IT meltdown: Indian tech firms plan more job cuts
Report says half of the workforce would be redundant in the near future.
India's IT companies employ close to 40 lakh people directly. They are one of the main reasons why Indian economy is relatively doing well. That story seems to be changing as of last week. A McKinsey report says half of the workforce would be redundant in the near future. The signs are already here.
Last week Cognizant announced a "voluntary separation programme" for directors, associate VPs and senior VPs. 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. "It's a bloodbath," said a Cognizant HR manager.
Last Thursday, 10 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.
Last week, Wipro decided to say farewell to 500 of its staff, after what it called a "rigorous performance appraisal". That just means workforce rationalization. And there are likely to be more of these at increasing intervals. A Wipro engineer who found himself at the receiving end of the "rigorous appraisal" said overnight the "company found we are not up to the standard".
Three weeks ago, Wipro CEO Abid Ali Neemuchwala had mentioned in an internal conference that if revenues didn't grow, around 10% of employees would be asked to go this year.
Cognizant, another tech firm, last week decided to lay off five per cent or 10,00 of its senior executives.
Infosys has cut down its fresh hiring by as much as 60 per cent, while others have already gone in for a big re-skilling of their staff, in a sign that they will be hiring fewer new employees from now on.
Large IT services companies are all in the process of laying off employees on a scale not seen since the 2008-10 downturn. Those taking the brunt are mid and senior level professionals, and those with 10 to 20 years of experience, as their pay packet is larger.
But lower level employees too will be hurt later in the year, as growth in the $150-billion industry slows far more than anticipated, and companies move towards hiring more in the US, as Trump administration has insisted on "buy American, hire American".
The situation is worsening to a point where affected employees are beginning to approach labour unions and courts to take up their cause. That most executives are on contract actually weaken their legal standing on the issue.
That all this is happening in the context of the US tightening the issuance of H1-B visa, and in the face of stiff resistance to Indian engineers and other skilled professionals in countries like Australia and Britain, adds to why the Indian IT dream is slowing turning into a nightmare.
The IT meltdown is a clear indication that the economy, contrary to what the Modi government has been consistently claiming, is turning bleaker by the day. While it is not clear if Modi's demonetization drive has directly impacted the IT industry, exports are down and global protectionism has affected one of India's hitherto booming sector.
French IT services major Capgemini is said to be letting go off nearly 9,000 people, or nearly 5% of its workforce. A large part of this are erstwhile 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.As of March 31, Capgemini's total headcount was 195,800; 57%, or 111,300 employees, are in offshore centers, mostly in India.
The slowdown in IT services is now clear and appears irrevocable. Cognizant, which was growing at about 20%, expects to grow this year at only 8-10%. Infosys, which grew at 13.3% 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 double digits did just 8.3% last year.
India's largest software services company Tata Consultancy Services' (TCS) plans to lay off employees is further snowballing into a labour issue across India as employees plan to step up street protests and file cases against the company.
Already Bengaluru, Kochi and Chennai have witnessed protests, and a TCS employee got an injunction against her termination by the Madras High Court in a case she filed against the company. The entire issue is moving into the unionization of the sector with labour unions owing allegiance to mainstream political parties and other non-governmental organizations extending their support.
An employee who participated in a masked protest on Saturday in Bengaluru said that TCS started issuing termination notices to employees as early as December 8, 2014. As per a report, TCS had asked 2,574 employees to leave in the first nine months of FY 2014-15, while the total layoffs in the full year may exceed 3,000.
"I have been working with the company for the past nine years and have performed well. Now I am not involved in any projects, and the HR informed me that I will be sacked. I have the proof of my performance and the comments of my seniors. The HR did not mention any valid reason for their action," says an employee who did not want to be identified.
Indian IT companies reportedly earn around $60 billion annually from the US market, providing an array of services to top American firms. H1B visas are employment-based visas for temporary workers, issued by the US Citizenship and Immigration Services (USCIS). Being the most coveted among US work visas, only 85,000 H1B visas, including 20,000 for students, are issued every year.
Indian IT companies account for roughly 17,000 to 18,000 of these every year, several of them in the priority category, where visa processing is fast-tracked by paying an extra fee of $1,225 (around Rs 80,000). Indian companies used this window to send their staff to the US on urgent assignments. That window is closing.
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