Are Layoffs the Solution to Indian IT sector Challenges?

Are Layoffs the Solution to Indian IT sector Challenges?

Are Layoffs the Solution to Indian IT sector Challenges?

The Indian IT sector has seen a lot of changes in recent times. But one thing that does not alter is the pattern of retrenchments. News of retrenchment does not seem to stop coming from the $150 billion Indian IT sector. Automation, artificial intelligence, global gloom and stricter visa norms are some of the challenges looming in the forefront. Can layoffs or retrenchment be the solution the Indian IT sector needs? Let's see if IT recruitment has changed for the better, or the worse.


1. Automation Makes Operations Easier

Automation has made it easy to handle the different aspects of operations with ease. The human element in technology is not being ignored, because the automation is designed to be intuitive and user friendly. Layoffs are the solution because manpower needs to reskill to survive. The larger growth of the IT industry is at stake here.

2. Lack of competency

Massive layoffs are the order of the day if a worker is not worthy of a job. Poor ratings, appraisal arguments and automation have helped IT companies remove the employees not suited for the job. Layoffs are a natural consequence of lack of competency, so why should it be any different for the IT sector?

3. Rampant Unprofessionalism in Tier-2 companies

Dynamic hirings and firings are critical for Tier-2 IT companies to remain productive and get the profit margins they seek. There is a rising competition in IT recruitment and the layoffs are a good news for these companies, which will now leave aside surplus employees, diminishing the volatility of the sector as a whole.

4. Layoffs Will Bring Higher Competencies

Countless bottlenecks and a surplus staff have created bureaucratic hurdles making it tough for startups to function. The booming IT bubble had to burst sometime and it is essential that it do so in a way that changes how IT professionals are educated. So many engineering and technical colleges do not impart high quality education, because jobs were once in plenty. But with the recent retrenchment of 56,000 employees in the IT sector from bigwigs such as Cognizant, TCS, Wipro, Infosys and many more, the situation has undergone a change for the better. Recruitment will now be competitive and there will be an emphasis on reskilling rather than blindly hiring cheap labor.

5. Layoffs will create even growth

India needs to look beyond the IT sector when it comes to private sector employment. With a nation with the highest working population, other sectors like services and manufacturing need to catch up to ensure that growth is even across all sectors. China and other nations in SE Asia are emerging as cheaper options for affordable IT workers. The layoffs have been accompanied by positive changes such as push for digital economy, electronic accessibility and state reforms which will initiate a progressive economy.


1. The IT industry faces a challenge from within

The employees facing retrenchment are not new graduates or inexperienced cheap labor, but mid level and senior managers with substantial compensation as the IT industry embarked on mass pink slips for a cost cutting measure. This includes team leaders, project managers, programme managers, software or technical architects, supervisors, functional managers, pre sales lead or solutions lead and engineering managers. Cost arbitrage cost has made the practice of benching unviable. But this sector will not experience a positive outcome from a mass layoff threatening to stall growth.

2. Structural change in IT industry

This change has seen the loss of close to 100,000 jobs from 3.9 million the sector currently offers. Job losses will have serious consequences for skilled workers who are on loans, EMIs and worse. If reasons are not linked to non performance, a job loss can become a social issue.

3. Cloud and AI increase need for reskilling and cost the industry

Re-skilling is an important point, with emergence of digital technologies like Cloud and AI. Engineering colleges are not equipped to retrain the people. Organisations will be forced to take up an additional challenge which can have serious cost drawbacks.

4. When Robots Replace Humans

While job redundancy is becoming the latest trend in a sector once renowned for the H1-B visa and the great American dream, global analysts point to a 20-30 percent reduction in workforce on account of automation.

The solution to the IT layoff is to increase hiring in skills around design thinking, AI design and data science. Robotic process automation and AI still need the human element. Pink slips for system administrators, coders and manual testers is not the solution. Equipping them with superior skills to handle the challenges of automation is. For this, a complete overhaul of education and training systems is required. Or we could believe what NASSCOM says that IT layoffs are not reaching an extreme degree this year. Welcome to the new normal of the IT industry, where hiring and firing work in tandem!
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