The axe effect: IT’s layoff time for techies

Priya Srinivasan in Mumbai with
R Ravichandran in Hyderabad and
Anand Krishnamoorthy in Chennai

The cat is finally out of the bag and the numbers are trickling in. The slowdown-hit IT industry is coming to terms with layoffs in India and not many companies are issuing elaborate denials terming it an ‘‘exercise in resource optimisation’’, although they are trying to justify it by calling it an effort to weed out underperformers.

A snapshot survey on the numbers of people retrenched in the IT sector conducted by eFE bureaux across the country revealed that just a handful of IT companies have already axed over 2000 people. Some of these companies confirmed the retrenchments.

The sample size includes large IT majors, mid-sized companies as well as startups and subsidiaries of overseas companies. Extrapolating on the findings could take the overall industry toll to anywhere between 5000 to 10000 IT professionals thus far.

Companies which recently announced cutbacks include Silverline, Zensar, Plexus Technologies, Pentasoft Technologies, SSI and HCL Perot.

Among the top 5 Indian IT players, while most of them have not reported retrenchment yet, reports are that some of them are indeed quietly handing out pink slips. One of the software majors in fact is reported to have axed anywhere between 400-600 of its workforce, which it maintains constitute the bottom 10 per cent of its workforce as per an internal performance evaluation exercise.

Commenting on a recent cutback announced by the company, the spokesperson for HCL-Perot said the cutback has been effected among underperformers as per an internal appraisal and the toll is in the region of “anywhere between 5 to 10 per cent of the workforce”.
Software major Satyam has decided to bring down its staff strength in the middle and lower levels by about 5 per cent, according to industry sources. Company officials when contacted denied the rumour but added that there will be “no fresh recruitment in the immediate future.”

Chennai based SSI has cut down about 143 staff from SSI Tech and 167 professionals from SSI Education between the last two successive quarters. The areas for the cuts include sales and marketing and support. SSI Education staff cuts are due to the company moving towards a franchise model wherein its own centres are being sold and converted to franchises, the spokesperson said.

The company has also cut staff at its overseas subsidiary Albion Orion Corporation by 15 per cent (about 35-38 people), said Kalpathi S Suresh, CEO, SSI Ltd. These are professionals “not being billed”.

Another Chennai based company - Pentasoft Technologies Ltd has laid off over 100 professionals. Mr D Kannan, CEO, Pentasoft Technologies said that these were not layoffs but “weeding out of non performers”.

Among the smaller players, Hyderabad based company Mantiss Software Solutions India, which set up shop a few months ago, has closed down and has had to axe its 40 odd staff.

Another Hyderabad based company Aristasoft International plans to close operations shortly and will have to bid adieu to about 60 staff. Most IT companies who are currently retrenching staff are doing so since they maintain that asset utilization has been below par. Asset utilization is arrived at by dividing the number of hours billed by the number of employee hours available.

Companies have also been citing ‘underperformance’ as a key reason for the cutbacks. Placement consultant Satish Doshi, who heads Sampoorna says, “At one level you have the large fast-growing companies who have withdrawn job offers, the small to medium companies who were mostly dotcoms and Internet-related companies with 50-100 people which have mostly shut down, and finally you have large IT companies which are divisionalized. Typically the e-commerce division in the last category has shut down and they have laid off those people.

Mr Ganesh Natrajan, chief executive officer, Zensar Ltd (which has announced a reduction of about 90 of its staff), when contacted on the issue, corroborates this point when he cites “we are moving from horizontal to vertical services and want to hire people with domain expertise so that they can provide end to end solutions for sectors like manufacturing, retail, and utilities and we have decided to come down heavily on underperformers.”