IT SLUMP

Lay-offs in Indian IT sector expected to peak this year

it-companies-reuters [File photo] Work in the IT sector is getting highly specialised and people who were doing simple mundane tasks are expected to be shown the door by the companies this year | Reuters

Experts predict about 1,00,000 people could lose jobs in India in the current financial year

A 42-year old mid-level manager at French IT firm Capgemini, currently at an onsite location abroad, is having sleepless nights these days. The manager, who is based in India, fears that he might face the axe as part of a retrenchment exercise at the technology major. 

The manager has been working with the company for over a decade and currently, draws more than Rs 1,00,000 per month as salary. But he fears that the company might look out for people who can work for much lesser salary. 

“Many managers who had joined at a junior level in the company around a decade back have now become mid-level people and are drawing an average of Rs 1-1.5 lakh per month. The company may do away with many of the managers like us and take people for lesser salary. Though automation is also a major reason for this, it cannot be a major factor as automation cannot be implemented at all the places. It can be done only where tasks are repetitive. It is more of a cost cutting measure and our company wants to get rid of the excessive flab as they can manage with junior-level people,” he told THE WEEK, on conditions of anonymity.

However, according to industry experts all these were anticipated due to changing business dynamics, thanks to shrinking deal sizes. In addition, work is getting highly specialised and people who were doing simple mundane tasks are expected to be shown the door by the IT companies this year. 

“The major axe will fall on mid-management level people as they are the ones who will be affected the most by automation. For instance, a project manager’s job can be taken over by project management tools that can manage projects and the company doesn’t require too many people to manage projects. Companies will also try to shed extra flab as projects are becoming more and more fixed in nature wherein the money is paid based on the total project and not on the basis of the number of people deployed and the number of hours they have put in for the project. The companies, thus, can deploy lesser number of people for a project and manage it with that limited number,” explained Amit Chandra of Mumbai-based HDFC Securities.

Chandra added that norm is changing and companies such as Cognizant planning to show the door to 6,000 people is something unusual. “Cognizant used to remove people in phases and not in one go. The VRS (Voluntary Retirement Scheme) by Cognizant for its senior vice-president level employees shows that the IT sector is under severe stress and many more lay-offs are expected this year. On the other hand, new hiring will be very selective and people will need to add on skills in the field of cloud computing and data analytics to brighten their prospects of getting a job in the IT sector. As such, overall campus hiring has also slowed down but there will still be requirement for programmers, coders and java professionals in IT companies,” he said.

Thanks to the mass lay-offs, there is a general belief that this year would be a bad one for IT professionals in India. Kris Lakshmikanth, founder of recruitment firm Head Hunters India, predicts that around 1,00,000 people from the IT sector might lose jobs in India the current financial year, ending March 2018. 

“Bengaluru, where around 30,000-40,000 people will lose their jobs, will be the most impacted. This will also bring down the real estate sector in the city. Automation has affected almost all the divisions of the IT companies. Though there had been talks about automation, its impact has been all of a sudden like a tsunami,” Lakshmikanth said.

There are also disruptive technologies such as cloud computing, which has made it possible for these companies to transfer their physical infrastructure on a cloud system wherein they do not require a physical network or server as everything can be managed virtually through cloud computing. “You do not require IT infrastructure managers or project managers as technology can do it much more faster and efficiently. Only if a large IT company removes more than 10,000 people, will it have an impact on their bottom lines. A lesser number may not have a major impact,” he explained.

Eventually, with large number of people being laid off by the IT companies, the demand for project managers will also come down as these companies would then require fewer managers to manage lesser number of people. “With shrinking work force and lesser people, there would also be lesser requirement of a delivery head and they may also be laid off. Moreover, besides VRS schemes, we will also further see the shrinking of the variable pay component for senior level people in the IT sector,” remarked Lakshmikanth.

However, experts say that employee churn rates in the IT companies has come down due to lesser opportunities in the market. “There are fewer opportunities in the market. Hence, IT professionals are forced to continue in their present jobs. Moreover, the focus of Indian IT companies has not been that great towards the new emerging digital businesses and they have not been able to significantly cut out any major deals in the new digital businesses. The need of the hour is to upskill their people in newer technology areas and look for new opportunities in the digital businesses,” said Alok Shende of Mumbai-based Ascentius Consulting.  

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