The information technology industry has shifted dramatically over the past two decades. Once a hub of long-term stability, it’s now marked by regular restructures and layoffs. In 2024 alone, over 150,000 tech workers lost their jobs worldwide and by late 2025, another 100,000 followed in the U.S. alone. Despite continued demand for cloud and AI skills, job security is eroding. The reason lies in the economics and the metrics behind how hardware and software companies operate.

Hardware: Thin Margins, Tight Levers
Hardware vendors face persistent margin pressure. Manufacturing costs, supply-chain volatility, and commoditised pricing limit flexibility. Industry data for 2025 shows gross profit margins averaging 30–45 %. CEOs in these environments must still satisfy investors watching indicators like earnings per share (EPS), sales per employee, and profit per share. When margins tighten, the quickest way to improve these metrics isn’t innovation, it’s cost reduction.

Layoffs become a convenient lever. Cutting staff immediately lowers operating expenses, making quarterly results and profitability ratios look healthier. Investors often reward these moves, pushing stock prices up in the short term. The result is an incentive structure that priorities optics over long-term capability.

Software: High Margins, More Resilience
Software companies, especially those operating subscription or cloud models, enjoy higher gross profit margins than hardware vendors. Their near-zero distribution costs and recurring revenue give them more flexibility to invest in people and innovation. While software vendors are not immune to layoffs, they generally offer greater stability and longer-term investment in human capital because their financial structure supports it.

When I transitioned from a hardware vendor to a software company, the difference was immediate. The organization was growing fast, taking market share left open by VMware’s exit from certain segments. The higher margins allowed leadership to focus on development, customer success, and innovation rather than constant cost-cutting. It was a conscious decision to align my career with a business model that rewards growth, not contraction.

AI and the Next Chapter
this is a topic for another blog ………………………………………..

The Bottom Line
In today’s IT world, job stability is tied to a company’s margins and market position. Understanding your employer’s economics and aligning with those built for growth is the smartest career decision you can make.