India’s IT service companies are in the process of laying off employees on a massive scale. This scale of layoffs wasn’t seen since the 2008-10 downturn in IT sector. The move has come after the growth in India’s $150 billion IT industry has slowed down more than anticipated and companies move towards hiring more in the US. Indian IT biggies denied of any layoffs but said employees had been let off due to low feedback on performance assessment.
Those taking the hit first are mid and senior level professionals with 10 to 20 years of experience, but the expectation is that lower level employees too will be hurt later in the year. The situation is worsening to a point where affected employees are beginning to approach labour unions to take up their cause.
Aggravated by rising rupee leading to lower realizations for software exports, earlier in April country’s apex trade body ASSOCHAM (The Associated Chambers of Commerce & Industry of India) had warned about industry’s growth prospect and this may lead the Indian IT firms to displace work force. In that case, the chances of layoffs are real.
After a week of this warning, India’s third largest software services firm Wipro as part of its annual “performance appraisal” fired hundreds of employees. Wipro laid off around 600 employees, while many predicted that number to go as high as 2,000. Earlier in the month, according to reports, Wipro CEO Abid Ali Neemuchwala, mentioned that if revenues don’t grow, around 10 per cent of employees would be let go this year. The product engineering team is likely to be one of the big casualties. Wipro ended the last fiscal year with 1.81 lakh employees.
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Last week, Cognizant announced a voluntary separation programme for directors, associate VPs and senior VPs a – part of its plan to shift operations to automation and digital technology. It is reported that, some 1,000 executives are expected to go. The company, one of the top performers in the industry, is expected to eventually cut at least 6,000 jobs or 2.3% of its total workforce.
Last Thursday, ten Cognizant employees, through the Forum for IT Employees, filed a petition with the assistant commissioner of labour arguing that they were being forced to sign voluntary resignation letters. Two groupings — the Forum of IT Employees (FITE) and NDLF IT employees wing — are petitioning the Tamil Nadu government against what they call unjustified dismissals of employees at Cognizant. Cognizant has denied that there have been any layoffs and said employees had been let off because they did not meet performance requirements.
The TOI reported that, at Infosys also nearly 1,000 employees in job level 6 and above (group project managers, project managers, senior architects and higher levels) are expected to be asked to leave. Managers at these levels have been asked to identify the bottom 10% of their reportees in terms of performance.
French IT services major Capgemini is said to be letting go off nearly 9,000 people, or nearly 5% of its workforce mainly employees of Igate, the company that Capgemini acquired in 2015. Capgemini had asked over 35 VP, SVPs, directors and senior directors to leave in February and 200 people were asked to leave at one of its offices in Mumbai.
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As reported by TOI, Capgemini did not deny that some had been asked to leave as evaluated on strict performance criteria, but said it expects to recruit over 20,000 new team members in India this year.
The slowdown in IT services is now palpable. Cognizant, which was growing at about 20%, expects to grow this year at only 8-10%. Infosys, which grew at 13.3% in constant currency in 2015-16, was down to 8.3% in the last fiscal and expects to grow only between 6.5% and 8.5% this year. TCS, which was growing in the teens, did just 8.3% last year.
“The industry growth has slowed and the “arbitrage first” segment (traditional IT services) is in secular decline. When this is added to the pyramid factory model which requires new freshers to be brought in every year to keep cost low, it results in an excess of more experienced employees,” Peter Bendor Samuel, CEO of IT consulting firm Everest Group, said.
He thinks the most vulnerable employees are those with 3-7 years of experience. “Unfortunately, the new digital service economy is starting to further reduce the need for these employees. In many instances, the introduction of digital service models with extreme automation, can eliminate 40% or more of the FTEs (full time equivalent/ employee) in a function. Finally, the new digital models require a lower proportion of FTEs offshore than the traditional arbitrage model and as these new service models take over, they will further stress the employment model,” he said.
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Tom Reuner, SVP of intelligent automation and IT services at IT consulting firm HfS, believes that employees have to incessantly re-invent themselves as the journey toward digital transformation necessitates new skill sets and continuous learning. Skills will become more important than just scale.
Ray Wang, CEO of Constellation Research, said cloud, artificial intelligence, and software platforms will lead to 20%-30% reduction of staffing by 2020.
The trouble in Indian IT industry started with US President Donald Trump’s ‘Buy American, Hire American‘ campaign. The US is in the process of tightening the norms for H-1B visas. ASSOCHAM had earlier said that nearly 86 per cent of the H1B visas issued for workers in the IT sector go to Indians and this figure is now sure to be scaled down to about 60 per cent or even less.
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(Article Courtesy : The Times of India)
