Bosses betting on AI to slash headcount and boost margins are discovering an uncomfortable truth: the strategy isn’t working.
New research from Gartner lays out the problem in stark terms. The analyst firm surveyed 350 global businesses - all with annual revenues above $1 billion, all piloting or deploying intelligent automation - and found that around 80 percent had cut staff as a result.
The returns? Elusive. Companies that reduced their workforces were just as likely to see negative outcomes or marginal gains as they were to generate any meaningful return on investment (ROI).
The conclusion? Layoffs don’t create returns, they just create vacancies.
“Many CEOs turn to layoffs to demonstrate quick AI returns; however, this disposition is misplaced,” said distinguished VP analyst Helen Poitevin and lead researcher on the study. “Workforce reductions may create budget room, but they do not create return. Organizations that improve ROI are not those that eliminate the need for people, but those that amplify them,” she added.
LLM prices will continue to rise and they’ll be stuck holding the bag
This is the part I’m waiting to see. My prediction; once AI providers have other companies by the nuts watch them hike prices and then we’ll hear CEO’s squealing about the unfairness of it even though they were the ones calling the shots.
Yup. And costs right now are rising while they’re still in the “get everybody hooked” stage of things, in no small part because they can’t survive at current prices. Anthropic is desperate to get to their IPO so they can have the warchest they need to actually become an established integral part of development pipelines and not just a fad.