Category Archives: Big Tech

White officials will sit down with CEOs from several tech companies.AP Photo/Susan Walsh

White House officials will discuss AI development with CEOs from Microsoft and OpenAI, among others.

The meeting comes amid growing concerns around advanced AI safety.

The administration announced several plans to tackle the potential implications of the tech.

White House officials, including Vice President Kamala Harris, are set to meet Big Tech CEOs at the White House as concerns grow over AI safety.

The officials will meet with leaders at the forefront of advanced AI development, including the chief executives of Alphabet, Anthropic, Microsoft, and OpenAI, per a White House fact sheet.

The invitation to the CEOs, which was viewed by Reuters, noted President Joe Biden's expectation that such companies "must make sure their products are safe before making them available to the public."

The meeting is part of a broader attempt by the administration to address issues around advanced AI. Public scrutiny of the technology has grown since OpenAI's viral ChatGPT appeared to spark the release of several other AI products.

Several countries are looking to introduce new regulations for the powerful technology. The European Union, for example, is pushing ahead with a proposed AI Act the first law on AIby a major regulator.

The fact sheet, which was released on Thursday, announced several plans to tackle the potential implications of the tech. The announcements included independent public assessments of existing generative AI systems and $140 million in funding to launch new AI research institutes.

The administration said AI developers, including Anthropic, Google, Hugging Face, Microsoft, NVIDIA, OpenAI, and Stability AI, had committed to participate in a public evaluation of AI systems at the AI Village at DEF CON 31.

The fact sheet noted President Biden had "been clear that when it comes to AI" that people and communities must be at the center of innovation and society must be protected.

The administration also said it was actively working to address national security concerns raised by AI, especially in critical areas like cybersecurity, biosecurity, and safety.

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White House officials will meet Big Tech CEOs as President Biden looks to tackle AI safety concerns - Yahoo Canada Finance

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The graduating class of 2023's desire for stability in an uncertain economy is dictating where they want to work most after college.

It's hard to escape unrelenting news of tech layoffs in recent months, including major staff cuts from Meta, Google, Amazon, Microsoft and many others. As a result, zero Big Tech companies are among the trending employers Gen Z college grads are most interested in working for this year, according to the latest report from Handshake, the college and new-grad career site, which analyzed search traffic on the platform in the last year and surveyed 954 students from the class of 2023.

This year's graduating class is "prioritizing stability, and they're quite turned off by the volatility they've seen in the news around Big Tech," Christine Cruzvergara, Handshake's chief education strategy officer, tells CNBC Make It. "They're gravitating toward companies that offer solid benefits, career pathing and a level of stability they've been looking for."

Here are the top 10 companies that saw the fastest growth in search interest on Handshake in the last year:

While search traffic from 2023 grads for major tech brands is down 15% compared to the class of 2022, interest and applications are up for jobs in retail, finance and manufacturing.

"Some of the luster has definitely come off" of Big Tech jobs, Cruzvergara adds and "this class is willing to look at tried and true companies that have stood the test of time."

That's true for Wes Yates, 21, a senior at the Embry-Riddle Aeronautical University in Daytona, Fla., who'll soon move to Tucson, Ariz., to start his first post-graduation job with Raytheon soon. He learned the company had several roles open thanks to Handshake and, after just about two weeks of interviews, landed a full-time job offer by October.

Wes Yates, 21, is a graduating senior at Embry-Riddle Aeronautical University and quickly landed a job offer with Raytheon in October.

Courtesy of Wes Yates

His biggest priorities in finding a job after college were financial security to pay off his student loans, as well as job security, which he believes he'll find in the defense industry. Given his aeronautics background, he says other employers like Lockheed Martin and Boeing also on Handshake's shortlist of desirable employers were also on his radar for himself and among his peers.

Raytheon's ability to provide stability has been a big hiring asset, especially among some of the newest entrants to the labor force, says Steve Schultz, the company's global head of talent acquisition. Raytheon is the biggest employer in Tucson, with more than 13,000 workers atits main manufacturing campus at Tucson International Airport.

He says roughly a quarter of the company's new hires come from the new or recent college grad demographic a share that's grown in recent years.

Though search interest for major tech companies dropped, Cruzvergara says today's grads are more likely than their predecessors to be interested in jobs that require tech skills. So "while the companies on this list might not be considered a tech employer, it's become an opportunity for these types of employers to hire great tech talent," she says. "The reality is, every company today is a tech company."

New college grads feel confident they have the skills they need to get the job they want but also plan to develop new tech skills on the job or after hours. Looking ahead, a majority, 60%, say generative artificial intelligence tools will impact their fields in the next decade, but 40% aren't worried it will actually have an impact on their own career.

A recent Stanford and MIT study found generative AI boosted productivity by up to 35% for new workers with less experience, and by 14% among all workers.

"I don't think the generative AI is going to replace workers, but workers who work with generative AI will replace those who don't," says Erik Brynjolfsson, the director of the Digital Economy Lab at the Stanford Institute for Human-Centered AI, and co-author on the report.

As major tech players take an employer branding hit, Cruzvergara predicts future college grads will care more about employers that are dedicated to helping solve the climate crisis.

In the meantime, the class of 2023 is more anxious than previous classes about their prospects in a turbulent job market where new layoff announcements seem to come out by the day.

Nearly half, 47%, of 2023 grads say they're applying to more jobs in response to news about the economy. The average 2023 grad is applying to 14 jobs after college, up from the average 11 among 2022 grads.

And a majority, 71%, say they're willing to move to a different city for the right job opportunity.

Applications are up by 20% in Chicago, 15% in Dallas and 12% in Atlanta compared to the year prior, which Cruzvergara says could be in response to new grads hoping to beat inflation and find more affordable areas to start their post-college lives.

Young professionals also see the appeal of reporting to an office at lest some of the time as a key part of advancing their early careers: 72% want a hybrid job, 16% want a fully remote job, and 12% want to be fully onsite.

