I'm always a bit confused by profitable companies with (presumably) large reserves laying off lots of people. I get that they want to remain profitable. But sure 500ish people could be put to some use? A new product, a new market, a spinoff. Whatever? Are you telling me that no one in such a big, wealthy company of clever engineers has any use for a bunch of talented people?
It always seemed common sense to me that once a piece of software became stable and profitable you would need a much smaller engineering staff than when it was being built. The opposite seems to happens and orgs 10X their engineer headcount once they start making money.
It makes sense to keep some high performers and a few redundancies to stabilize/modernize it and make small improvements, but it feels like tech got really bloated with these massive corps who were trying to burn as much as they could to keep all the VC money flowing. Take like Uber having a team that built and maintained a chat app just for internal use, and every single big org having a bunch of teams responsible for various "some_dumb_name" that is the "custom X for 'Y'" where smaller teams just use the OS solutions to those problems.
> once a piece of software became stable and profitable you would need a much smaller engineering staff than when it was being built
This is not generally the case, except in monopoly situations.
Your software product generally has a competitor, and they're busy trying to make theirs better than yours -- whether with more features, better integrations, whatever it is.
So your staff size generally stays about the same in order to build more features desired by customers to prevent customers from switching to your competitor and you go out of business. And certain features, by themselves, can be more complex than the entire v1 of a product. And/or involve massive refactoring, etc.
The companies that get to reduce their team size are often because they're in a monopoly position, and then customers suffer because the software gets stagnant and the features they need don't get built. That's capitalism failing.
Also, something like an internal chat app isn't always a bad decision. If your company is above a certain size headcount, it can literally be cheaper to build small tools than to license them. Especially when you can more deeply customize and integrate them, which you often simply can't with off-the-shelf software.
>There is a good case to be made that what Dropbox sells is a commodity.
Is there? I argue Drive and OneDrive surpassed Dropbox a while ago. Box is dirt cheap if you came in early as well (I still have some 50 GB forever deal from like, 2012). And there's a dozen others if you look into it. It's not very hard to drop any one cloud storage solution (or all of them if you invest in a NAS setup).
The present value of your org is your old products, all futures gains are from new products. The tech industry is littered with tombstones of companies that sat coasted on the success of an older product. Conversely there's a fascinating habit of really smart people in the right environment (Google, Bell Labs, Xerox PARC etc) to create things of enormous value. Things that were just a side project include AWS, Slack, the transistor and transformer architecture. All these companies are really trying to be incubators for the next 100x thing.
What you are talking of is only possible in companies where the founder didn't take VC investment. Once you take VC money, you get on the treadmill of infinite growth to satisfy investors. That makes companies do strange things in pursuit of this impossible goal. Like hiring for the sake of showing growth in headcount, hiring people to branch into unrelated verticals, hiring people with big resumes just to say you have them on the team etc
Interestingly enough, I once worked at a company that saw how huge amounts of money could be made taking the exact opposite approach.
This all came about because this company had built a couple of hugely successful, and profitable, enterprise software products. So this company then decided to plow a ton of money into building out other products. The company was also pretty famous for having a high employee bar, and their college recruiting process was kind of legendary for attracting top CS and other tech grads.
However, this company discovered that building follow on successful products, even with lots of really smart people, is extremely difficult. As a not-perfect analogy, think of all the "one hit wonders" out there in the music industry. Beyond those one hit wonders, the vast majority of the rest are basically two hit wonders. Point being, once you've built a really successful product, even if you have tons of smart people, there is no guarantee that plowing money into another product will give you a positive ROI.
So this company realized this, and then saw there were a lot of other small-to-midsize software companies who were similar: they had one or two really successful products, but then were trying to use money from that to expand and grow into other areas, usually with little or no success. So this original company pivoted their business model: they went out to buy these "one hit wonder" software companies, immediately stopped any investment into other products, laid off as many people as possible and outsourced the operations and maintenance of the few successful products to low-cost locales (at the time, India and China) and then essentially just milked the subscription revenue until the product slowly petered out. That is, they weren't really investing in big new features in the product, but the product had a lot of existing customers who didn't (or couldn't) move off of it right away, so often they had at least a couple years of milking the existing revenue dry. I called it "the world's most successful and depressing business model".
