Aviatrix CEO: Why ‘Nothing’s Wrong’ With AWS, Tech Layoffs

“Everyone just kept hiring, hiring and hiring, whether it made any sense or not. There was no downside to it. And all anyone cared about was growth at any cost,” Aviatrix CEO Steve Mullaney tells CRN.

Aviatrix CEO and longtime tech leader Steve Mullaney believes people shouldn’t be panicking due to the massive layoffs currently occurring in the IT industry, including recent tech layoffs at giants like Accenture and Amazon Web Services.

The amount of “over hiring” technology companies did over the past few years during the COVID-19 pandemic was put on check from Wall Street and the financial markets during the summer of 2022, he said.

“Everyone just kept hiring, hiring and hiring, whether it made any sense or not. There was no downside to it. And all anyone cared about was growth at any cost,” said Aviatrix CEO Mullaney (pictured) in an interview with CRN. “Then last summer hits. All of a sudden everybody then says, ‘We’ll now, hang on. That’s not the way the world works anymore. You actually have to be profitable.’ It’s going back to what’s normal.”

[Related: Why Accenture Is Laying Off 19,000 Employees: 5 Things To Know]

Mullaney leads Santa Clara, Calif.-based Aviatrix, a multi-cloud networking software company focused on driving cloud transformation and optimization. He was previously the CEO of Nicira and has held top executive positions for the likes of VMware and Palo Alto Networks.

AWS Layoffs

IT companies of all shapes and sizes have been conducting massive layoffs, starting in the second half of 2022 and continuing into 2023.

In March alone some of the largest tech companies in the world conducted large layoff rounds, including Accenture cutting 19,000 employees, Meta axing 10,000 staff and Amazon saying it would lay off 9,000 employees, including at AWS.

“My bet is AWS hired tens-of-thousands of people over the last year. I bet they way over-hired. So I wouldn’t view it as a weakness in AWS,” said Mullaney. “It’s not ‘Oh, what’s going wrong with AWS?’ No, nothing’s going wrong.”

AWS declined to tell CRN how many employees will be cut from the $85 billion cloud company.

In an interview with CRN, Aviatrix CEO Mullaney talks about why so many large layoffs are occurring in the tech industry right now, why partners and customers shouldn’t be worried about layoffs at AWS, and how Aviatrix is helping enterprises as cloud operations are being passed over to the networking team.

As a cloud company yourself who partners with AWS, what’s your thoughts on Amazon laying off hundreds, potentially thousands of AWS employees?

I don’t know what the exact numbers are, but Amazon hired, what, a couple 100,000 people over the last couple of years. My bet is AWS hired tens-of-thousands of people over the last year. I bet they way over hired.

So I wouldn’t view it as a weakness in AWS, ‘Oh, what’s going wrong with AWS?’ No, nothing’s going wrong. They way over-hired. They’re just coming back to normal.

It’s like when a company stuffs the channel. They push too many boxes into the channel. Right? And the channel is full with inventory. And then the company reports their numbers the next quarter, and it’s horrible. Why? Because they stopped stuffing the channel last quarter.

The real demand lines are still doing good. It’s just that they had all that inventory way up high. It’s going to bleed off and then eventually, you hit that demand line again. That’s just what happened with everybody.

So I wouldn’t look at AWS and say ‘What’s going on? What’s wrong?’ Nothing’s wrong. They way over-hired. They have to right-size now.

What are your thoughts on the tech industry, as a whole, laying off hundreds-of-thousands of people over the past six months?

I think everybody got ahead of themselves. Right? They got excited. During the pandemic they started hiring all these people.

The world was a very different world. Meaning, we probably would have kept on hiring if the financial markets hadn’t changed. So the markets before, it was all about growth at any cost. Who cares about whether you make money. Just keep growing and no one cares.

So guess what? If they’re not going to get penalized for hiring people, they hired people. No one cared—whether you’re a startup or a big company. So everyone just kept hiring, hiring, hiring, hiring, hiring, whether it made any sense or not. There was no downside to it. And all anyone cared about was growth at any cost.

Then last summer hits and all of a sudden everybody then says ‘We’ll now, hang on. That’s not the way the world works anymore. You actually have to be profitable.’ It went back to what’s normal. [These IT layoffs are] actually normal. That’s how business always is.

What we were doing for years was not normal. But because we were doing it for so long, everybody thought that was normal. We’re back to normal.

So you’re saying tech companies over hired because there was no downside to it, then the market changed last summer?

It all started in the summer when Wall Street said ‘No more.’ And as soon as that happened, ‘Boom’—that’s when you started seeing all the layoffs.

Everyone looked and said, ‘Oh, crap. I’m going to get penalized for not being profitable.’ So what’s the first thing that they do? You see Facebook [parent company Meta] fire over 20,000 people. You see Google firing people left and right.

If there’s no pain, if there’s no downside to [hiring a ton of people] they’re going to do it. So that’s what the whole industry did.

What people are figuring out, though, is sometimes, ‘We’re actually more efficient without all those people.’ Laying off is unfortunate for people’s lives and families and so forth. It’s truly horrible. But for companies, they’re capitalists.

For example, if you’re a salesperson—compensation drives behavior. For companies—valuation drives behavior.

Like, ‘If you don’t care that we’re going to hire a whole bunch of people, then we’ll hire a bunch of people.’ But if Wall Street and the market cares, then you’re going see it go the other way. That’s what I think you’re seeing. Wall Street said, ‘We now value profitable growth.’

What’s the biggest IT market trend happening right now?

Networking teams are now being handed the keys for cloud networking.

Enterprises cloud teams are now saying, ‘This is getting too complicated. This is getting too expensive. This is getting too important. I can’t handle it. Hey, [on-premise] networking guys. We need your help. Not just for on-prem or connecting in a direct connect, I need you to actually build the networking backbone, my cloud backbone, connect regions together, connect data centers to these regions, connect clouds together. I need you to own all of cloud networking because I realized that this is now business-critical to the company and I can’t handle it.’

That shift happened three months ago. Enterprises move as a herd. I guarantee you thousands of enterprises are going through that.

This is happening for two reasons: The scale of the cloud is actually now starting to show the limitations of native networking and security. And the business criticality of what they’re starting to put in the cloud is actually now starting to mandate that they need day-two operations, ‘I need visibility. I need security controls. I need troubleshooting. I need all these things that I used to have on-prem, I need it now in the cloud.’

It’s a maturity thing. After three or four years, enterprises are now realizing that the ‘good enough’ networking and network security of the CSPs [cloud service providers] is no longer good enough.

They need Aviatrix. That’s why they’re rushing to us. A lot of companies tried native constructs and now they realize it’s not working. … Aviatrix is giving them the visibility and control their IT team needs, but yet still maintain the agility for the developers in a cloud model. It’s perfect. It’s what we were designed for.