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Check out: Gen Z college students say this is the No. 1 most important thing to them in a new job

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The top 10 buzziest companies Gen Z wants to work fornone of them are in Big Tech, says new report - CNBC

Apple is set to close out Big Tech earnings Thursday after the market closes. The iPhone maker is expected to report another year-over-year sales decline for the March quarter.

Shares of Apple (ticker: AAPL) have soared nearly 31% in 2023, though the stock is up just 2.4% over the past 12 months. The S&P 500 is up 7.7% this year and down 3.9% in the past 12 months.

So far, Big Tech earnings have been fairly positive. Reports from Microsoft (MSFT), Alphabet (GOOGL), and Meta Platforms (META) were mostly well received by Wall Street. Amazon.com s results topped estimates but a weak outlook around the cloud sent shares falling. Apple investors are hoping the firm follows in Microsofts footsteps, and not Amazons.

WithBigTechshowing impressive resiliency during earnings season the last few weeks now the baton is handed to Cook as investors all look towards Apples Thursday night print/guidance with thetechfinale on 1Q, Wedbush analyst Dan Ives wrote on Monday.

For Apples fiscal second quarter, the consensus among analysts polled by FactSet calls for earnings of $1.43 a share. Analysts expect sales fell 4.5% to $92.91 billion.

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Ives rates Apple at Outperform with a $205 price target. He wrote Monday that he thinks an uptick in demand in China will help drive upside for iPhone sales.

With an App Store uptick this quarter we also believe Services revenue should be stable and combined should translate into headline numbers from Cupertino that should at least meet the Streets expectations, Ives wrote.

J.P. Morgan analyst Samik Chatterjee, who rates Apple at Overweight with a $190 price target, wrote Wednesday that investors will be especially interested in the firms commentary about the current quarter. The FactSet consensus call for the June quarter is for earnings of $1.21 a share and sales of $84.5 billion.

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Write to Connor Smith at connor.smith@barrons.com

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Apple Reports Earnings Today. What to Expect. - Barron's

Earnings season has been in high gear for some time now, with a feared earnings apocalypse failing to materialize.

Last week, as many are highly aware, big-tech stole the spotlight, posting results that had the market celebrating and helping keep sentiment lifted heading into this weeks FOMC meeting.

We now have four quarterly prints from the Big 5 Tech Players, a list that includes Meta Platforms META, Alphabet GOOGL, Microsoft MSFT, Amazon AMZN.

And then theres Apple AAPL, the last of the group slated to report and arguably the most important of the five. The company will reveal its quarterly results this Thursday, May 4th, after the markets close.

All styles of investors will be tuning into the quarterly results, as Apple carries the biggest weight in the S&P 500, roughly 7%. Lets take a closer look at how the mega-cap titan stacks up heading into its quarterly release.

Quarterly Estimates

Since February of this year, the quarterly EPS estimate for Apples upcoming release has been revised 0.7% higher to $1.44 per share, with the value reflecting a modest 5.3% year-over-year pullback in earnings.

Zacks Investment Research

Image Source: Zacks Investment Research

Regarding the top line, our consensus estimate of $93.3 billion implies a 4% pullback from the year-ago quarter, with analysts revising their quarterly expectations marginally lower since February.

Zacks Investment Research

Image Source: Zacks Investment Research

Of course, iPhone revenue will be a focus. Currently, the Zacks Consensus estimate for iPhone revenue sits at $49.6 billion, implying a slight pullback year-over-year. In addition, its worth noting that the company has delivered back-to-back negative surprises within this metric.

iPhone Revenue - Surprise %

Zacks Investment Research

Image Source: Zacks Investment Research

While iPhone revenue remains important, the companys Services results will also be closely watched, which includes cloud services, the App store, Apple Music, Apple Pay, and several others. Overall, Apples services have gained significant traction and have become a big contributor to the top line.

Story continues

For the quarter, the Zacks Consensus estimate for Services net sales sits at $20.9 billion, implying growth of 5.5% from the year-ago period. As we can see in the chart below, Apple snapped a negative streak of surprises within the metric in its latest release.

Zacks Investment Research

Image Source: Zacks Investment Research

Quarterly Performance

Apple posted results that came in under expectations in its latest release, snapping a long streak of positive surprises on the top and bottom lines. The company reported earnings of $1.88 per share, 2.5% below the Zacks Consensus EPS estimate.

Further, quarterly revenue totaled $117.1 billion, again falling short of expectations by roughly 3.3%. Below is a chart illustrating the companys revenue on a quarterly basis.

Zacks Investment Research

Image Source: Zacks Investment Research

As we can see in the chart below, the market has had somewhat mixed reactions to Apples quarterly results post-earnings.

Zacks Investment Research

Image Source: Zacks Investment Research

Valuation

Apple shares could be seen as a bit expensive, with the 28.2X forward earnings multiple sitting above the 24.2X five-year median by a fair margin. Still, the value remains well below highs of 31.3X in 2022.

Zacks Investment Research

Image Source: Zacks Investment Research

Further, the companys forward price-to-sales ratio presently works out to be 6.9X, again above the 5.8X five-year median and the Zacks Computer and Technology sector average.

Zacks Investment Research

Image Source: Zacks Investment Research

Bottom Line

Investors of all styles will be tuning into Apples AAPL quarterly print, as the stock is one of the most important regarding the direction of the general market.

Weve already gotten results from the other big-tech guys, including Alphabet GOOGL, Microsoft MSFT, Amazon AMZN, and Meta Platforms META. All five stocks have staged big rebounds in 2023 so far following a forgettable 2022.

Heading into the quarterly release, Apple is a Zacks Rank #3 (Hold) with an Earnings ESP Score of -0.3%.

