The layoffs are adding up.
As big tech recalibrates in the face of economic uncertainty and post-pandemic growth deceleration, layoffs are occurring at a faster clip. Just this week, Microsoft announced cutbacks across multiple divisions. Meta, Twitter, and Snap are also laying off employees. More than 44,000 U.S. tech workers have been laid off in mass job cuts so far this year — and it’s only October.
While most of the discussion surrounding tech industry layoffs has centered around what will happen to the affected employees, the changes will almost certainly impact businesses that are SaaS customers, as well. Given how important enterprise clients are to SaaS providers, it’s likely that the brunt of the impact will fall onto the companies’ small and mid-size customers.
Why are big tech layoffs impacting small businesses, and what can business owners do to prepare?
For starters, SaaS providers tend to generate less profit from SMBs than larger, enterprise clients. Pricing tiers aimed at small and mid-size businesses have less wiggle room for profitability. At the same time, SMB clients also tend to need more one-on-one support than enterprise clients, who may have agencies working on their behalf. If tech firms make big cuts to their customer service teams, SMBs will be the first to notice the impact.
Some SaaS companies are already dropping their SMB customers, as belt straps begin to tighten. Brex, which lends money to startups, pulled out of the traditional small and mid-size business market entirely to focus on larger venture-backed clients, back in June. In explaining their decision, Brex executives placed the blame squarely on their own SMB customers, saying they had become “increasingly demanding” as market conditions worsened and that they had “flooded support lines” to the point where the company could no longer provide service to its higher-value customers.
“We got to a situation where we realized that if we didn’t choose one, we would do a poor job for both groups of clients … So we decided to focus on our core customers which are the start-ups that are growing,” said Brex Co-Founder Henrique Dubugras, in an interview.
Where Should SMBs Turn?
For the time being, companies like Brex are the outliers. The majority of SaaS companies are still serving small and mid-size businesses, and they have no plans to cut back on pricing tiers or layoff customer support teams. There is no reason for businesses to make major changes immediately. However, now is the time to start considering what might happen if certain SaaS providers do begin to cut back on their SMB offerings in the near future.
Given that the current economic situation could get worse heading into 2023, it’s not too early for businesses to consider how a shrinking tech industry might impact their own bottom lines.
- Self-service solutions are less likely to be impacted than SaaS platforms that require heavy hand-holding and continuous support. When evaluating SaaS options, businesses may want to consider platforms that function on a self-service model.
- Reputation is another consideration. Established SaaS vendors, known for being responsive and helpful, particularly to smaller clients, are often going to be the better option — especially for the time being.
Businesses should always consider the financial health and long-term viability of SaaS providers before adding any new platforms to their stacks. If market turmoil continues to worsen, then thorough vetting will become even more important as we move forward into the new year.
