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IT industry slows, Indian companies ready for large layoffs

10/05/2017


IT industry slows, Indian companies ready for large layoffs

BENGALURU/CHENNAI: 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 hit first are mid and senior level professionals, those with 10 to 20 years of experience, but the expectation is that 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. The situation is worsening to a point where affected employees are beginning to approach labour unions to take up their cause.


Cognizant last week 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, 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.

At Infosys, 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, in terms of performance, the bottom 10% of their reportees.

Three weeks ago, Wipro CEO Abid Ali Neemuchwala mentioned in an internal conference call that if revenues don't grow, around 10% of employees would be let go off 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.

Responding to TOI's question after the earnings, Neemuchwala said, "It's across service lines...performance appraisal is nothing new. I don't know which conference call you're talking about, but I have a conference call with my leadership team every month and I go through a lot of items. There are to-dos in every quarter. We have done away with the bell curve. Today, the performance measurement is not on what you were doing till yesterday, but whether you are ready for tomorrow."

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 centres, mostly in India.

Asked about the layoffs, Capgemini did not deny that some had been asked to leave, but said it expects to recruit over 20,000 new team members in India this year. "Each year our employees are evaluated based on strict performance criteria in an objective process, consistent with industry norms, to ensure we are aligned with our customer needs, business priorities, and the overall industry evolution. This leads naturally to a varying number of employees transitioning out of the organisation in any given year. We continue to accelerate our training programmes in 2017 with over 2,000 India employees having already undertaken upskilling and emerging technologies training alone," it said.

Infosys said its performance management process provides for a bi-annual assessment of performance. "A continued low feedback on performance could lead to certain performance actions, including separation of an individual and this is done only after feedback. We do this every year and the numbers could vary every performance cycle," the company said in a statement.

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.

Peter Bendor Samuel, CEO of IT consulting firm Everest Group, said 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," he 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.

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. "Many employees will struggle to make that journey. But equally, many service providers will struggle to adapt to these new realities. Skills will become more important than just scale," he said.

Ray Wang, CEO of Constellation Research, said cloud, artificial intelligence, and software platforms will lead to 20%-30% reduction of staffing by 2020.

http://timesofindia.indiatimes.com/business/india-business/technology-giants-prepare-for-layoffs/articleshow/58585806.cms

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