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Big Tech Earnings: Time to Take Another Bite of Apple? - Yahoo Finance

According to a Handshake survey of 954 students, the share of 2023 graduates who say company brand is a factor in their job search dropped 10 percentage points between summer 2022 and spring 2023.

Yale University senior Yuliia Zhukovets was one interview and an assessment into the job application process to be a data scientist at a tech giant when she says the company went silent for three weeks.

After reaching out to the company, which she asked to keep anonymous as she continues her job search, Zhukovets got some bad news: The employer was putting a hiring freeze on data science positions. Now, with graduation around the corner, shes applying to smaller companies and considering nontechnical roles such as consulting.

As shes watched big companies enact mass layoffs and some even rescind offers, its definitely de-incentivized even looking into [them], says Zhukovets, a statistics and data science major.

More peoplenearly 140,000lost their jobs in major layoffs at U.S. companies in the past fiscal quarter than the prior two quarters combined, according to Forbes layoff tracker, as tech layoffs led by Amazon, Google, Meta and Microsoft surged. Job cuts at big corporations in other sectors such as Disney, 3M and Goldman Sachs are growing while consulting firms like Accenture, Bain and McKinsey that typically hire recent graduates in bulk are in some cases pushing back start dates, according to media reports.

Now, many in the class of 2023 are shifting their focus. According to a survey of 954 student users of Handshake, a job search platform for college students, the share of 2023 graduates who say company brand is a factor in their job search dropped 10 percentage points between summer 2022 and spring 2023. Over the same period, those who prioritized a fast-growing company in their job search sank from 39% to 19%.

Theyre thinking I dont want any more instability, says Christine Cruzvergara, chief education strategy officer at Handshake. She says this years graduating class is unique in that it has had all four years of college disrupted by Covid-19, saw ChatGPT explode onto the scene during their senior year and watched their parents lives disrupted by the financial crisis during elementary school. You see this shift in what theyre looking for. Theyre not just attracted to the big name, fast-growing companiesthe flashiness of what you saw a lot of previous classes gravitate toward.

Handshakes survey also shows that 36% of respondents said they are opening their job search to more industries, companies and roles while 71% said theyre willing to move to a different city for the right job.

The percentage of students who prioritized a fast-growing company in their job search sank from 39% last summer to 19% this spring.

While young job seekers will certainly jump at jobs in big tech firms when hiring increases again, says Cruzvergara, the large-scale layoffs of the last few months and perk-cession thats gotten underway could have a lasting impact on how young workers view the culture and security of tech jobs. I think the luster is definitely lost, she says.

Zhukovets is just one of many students resetting both their expectationsand their goals. Id rather work in a smaller company where I can get more hands-on experience and have more impact in my job, she says. While shes hoping to still get a job in tech, Im trying to find those alternatives and compromises.

Plagued by the pandemic throughout their college career, the class of 2023 is more comfortable with change, says Jenny Dearborn, a veteran human resources executive who has held C-suite positions such as Hewlett Packard Enterprise and SAP.

When companies were hiring even more people than they knew what to do with and the economy was super hot, Dearborn says, new grads had so many choices that they felt frozen. Some even hesitated to say yes to something goodbecause something great might be right down the line. Now, Dearborn says, new grads are more pragmatic.

Like Zhukovets at Yale, this years graduating class is showing an increased appetite for tech roles in other sectors. In a separate data analysis, Handshake saw an 8.1 percentage point drop in applications to tech employers and an increase in applications for all other industries for students with technology majors applying to internships this year. Meanwhile, government sector job applications are up 104%, according to Handshakes new report.

Sophia Cusack, who is about to complete a masters in marketing at the University of Tennessee, says she had always wanted to move to New York and work for a major beauty corporation like LOreal after graduating, but amid a tougher job market, is targeting jobs at agencies or smaller firms and looking to move back to Charlotte, N.C. instead. After looking since February, shes getting more creative, sending along video with applications and zeroing in on jobs that use her analytics and consumer insights skills.

As tech companies have made big cuts, she thinks it could have an impact on her peers. I feel like everyone at some point is like I want to go work for GoogleI can go slide down some slides [in Googles office]but Ive been pulled away from that thought process, Cusack says.

Others, like Pace University senior Alessandro Seni, want to work on their own startups full-time after graduation. Sixty-one percent of the 500 soon-to-be college graduates surveyed by A.Team, a freelance platform where companies can hire teams of contractors to work projects, said they want to turn their side hustle into their full-time job, while 68% are considering starting their careers as a freelancer.

After applying to about 50 jobs with few replies, Seni says hes now leaning toward focusing on an educational platform he created. If I try to do my own thing and a year passes and it doesn't really go anywhere, Im still 23, says Seni, now 22. By then, he says, maybe the market will be better.

Lindsay Sanchez, who graduated in April from Ensign College in Utah and says she has applied to more than 200 jobs, wants a strong company culture, but hasnt even been given the chance to be picky with these jobs, saying shes been ghosted on some interviews. Instead of digital marketing jobs, now shes looking into customer service jobs.

Other surveys of sentiment among graduating students also find that increasingly, stability reigns. They want to have something in hand if something happens to the economy, says Tom Gimbel, CEO of Chicago-based recruiting firm the LaSalle Network. They dont want to get caught without a chair when the music stops.

Ketaki Tilak, a computer science masters student at Rochester Institute of Technology, worries that other early-career, recently laid-off employees could be competitionas might interns from last summer who didnt get full-time offers at the time. Normally you wouldnt be competing with these people who worked at FANG companies for a year, says Tilak, who says shes applied to about 450 jobs since October but hasnt had an offer yet.

Johnson & Wales University senior Kyle Leupold is also feeling the heat. After a higher education institution gave him three months to accept an IT positionhe says he got so much time because they knew he was still a studentthe offer was rescinded. (He was told the position was no longer open, Leupold says.) The cybersecurity major says tightened budgets and the tendency for employers to increasingly outsource IT and security specialists is not helping.