My overall point in telling this story is that when you ask "Are you telling me that no one in such a big, wealthy company of clever engineers has any use for a bunch of talented people?", that often times the answer is "Correct!" People tend to underestimate how difficult it is to build successful products, even if you've already knocked one out of the park.
Google has killed products that could be entire companies if they weren't attached to the Search Ads firehose.
A $100 dinner could be an annual splurge if you're making minimum wage, and an arbitrary Tuesday if you have a quarter million dollar salary.
Executives think the same way about revenue streams. When they have one product that makes $$$$$ in revenue, they think "not worth my time" to consider another that makes $$. Really frustrating for the people making and using the lower revenue product, but it's why Google feels like a "billion users or bust" company.
> So this original company pivoted their business model: they went out to buy these "one hit wonder" software companies, immediately stopped any investment into other products, laid off as many people as possible and outsourced the operations and maintenance of the few successful products to low-cost locales (at the time, India and China) and then essentially just milked the subscription revenue until the product slowly petered out.
well that's just a dreadful experience. Couldn't innovate so they instead became a very alluring anglerfish with no intent to help stimulate the American economy at all. Successful and depressing business model indeed.
Such a shame how little respect tech gets unless we're spamming buzzwords to rich people. really ruined the reputation of "tech will make everyone's lives easier!"
It’s better for cash cow companies to acquire startups with PMF and real revenues. Let the market experiment and then pay for the successes. Investors and founders win, the company doesn’t waste it pretending to be a startup. Any other cash should be returned in dividends or buy backs.
Was this Insight Software? I usually wouldn't ask since you didn't volunteer the name, but seeing as throwaway is in your username I'd figured I'd ask.
> I'm always a bit confused by profitable companies with (presumably) large reserves laying off lots of people.
According to their financial statement, Dropbox has more liabilities than assets. So yes, they have a large cash reserve, but with an even larger debt offsetting it its hard to argue they are in a good overall financial position.
I had a product manager at Salesforce tell me he went around trying to build support for a new reporting product. He was eventually taken aside by some coworker and told they don't build new products at Salesforce, and bought companies instead.
And they did indeed later buy multiple companies, including Tableau, in that space.
Which can make business sense if you take into account both the probability of the project failing to deliver a competitive product (always high no matter how slick the pitch deck is) and the probability that it gets no traction in the marketplace even if it is as good as the competition. Buying an existing successful product and its customer base can be much lower risk even if it is the more expensive route.
> But sure 500ish people could be put to some use? A new product, a new market, a spinoff. Whatever? Are you telling me that no one in such a big, wealthy company of clever engineers has any use for a bunch of talented people?
I think a lot of the low hanging fruit in tech has been eaten up, bought up and consolidated, or actually was recognized as much more difficult and expensive than they actually thought. The leadership talent and vision in a lot of these companies is also painfully lacking. In short, to answer your last question: probably not. And I think they're terrified that Wall Street is going to notice.
I agree with both comments. ~500 can surely build some amazing tech, smaller teams have done more. I personally do think there's still a lot of relatively low-hanging fruit left, especially with the boom of possibilities due to AI, or simply what one can do with modern CPU/GPU performance, new browser APIs, modern tech factors, etc.
I also do agree and think leadership talent and vision in a lot tech companies is painfully lacking. This are the companies that could burn some money and use their wedge in the market to build some really cool things, but they wont. I guess to some degree, ironically, the money they're making might be part of the problem.
I mean, you don't hire 500 people to build something from scratch. You get at best 10 core leaders/founders for a tech, establish an MVP, then hire the other 490 to expand and scale.
Tho in honesty, 500 if overkill unless you really are tapping into some multi-disciplinary project that needs experts in a dozen backgrounds.
The "exhausted low hanging fruit" model IMO has been wrong since the industrial revolution. The fundamental problem is it's based on the heuristic of fixed demand + technology saturating the demand. It's really the opposite - technology is an ever expanding fractal, and the larger the surface area, the more things are needed. For example compilers are having a huge boom now because hardware is increasingly performance demanding and heterogeneous.
