Infosys, Cognizant, Wipro lay-offs: Churn in Indian IT is inevitable; there is no need to panic

When you are addicted to growth, a slowdown seems like a recession. And a relatively small round of rationalisation in headcount triggers panic. That seems to be the state of India's IT industry. There have been reports of layoffs in three leading software service companies, Wipro, Cognizant and Infosys. But it does smell of overreaction when one headline actually says the industry faces mayhem!

Reuters

Does a voluntary separation programme or 10,000 people going off  the rolls in Cognizant, 2000 heads reduced  in Wipro and a maximum of 2,000 foreseen in in Infosys justify such words? Evidently not. Between them, these three companies employ close to 750,000 people and a total of even job cuts in all this year would be only 2 per cent of the total workforce involved.

However, there is no room for doubt that India's IT sector is not and cannot be what it was 20 years ago. One analyst said after Infosys results last month that it is no longer a growth stock. That is a fair assessment. But what it implies in share market speak is that dizzy growth is over and both investors and the company will have to take stock of the situation carefully. Given that Infosys is planning to hire as many as 10,000 people in the US over the next two years, we do need a sense of proportion or detail and not panic words like mayhem.

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One thing is clear, the industry that was once aspiring to run close to the high-end consulting companies is now slowing down on hiring and hearing murmurs of unionist protests that we thought belonged in blue-collar factories. Whether it is Uber, Cognizant or Infosys, the simple rules of American capitalism do not apply in India that has a socialist legacy. If anything, Donald Trump got elected as President of the US on a plank of labour protectionism. Indian IT companies now have to get sober not just on hiring and firing in terms of numbers, but also in matters of how to deal with potentially difficult situations.

What is happening, if you look hard, is a case of churning and not burning as superficial critics and headline writers suggest.

India's IT industry has seen many ups and downs (Remember the "dotcom" bubble and the telecom meltdown of 2000/01) but this time, there are multiple issues at stake. Artificial intelligence, software automation, robotics and Trump economics between them are altering the fundamental DNA of the IT services industry. But the old economy is not going to give in quickly, as the dismantled "dotcom" euphoria showed 17 years ago. What is likely to happen is that there will be calibrated shifts in the client companies that outsource work to companies like Wipro, Cognizant and Infosys. These would be likely met with calibrated responses in hiring, relocation and pricing by IT service companies. IT companies are also actively embracing new technologies to serve old clients as Wipro's heir apparent Rishad Premji said this week.

Signs are evident that mid-level IT sector employees may have to re-skill or reinvent themselves if they have thus far been just glorified head clerks while being called managers. Simple code writers may have become glorified typists of the new age. Employers may find younger workers doing more for less if mid-level folks do not match elementary skills with more value. These are clear signs of a slowdown in growth and a reality check. But all indications are that there is room for introspection, but not panic.

(The author is a senior journalist. He tweets as @madversity)