I didnt plan to be graduating into the economy that we have now, Leupold says.

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Vibe Check: Big Tech Is Losing Its 'Luster' For The Class Of 2023 Amid Mounting Layoffs And An Uncertain Economy - Forbes

Sen. Lindsey Graham on Thursday said Big Tech companies will kill his legislation intending to protect kids online and he is working on a fallback plan.

The South Carolina Republican said his frustration with the Senates inaction has driven him to team with Sen. Elizabeth Warren, Massachusetts Democrat, on an alternative proposal to empower regulators to go after large technology companies.

Mr. Grahams EARN IT Act has more than 20 Democratic and Republican co-sponsors and advanced via a voice vote through the Senate Judiciary Committee on Thursday. The authors have said their bill would strike a blow against Big Tech by stripping the companies immunity from legal liability for child sexual abuse material posted by people using the companies platforms.

The committee advanced a previous version of the legislation last year that never became law. Mr. Graham said the 2023 bill is doomed to a similar demise because of Big Tech companies influence over Congress.

Theyre the largest companies in the world; theyre making hundreds of billions of dollars, and part of their business model is destroying peoples lives and theyre going to beat us, Mr. Graham said at the meeting before the vote. Were going to pass the EARN IT Act today, but itll go nowhere.

The EARN IT Acts co-sponsors urged Mr. Graham not to sound so fatalistic. Sen. Richard Blumenthal, Connecticut Democrat, said he hasnt given up hope and implored the Republican to consider that a journey of a thousand miles begins with a single step.

Mr. Graham did not appear persuaded. He said consumers are getting completely screwed and he wanted to create new powers for government regulators to crack down on tech companies.

Giving more power to the government to shape tech companies operations is something that has concerned several of Mr. Grahams colleagues about the EARN IT Act.

After the bills failure last year, lawmakers rewrote the legislations duty of care that directs companies to prevent and mitigate their tech platforms from enabling mental health disorders in children.

State attorneys general and the Federal Trade Commission are tasked with enforcing the law, and both Democrats and Republicans fretted about how the law would be applied.

Sen. Cory Booker, New Jersey Democrat, said the bill needed to be refined more before receiving final consideration on the Senate floor.

I have a real concern in this bill about issues of cybersecurity and how we might empower the government to do things to target disadvantaged groups for more harassment and discrimination, groups that we know are ultimately vulnerable, Mr. Booker said.

Sen. Ron Wyden, Oregon Democrat, similarly said Wednesday that he feared Republican state government officials would use the legislation to wage a culture war against children.

Democrats are not the only ones raising concerns about online child safety legislation. Sen. Mike Lee, Utah Republican, said lawmakers must be careful that the legislation would not accidentally destroy encryption that is used for things such as securing governmental secrets and making online payments safe.

The EARN IT Act has also drawn the ire of liberal and conservative advocacy groups. The American Civil Liberties Union and Americans for Prosperity urged lawmakers on Wednesday to oppose the legislation over fears that it would chill free speech on the internet and stifle innovation.

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Lindsey Graham says Big Tech will kill online child safety bill, teases plan with Elizabeth Warren - Washington Times

As dry and bureaucratic as EU legislation may seem, it can also be groundbreaking and, dare we say it, radical. The bloc has taken a global lead in tackling regulation in areas such as green taxonomy and the much-anticipated AI Act. European lawmakers are also at the forefront in trying to curb the seemingly ever-growing dominance of Big Tech.

The Digital Markets Act (DMA) is the EUs tool to attempt to open the digital app marketplace up for smaller competitors. It sets criteria to identify the gatekeepers of the market and make them comply with a certain list of dos and donts.

Among other things, the DMA will promote interoperability, forcing companies like Google, Apple, and Meta to let users link rival apps to their services. This means that Apple will need to release the tightly controlled (and heavily commissioned) grip it exerts through its app store.

In the words of Cdric O, Frances then-digital economy minister, upon the signing of the act last year, Dont break them up, break them open.

Theoretically, it also means that users of different messaging apps will be able to contact each other from, say, WhatsApp to Telegram, but it is unclear how this would actually be implemented. It will also forbid the gatekeeper companies from doing things such as track their users outside core platforms for targeted marketing without consent.

While it entered into force on 1 November 2022, the DMA technically began applying yesterday, 2 May 2023. This means that potential gatekeeper tech companies now have until 3 July to notify their core platform services to the European Commission.

The Commission will then have 45 working days (until 6 September) to decide whether or not they pass the gatekeeper threshold. If the Commission concludes that the company in question does indeed meet the designated criteria, the gatekeeper will then have six months (until 6 March 2024) to comply with the requirements set out in the DMA.

In the case of non-compliance, the Commission can impose fines of up to 10% of the companys total worldwide annual turnover. In the event of repeated infringements this can increase to 20% plus periodic penalty payments of up to 5% of the companys total worldwide daily turnover.

So who are the gatekeepers? According to the DMA, they are platforms in the digital markets that have a significant impact on the internal market, serve as an important gateway for business users to reach their end users, and which enjoy, or will foreseeably enjoy, an entrenched and durable position.

As with all legal texts, the criteria go into significant detail. Simplified, they entail that companies will be considered gatekeepers if they have a market capitalisation of more than 75 billion, and 45 million monthly active users in the EU.

There are 10 platform services listed in the DMA. These are:

A company may be listed as a gatekeeper for more than one service.

Together with the Digital Services Act (DSA), the DMA forms one of the central columns of the EUs digital strategies. They are both part of a regulatory program known as A Europe Fit For the Digital Age.

Adopted three years ago, it is part of the Commissions ambition to make this Europes Digital Decade in which it will strengthen its digital sovereignty and set standards, rather than following those of others with a clear focus on data, technology, and infrastructure.

