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Business News/ Companies / News/  Mass layoffs brewing in IT sector amid uncertainties

Mass layoffs brewing in IT sector amid uncertainties

Global IT firms have reduced staff amid shift to automation, covid-related challenges
  • IBM is sacking 2,000 employees globally, and a few hundred of India employees would be hit as well
  • Non-performance, lack of projects, rightsizing the workforce are some of the reasons cited for layoffs. (Mint)Premium
    Non-performance, lack of projects, rightsizing the workforce are some of the reasons cited for layoffs. (Mint)

    BENGALURU : The information technology (IT) industry is laying off thousands of employees across the globe, including in India, on grounds of non-performance, lack of projects and rightsizing the workforce as pressure mounts on firms because of an uncertain business environment.

    Global IT companies have gradually reduced their headcount in last two years as they embark on automation and related technologies. The covid crisis may have accelerated these process as newer challenges have emerged for these firms.

    International Business Machines (IBM) Corp. is laying off about 2,000 employees globally as the company reshapes its business. It is estimated that a few hundred of its India employees would be affected as the country accounts for about one-third of IBM’s global headcount of more than 350,000 employees.

    IBM didn’t respond to queries on the India impact.

    Nasdaq-listed Cognizant Technology Solutions Corp. recently laid off thousands of workers in India, who were on the bench. India is Cognizant’s largest employee hub with more than 200,000 employees of its global headcount of nearly 290,000.

    In IT services companies, employees on the bench are considered “non-billable" resources as their cost is not billed to any client. Typically, firms maintain a small percentage of bench employees so that they are prepared to execute new projects immediately.

    A Cognizant spokesperson said the layoffs are likely to be performance-based exits. “Performance management is a normal process across all companies in the IT industry, including Cognizant," said the spokesperson.

    Analysts say employees on the bench will inevitably be the first to be let go of. “Layoffs are obvious. The existing business models of these IT companies are under tremendous pressure as new deals are very hard to come by... Benched employees are non-billable so they would be hit first," said Sanchit Vir Gogia, CEO and chief analyst, Greyhound Research.

    Accenture is cutting up to 900 jobs in the UK to reduce costs in the face of lower demand for its services, according to reports. “Beyond this, we are not planning extraordinary global workforce actions," said an Accenture spokesperson for India.

    Indian IT services companies such as Tata Consultancy Services (TCS), Infosys Ltd, Wipro Ltd, and HCL Technologies Ltd may not have undertaken any massive layoffs but performance-based exits could be taking place.

    TCS said during its Q4 earnings it would not cut any jobs because of the impact of covid-19.

    Infoysys has “no plans for mass layoffs" though performance-based exits will continue, U.B. Pravin Rao, its chief operating officer, said recently.

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    Published: 08 Jul 2020, 07:51 AM IST
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