Zendesk announces 300 job cuts to cut costs

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CRM software provider Zendesk has decided to lay off 300 employees from 5,450 of its global workforce to reduce operating expenses, a recent filing with the US Securities and Exchange Commission (SEC) showed.

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The decision comes just months after the company was acquired by a consortium of private equity firms for $10.2 billion. “This decision (the layoff) was based on cost reduction initiatives aimed at reducing operating expenses and accelerating Zendesk’s focus on key growth priorities,” the company wrote in an SEC filing.

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In a separate press statement, Zendesk’s executive team took responsibility for the job cuts and said the company was backtracking on ways it had previously invested in “hiring growth” long before the business grew.

“…we grew our team very quickly based on revenue growth expectations, which was not practical. As an executive team we take responsibility for this,” the company said.

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The statement described how Zendesk’s top management tried various measures, such as closing over 100 positions to try and address its bottom line, but was unable to address the issue. .

The roles impacted by the layoffs were set on five strategic priorities, the company said, “to optimize our processes and systems, reduce duplication of efforts, increase our expansion of control, and build on our enterprise opportunity.” Including rebalancing our roles towards the go-to-market.” We continue to manufacture and distribute attractive products to our customers.”

Layoffs cost Zendesk $28 million

The layoffs are estimated to set Zendesk back about $28 million, primarily due to costs incurred on severance pay and employee benefits, the SEC filing showed.

Of the total estimated cost, the company expects to spend $8 million in the fourth quarter of 2022.

As part of the layoffs, Zendesk said it would provide outgoing employees three months of basic pay along with one week’s pay for each year of full service.

Other benefits include a pro-rata portion of the employee’s annual bonus payable at Target, two months of equity award vesting, health insurance benefits coverage, and job search support resources.

Tech firms continue to lay off

The CRM software provider’s decision to lay off around 5% of its workforce comes at a time when other tech firms such as Salesforce, Meta, Twitter, Microsoft and Oracle have announced job cuts in the wake of economic headwinds.

On Wednesday, Meta, the parent company of Facebook, Instagram and WhatsApp, said it was preparing to cut thousands of jobs, affecting 13% of its global workforce.

Salesforce, another CRM software provider, also announced massive layoffs this week, cutting at least hundreds of jobs from its 73,000-person workforce.

Last month, Microsoft said it would lay off about 1,000 employees. Cloud services provider Oracle has also continued to lay off employees globally over the past few months.

Tech industry prepares for more layoffs

The announcement of thousands of job cuts in the past few weeks may not be the end of trouble for the technology sector. Analysts believe that the worst is yet to come.

“It’s a good bet that tech companies that haven’t laid off employees are considering carefully whether to do so. More over the next few months,” Forrester principal analyst JP Gounder said in a statement. It would not be surprising to see layoffs, especially in firms whose financial year ends on December 31.”

Gounder said job cuts were the result of these companies trying to set the finances up for success in 2023. “Macroeconomic concerns—some driven by rising interest rates, others driven by the war in Ukraine, high fuel costs and supply chain issues—are prompting these moves in anticipation of lower demand.”

Layoffs, according to the analyst, also point to the skill challenges being experienced by many employees.

Gounder said positions that don’t require “substantial” IT skills will be more difficult to find jobs than those considered to be top talent in the technology sector. “Many laid off technical workers have skills that would be valuable in other areas. Almost every company regardless of industry is now a “technology firm” that relies on software developers, engineers and IT talent. So top tech talents who lose their jobs will find other positions, most likely. ,

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