This article was originally published in 2005 and was last updated on June 27, 2025.
- Tension: Gateway’s bold pivot toward regional efficiency masked a deeper contradiction—how can a company claim to be customer-centric while eliminating the very teams built to serve them?
- Noise: Corporate language around “nimbleness,” “consolidation,” and “realignment” blurred the human cost of the decision, while Wall Street fixated on short-term cost savings instead of long-term brand damage.
- Direct Message: When operational efficiency sacrifices human connection, it isn’t efficiency—it’s erosion. Sustainable strategy means knowing what not to cut when you’re trying to stay lean.
To learn more about our editorial approach, explore The Direct Message methodology.
In mid-2001, Gateway Inc., then a top-tier PC maker, announced it would shutter four of its U.S. call centers as part of a sweeping $300 million cost-reduction initiative.
The centers—located in Virginia, South Dakota, Utah, and California—represented not just jobs, but local hubs of customer support, technical help, and brand interaction.
The closures led to thousands of layoffs both domestically and abroad, including a full-scale exit from the Asia-Pacific market. CEO Ted Waitt framed the move as a strategic evolution that would make Gateway “nimbler, faster, better.”
But in practice, it meant slashing 15% of its U.S. workforce and losing hard-won relationships in local communities and overseas markets.
Call center operations were to be consolidated into remaining U.S. sites and aligned more closely with Gateway’s retail strategy.
But even then, cracks in the logic were visible: retail traffic was slipping industry-wide, and customer service was increasingly moving online.
The reality behind “getting lean”
At first glance, Gateway’s rationale tracked: reduce redundancies, focus on core markets, and streamline support operations.
But beneath the surface, this wasn’t a shift in efficiency—it was a retreat from the brand’s own values.
What Gateway and many others misunderstood then—and what some tech companies still overlook now—is that call centers aren’t just logistical expenses.
They’re emotional infrastructure. They anchor the company to its customers in moments of need. You can’t automate empathy. You can’t consolidate trust.
The Direct Message
Cost reduction is not a strategy. It’s a tool. If you don’t pair it with a clear reinvestment plan that prioritizes relationships, you’re not innovating—you’re disappearing.
What modern companies can learn from Gateway
More than two decades later, Gateway’s story isn’t just a corporate case study—it’s a blueprint for what not to do when pressure hits.
The tools have changed, the platforms are new, and the scale is bigger, but the core dilemma remains the same: how do you cut costs without cutting corners on trust?
Today’s companies are facing similar market contractions, and many are reaching for the same playbook. But history offers a clear warning—efficiency without clarity is a fast track to irrelevance.
1. Short-term savings don’t always translate to long-term sustainability
Gateway’s stock briefly stabilized after the cuts. Analysts applauded the $475 million in charges as a “necessary reset.”
However, what followed was a slow erosion of brand equity. Gateway faded from relevance not because it didn’t pivot—but because it didn’t pivot with purpose. It made a financial move without a strategic soul.
Today, we’re watching similar narratives unfold. Look at Zoom, Salesforce, or Meta—companies that rode pandemic growth and are now laying off tens of thousands while promising reinvention.
But reinvention without reinvestment isn’t transformation. It’s fragmentation.
2. You can’t outsource brand trust
Gateway’s overseas exits—Japan, Australia, Singapore, and more—were justified with a single phrase: “We don’t have the brand awareness.”
But that was precisely the problem. Instead of investing to build awareness and partnerships, the company pulled out.
Today’s businesses should take the opposite lesson. Emerging markets demand care, not shortcuts. The global economy doesn’t reward rapid withdrawal; it punishes it.
In a post-pandemic world, customer loyalty is won through consistency and local nuance. Brands that scale well—like Shopify or Canva—know this. They grow by getting closer, not farther, from their users.
3. Call centers were early victims of a mindset that still persists
Gateway’s decision marked an early chapter in the now-familiar tech pattern: cut support first, automate later.
It’s a mindset that continues to haunt the industry. Every time a company pushes customers toward generic chatbots while touting “efficiency,” it walks the same risky line Gateway did.
Automation without augmentation—without human backup, real escalation paths, and empathetic design—is just a digital version of silence. And silence doesn’t retain customers.
What today’s execs should ask before making the same cuts
- What part of our brand experience do customers actually value?
- Are we cutting expenses, or amputating relationships?
- What are we doing to ensure service quality doesn’t erode while we “scale down”?
If Gateway had asked these questions, its trajectory might have been different.
Then vs. now: Downsizing in the era of public scrutiny
In 2001, Gateway’s cuts were reported in business sections and tech trades. In 2025, a similar decision would trend on X, trigger Glassdoor backlash, and prompt CEO apologies on LinkedIn.
Today’s consumers and employees are connected, vocal, and data-literate. They don’t just react to what companies say—they dissect how they act.
Layoffs may be necessary, but performative PR and cold execution are no longer acceptable.
We’ve seen companies like Shopify handle cuts with transparency and severance empathy—and be commended for it. Others, like Twitter/X, have faced reputational decline after hasty mass firings.
The delivery matters now as much as the decision.
So what does a smart, modern pivot look like?
It means:
- Cutting with context: Knowing which roles are redundant and which are relational.
- Reinvesting publicly: Communicating where the saved resources are going—new services, better tooling, upskilled teams.
- Treating support as a product: Customer service isn’t just reactive. It’s part of the value proposition.
Gateway failed not because it downsized—but because it failed to pair contraction with clarity.
Downsizing is not the story—what happens next is
The Gateway example reminds us that what looks like a smart operational shift can quietly become the first step in brand decay.
Downsizing isn’t inherently bad. What matters is what you protect, what you communicate, and what you’re really optimizing for.
Brands that endure downturns don’t just cut—they recalibrate. They clarify their priorities. And they invest in connection, not just compression.
Legacy isn’t built in boom times. It’s shaped by how you respond when the numbers dip.