Is Indian IT using layoffs to combat economic slowdown?


The world has smartly recovered from the 18-month economic recession two years back. But, seems the Indian IT has still not recovered from its ill-effects of downturn faced by the economies back then. If we take the IT segment in consideration, Layoffs and lower than expected earnings have become frequent terms with the technology industry.

Experts have been forecasting dark clouds of more possible layoffs looming over the biggest tech product and service players of the world. Analysts in Indian technology and consumer electronics market have also intensified a tough ride ahead.

One can easily sense the trend of a flagging economy; many companies even after generating revenue in billions are trimming their estimates for growth in the upcoming quarter. In fact, many tech bigwigs have posted a gloomy outlook for the entire year as well.

After a flourishing start, the world’s superpower is facing a serious employment crisis with the months passing. In May, the tech sector recorded only 54,000 new jobs. To recover itself from the job crisis, however the US would have to create 250,000 jobs each month.

Layoffs on roll

Despite earning decent profits, the companies are unable to retain their employees and overall management structure.

In order to reduce costs and help the company contends with reducing demand for computers and services, Hewlett-Packard has recently announced to cut as many as 25,000 jobs. 25,000 jobs are equal to HP’s 8 percent workforce.

Even the big players like RIM, has announced a “headcount reduction” to realign the cost structure. The BlackBerry maker has slashed its earnings and revenue outlook for the fiscal year. According to RIM, it has taken this step to focus on the core areas with high growth opportunities.

Sony Corp announced to reduce its global workforce by 6 percent cuts in April 2012. 6 percent workforce is equal to nearly 10,000 jobs.The Finnish cell phone maker,

Slow hiring

Numerous companies across the information technology (IT), IT-enabled services and retail sectors are hiring more temporary staffers.

Moreover, companies are cutting the number of permanent employees on their rolls and even for temporary hires, companies are going for multiple rounds of interviews, psychometric and other assessments tests.

It is found, the hiring is least in the banking and finance sectors as these are the worst hit during the time of recession.

As a matter of concern, it is found, the temporary staffing business in India accounts for nearly Rs. 3,000 crore while the permanent staffing business is at nearly Rs. 17,200 crore. As far as global temporary staffing industry is concerned, it is at around $140 billion.

Hope of recovery

Although, many tech companies are going for layoffs, there are others who are aggressively looking for skilled talent.

Therefore, turnaround is clearly visible in the IT sector.

Many tech majors are eying mergers and acquisitions to stave off a credit crunch. Companies like Microsoft, Infosys are also restructuring their management to turn around the fortunes.

Let’s hope, time ahead would be favorable for industry and the companies will start again their recruitment drive very soon. However, it is difficult to say anything for now.

Satinder/ ITVoir NewsDesk