus lots of excess money to hire people that aren't necessarily operationally critical.

A retailer with a large excess of store associates would fail quickly, whereas a software company can often survive in perpetuity

[delfinom]

During COVID, software companies massively overhired, because the executives in charge went all "hurr durr, digital is the future boys! Nobody is going outside anymore!". Not to mention the government was handing out money like candy through various schemes complete with low interest rates. I believe Facebook (as example) alone went from a headcount from 40k to over 80k employees in just 2 years of COVID.

2022+ was the "return to normal" with online trends quickly reverting back to pre-COVID levels. This resulted in a sudden drop in online economics (such as ad spend) that could justify the bloated workforces.

Drastically increased interest rates to fight inflation also cut off the cheap money flow to companies that would previously burn it like crazy on "R&D" and the like.