The IT industry finds itself in a paradoxical position in 2025. Over 13,000 workers have already faced tech layoffs in 2025, yet the demand for technical talent has never been more urgent. By 2026, the International Data Corporation expects over 90% of global organizations to face IT skills shortage challenges—which could lead to product delays driving $5.5 trillion in losses.
This stark contradiction between ongoing workforce reductions and an intensifying talent shortage reflects a fundamental transformation in the technology sector. Companies are not just changing how many people they employ but also reassessing the skillsets they need.
Here are three factors driving this shift and how employers can optimize their IT hiring strategies in this challenging time.
1. The Maturation of Existing Tech Sectors
Let’s start with a key factor driving tech layoffs: The era of explosive growth for many Silicon Valley darlings is over.
Social media giants—including TikTok, Meta, LinkedIn, and X—have made some of the most significant job cuts over the past six months alone. Other technology leaders, like Google and PayPal, are leveraging layoffs in pursuit of efficiency as pressure to cut costs grows.
These shifts are not anomalies. Just as direct-to-consumer brands boomed in the 2010s, only to crash or consolidate by the early 2020s, many tech companies are facing the headwinds of industry maturation. Organizations have shifted focus to cost optimization and automation, rather than innovation, sparking a decline in labor demand. According to Investopedia, “Price competition becomes much more relevant as product differentiation declines with consolidation.”
Paired with over-hiring practices in bullish markets and the growing prioritization of AI, it’s clear traditional tech recruitment was bound to face a slowdown at some point.
2. Emerging Technology Demands
So, what’s driving the continued growth in IT skills shortage? The emergence of new, disruptive technologies may be the biggest culprit. Artificial intelligence in particular has created a surge in demand for AI and machine learning expertise. In 2023, job postings seeking related skills increased over 1,800%.
Even organizations in maturing industries are often conducting layoffs to reprioritize hiring for AI innovation. But artificial intelligence isn’t the only high-growth tech sector right now. According to IBM, there’s also rapidly accelerating demand for experienced professionals in:
- Automation
- Cybersecurity
- Cloud computing
- Systems architecture
As older skills lose relevance, demand for expertise in these arenas is rising faster than upskilling can occur.
3. Economic Uncertainties
Even in companies with the potential for fast growth, it seems market volatility is holding back IT hiring and innovation—even sparking tech layoffs in some cases.
Investor pressures, wavering consumer sentiment, and the impact of a years-long high-interest, high-inflation landscape are all converging to cast doubts on labor spend. Our recent analysis of IT hiring trends revealed continued hesitance around recruitment, even after Fed rate cuts.
Beyond driving decreased hiring and layoffs, economic uncertainty is making it harder to retain top talent. According to Bankrate, job security worries increase the likelihood of employees quitting by 29% and job searching by 38%. Today, a job security concerns are reported among:
- 66% of IT services and data workers
- 85% of C-suite executives
- 42% of software developers
- 58% of full-time workers
As employee anxieties grow, so will turnover and the subsequent competition for qualified tech talent—hence a growing IT skills gap within companies, even in areas that should have enough professionals.
5 Steps to Strategic IT Hiring During Disruption
Companies can take proactive steps to optimize their IT talent strategies amid tech layoffs and the IT skills shortage. Here are five effective strategies:
1. Assess Your Current Workforce Capabilities
Before launching new hiring initiatives, organizations must understand their existing talent landscape. Leverage your workforce data to:
- Identify individual employee strengths.
- Pinpoint current IT skill gaps.
- Optimize role assignments by aligning skillsets with existing demands.
McKinsey reports top performers in complex technical roles (like software developers) can be up to 800% more productive than average workers. Given this statistic, it’s crucial to play to existing employee strengths—filling gaps and improving performance amid hiring uncertainties. A reorg can also prevent anxiety-inducing tech layoffs by maximizing individual and team efficiency.
2. Forecast IT Hiring Demands
Your assessment will reveal where skills gaps still exist after reorganization. However, before you jump into hiring, map out your upcoming projects and initiatives, as well as their skill requirements.
This strategic approach keeps recruiters and hiring managers mindful of upcoming demands. They can go beyond assessing talent based on their current capabilities, proactively evaluating upskilling potential with key training milestones in mind.
3. Embrace Skills & Potential Over Credentials
Bear in mind that traditional hiring metrics may no longer serve organizations well in a rapidly evolving technical landscape. Instead of credentials, focus on implementing high-impact technical assessments that reveal competency, trainability, and innovative thinking.
A strategic IT staffing partner can support your workforce adaptability by conducting rigorous, expert-led tests that unlock deeper insights about candidate capabilities.
4. Leverage Contingent Staffing for Immediate Needs
Feeling the pain of the IT skills shortage while recruiting critical employees? Contingent staffing can help you maintain project momentum and eliminate the pressure to hire a less-than-ideal employee full-time.
An experienced technical staffing firm like Capstone IT will have the expansive network you need to fill temporary gaps quickly—for as long as you need. Contingent staffing and contract-to-hire services also allow for flexible scaling when demands fluctuate, so your full-time hiring initiatives can be more sustainable.
5. Prioritize the Employee Experience
In a competitive talent market, the employee experience becomes a critical differentiator and driver of retention. Beyond offering a competitive salary and benefits, you can attract and engage IT talent with:
- Career pathing and professional development opportunities
- A values-driven and innovative workplace culture
- Work-life balance initiatives, like a hybrid work policy
- A sense of belonging
Organizations that measure and invest in employee satisfaction, creating opportunities for enjoyable and meaningful work, can ultimately gain a competitive edge.
Looking Forward
The current market dynamics require organizations to evolve their approach to technical talent acquisition and retention. Success in this environment demands:
- A balanced approach to immediate needs and long-term capability building
- Investment in both new talent acquisition and existing workforce development
- Flexibility in hiring approaches and employment models
- Strong partnerships with staffing and recruiting specialists
Capstone IT can support your hiring strategy by delivering highly skilled, thoroughly vetted IT candidates who align with your culture and long-term goals. With our flexible partnership, we can quickly pivot as your priorities change or your industry evolves.
Strengthen recruitment amid tech layoffs and the IT skills shortage. Optimize your hiring initiatives with Capstone IT.