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'Break them open' new EU rules coming for Big Tech - TNW

Ernst & Young has a tech growth problem the size of Silicon Valley, and the firms failure to spin off its consulting business has eliminated what it envisioned as a way out.

Like all accounting firms, it is barred from forming lucrative consulting partnerships with its audit clients, but the restriction is especially onerous for EY, with its audit roster of tech heavyweights like Amazon, Alphabet, and Salesforce. Its inability to team up with such companies to build and sell tech solutions hamstrings its consulting practice, forcing it to leave millions of dollars on the table for in-demand services crucial to todays corporations.

EYs leaders had sought to split up the firm so its $19.7 billion consulting and strategy practices could pursue such partnerships, freeing those businesses from rules intended to ensure that auditors provide unvarnished views of their clients financial health. The collapse of the ambitious plan puts EY back where it started: Its restricted from promoting or jointly selling services offered by audit clients.

It really makes it impossible to enter into any kind of partnership or joint marketing, joint-service-provision type of an arrangement when youre auditing that company, Cathy Allen, who runs the ethics compliance firm Audit Conduct, said of US conflict-of-interest rules.

Those conflicts and restrictions will remain as the firm confronts its future with audit, tax and consulting tethered together.

EY didnt respond to requests for comment for this article.

EY leaders, however, have said that they still want to restructure at some point, committing to their argument that the practices would be stronger apart.

This was a way to disrupt our industry, Carmine Di Sibio, the firms global chairman, said about the firms restructuring in remarks to a Milken Institute event Monday. Its on pause, its really on pause for a while, but its something that well continue to look at over the next couple years.

In some ways EY is a victim of its own success. Its buildup of software and tech clientele over the years means its potential for conflicts of interest is bigger than for the other Big Four firms, said Doug Carmichael, former chief auditor of the Public Company Accounting Oversight Board and an accounting professor at Baruch College.

PwC, also known as PriceWaterhouseCoopers, KPMG and Deloitte are the other Big Four firms.

EY has acknowledged the restrictions under which its working.

The firm audits nine of the 10 biggest tech companies, DiSibio told CNBC in January while discussing the firms plans to carve out its consulting arm and much of its tax practice into a unit known provisionally as Newco.

Theyre also the companies we could have alliances with going forward on the Newco side, he said. So thats been an inhibitor in terms of our growth in consulting.

In addition to Amazon, Alphabet and Salesforce, EYs audit clients include Intuit, HP, Workday and Apple. It also audits small, nascent technology companies and has served as auditor to eight tech IPOs since 2018, according to PitchBook data.

EYs technology and digital transformation work contributed to a 25% spike in revenue for its global consulting practice last year. Tech consulting is among the most heavily promoted consulting services offered by the Big Four, and such work is much more profitable than auditing, said Elizabeth Cowle, assistant professor of accounting at Colorado State University.

Alphabet last year paid EY $41 million for auditing and related services, she noted.

If youre making $41 million off the audit, she said, how much could you be making off consulting?

Longstanding US securities rules prohibit accounting firms from entering into certain business relationships with their audit clients if they were to share whats known as a mutual interest. That means that profit sharing, jointly developing products or even advocating for a clients work is out of bounds.

Firms have learned the hard way to steer clear of arrangements that could threaten their independence from audit clients.

The Securities and Exchange Commission suspended EY in 2004 from accepting new public-company audit clients for six months over auditor-independence issues that dated back to the 1990s. EY had audited the software firm PeopleSoft at the same time the firms consulting arm profited from recommending PeopleSoft software to customers.

More recently, Marcum LLP, a top-15 US accounting firm, paid $525,000 in penalties and other sanctions in 2019 for promoting audit clients as good investment opportunities at conferences the firm hosted.

Although big partnerships with audit clients are off limits, firms may be able to help consulting clients adopt mainstream software or cloud platformsroutine implementation work considered a core consulting serviceeven if those platforms and apps are run by audit clients.

But accounting firms have to be careful how they market those services to avoid violating the independence rules, Allen said, referring to Securities and Exchange Commission regulations. Its a very tricky area to navigate.

Consultants, for example, cant tell a client to use a specific application or tool if it happens to be one provided by an audit client, but they could offer a menu of options which includes products of its audit clients, Carmichael said.

Sorting through those gray areas with regulators and audit committees takes time, however. Clients may be unwilling to wait to clear any possible conflicts and may choose instead a competitor who can start right away on the project.

Even there, EY could run into problems. Many major tech companies, including Netflix, Airbnb, and Pinterest, say Amazon Web Services is critical to running their businessand EY is Amazons auditor. Depending on the circumstances, that alone could be enough to preclude EY from pitching work to those companies, industry observers say.

The rules arent always very clear about this, said Fiona Czerniawska, CEO of Source Global Research, which tracks the professional-services industry.

EYs leaders contended that separating auditing from consulting would have better enabled EYs consulting operations to compete with consulting companies like Accenture, McKinsey, and Alvarez & Marsal that dont have to vet potential clients for audit conflicts.

They dont have to worry about calling us and us telling them, We cant serve you here because we have an audit conflict, Paul Aversano, managing director at Alvarez & Marsal and a former EY partner, said of advisory clients. They know when they call us, were largely going to be able to serve them.

Still, accounting firms, including their consulting arms, benefit from the stable revenue audits deliver, especially for decades-long client relationships. Sri Ramamoorti, an associate professor at the University of Dayton, compared that steady stream of revenue to a perpetual annuity.

And that stability obviously is very good in business, Ramamoorti said.

A split might resolve concerns about keeping auditors independent. But it would also deprive them of the market knowledge and technical skills that their consulting colleagues provide them under the current setup, in areas from cybersecurity to valuations to automation.

Theres no perfect solution here, Czerniawska said.

The future of auditing and consulting is going to be about technology, she said. Is there going to be an audit in the way we know it in 20 years time?