It's easy to find new uses for technology. The hard part is turning the new idea into a commercially viable product. And it's even harder to find a business model that doesn't destroy the product in the long term.
The whole is often more than the sum of its parts. A company is not just a bunch of people, but it's also the company culture and the established ways of doing things. It's common that a company can't make something work, but the same people in another company could, because they can organize their labor in a different way.
Software development is often an investment. Hiring a developer is often an investment. Most companies eventually reach the point, where the rate of investment slows down and the company chooses to return the profits to the shareholders. When the company no longer believes that it can invest the money more profitably than the shareholders could, it's rational to lay off people working in R&D and use the profits for dividends or buybacks.
Dividend buybacks aka stock manipulation. You are saying that it is logic that companies turn from making things to stock manipulation. That is a system that just doesn't work long term. I guess you are saying companies have a life cycle, and once it reaches the stock buyback phase they are basically dieing.
Why not? Some companies do try this. It rarely succeeds though. The reason is that re-education en-masse, restructuring of the chain of command, re-allocation of resources are hard. Most businesses at some point enter the phase where the inertia is the strongest driving force: they only need to apply a tiny fraction of initial force to keep the lights on. At this point, trying to restructure is bound to be very hard.
Maybe, if the company can foresee and realistically assess the problems it's about to face, it may gradually prepare for the transition. I've seen this happen at my friend's job at Dell storage division: some storage product failed, they tried to reshuffle the teams to start working on something else, with some code reuse from the previous one. It still didn't go well, and a lot of people were still let go (because the initial effort of developing a new product cannot really accommodate an army of various kinds of extra personal that's necessary for mature product). They sort-of survived, but with a huge loss.
Remember Better, the mortgage company? They were briefly notable for laying off 900 people on a Zoom call. However, no-one asked why a re-envisioned mortgage application/process was failing in the best possible market. My opinion is Dropbox most valuable commodity is the millions of Windows PCs with a system level scheduled task that is vulnerable to "hijacking"... basically they are a data stream.
It was not failing in the best possible market. Better was a successful lender for mortgage refinancing. Better struggled to establish itself within the purchase market which has far more complex relationships.
And once 30-year mortgage rates got to 5% or higher, the refinancing market basically dried up. Without much of a purchase mortgage business they basically had no business, regardless of how much better their technology was.
It may well be that there is no alternative. Maybe Dropbox did try everything, maybe tried to let those 500 people work on producing different products or on finding other sources of income, I don't know. And I get that it's important for a business to keep itself afloat. But it's a recurring phenomenon in larger tech companies that I find puzzling.
Many of the answers in this thread have been perfectly reasonable. And I'm probably kidding myself when I think that "if I were that CEO, I'd do things differently".
Five or 10 years ago, they were doing a lot of this. Dropbox Paper ("a collaborative online workspace that allows you to create, share, and edit documents and notes with your team") for one. It's still active but it never took off. I was just notified that there is some sort of migration taking place which is probably related to the RIF.
Dropbox was barely cash-flow positive (basically meaning profitable excluding equity compensation) when it had its IPO. It's been having trouble expanding from the consumer space into the business space, and I wouldn't be surprised if its profits are slim.
Also, they've repeatedly tried to create new products. Carousel, Mailbox, and others. Dropbox has had little to no success outside of its core business. While it does that core business very well, it has stiff competition, and the market seems to be already tapped out.
Those employees were costing more than the value they were creating.
If the marginal product of labor is lower than the marginal cost of labor, the company should reduce headcount. If higher, the company should increase headcount.
Whether in the long term this is net-beneficial for a given actor in the typical case, is at best unclear. This marginal-labor-cost/benefit-in-a-given-moment accounting misses a large proportion of the harmful effects of a layoff.
When a bunch of companies in one sector do it, it does lower wages and reduce labor power to e.g. demand better working conditions. That part, is a benefit for companies. But it's not the result of one company doing what's best for their particular situation—it's a result of coordination, even if only by the understanding that "this is what you do, when there's an excuse to, and especially when you see others doing it". It's merely best practice then, not... collusion.
Arguably the value they were creating was influenced by the direction and application that labor was directed at. Redirecting that available labor at something more valuable would fix that as well wouldn't it?
