Information technology (IT) companies in India are in conducting one of the industry’s largest retrenchment drives with several of the biggest IT firms planning to ask between 50,000-60,000 employees, primarily Engineers to depart this year.
The number is approximately twice the lay-offs last year, reflecting their inability to successfully match the rapid development of computing technology in use. The companies include both Indian and multinational firms with a large footprint in India.
Seven companies — Infosys Ltd, Wipro Ltd, Tech Mahindra Ltd, HCL Technologies Ltd, US-based Cognizant Technology Solutions Corp. and DXC Technology Co, and French Capgeimini SA — all who together employ 1.25 million people approximately, plan to let go of 4-5% of their workforce in 2017.
Numerous companies will definitely end the year with a lower number of employees that they started with, despite continuing to hire young engineers, according to the HR heads at two of the seven companies.
Preparing the ground for layoffs, each of these seven companies had alerted a number of employees by awarding them the lowest ratings. Cognizant has placed more than 15,000 employees in the lowest category and Infosys has placed more than 3,000 senior managers in the category of employees who required improvement.
“Cognizant has not conducted any layoffs,” a spokesman said, adding that the performance-based reviews this year are consistent with past ones.
“Our performance management process provides for a bi-annual assessment of performance,” a spokeswoman for Infosys said. “We do this every year and the numbers could vary every performance cycle”. The same spokeswoman however, declined to commit to a definite number of employees leaving.
“Performance appraisal may also lead to the separation of some employees from the company and these numbers vary from year to year,” a Wipro spokesperson said.
Tata Consultancy Services Ltd (TCS), the largest IT employer with close to 4 Lakh employees, does not have any plans to ask anyone to leave this year, a spokeswoman said.
At the heart of the problem is the fundamental change in the business models that Indian IT companies are wrestling with. The world has Digitally progressed at a standard that Indian companies are finding difficult to compete at.
IT companies have started working more extensively with recent technologies such as cloud computing, and moving away from a people-led model. This detrimentally impacts the talent pool of every company. Meanwhile, many of the IT companies have embraced automated tools do perform the mundane, repeatable tasks that earlier were performed by an army of engineers.
That speaks of a bigger problem, said an expert.
“What required 50 programmers, analysts or accountants 5 years ago, can be done by a handful of smart thinkers and much smarter systems,” said Phil Fersht, CEO of US-based HfS Research, an outsourcing-research firm. “If I were Prime Minister Narendra Modi, I would be very concerned that a whole workforce generation needs reorienting to address work activities that are growing in demand.”
Poor growth and unrealistic expectations on profitability has prompted most companies to save on costs. In the year ended March 2017, TCS, Infosys and Wipro grew slower than industry body Nasscom’s 8.6% growth forecast. This was a first for nearly 8 years.
Cognizant, Capgemini, Wipro and Tech Mahindra started culling their employee roster in February while Infosys, HCL, and DXC are expected to do so in late May/early June. Most employees being asked to leave are engineers with at least 6-8 years of work experience.