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EY's Abandoned Split Exposes Obstacles to Big Tech Consulting - Bloomberg Law

In recent years, major players like Microsoft, Amazon and Google have increased their involvement in open source projects, providing both financial and technical support. More consistent contributions from big techwhether in the form of people or resourcesis exactly what the open source community needs. However, underdeveloped collaboration guidelines can lead to friction between large corporations and open source developers, which ultimately harms both parties. Friction jeopardizes tech companies ability to rely on open source for operations while leaving the open source community without the support it needs. To make their relationship more sustainable, both parties need to cultivate a greater level of trust, develop clear guidelines for collaboration, and prioritize community.

For years, major tech companies have used open source solutions in their tech stacks. But many open source developerswho receive little to no money for their workhave voiced concerns about companies that take more from the open source community than they give.

In many ways, big tech has answered the call. For example, Amazon recently passed IBM as the fifth-largest contributor to open source projects. Companies like IBM and Amazon have a vested interest in supporting these projectsif open source projects are understaffed and underfunded, the quality of the solutions suffers.

But many tech companies are grappling with an unstable financial environment, which makes hefty donations more difficult to justify. As a result, support from big tech often involves donations of their developers time. However, this is also challenging as tech companies like Twitter and Google continue to lay off the developers who were keeping many open source projects afloat.

Yet, even before recent layoffs, collaborations between big tech and open source teams were strained. Theres a natural power imbalance between a corporation like Amazon and the open source community, which includes members who contribute to these projects in their free time, sometimes for little or no pay. Big tech developers must juggle the interests of the open source team theyre collaborating with and their own employerwith little guidance on how to do so.

A lack of transparency and communication from big tech also puts open source developers in a tricky situation. Many developers need financial and personnel support but may not want to relinquish control of their solutions to an outside corporation.

To alleviate this tension, big tech needs to establish clear, mutually beneficial guidelines for open source collaboration that prioritizes sustainability.

Past tensions between big tech and the open source community can affect collaboration if left unaddressed. For example, Microsoft has become one of the biggest contributors to the Linux kernel, but many open source teams still remember former Microsoft CEO Steve Ballmer calling Linux a cancerin 2001.

To overcome this tension, big tech companies need to clarify their intentions from the beginning of a project. They should disclose their reasons for selecting the project, the developers who will work on that project and how their contributions will look. Open source maintainers also have a role to play here. They must properly vet these companies and inquire about their prior open source experience and strategies before welcoming them into the fold.

One way to reduce the risk of power imbalances or other tension is by collaborating through a project like the Linux kernel. Google, IBM and many other corporations contribute toward Linux kernel, and this distribution of contributors creates a much more balanced playing field. Rather than one company assuming operational control, multiple companies play a small part in keeping the Linux kernel up and running.

While these guardrails certainly help, big tech companies also need to formalize their open source contribution processes. At Aiven, weve done this through our open source program office (OSPO), which helps us manage our relationships with the open source communities we rely on. OSPOs ensure organizations remain compliant with open source licensing and provide a foundation to expand their involvement with the community over time.

When developing an OSPO, tech companies should be intentional about how they measure success. The most obvious metrics relate to the work developers dofor example, the number of features delivered, the number of fixes and the number of projects they contributed to. But OSPOs should also measure how developers contribute to the community itself, not just the projects within it. For example, do developers review work from other developers in the community? Do they attend conferences, write blog posts and share knowledge with other developers?

Big tech leaders must place as much emphasis on community-building as they do the number of contributions developers make. If they dont evaluate developers based on their engagement with the community, the developer is less likely to focus their efforts there, injecting toxicity into the communities theyre trying to support.

The challenge of reducing the stress and burnout of open source developers cant be solved solely through financial means. No amount of money will reduce the amount of work it takes to maintain an open source project.

To make collaborations between open source teams and big tech sustainable, both sides need to prioritize supporting the community above all else and develop guidelines that support this mission. More sustainable collaborations will ensure that the open source community gets the support it needs while big tech continues to reap the rewards of the communitys innovations.

Read more here:

Open Source Communities Need More Than Funding From Big Tech - DevOps.com

This is an audio transcript of the Behind the Money podcast episode: Night School, Class 3 Big Tech vs the insurgents

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Peter Spiegel Welcome to Behind the Money Night School. Im Peter Spiegel. Im the US managing editor of the Financial Times. BTM Night School is a special series made in collaboration with Blinkist that will serve as a guide to the US economy in 2023. For tonights lesson...

John Thornhill I think AI is different. It does disrupt peoples jobs. I dont think it ever tends to replace jobs outright. What it does do is change the nature of those jobs.

Peter SpiegelFrom the rise of ChatGPT to lay-offs at companies like Meta and Amazon, tech has dominated the headlines in 2023. Here to help us make sense of it all is the Financial Times innovation editor John Thornhill.

John, looking at the US economy, 2023 has been a year where weve seen the economy slow, and that is nowhere more apparent than in big tech, where firms like Amazon, Google and Microsoft have all announced some of the biggest lay-offs of any American companies. Why are they being hit so hard?

John Thornhill I think several things are going on at the moment. And youre right. I mean, so far this year, the latest tally, I think about 100,000 jobs have gone from the big tech companies, which is a lot of jobs. Several things, I think. One, last year, I think during the whole Covid pandemic, all of the big tech companies overinvested. They thought the future was gonna arrive quicker than it in fact did. And everyone was going online. They were using Zoom; they were using Google Meet. Everyone is working remotely. So there was a big demand for tech products. And so I think part of the story is were just coming off the peak. The Nasdaq index of kind of tech stocks is down 16 per cent over the past year, although its gone up 12 per cent this year. And I think that really, its just a recalibration when you look at a lot of the hiring figures or the investment levels or the VC funding, 2023 compared to 21, its really still showing an upward tick. Its just that this blowout year of 2022 has now been rolled back.

