Why ‘moonshot’ projects are being cut

Leaders at major Tech companies are ditching giant “moonshot” projects to cut costs.

An article in New York TimesThe risks of working on the CEO’s pet project,” highlights an existing axis in Big Tech. Often, when the CEO’s big bet project fails, employees move to another role at the company and the business picks up on the bad idea. But as companies are now looking to cut budgets, employees involved in projects that can take years to turn a profit have found themselves among them. Mass layoffs.

For example: “At Amazon, teams work on the Alexa voice system, drones, and automated stores, all projects led by Amazon founder Jeff Bezos, who no longer runs the company. company, support,” according to the report. time. “At Google, it attacks projects like self-driving trucks and other things called moonshots that were championed by Larry Page and Sergey Brin, who also no longer run their companies.”

I asked Dan Ives, an analyst at Wedbush Securities who specializes in technology, for a review. Ives told me, “What’s happening right now is—the clock strikes midnight for Big Tech’s massive growth.

Before that, “they spent money like 1980s rock stars,” he said. Hiring has increased during a “rapid growth phase” over the past decade, Ives said. “That led to a moment of Band-Aid ripping, where a lot of moonshot or next-gen projects could easily have been cut,” he said. “And now these CEOs are making tough decisions they haven’t had to make since the 2009 financial crisis.”

But is getting rid of teams of highly skilled professionals a good move for the company in the long run? A recent Mercer report advises that if you are reducing the number of employees, it is important to “separate skills from work”. This means that even when non-device roles are eliminated, employees with critical skills are retained and reassigned to different areas.

I asked Ives his thoughts on that approach. “The massive headcount reductions that are happening in Big Tech are in older or less strategic areas,” says Ives. “Those employees can be transferred from one department to another. But I think what you’re seeing in this mass layoff is a prioritization of resources going on in the tech space.”

The big Tech companies combined have nearly a trillion dollars on their balance sheets, Ives said. “So there are significant resources that will be allocated to drive the next cycle,” he said. For example, “Apple and Amazon are now highly focused on where they spend their money,” he explains. “But from Apple’s AR [augmented reality] and virtual reality [virtual reality] For Amazon’s cloud building, as well as its artificial intelligence capabilities, it won’t stop.”

“I think the fourth industrial revolution is happening between the technologies around AI, ChatGPT, trams and the cloud,” said Ives. “Spending in the next generation sectors will really accelerate during this period Game of Thrones the ongoing battle between technology.”

And in this Game of ThronesTech talent may be more cautious in deciding whether to jump into their CEO’s pet project.

Sheryl Estrada

big deal

According to S&P Global Market Intelligence data, venture capital investments worldwide fell 64.7% in February to $17 billion from $48.22 billion a year earlier. The number of funding rounds involving venture capital has nearly halved (44%) to 1,150 rounds compared to 2,056 rounds in February 2022, research found. Total funds raised also fell from $19.46 billion in January through 1,197 rounds.

Courtesy of S&P Global Market Intelligence

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