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Pink slips resurface in Indian IT industry, but for different reasons this time

Experts peg the layoffs to be less than 10,000 coupled with bullish hiring at the back of huge demand for digital.

August 28, 2019 / 02:49 PM IST
Representative Image

Representative Image

Tension is palpable and hushed conversations are commonplace at the information technology firm where Maya* works. “There is much anxiety in the company as reports of layoffs are making rounds,” Maya said, adding, "We are not sure how many have really been laid off, but we are dreading we may be next.”

After a hiatus of a couple of years, IT firms have now returned to laying off non-performers.

But there is a difference this time. Most vulnerable are those who are unable to upskill themselves to the changing demands.

Skill recession

“The market is such,” said an industry watcher. “Digital skills are a major differentiator in the nature of layoffs we are seeing now and the one we witnessed a few years back,” the source added.


Experts peg the number of layoffs-- the fallout of bullish hiring on the back of huge demand for digital -- at less than 10,000.

Between 2014 and 2017, IT industry saw mass layoffs. In 2014-15, TCS laid off close to 3,000 employees. A 2017 Mint report said seven top IT firms such as InfosysWipro and HCL Tech looked to lay off close to 56,000 employees.

While these were non-performers, the layoffs were on the back of economic downturn and the companies were trying to weather them down by freezing recruiting and letting go of its workforce that were deemed under-performers.

Things are different now though. Pareekh Jain, founder, Pareekh Consulting, an IT consultancy firms, said, "People who are being let off are the ones with legacy skills and have not up-skilled themselves in new-age technologies such as cloud and artificial intelligence,” he added.

“In a way, what we are looking at is not recession of business opportunities but the recession of skills,” the source pointed out.

What is happening is that enterprises world over are cutting down on their legacy spending in maintenance and support of mainframe systems and investing in migrating to Cloud. The clients are looking for tech partners who can help them with products and solutions that will make the transition faster.

This means that legacy business, which is a major revenue generator for the IT firms, is coming down. Given the pace at which this migration is happening, some experts said legacy will be phased out in the next couple of years.

At this juncture, IT firms and its employees should step-up to cater to these changing needs. “But this is not happening at the rate it should,” said Supaul Chanda, Business Head, Teamlease Digital.

Senior employees' jobs at stake

Kris Lakshmikanth, Founder and Managing Director, Head Hunters India, an HR consultancy firm said, “There is a severe dearth of professionals skilled in combination technologies such as Cloud and Java or Cloud and networking skills, which clients are looking for.”

Training employees in these skills is not as successful, as clients are looking for resources with few years of experience. This is resulting in layoffs, which are happening in small spurts with a few hundred every quarter.

For instance, Infosys COO UB Pravin Rao said the company’s attrition rate was high in part due to involuntary attrition (layoffs) for the quarter ending June 30. There have been reports of Cognizant laying off few hundreds of its people, especially at the senior level.

Lakshmikanth pointed out that jobs of senior-level employees over 40 years are more likely at stake.

“Moment you are over 40, you are doing mostly meetings and taking home a package of over Rs 20 lakh. In this salary, you can employ at least five to six freshers and train them in digital skills,” he added.

“At a time when margins are under pressure, companies will look to get more value out of its junior employees, who can be trained in latest technologies,” he added.
Swathi Moorthy
first published: Aug 28, 2019 02:49 pm

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