Peter SpiegelSo these names that we were just talking about that dominate in many ways our daily life Microsofts, the Googles, the Amazons if were coming off the peak, are these lay-offs and the downturn sign that these companies are sort of losing the position in the US economy, that theyre gonna be diminished in the US economy going forward? Or is this a classic case of sort of retrenchment where theyre basically just sort of cutting costs to maintain their leadership position going forward?

John Thornhill Im definitely in the retrenchment school. If you look at the underlying trend lines on ecommerce or the shift to digital advertising or just the uptick of adoption of all these tech products, youre seeing the underlying trend is still moving very sharply northwards. Youre seeing a whole load of new start-ups being formed, partly as a result of the kind of tech lay-offs as well, that there are a lot of kind of surplus tech workers who are now thinking about what theyre gonna do. So theres been a big surge in kind of new business formation weve seen since the Covid pandemic. And I think just generally theres a whole secular trend towards increased use of technology. Five billion people in the world have a smartphone. Increasing amount of commerce is going online, about 20 per cent in the US now. And so I think the secular trend will eventually can outweigh the cyclical downturn.

Peter Spiegel All right. So lets talk about that because theres this trend towards increased use. I think when we talk about technology in general, we tend to focus on these big companies because, as I said, they tend to dominate our lives. But as you pointed out, new companies being started, a secular trend towards more use of technology in our daily lives, so although these big tech groups in Silicon Valley play an important role, its not the only way technology is impacting the US economy. But what are some of these trends that we should be watching, you know, to see whats going to influence our lives and whats going to influence the broader economy?

John ThornhillWell, I think part of the story is that youre gonna see a battle between the big incumbents the Microsofts, the Googles, the Amazons and so on that youve been talking about and the insurgents, if I call them, the next generation of those companies that are emerging. And I think its gonna be fascinating to see how this battle plays out. On the one hand, its been easier and cheaper to launch a company than ever before. You have, everyone can operate in the cloud, which means that the cost has been reduced, the cost of software has plummeted, and finance is more readily available than ever before. So I think we have seen this really interesting trend of new business formation post-the Covid pandemic and how these businesses grow and adopt the new technologies that are coming along. Are they gonna shake the market grip that the big companies have, or are we gonna see a lot more disruption from below?

Peter Spiegel OK, so disruption by insurgents takes us very quickly to what I mentioned at the top, ChatGPT. Now OpenAI, which is sort of the inventor or the developer of it, has gotten some backing from Microsoft, but it clearly has become a disrupter, as you say. And its also convinced a lot of people that AI has finally arrived, and it become a...have a real impact on the real economy. Whats your view? I mean, is AI now ready for prime time? Will it play a role as a disrupter, or should we not believe the hype?

John Thornhill Well, these technologies have been developing over several years. I mean, Google really, the first people who came up with the transformer technology, and GPT stands for Generative Pre-trained Transformers. So they were the people who first came up with the technology, and then its been spread and other people have adopted it. As youre saying, OpenAI, which is this fascinating, kind of San Francisco-based research company, has really kind of pioneered the use of what are called large language models or the ChatGPT that came out. And I think theyve had a huge impact. So I think what...the difference is that a lot of the big companies and Google and Microsoft in particular had been developing these generative models. But when we saw the launch of ChatGPT in November last year, they really went mainstream. Millions of people started playing with them. About a hundred million people started using them within two months of launch, which is an astonishingly rapid take-up of a new technology. And I think we all had that kind of wow moment where you prompt a question in ChatGPT and you get this extraordinarily plausible instantaneous text coming out of the machine. And I think it is an amazing thing. But I think people are only just beginning to work out how its gonna have an impact.

Peter Spiegel Let me play the cynic or the sceptic here, because it was not so long ago that we had another, quote unquote, disruptive technology in something called the blockchain. And the most vivid thing we saw about this blockchain was in cryptocurrencies. And yet in the last few months, weve seen a complete collapse of the most prominent part of the crypto exchange called FTX. And that has seemed to raise all sorts of new questions about cryptocurrencies in general, but also whether blockchain is actually as disruptive as we maybe once thought. Take me through your thoughts on blockchain, and why perhaps AI as a disruptive technology is more worth paying attention to or not versus the hype that was around blockchain?

John ThornhillWell, Gartner, the data company, came up with this quite useful model called the hype cycle, which is rather nice (Peter chuckles). And so they plot where each technology is on this chart that they produced according to how much hype there is around a particular technology. So at the moment, AI is very close to the top of the peak of inflated expectations, as they call it. People are getting so excited about it. Metaverse and blockchain have gone over the top of that peak, and theyre now in what the Gartner would call the slough of despond. (Peter laughs) And then after a few months after people have stopped talking about it, then you get the slow adoption. And thats really when I think a lot of these technologies go mainstream. So I think that youre seeing exactly that with blockchain, there is massive overhyping of it. We saw the whole collapse of the FTX crypto empire. People have almost shaken their heads and thrown up their hands in despair and thought, this is never gonna come to anything. But I think people will start thinking, what are the real uses of this? How can we adopt it? And I think we might begin to see some really interesting uses over the next five, 10 years.

Peter SpiegelAnd when you say find ways to use it, do you mean cryptocurrencies specifically or more broadly, the blockchain technologies and how something that is, you know, visible and transparent to the world and cannot be hacked at is something that other industries could use potentially?

John ThornhillI think its the underlying blockchain technology that people are beginning to think, is this a different way of handling data and making transfers in a way that is more decentralised, is not controlled by one central authority and so on? So I think a lot of the models that weve seen emerge so far have failed, but there is still, I think, possibilities that they could get adopted in the future.

