Layoffs and hiring freezes: IT slowdown signs are getting harder to ignore

The Indian IT sector has started cutting back on its hiring activities as part of its strategy to counter the pressure from an earnings downturn, and keep pace on modernising operations.

IT bellwether, Infosys, which recently reported earnings for the fourth quarter of financial year 2017, confirmed it had hired 6,320 people in the 2016. Whereas in 2015, the company hired almost three times at 17,857.

Not only this, media reports suggested the company 'released' almost 8,000 people from their posts in 2016, replacing them with automation. These employees will not be fired though. They will be shifted to other projects.

Both TCS and Infosys came up with muted earnings for the fourth quarter of last fiscal.

Industry body Nasscom, too, had downgraded the sector's growth rate in FY17 to 8-10 percent from last year's forecast of 10-12 percent.

"Adapting to automation will be a bigger challenge for the IT industry than the incoming Donald Trump administration in the US", said Vineet Nayyar, Vice Chairman of Tech Mahindra. He added, with automation and analytics assuming greater importance, there would be lower intensity of manpower.

Recently, media was abuzz with news of layoffs in the US-based IT firm Cognizant. Reports suggested the company may fire as many as 10,000 employees in 2017.

On Thursday, the country's third largest software services firm Wipro was learnt to have fired hundreds of employees as part of its annual performance appraisal.

According to sources, Wipro has shown the door to about 600 employees, and there are speculations the number could up to 2,000.

These IT companies have instead started hiring in the US, a market which accounts for most of their revenues. This is after the Donald Trump administration decided to make it harder to get H-1B visas with stricter norms.

Infosys now plans to focus more on local hiring in the US and is also looking at setting up development and training centres in the country as part of its efforts to tide over visa-related issues.

Infosys has been in favour of a healthy mix of local and global personnel even though hiring locals in overseas markets often pushes up operational costs for IT outsourcing companies.