Vendor bosses pour cash into AI with IBM and Dropbox slashing staff headcounts

Both vendors are among those to have recently announced major shifts towards AI investments amid employee job cuts

Artificial intelligence, and more specifically the monumental global influence of ChatGPT, has taken the tech world by storm, causing a paradigm shift in the way companies are viewing jobs.

Today analyst house Gartner published the findings of a poll of more than 2,500 executives which found that 45 per cent reported that the publicity of ChatGPT has prompted them to increase AI investments.

Moreover, 70 per cent of bosses said their organisation is in investigation and exploration mode with generative AI, while 19 per cent are in pilot or production mode.

"The generative AI frenzy shows no signs of abating," said Gartner distinguished VP analyst, Frances Karamouzis.

"Organisations are scrambling to determine how much cash to pour into generative AI solutions, which products are worth the investment, when to get started and how to mitigate the risks that come with this emerging technology."

IBM and Dropbox choosing AI over people

Talk of robots carrying out everyday jobs instead of people have usually been discussed in jest more than concern.

However, as technology has rapidly advanced and more organisations look to optimise costs amid a tough economy, some companies are turning these light quips into reality.

This week, $60.5bn-revenue vendor giant IBM told Bloomberg it was taking the "human" out of some human resources and other back-office jobs that AI and automation can do instead of people.

IBM CEO Arvind Krishna told the news outlet he plans to suspend or slow hiring for about 26,000 non-customer-facing back-office roles, a tenth of the company's total workforce.

Krishna said he "could easily see" 30 per cent of those roles - 7,800 jobs - replaced by AI and automation over the next five years.

In a statement to CRN US, an IBM spokesperson said the company does not have a "blanket hiring ‘pause' in place."

"IBM is being deliberate and thoughtful in our hiring with a focus on revenue-generating roles, and we're being very selective when filling jobs that don't directly touch our clients or technology. We are actively hiring for thousands of positions right now," the statement read.

Krishna also told Bloomberg that despite announcing a cull of about 3,900 people from its workforce (representing 1.5 per cent of its global employee base), the vendor has hired about 7,000 people during the first quarter.

The IBM boss also stated he believed until late 2022 that the US could avoid a recession. Now, however, he predicts a "shallow and short" recession toward the end of 2023, according to Bloomberg.

Dropbox cuts

Big Blue is not the only one announcing such dramatic internal changes, with file hosting service powerhouse Dropbox revealing plans to lay off 500 employees, (16 per cent of its global workforce) to free up investment for future growth and momentum around AI.

Dropbox CEO Drew Houston said in a message to employees: "I want to recognise the impact this decision has on Dropboxers who are affected and their families, and I take full ownership of this decision and the path that led us here.

"While our business is profitable, our growth has been slowing."

"The AI era of computing has finally arrived," Houston added. "The opportunity in front of us is greater than ever, but so is our need to act with urgency to seize it."

In an ideal world, Houston said Dropbox would simply shift employees from one year to another. However, he said its "next stage of growth requires a different mix of skill sets, particularly in AI and early-stage product development. We've been bringing in great talent in these areas over the last couple years and we'll need even more."

In addition to its shift towards AI innovation, Houston also said the 500 layoffs are, in part, due to the "economic downturn," which has put pressure on Dropbox customers.

"In some areas, investments that showed promise before the downturn have more limited potential today. In others, we haven't been executing consistently or managing performance as tightly as we need to," he said. "So we've made more significant cuts in these areas in order to free up investment in our future growth."

Cost optimisation upping AI investments

Despite ongoing economic headwinds, only 17 per cent of executives indicated cost optimisation as the primary purpose of generative AI investments, according to Gartner's research.

Customer experience was the most common primary focus of investments, cited by 38 per cent of respondents.
As organisations begin experimenting with generative AI, many are starting with use cases such as media content improvement or code generation, Gartner said.

The analyst firm added that, while these efforts can be a strong initial value-add, generative AI has vast potential to support solutions that augment humans or machines and autonomously execute business and IT processes.

"Autonomous business, the next macrophase of technological change, can mitigate the impact of inflation, talent shortages and even economic downturns," said Karamouzis.

"CEOs and CIOs that leverage generative AI to drive transformation through new products and business models will find massive opportunities for revenue growth."