Peter Spiegel Lets go back to AI and to a certain extent to ChatGPT, but AI more generally, because if you combine AI with robotics, you have a debate about whether basically increased automation and machine learning through robotics is good or bad for the US economy. So on the upside, theres the obvious economic argument that automation increases productivity and productivity is key to any country increasing its collective wealth. So therefore, on paper at least, this is a good thing for the US economy. But many of us have seen that there are, automation frankly takes jobs away from a lot of blue-collar Americans, which means there are even fewer well-paying jobs for the average American. So in your view, because you are a columnist, is automation and robotics, you know, a plus or a minus for the US economy?

John Thornhill I would say its definitely a plus. I think this debate has been going on for several centuries and in fact, ever since the Industrial Revolution, that its very easy to see which jobs are destroyed by new technologies and very hard to predict which jobs are gonna be created. I think AI is different. Its an incredibly powerful whats called a general purpose technology that infuses the whole economy at large. I think it will have an incredible impact on productivity in a whole load of different areas. And one of the ones Im most interested in is healthcare at the moment. But as you say, it does disrupt peoples jobs. So I dont think it ever tends to replace jobs outright. What it does do is change the nature of those jobs. In healthcare, for example, a lot of speculation out there that it will change the role of a doctor a lot more than it will change the role of a nurse, for example. In the past, when manufacturing was automated, it definitely hit the blue-collar jobs. It was that kind of automation of muscle. What AI is doing is automating the brain. And so I think thats gonna affect a lot more white-collar jobs going forward...

Peter Spiegel Hopefully not journalists...

John Thornhill Well, maybe some journalists (laughs), but not columnists, I think.

Peter SpiegelBefore I let you go, I want to change topic slightly from the hard science and the disruptive nature of technology to sort of the policy side of things, because one of the biggest stories in technology, I would argue, is that its become in many ways the big battleground in geopolitical conflict, particularly between China and the US. So almost on every sector in technology microprocessors, quantum computing, renewables, green technologies, 5G you have the US and China at loggerheads, sanctions, bans, all these kinds of things. Just to throw this out there, who do you think is winning the global tech war? Because there is a lot of nervousness in Washington that China has taken a quantum leap ahead of the west on many of these technologies. Is that paranoia? Is that actually happening? What would be your view in terms of where China and the US stand right now in advanced technologies?

John ThornhillIf I can put it in a slightly different way, I think both sides are winning, which means also both sides are losing. In some areas like 5G telecoms infrastructure that you were talking about, no doubt China has won that war. I think in open areas that are still now very competitive, in particular, three I would pick out. One is chips that you mentioned. At the moment, 90 per cent of the worlds leading chips are manufactured in Taiwan, which a lot of people in Washington worry is an incredible kind of geostrategic hotspot. What happens if Taiwan came off market? Thats obviously an enormous kind of strategic challenge for America, which is, explains why theres been this massive investment in kind of chip production in the US. AI, I think, is one of the other areas when you look at the papers that are now coming up. China has put an enormous effort into increasing its capability in that area. I think for the moment, as far as anyone can tell, America still has the significant edge in terms of research. But I think China has probably got the edge in terms of the application of a lot of these AI models, certainly kind of ecommerce and online world and digital payments and so on. So I think thats an even contest in a way. And then I think the real joker is quantum, and weve been spending quite a lot of time at the FT trying to investigate quantum computing. In truth, nobody knows who is ahead in this field.

The idea is that if one side or the other did develop a fully functioning quantum computer, they would be able to crack open the other sides encryption methods, the so-called Q-Day, which would have an enormous strategic impact if one of those two sides got ahead of the other. But the truth is that we have no idea really who is where at the cutting edge of this technology. So thats definitely an open race.

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Peter Spiegel OK, John, Im gonna ask you, if our listeners were to just walk away and say, here are the three things I need to take away from John Thornhills discussion, what are the three most important things do you think right now?

John ThornhillWell, first, I think the macro trend towards tech is still very strong. We had this blip in 22. Weve had the retrenchment in 23. But I think we still are gonna see a very strong uptake of technology, particularly in ecommerce, a whole load of software services and in generative AI. Number two would be the impact of generative AI. I think people are still trying to figure this out. Huge numbers of start-ups being created and getting funded right now, who are trying to work out how they can apply AI. Ninety per cent of the start-ups are gonna go bust, but the 10 per cent of them are gonna transform the workplace, I believe. And I think in many areas theyre gonna augment human creativity. Theyre gonna threaten a number of jobs, particularly kind of white-collar jobs. Theyre going to change the nature of work. But I think they will also augment human creativity and lead to a lot of increased productivity. And the third one is really how this all fits into the context of the US-China tech war. I think people have kind of pulled back from calling it the new cold war, but theres certainly very heightened rivalry between the two powers, most particularly in chips, where America is kind of really squeezing China. And China is putting huge effort into trying to develop state-of-the-art computer chips. But were also seeing it in the areas of kind of AI quantum computing and also synthetic biology.

Peter SpiegelOK, Im gonna be very unfair and push you even further. If theres one thing that our listeners should take away about technology and the US economy, what do you think that one thing is?

John ThornhillIts all about the humans, rather perversely. I would argue that technology is a subject that everyone gets obsessed by and they look at the kind of capabilities of the technology and what it could do. But technology is only useful when its applied, and thats all about how people use it. And so I think humans very much are in the driving seat still. Were trying to figure out how we use this technology. We can use it for wonderful, productive ends. We can also use it for very harmful purposes as well. Dont forget the humans.

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Peter SpiegelThanks again for listening. Im Peter Spiegel. You can find more of Johns reporting on FT.com. This episode was done in collaboration with Blinkist. If you want to find out more about conversations and topics like this, check out the Blinkist app. This episode was produced by Zach St. Louis. Topher Forhecz is our executive producer. Sound design by Breen Turner and Sam Giovinco. Cheryl Brumley is our global head of audio. Thanks for listening. Class dismissed.

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Night School, Class 3: Big Tech vs the insurgents - Financial Times