By Brody Ford | Bloomberg
Software companies are under pressure to invest in new artificial intelligence capabilities without denting profits. One increasingly popular strategy to keep costs low is to shift hiring outside the US.
Salesforce Inc. and Workday Inc. are simultaneously cutting jobs and highlighting the cost savings from adding workers internationally.
RELATED: Workday chops 600-plus Bay Area jobs, one-third of worldwide layoffs
“Do we need to hire everybody in San Francisco?” Salesforce Chief Operating Officer Brian Millham said at an event hosted by Barclays Plc in December. “Or can we think about other locations that are cheaper where we can get really incredible labor like India and Mexico City.”
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Workday chops 600-plus Bay Area jobs, one-third of worldwide layoffs
US-based employees at Salesforce dropped to 51% from 58% in the four years ending in January 2024. In early 2023, it announced a reduction of roughly 8,000 jobs. Earlier this week, Bloomberg reported that the San Francisco-based software company would cut more than 1,000 positions in large part to make room for new AI-focused hiring.
Since late 2022, tech companies have been under pressure from investors to focus on margins after years of prioritizing revenue growth. The emergence of generative AI has complicated the picture — software vendors must balance investing in expensive new capabilities without hurting their profitability.
Human resources software maker Workday, based in Pleasanton, California, announced Wednesday that it would eliminate about 1,750 jobs. Last year, Chief Executive Officer Carl Eschenbach emphasized a new focus on expanding margins, saying hiring more in countries like Costa Rica would help in this effort.
Eschenbach also highlighted using more AI in call centers or finance departments. About 65% of Workday’s employees are in the US, according to a person familiar with the figures who asked not to be identified discussing internal information. Like many peers, Workday doesn’t disclose a geographic breakdown of its workforce.
Salesforce and Workday both declined to comment. Each company has also worked to increase international sales, but still count on the US for the majority of their business.
Others such as PayPal Holdings Inc., ServiceNow Inc., and Synopsys Inc. also have reported a sliding share of US-based workers in recent years. PayPal’s portion of employees in the US slipped to 38% from 53% over a five-year period ending in 2023.
Checkr Inc., a platform that helps companies with background checks of new employees, said it saw a 42% increase in 2024 from a year earlier in the volume of international hiring among a cohort of thousands of tech customers.
The jump largely cames from pressure on profitability, said CEO Daniel Yanisse. He said that historically companies have considered global talent for lower-level work, but now employers see “there’s amazing global talent also for high-level work like engineering or financial professionals.”
Some companies, like Oracle Corp., have long employed most of their workers outside the US. Microsoft Corp., the world’s largest software company, has about 45% of its workforce overseas.
“On the operating margin side — I just think the rigor in which we’re inspecting the business and how we’re running it is different than it’s been run in the past,” Workday’s Eschenbach said during a September conference. “Historically, a lot of it has been here in our headquarters in California. Now we have a global footprint of offices around the world that gives us access to a lot more talent.”
–With assistance from Matthew Boyle.
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