Layoff in Indian IT/ITES firms – The recent globalization import
Sept 12th, 2008
The Indian firms and employees continue to struggle with the ‘pink slip’ showing more every day.Satyam recently announced they will be laying off 400 people (Satyam fires 400 people), Wipro let go of under 2000 people for non performance (Wipro to remove staff for non-performance), other IT vendors including Patni (Patni hands pink slips to non performers), Convergys (Convergsys shuts down Mumbai facility) have been laying off people under the non performance umbrella. This phenomenon has taken a number of people in the Industry by surprise. Looking at the comments, blog traffic people, especially employees have been shocked and are wondering why. Many of them feel cheated that they were not privy to the entire story and were kept in dark by the management. The expectations of raises, bonus have not been met and everyone is crying foul! Alongside the hiring of new people has slowed down and the joining dates for some of the college graduates in India has been deferred or delayed in some case to a undefined time in the future. All of a sudden the future prospects don’t appear as rosy as they may have been say nine months back. The IT/ITES firms still continue to put a brave front and are ‘cautiously optimistic’ of the markets. A number of them have said they see no downturn! The Indian IT firms are rushing to derisk themselves from the US marketplace and explore other opportunities. Firms are going domestic in India, looking at Europe, diversifying in additional service/product lines, looking at China.
This is the new face of globalization – the good and the bad. If there are going to be opportunities there will be challenges.
The Indian IT/ITES firms have been on an impressive growth streak thanks to the economies of the west. Financial Services in the US amongst others have always been on the bleeding edge and was one of the early adopters of globalization. The Indian IT/ITES growth has been phenomenal – Starting with an employee base of 400,000 in 2000-01 to 2 million in 2008 (NASSCOM). Aggregate revenues for IT-ITES grew from $ 21.6 billion in 2004 to $ 64 billion in 2008, a three fold growth in revenues (source: NASSCOM) . The top three IT firms are predicted to be mega vendors in IT by year 2010 ( Gartner report – which I don’t necessarily agree with).
Move to the present and the financial services firms once at the bleeding edge are infact bleeding. The US economy has been on a downward spin with the rest of the world watching and hoping that it will have a limited effect on their domestic growth story. Job unemployment rates are highest ever in the US. Here are some harsh facts for the US markets:
• 84,000 jobs lost in August 2008
• Unemployment rate a five-year peak of 6.1%
• 2.2 million Americans lost their jobs in the past 12 months
• Firms laid of 605, 000 workers in 2008 with an average of 76,000 a month
Financial Services sector in the US has suffered the most. You cannot see a business news item today which does not speak about financial crisis in the US. The giants of the US financial markets are on the verge of collapsing or already there. Layoffs in financial services are in thousands if not hundreds of thousand. (Financial Services layoffs, For Wall Street axe falls quietly)
What does that all mean ! It means that the globalization has created a coupled world, is here to stay and companies and individuals have to learn to manage in this globalized world both for the up and down ride. It is like a train engine pulling the rest of the bogies. Today the engine is the US, tomorrow it could be someone else but the train moves together. You can get decoupled and stay on the track but then you go nowhere! I am an optimist and always hope for the best and am sure that we will get past this craziness. The operating model though will not be the same. Globalization is here to stay and unless we all decide to go back to our holes and stop all world trade and exchange , there is no going back to as some would say ‘the good old days’.
The fear and insecurity when the operational basis moved from the US to other countries – manufacturing and services economy has now been exported to rest of the world too and no one is isolated.
For a number of the Indian firms and employees which grew in a sunrise industry have now to adjust to the new world. Companies have to figure out models to survive and with top line slowing down , they will look at the bottom line to reduce costs. A number of them will not survive and those which will , will be in a completely different form five years down the road. Employees will have to learn to create value and boil down expectations on what they expect from the organization and be prepared to work harder to survive. There is no going back to an isolated world markets but learning to manage in a globalized world would mean fluidity in jobs, locations, skill set and be ready for an unexpected turn.
In a way it rings true Andy Grove’s statement ‘ Only the paranoid will survive’. Hope it does not mean we are creating a world filled with paranoid nations.
If you are in the industry and have any comments or views on how you believe the changing globalization is affecting what you do today or will affect what you do down the road drop me an email at msharma@corrystone.com
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