The Great Belt Tightening of Southeast Asia Tech Companies
There is no doubt that the last couple of months have been a layoffs bloodbath as companies are now tightening their belts in this downturn. No industry has been spared – from Crypto.com’s recent layoffs to Shopee and SEA Limited’s recent consolidations. Even global companies such as Tesla have axed local operations.
One thing to keep in mind is that – as in any downturn – not all businesses are affected equally. Profitable and cash flow-positive businesses are in a good position despite changes in consumer demand. Prudent tech startups with strong unit economics will continue to attract funds and therefore are likely to continue hiring. On the flip side, early-stage companies that do not have a strong cash position or are very dependent on liquidity (i.e. Buy Now, Pay Later (BNPL), credit or lending) or inventory-holding businesses like retail, and e-commerce will be negatively impacted.
It is uncertain how long the bearish environment will last with the Fed just announcing its highest interest rate increase since 1994, rampant inflation expected to continue, and a recession any day now. In Southeast Asia, we are seeing tech companies preparing and taking various measures to adjust to this current climate. Despite the downturn, strong tech talent will still be attractive and highly sought after as the talent crunch remains. Startups and enterprises that are in a solid financial position can take advantage of the talent pool.
We see that companies in Singapore are reevaluating their hiring plans or slowing down hiring decisions if they are not actively laying off or conducting hiring freezes. Yet, tech talent remains in demand. The only shift is that hiring managers are more prudent and selective about which roles to fill on a priority basis, and about their choice of candidates.
Looking at the bigger picture – digital transformation remains a trend for larger enterprises, while resilient startups continue to build and scale. Interest in setting up remote tech teams in Indonesia and Vietnam to solve the tech talent supply scarcity in Singapore also remains high.
We have recently seen large cuts across the board by edtech firm Zenius, fintech company Lummo and e-commerce company JD.ID.
Overall, a wave of companies is cutting back on non-revenue generating roles. Yet, roles such as engineering, data science, and product roles continue to be in high demand. These tech talents are being offered 20-25% salary increments from 15-20% in the current climate.
Some startups who conducted mass hiring before this market correction are now conducting mass layoffs, starting with those still under probation. The layoffs have deterred high-quality talent from accepting offers despite significant pay increases.
To ride the downturn, we are also expecting more employers to implement fixed-term contracts (e.g. one-year contracts). We also see companies shifting to hiring on a project basis where possible. For smaller or bootstrapped companies in Indonesia, now is an opportunity to hire talent from top tech companies that are downsizing or freezing headcount.
Enterprises with strong business moats will continue to hire and expand. Due to the current tech talent supply constraint, we do see that the demand and supply gap will narrow. At the same time, we do not expect a sudden oversupply of tech talents relative to jobs, particularly for
mid to senior talents.
We still see local startups who are expanding their business regionally still hiring cross-border talent. However, companies who are only in one market that were hiring cross-border talent to save costs have shifted back to hiring locally as the cost arbitrage for hiring outside Malaysia is not very different.
We do not expect mid to senior compensation to drop from current levels. However, junior talent compensation and salary growth will likely be affected.
In Vietnam, mass layoffs have yet to trickle down to companies locally. In a Glints survey we conducted with 30 startup and SME tech companies, we found:
We do expect some layoffs or hiring freezes to occur in Vietnam in the coming months though it will likely be more of a correction for tech companies that aggressively hired during Covid-19. We do not expect this to be a long-term and fundamental change in the hiring landscape in Vietnam.
In Southeast Asia, we are seeing two trends. One – prudent early-stage tech companies are taking advantage of the current layoff environment in hiring high-performing talent. Enterprises will still hire top tech talent to support digital transformation. Two – high-performing talent that were laid off are now starting their own companies across industry verticals.
In the end, we believe the current layoffs to be a correction in the market rather than a long-term trend. Given Southeast Asia’s strong macros as a digital-first region, increasing middle class, and strong local tech talent, we remain positive that Southeast Asia will continue to be a market to bet on.
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