Commentary: Grab layoffs show tech investment landscape has changed

SINGAPORE: The Jun 20 announcement that Southeast Asian ride-hailing and food delivery app Grab will cut 1,000 jobs has reverberated across the regional tech ecosystem. The job cuts, equal to 11 per cent of Grab's total workforce, are the largest since 360 employees were let go at the height of the pandemic in 2020.

The latest round of layoffs might initially appear as a symptom of turbulent times for the tech sector. Did Grab, previously steadfast amid industry-wide layoffs, simply delay the inevitable?

Upon closer inspection, Grab’s job cuts more accurately represent the firm's proactive adjustment in the face of changing market dynamics.

While post-pandemic recession fears, persistent high inflation, rising interest rates and the ongoing Ukraine invasion have undoubtedly dented consumers' spending confidence, Grab avoided retrenchments, freezing pay raises and tightening expense budgets instead. The firm might have been insulated due to the inherent necessity and popularity of its services in the region.

But the recent layoff indicates a change of course. Grab CEO Anthony Tan emphasised that the move is not a desperate bid for profitability but rather a strategic reorientation in response to changes in the business landscape, namely the increasing costs of capital and generative artificial intelligence (AI).

A NEW ERA FOR TECH SECTOR

There's little doubt that we are at the cusp of a new era in tech, where generative AI will play a central role. Thanks to investor interest in AI, tech stocks in early June saw their largest inflows since February, with firms like chipmaker Nvidia enjoying a 30 per cent rise in shares.

The growing ubiquity of AI will demand companies reassess their workforce requirements, skill sets and operational structures. This kind of transformation often leads to job disruptions and reallocations.

In the broader context, recent job cuts across the global tech sector underline the continued digital transformation sparked and accelerated by the pandemic. Now that interest rates and operational costs are high, investor sentiment has shifted from valuing growth at all costs to demanding a clearer path to profitability.

Markets are grappling with the double-edged sword of digital innovation: The boon of increased efficiency and the bane of potential job losses.

Recently, Meta CEO Mark Zuckerberg credits Twitter owner Elon Musk for kicking off the trend of letting middle managers go. Mr Zuckerberg even commented that this trend is “good for the industry”. 

As a result, firms like Grab are under increasing pressure to tighten their belts and adopt more sustainable business models. The evolving landscape also underscores the importance of tech reskilling and upskilling.

Yet, this is often easier said than done. A 2021 survey conducted by UOB showed that 90 per cent of employees aged between 18 and 65 in Singapore believed they will need to reskill or upskill. The issue is how.

The rise of generative AI does not spell an outright threat to human jobs but indicates a shift in the nature of work. As routine tasks become automated, human resources can be better utilised for higher-level strategic and creative roles that machines cannot replicate.

The real challenge for businesses and individuals lies in navigating this transition smoothly, underscoring the importance of retraining initiatives and educational programmes aimed at fostering the necessary skills.

MORE TROUBLE LURKING FOR TECH?

The broader question is whether Grab's recent decision to conduct a layoff is an indication of more widespread trouble lurking in the Southeast Asia tech sector.

It's worth noting that Grab operates in a particularly competitive market segment. The company is a superapp, offering a large range of services, each with its own set of competitors.

Furthermore, Grab's large size and broad scope make it especially susceptible to wide market shifts such as those mentioned by Grab CEO Anthony Tan. The tech sector remains a hotbed of innovation and a vital engine of economic growth. These developments, though disruptive in the short term, could steer the industry towards more sustainable growth and resilience in the long run.

In the meantime, all eyes are on Grab as it navigates these choppy waters. The market seemed to embrace Grab’s downsizing as a good thing for its bottom line. Grab's shares were up as much as 5.6 per cent in premarket trading after the announcement was made.

Perhaps the takeaway here is that adaptability is an important success factor in an ever-evolving tech landscape. Other companies in Singapore and the region ought to adapt and evolve in line with tech advancements and changing investment landscapes. 

Dr Jonathan Chang is CEO of Fintopia Indonesia - a digital lending fintech unicorn. He is also a lecturer, public policy advisor and an award-winning researcher.