Yes, if there is something more valuable to redirect the labor to and my intuition is that there is not, I mean not in the Dropbox business.
2640 employees seems like a ridiculous number for a company like Dropbox. I work at a company that's about half of that and you wouldn't believe how many different services this company runs and I still think there's a lot of inefficiency.
If companies wanted efficiency, they coould probably spend $400k to 10 engineers and get the best of all worlds. That's going to be cheaper than hiring a team of 50 @100k of varying quality.
Except when the engineer leaves for a $500k postion. Companies basically moved towards this churn market in a way not as far off from an assembly line as you'd expect. They prefer some inefficiency if the cogs are easier to replace every 1-2 years.
Yes, but not in a way that blames the workers. If a product improves but margins don't (because say, interest rates), you have employees who all perfomed above expectations that can still get taken off because the current environment can't make money on anything through consumers (who are getting less buying power and cutting non-essential services).
I'd hope tech workers on a community like this could empathize with other tech workers in such an environment.
I feel like leadership and vision are lacking at DropBox, so they don't have any good ideas of what to do with the staff they've got.
They should be exploring new opportunities which leverage the skillset of their existing employees, this would diversify them from the effects of OneDrive and GDrive.
For example with AI alone we've seen an incredible number of new file services dedicated to just serving models, and DropBox has totally ignored that need.
Instead they regularly add bitsy, poorly implemented, "us too" features to DropBox which adds friction to common workflows - then provide no way to customise these features away for people who do not want them.
Perhaps to them they see this as evolving the product and keeping it relevant, but their approach doesn't address why Google and Microsoft are eating their lunch, nor does it take their eggs out of one basket.
But which people: the sales/marketing, the developers that actually make the product, across the board? At some point, development gets to a stable and solid product, so revenue increases come from staffing up sales/marketing. So does that mean you can reduce the devs to try and increase new users or that you've overstaffed the sales/marketing? Maybe there's just too damn many middle managers? Will the cutting be a surgical blade or a broad axe?
The company could put them to some use, or they could get capital and launch their own ventures. It's equivalent from a market perspective, except the one you suggest requires unnecessary coercion (forcing the employees to work on something they may not have signed up for).
At the end of the day, the american market place is distinguished in that venture capital, especially in tech, is very accessible. Being laid off seems to be a bonus in the hunt for VC money.
It's the same reason companies return dividends. Sure, they could use the money for R&D and launching a new product, or they could send the money to investors so that they can scour the marketplace for a new technology of their own choosing for investment. The first one unnecessarily takes investor money for a project they may not have signed up for, whereas the former maximizes their freedom to invest in what they find interesting
Often they target the lowest performers for such layoff. Of course they rarely succeed in doing that, but the idea is that these people should have been let go anyway but weren’t for various reasons.
> Often they target the lowest performers for such layoff.
In my experience, this is often an after-the-fact rationalization by people who "survive" layoffs to explain them, and a convenient justification by leadership for layoffs. If you've ever been in the room when layoffs are planned or discussed, the actual process is way more focused on blunt cost, personality of the people involved or on the chopping block, and is often practically a tossup considering "performance" is not really a clear or meaningful metric (actually, more often it's arbitrary for most companies --- they will find the metric they need to justify laying off someone). This phenomenon is greater the bigger the company and the more abstracted managers and leadership are from their lower level employees.
In many cases it can actually be inversely proportional to performance, since the one factor they can count in black and white is how much the person costs. Laying off someone making a TC of $500K probably feels like you're saving the company a lot of money, but its also possible the reason they were making that much is because they were more than twice as productive/valuable as the person making $250K. But salary and benefits are easy to quantify, and performance is not.
I've heard secondhand that a few layoffs of star players was as messed up as "well Suzy is pregnant, but we need to axe someone else to justifty it as being coincidental". It shouldn't be surprising at this point, but companies can and do go that far sometimes just to cover their tracks. slicing their nose off to spite the pimple.
Many times the marching orders were to fire the high earners, assuming that the remaining, less well compensated workers, could together do the same work for less.
Every new product or market usually also needs additional investments, maybe even new workers with relevant domain knowledge. And Dropbox did try new products and markets, but what if it's not working out? Should they continue until money runs out?
