Despite massive layoffs in the tech industry over the past year, one CEO is in hiring mode.
Fred Voccola, the CEO of Miami-based software company Kaseya, discussed why the industry is struggling and how his business is avoiding pink slips on "The Big Money Show" Tuesday.
"What we're finding in the tech sector is a lot of the technology companies overextended themselves. And the primary reason for it is their customers," Voccola told FOX Business' Brian Brenberg.
"Most of the buyers of technology, if you think about a LinkedIn or a Microsoft or a Facebook, the majority of their customers are large enterprise companies. And those enterprise companies have spent the last 15 years digitally transforming themselves or investing huge amounts of money to make them digital-first companies. We're kind of at the end of that stage now. So the technology companies haven't properly adjusted their OpEx or their spending to account for that. So they're seeing a slowdown in spending from their customers, and they've realized that they're overextended. So they're cutting back pretty aggressively," he explained.
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Mass layoffs at companies including Amazon, Meta, Salesforce, and most recently LinkedIn rocked the tech sector over the past year, leaving thousands without a place to work.
Voccola believes part of the problem lies within labor costs. According to the Employment Cost Index (ECI), U.S. labor costs rose 1.2% in the first quarter of 2023 and 4.8% year-over-year from March 2022 to March 2023.
"In the last nine months, they've [labor costs] still gone up. I think we're going to see them go up for the next year or two. The labor costs are pretty high," he said.
However, certain regions of the U.S., including South Florida where his company is headquartered, are not seeing a rapid increase in labor costs, Voccola noted.
"Depending geographically where people are situated, the rate of increase is slower. For example, in Silicon Valley, the rate of increase is astronomical. We're a Miami-based company, so we have a little more reasonable labor rates. But the rates of labor are still going up."
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Voccola went on to explain that he moved the company from California to the "very business-friendly" Miami where it has expanded to do business in more than 10 countries.
"You have a really motivated workforce and a very cost-effective labor force and a great business state," he said.
While the pandemic changed office dynamics, the CEO said he has maintained an in-office workplace.
"It builds a culture of accomplishing a goal," Voccola said. "A common goal when you're around your colleagues every day, instead of staring at a zoom in your living room, doing your laundry between your meetings, it allows you to focus more on the task at hand."
