I’m a former AWS employee: most of the hot takes on Amazon's new strict return-to-office policy are wrong.
Anyone who’s been paying attention saw this coming years ago. And ultimately, it comes down to taxes and economics.
Here's their plan:
Phase 1: layoff over 30k people.
Phase 2: “Return to office” 2-3 days a week to an office near you. I went into the Denver office near me, 20 min commute.
Phase 3: “Return to team” where you had to go in where your team is physically located (I.e. Seattle). Many, many people left during this phase. This is when I personally left in 2023 because I wouldn’t relocate to Seattle.
Phase 4: the “Silent sacking”. If you managed to somehow stick around this long, your work life would be made incredibly unsatisfying and cumbersome: you'd be left out of in-person meetings, you'd be stiff-armed by management, you wouldn't be given interesting or meaningful work, etc. etc. (read Justin Garrison's excellent piece on how this affected him: justingarrison.com/blog/2023-12-3…)
And finally, Phase 5: death of remote. Everyone must sit at a desk in a physical office where your team is located.
But why?
Amazon execs will say it's because of "innovation" and "customer obsession" and "being earth's best employer".
But really, it comes down to economics.
Ultimately, this plan is an effort to reduce their headcount, avoid a massive tax liability, and increase profit margins now that spending and books across the economy are very tight. You'd better believe AWS, Amazon's biggest business, is getting squeezed: anyone and everyone who uses cloud services are looking for a way to reduce cost in this current economic moment. Some are even leaving AWS all together. Because of this, no one should be surprised when AWS deprecates and removes services: they don't want to continue to support expensive services and staff up teams where profit margins are extremely tight.
This may surprise you: most of AWS operates on a very, very thin margin. To their credit, they offer some incredible services at excellent usage cost pricing. This has completely transformed the cloud game and has enabled small disruptors to use just enough cloud that meets their needs.
But all of Amazon has operated on Jeff Bezo's mantra of "Your margin is my opportunity." I.e., mass amounts of product with minuscule margins are Amazon's bread and butter business. They make very little money on a ton of services at a massive scale which results in huge profits.
But as belts tighten, this means that ANYONE who leaves AWS or meaningfully reduces their cloud spend can have an impact on AWS's razor thin profit margins. For this reason, during a time of reduced spend and over hiring, they MUST reduce their most expensive cost: headcount.
But why reduce so much headcount?
Amazon, especially AWS, much like the rest of the tech sector, dramatically over hired during the pandemic. With interest rates at near zero and tech spending at an all time high in 2020 and 2021, they ramped up a huge global, remote workforce.
And they didn't really have any other option: AWS needed to continue to scale their razor thin margins as tech needs in the pandemic, remote first world continued to grow and grow.
When the economy flipped, interest rates rose, layoffs began, and tech spending plummeted, they were forced to keep profit up by reducing headcount.
Ok, but what about taxes?
Amazon gets MASSIVE tax breaks from cities and states where they have offices. In theory, how this should work is: Amazon gets tax breaks, people get jobs, locations become booming tech towns (like Seattle), home owners profit, local officials profit, local business owners profit, everyone enriches themselves.
But if offices remain empty and downtown areas continue to become desolate abandoned places, cities and states have no incentive to continue to let Amazon get off tax free. If Amazon continued to enable a remote workforce, the tax man would come knocking and they'd be liable for hundreds of millions of dollars.
In the end, Amazon's strict return-to-office policy isn't just about fostering innovation or collaboration - it's a strategic move driven by macro and micro economics. By consolidating their workforce in physical offices, they're aiming to maximize tax incentives and reduce operational costs.