And some interesting part of this announcement is the mentioning of the grown overcomplex management. This kinda smells of some shrinking for health-benefits. For some reason or another, they grew into a wrong direction, and maybe now remove the unhealthy parts to be able to operate better.
I'm a libertarian in most things but I still don't like layoffs from profitable companies.
Like it's probably not good for our society that people have to up end their life every few years and probably move to find a new job.
Both my parents stayed in the same
job for their careers and it meant they could stay in the same place, have kids, build ties to the community, etc. Seems important if you want to not die out as a society.
> Like it's probably not good for our society that people have to up end their life every few years and probably move to find a new job.
The thing is, Dropbox is done (as in feature complete). Like when the construction of a building completes, many people are "laid off" because they aren’t needed anymore. Yeah, you need to keep some people around for things like maintaining the building, but not to the scale of the original workforce required to build it.
It is "good" that the excess labour is freed up to go work on the next "building". What may not be good is that the workers didn't think to associate with each other like construction workers do. Construction, being a much more mature industry, typically keeps a clear separation between the workers and the building so that then construction is done the entire excess group of people can be lifted on to the next project instead of all going their separate ways.
Software will undoubtedly go that way eventually. But it is, in the grand scheme of things, still early days for it as an industry. We haven't yet learned the lessons that older industries have.
Interesting insight about construction. I think you're right.
We see this ad hoc in software now. When there is a mass layoff, someone will go get a new job, and then try to bring on all of their previous coworkers. Or a group will go off and start a startup which (if they're lucky) will get acquired and they get to keep working together.
Which now makes me think, if you're a big company, maybe it behooves you to offer a highly functioning team a seed round instead of individual severances...
Software engineering, as profession, offers a very different kind of capacity compared to professions found in the construction industry, though. The physical resources for buildings are expensive and rare (land, material etc), whereas compute and storage are literally getting cheaper by the minute. The Silicon Valley dream of getting from garage to unicorn within months might be far from realistic, but still way more probable that in any other industry. Quick prototypes can be built in days and it isn't uncommon for graduates to finish their research with a viable business idea. I never seen that in my circle of architecture friends.
>he thing is, Dropbox is done (as in feature complete)
Dropbox is "done" but Dropbox didn't employe 2700 people just to work on dropbox.
They toyed around with other services, weren't as gamebreaking as dropbox, and in hard times (not necessarily for their business) they deided to just abandon those other experients or products. This isn't some "the job is done" scenario, it's "we're hunkering down for the storm that we pretend isn't happening out loud" scenario and people are still falling for the idea that "the economy is soaring". It's disgusting.
>It is "good" that the excess labour is freed up to go work on the next "building".
sadly there is no "next building" in these times. When everyone is "feature complete", you just have a purge, not a new opportunity.
>Software will undoubtedly go that way eventually.
given the 3rd wave of attempting to outsourcce large software out, and the AI bubble, I don't think companies are ever going to truly appreciate proper mature software. Just the bare minimum to pretend the machine is running until the next CEO deals with the fire.
> Both my parents stayed in the same job for their careers
My father was the same, BUT.. this is an INCREDIBLY risky thing to do career-wise in the modern era. Given how much tech advances and that we actually face international competition that a lot of our boomer parents didn't during their career, I don't see really any going back either.
Some of the worst layoff situations I've seen were guys who worked in the same company for 25 years.. long enough that their knowledge & skills was too company-specific, but not long enough to retire. Just because someone seems indispensable doesn't mean they are safe.
Having to drain savings for 1-2 years jobless after a layoff in the last 10 years of your career and reset at a probably lower salary can set back your retirement 10 years.
Fully agreed - yet, we as a society consistently and systematically trade (or let "others" trade) much more critical aspects of life, such as quality of air, water, food etc. for short-term profits, even though that very often has no clear/direct positive impact on any other comparably valuable aspects of our lives.
So it's no wonder that "some people losing their jobs and needing to move for a new one" is irrelevant, when the only goal is profit maximisation, even though we don't even understand what for.
Why do people still think like this? Have we not had enough layoffs these years from nearly all companies in tech with so many configurations to realize that this isn't just targeting new or incompetent people?
