Oracle lays off 21,000 employees and blames AI: the future of work is already here

What happened?

According to an investigation by Gizmodo, Oracle reduced its workforce by approximately 21,000 employees during the last fiscal year. The company has indicated that part of these cuts are due to the implementation of artificial intelligence in its internal processes. Although Oracle has not broken down how many layoffs correspond directly to AI, the message is clear: automation is replacing jobs. This announcement comes in a context where Oracle reported revenues of $53 billion in its last fiscal year, with an operating margin that has improved thanks to cost reduction. The company, which employed more than 143,000 people at the beginning of 2023, has seen its workforce reduced to about 122,000 employees, according to company data. Oracle's decision is not isolated: it is part of a broader trend in the tech industry, where companies like IBM have already announced a halt to hiring in positions that could be replaced by AI in the coming years.

Why is it important?

This case is relevant because Oracle is not a small startup, but a tech giant with more than 140,000 employees. That a company of this size explicitly blames AI for layoffs sets a precedent. Additionally, Oracle is heavily investing in AI for its cloud products, suggesting that the technology not only affects internal workers but also transforms the labor market of its clients. According to Gizmodo, Oracle is using AI internally and spending money to support AI everywhere. This duality reflects a strategy that prioritizes operational efficiency and competitiveness in the cloud market, where it competes with Amazon Web Services (AWS) and Microsoft Azure. Oracle has allocated $4 billion in capital investments for 2024, mainly in AI infrastructure and data centers. The impact on employees is not only quantitative: layoffs have mainly affected sales, technical support, and database administration departments, roles that AI can partially automate. For Oracle users, this could translate into greater efficiency in services, but also a reduction in direct human support.

Consequences for the sector

• Normalization of AI-driven layoffs: Other companies could follow Oracle's example and justify workforce cuts with automation. In fact, according to a report by Challenger, Gray & Christmas, in 2023 layoffs linked to AI in the United States increased by 500% compared to the previous year. Companies like IBM, Google, and Microsoft have already announced similar cuts.
• Pressure on tech workers: Roles such as database administrators, technical support, and cloud operations are at risk. A Goldman Sachs study estimates that AI could replace the equivalent of 300 million full-time jobs worldwide, although it will also create new positions. In Oracle's case, layoffs have been concentrated in profiles with repetitive and predictable tasks.
• Investment in AI as a priority: Oracle is redirecting resources toward AI, which can increase its competitiveness but also reduce its workforce. The company has increased its R&D spending by 15% year-over-year, reaching $7 billion, with a focus on artificial intelligence and machine learning. This contrasts with staff reductions in traditional areas.

What should readers know?

Oracle's layoffs are not an isolated case. Companies like IBM, Google, and Microsoft have also made cuts linked to automation. IBM, for example, announced in May 2023 that it would pause hiring for about 7,800 positions that could be replaced by AI in the coming years. Google, for its part, eliminated 12,000 jobs in January 2023, and although it did not directly attribute it to AI, it did point out that automation would play a key role in future efficiency. Microsoft laid off 10,000 workers in 2023, and its CEO Satya Nadella has spoken openly about how AI will transform job roles. For tech professionals, the key lies in reskilling: skills in AI, data analysis, and cybersecurity will be increasingly in demand. A LinkedIn report shows that job postings requiring AI skills grew by 75% in 2023. For companies, the challenge is to balance AI efficiency with social responsibility. The International Labour Organization (ILO) has warned that automation could exacerbate inequality if labor retraining policies are not implemented.

"Oracle is using AI internally and spending money to support AI everywhere," notes Gizmodo, highlighting the duality of technology as a cost-saving tool and an investment driver.

Readers should watch Oracle's earnings reports and statements from its CEO, Safra Catz, for more details on AI's impact on employment. In the last earnings call, Catz mentioned that the company expects AI to generate $1 billion in additional revenue in the next fiscal year. Meanwhile, the debate over the future of work is intensifying. Unions and worker advocacy groups are pushing for regulations that require companies to report on the impact of automation on employment. In the European Union, the proposed AI Act includes provisions to assess the impact on labor rights. In the United States, President Biden has urged tech companies to ensure that AI benefits workers, not just shareholders. The Oracle case is a reminder that digital transformation is not neutral: it brings winners and losers, and society must decide how to manage this transition.