BENGALURU: Employees in IT and IT-related industry always knew that the much-vaunted industry, touted as the sector that mops up massive revenues, is also remorseless in maintaining its margins.
The likely move by Cognizant to slash 6,000 jobs has raised concerns among many at what is being seen as a massacre of sorts. But in reality, industry insiders say this is routine and is a move resorted to by most IT companies.
Any IT employee will say that being in the bottom 5 per cent during performance reviews is a sure shot way to getting the pink slip. With companies getting increasingly concerned about quarterly profits, picking who is essential for a company or a ‘lifeboat exercise’ is the norm. Cognizant, working with Elliott Management Corporation that obtained a 4 per cent stake in 2016, is now working towards Elliott’s goals, which include reducing concentration of employees in high-cost locations abroad to trim operating expenditure.
They are not just the ones reducing employees in sizeable numbers. Tech giants like Cisco cut 5,500 jobs in 2016, an estimated 7 per cent of its global workforce as part of restructuring it took upon itself since 2011. HP gave the pink slip to 3,000 people last year, while IBM is said to have laid off more than 5,000 employees last year.
An industry insider said that three factors — performance reviews, increasing automation and emergence of newer technologies — have determined employee presence in a company. “Letting go of 2 per cent of employees due to low performance ratings is a given. Sometimes this figure can go up as high as 5 per cent or even more. Automation especially in areas like testing can also determine the necessity of retaining employees. If a testing tool can do the job with the help of one person, what earlier had to be done by three of four people, then obviously, the company will not want to saddle itself with more people,” he said.
Emergence of newer technologies is another reason. Reskilling themselves is a must at a time when older technologies grow obsolete at an alarming level. “This happens in other sectors as well. When banking systems shifted to IT-enabled systems, the number of people they required to complete a process reduced. It is a common phenomenon,” he said.
Ashok Pamidi, a member of Nasscom, said that companies would continue to follow a cautious trend where their hiring would not be on par with their growth like in earlier years. “Disruption of technologies as well as changing market conditions are the driving factors why companies have chosen not to equate the growth to their hiring. Financial and geopolitical conditions have also affected the intake. While companies will continue to hire at 5 to 6 per cent, their growth rate is estimated to be at 8 to 10 per cent. Now the focus is on retaining staff with work expertise and skill rather than scale. If people need to stay relevant in the industry, they have to re-skill themselves constantly. There is no choice,” he said.