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Why IT companies like Cognizant and Wipro are laying off employees

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MG Arun
MG ArunMay 08, 2017 | 11:53

Why IT companies like Cognizant and Wipro are laying off employees

The layoffs in India’s IT companies, one of the largest private employers providing jobs to more than 37 lakh people, are worrying. Combined with the backlash the IT industry is facing in the US on the H1-B visa front, and in countries such as Australia, the future of the industry as a beacon of hope for young professionals is dimming, feel many.

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Add to this a widespread pessimism in the sector that much of its workforce will become redundant very soon (McKinsey in a report puts this number at half the workforce) and it is bad news for job-seekers and the government, which is staring at slack job creation across all segments.

It also draws a grim picture of the economy’s growth, which was being postured to be picking up smartly despite the demonetisation impact. Every business is going through huge transformation with the rampant use of technology that is making several traditional jobs obsolete.

It was already felt in sectors like automotive and the financial world, but have become more pronounced at present because of the general slowdown in domestic demand and the slow off-take of exports. But when the job losses strike the IT industry, the issue becomes more pronounced, as the sector, where homegrown companies have made an international mark, is seen as a good paymaster with good corporate governance standards.

But with Wipro deciding to lay off 500 of its staff, after what it calls a “rigorous performance appraisal”, and Cognizant deciding to lay off five per cent or 10,000 of its staff, the jobs scene is likely to become bloodier. Infosys has cut down its fresh hiring by as much as 60 per cent, while others have already gone in for a big reskilling of their staff, in a sign that they will be hiring fewer new employees from now on.

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Cognizant decided to lay off five per cent or 10,000 of its staff.

What are the factors that are necessitating layoffs in companies?

For one, the growth of the IT industry is certainly coming down, and if one goes by the projection of the industry body Nasscom, the growth rate during the current year is also expected to be lower, primarily due to geopolitical and several other factors.

In addition, there is a lot of focus on automation across the industry as global corporations starting from plane-makers to consumer goods firms bet on the use of machines to further reduce the costs and improve efficiency, believes Rajeev Dubey, President (HR, After-Market and Corporate Services) at the Mahindra Group.

Arup Roy, Research Director at Gartner, says layoffs are caused by muted growth prospects of the industry on the one hand, and business model related changes on the other.

Automation may threaten lower end jobs which are more repetitive in nature and can be done with minimal human interference. The industry is at the cusp of a major transformation due to proliferation of advanced digital technologies like business analytics, cloud, mobility, internet of things (IoT), security, artificial intelligence (AI), machine learning and robotic process automation (RPA).

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So while the traditional IT spend declines, spending on digital platforms has almost increased two-fold with a major focus on all these technologies. That should provide an opportunity of a different kind, but for that, companies need to focus on reskilling in a major way.

Most big companies are doing so.

At Wipro, for instance, reskilling programs are a combination of all necessary aspects – delivery, domain, technology and behavioural training. Against the annual plan of training of 33,000 employees on Digital skills in FY 17, Wipro trained 39,600 employees. Overall, it now has 61,000 technical employees trained on digital skills.

The paradigm shift across the world has resulted in two options – disrupt or die. Dubey says the disruption that is perhaps more visible to the outside world is machines replacing men, but the bigger disruption is about the underlying technologies that are at play and the resultant impact that have started becoming visible.

As service providers, the IT services companies have no options but to transform themselves to the new realities and newer kinds of demands.

(Courtesy of Mail Today.)

Last updated: May 09, 2017 | 14:05
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