IT Nightmare: Top IT companies cutting jobs in India to hire in US
Top IT firms in India are currently in a phase being termed as the biggest retrenchment drive in recent years. The top IT firms in the country are expected to release about 56,000 engineers this financial year. This number is almost double the number of engineers released in the previous year, which reflects how unprepared the industry as a whole is in regards to the ever increasing protectionist environment emerging across the western world and adapting to the ever evolving world of technology.
The companies in reference here include major organizations of the country and abroad who’ve set up development branches in the country including Infosys Ltd, Wipro Ltd, Tech Mahindra Ltd, HCL Technologies Ltd, US-based Cognizant Technology Solutions Corp. and DXC Technology Co., and France-based Cap Gemini SA. These companies employ around 1.24 million individuals cumulatively and are expected to let go of around 4.5% of them in this year.
Even though most if not all of these firms are still recruiting fresh talent, they will end this year with fewer employees than the began with according to HR heads of 2 of these 7 firms. In preparation, most of these firms have already put a higher than usual number of employees on notice already by different ways. Cognizant has placed more than 15,000 employees in the lowest category (bucket IV), and Infosys has placed more than 3,000 senior managers in the category of employees needing improvement.
DXC Technology is in the middle of their 3 year plan to reduce the number of offices in the country to 26 from the current 50. 5.9%, or 10,000, of its 170,000 of its employees will be asked to leave this year.
Denial or Cover up ?
The statements from these companies however, seem to point to exactly opposite to what reports claim. All seven companies have attributed the lay offs to increase in the number of poor performing employees rather than the companies shortcomings. “Cognizant has not conducted any layoffs,” said a representative, also adding that the performance-based review for this year was consistent with the ones conducted previous years.
“Our performance management process provides for a bi-annual assessment of performance,” a spokeswoman for Infosys said, declining to share the number of employees asked to leave in the current quarter. “We do this every year and the numbers could vary every performance cycle”
Spokespersons from some of these companies have cited the numbers mentioned in reports such as this one as speculative.
“Performance appraisal may also lead to the separation of some employees from the company and these numbers vary from year to year,” said a Wipro spokesperson.
A Tech Mahindra spokesperson said the company “has a process of weeding out bottom performers every year and this year is no different”. A spokesperson for HCL said that the company does not have any plans to ask more employees to leave in the current year.
In the past few years, large IT firms would generally release around 1-1.5% of their work force every year with the number being a little higher at 3% for countries based abroad with India operations. This year however, the number is expected to be 2% at minimum. Tata Consultancy Services Ltd (TCS), the largest IT employer with close to 390,000 employees, does not have any plans to ask anyone to leave this year, said a spokeswoman.
At the root of all this, is the change in the business model that these companies are still wrestling with. Most of the world, has turned to digitization and automation but Indian IT firms are yet to make that jump.
“Digital revenue is still less than a fourth of traditional business. Meanwhile, traditional business is slowing. All of us have to re-look at the existing talent pool to make sure it is aligned to future needs,” one of the HR heads cited above said on condition of anonymity.
“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.”
As more companies move towards newer technologies such as cloud computing and automation, the number of physical employees required to carry out these tasks have begun reducing. Tasks that needed a whole pyramid of employees earlier can now be done with just a handful of them. With companies facing this reality as a sudden jolt instead of a foreseen outcome has resulted in the soon to come mass layoffs. “The entire pyramid structure (organizational structure) is getting disrupted,” the second HR head cited earlier added.
The jolt has also resulted in these firms having to cut back on costs for the first time since the recession almost a decade earlier. In the financial year ended in March 2017, TCS, Infosys and Wipro – the big 3 in Indian IT – grew slower than the industry body’s projected growth of 8.6%. They also saw a decline in their profitability.
Outcome of protectionist policies
“IT industry grew on the twin premise of talent and mobility. Now both these are being questioned. Because of protectionist policies across the world, we have to go for more localization. And the business requirements of clients are in newer areas such as data analytics. Traditional maintenance work is getting automated. So we are seeing a more stringent appraisal process and more people being asked to go,” the first HR head cited above said
On the other hand, as a by product of the protectionist policies of the Donald Trump administration, most of these companies will see their workforce in countries getting localized further. Infosys has already announced that it’s plans to hire 10,000 US citizens over the next two years. Wipro has hired over 2,800 Americans over the last 18 months and expects half of its total workforce in the US to be locals by the end of June 2017.