India’s IT sector plagued by layoffs

A pall of gloom has descended over India’s Information Technology sector. The sector is plagued by layoffs by leading companies such as Infosys, Cognizant and Tech Mahindra. According to industry experts, this trend may continue for the next couple of years.

With the industry moving towards greater use of cloud computing, artificial intelligence and automation, the companies are rethinking their talent requirements. Software exporters are also reeling from the slow revenue growth, international business environment and stricter work permit regimes in countries such as US, Singapore, Australia and New Zealand.

India is the world's largest sourcing destination for the IT industry, accounting for approximately 67 per cent of the US$ 124-130 billion market. The Indian IT sector accounted for a large 9.3% of the Indian GDP. Nearly 10 million people are employed by India’s IT sector.

“It’s a situation wherein the available talent haven’t kept up with the pace at which the industry was evolving and hence, many of them find themselves redundant,” says Rituparna Chakraborty, TeamLease Services Executive Vice-President and co-founder.

Executive search organisation GlobalHunt MD Sunil Goel said: "This rationalisation does happen in every 3-5 years in the industry through new-age technologies, but this has impacted it more this time as the US also has changed policies for foreign IT workers."

The layoffs are expected to affect mid-level employees with 10-15 years of experience who may not have kept up with new skills. The layoffs began with software firm Wipro who sacked around 500 of its employees as part of its appraisal process. Software services firm Tech Mahindra has also reportedly sacked a thousand-odd employees recently.

US-listed IT major Cognizant Technology Solutions, which has a significant workforce in India, is said to be reducing its employee count by as much as five per cent, which translates to close to 10,000 workers, as reported in March this year. Another 1,000 people may be impacted in the bi-annual assessment at the tech major Infosys.

An earlier report by consulting firm McKinsey & Company had indicated that nearly half of the workforce in the IT services firms will be "irrelevant" over the next 3-4 years.

McKinsey India Managing Director Noshir Kaka had also said the bigger challenge ahead for the industry will be to retrain 50-60 per cent of the workforce as there will be a significant shift in technologies. The industry employs 3.9 million people and the majority of them have to be retrained.

Executive search firm Head Hunters India said the job cuts in IT sector will be between 1,75,000 and 2,00,000 annually for next three years due to under-preparedness in adapting to newer technologies.

Head Hunters India Founder-Chairman and MD K Lakshmikanth added that the IT services industry is passing through an uncertain time as the growth in digital technologies like cloud-based services is happening at a much faster pace and the companies are combining learning of some of the new technologies and reskilling.

"Because of the changing technology, the most affected will be the professionals aged 35 and above, for it would be very difficult for them to get jobs," Lakshmikanth said.

“While services account for 40-45% of India's total exports, a major portion of our service exports come for the IT service sector. “Something like 50-60% of all our exports of services goes to the United States. So it would worry us quite a bit,” said Chief Economic Advisor (CEA) Arvind Subramanian.

While the government’s focus on job creation may be what the IT sector needs right now as it would keep the unemployment levels low and the economy on the growth path. It remains to be seen, however, whether or not employment will be provided to the displaced employees.