HIRE AND FIRE AT WILL: WHAT DO GLOBAL TECH LAY-OFFS MEAN FOR INDIA?
T.K. Rajalakshmi
Will 2017’s nightmare year for India’s IT industry return in 2023?
It was a New Year gift that the employees of Big Tech did not see coming. By the end of January, the CEOs of many technology companies had announced massive workforce cuts in the US and they have triggered a crisis that industry insiders say is likely to continue until the end of 2023.
The announcements from the top honchos were apologetic and mostly on similar lines. According to US-based sites that track lay-offs, 1,59,684 employees were laid off from 1,040 tech companies in 2022. In the first month of 2023, 229 tech companies laid off 68,502 employees. In India, data from Indian start-up lay-off tracker Inc42 showed that 21,532 employees were laid off from 72 start-ups as of December 2022.
Another dimension of the US lay-offs is that nearly 40 per cent of those who lost their jobs are people of Indian origin on work visas. They were in the process of heading back to India to reapply for their H-1B visas, for which a window had been given from March 1 to 17. Frontline emailed the National Association of Software and Service Companies (Nasscom) for a comment on the crisis but did not receive any response until the time the edition went to press.
The Spotify website seen on a laptop. Spotify Technology is planning to lay off about 600 employees, joining a slew of technology companies from Amazon to Meta in announcing job cuts to lower costs. | Photo Credit: Tiffany Hagler-Geard/Bloomberg
People involved in organising employees in the IT and IT-enabled services industries in India told Frontline that the events in the US would impact India very soon. The COVID crisis bubble that took e-commerce to new heights now seems to have burst. Those in the tech industry said that the lay-offs happened due to one or a combination of factors, including excessive hiring during COVID, employees not upskilling themselves to match the skills required at present and companies overinvesting over several years. There is no doubt that excessive hiring did take place. However, on the not-skilled-enough question, the jury is still out. Insiders said the current system of lay-offs was standard operating practice for the industry.
Boss-speak
“We have decided to reduce our workforce by approximately 12,000 roles,” wrote Alphabet CEO Sundar Pichai in an internal memo to employees that became public. “This will mean saying goodbye to some incredibly talented people we worked hard to hire and have loved working with.” He went on to say that he was “deeply sorry for that”. Pichai wrote that the last two years had seen “dramatic growth” and that the company had hired to “match and fuel that growth for a different economic reality than the one we face today”. He then said that the company had to make “tough choices” to fully capture investments in Artificial Intelligence (AI). These involved “a rigorous review across product areas and functions” to ensure that there was alignment between people and roles with the “highest priorities as a company”. The roles that were eliminated, he wrote, was an outcome of that review. Insiders said the memo was full of typical corporate IT jargon.
Microsoft CEO Satya Nadella announced that the company was letting go of 10,000 employees. He told staff in a memo posted on Microsoft’s website that the company would emerge from the action “stronger and more competitive”. He wrote, “These decisions are difficult, but necessary. They are especially difficult because they impact people and people’s lives—our colleagues and friends. We are committed to ensuring all those whose roles are eliminated have our full support during these transitions.”
Meta CEO Mark Zuckerberg, meanwhile, announced that he would lay off 11,000 staff. Zuckerberg wrote to employees in November 2022 that he had decided “to reduce the size of the team by about 13 per cent and let more than 11,000 of our talented employees go”. He acknowledged that it was “tough for everyone” and apologised to those who had been impacted. He explained that the e-commerce surge during COVID had led to an outsized revenue growth that many felt would be permanent. “I made the decision to significantly increase our investments,” he wrote. “Unfortunately, this did not play out the way I expected. I got this wrong and I take responsibility for that.” He added that resources were shifted to a number of high-priority growth areas like an AI discovery engine, ads, business platforms and the company’s long-term vision for the metaverse.
Twitter co-founder and CEO Jack Dorsey, in a tweet, was another who apologised for last year’s lay-offs. Almost 50 per cent of the staff were laid off from Twitter, according to Techcrunch, an online American publication focusing on start-ups and the high-tech industry.
Many laid off employees took to platforms like LinkedIn to air grievances and share experiences. Many familiar with the IT sector do not believe the reasons given for the lay-offs, especially given the fact that the huge tech companies made record profits during COVID and those at the top earned astronomical bonuses.
Meanwhile, in India, companies like Wipro, Swiggy and EdTech giant Byju’s announced reductions in employee strength. Byju’s laid off 4,000 employees in a “restructuring exercise”. They were not done. The company then sacked at least 1,000 staff in the next round of lay-offs in the first week of February. Virtusa, a global digital engineering and IT outsourcing service, recently laid off more than 1,000 employees.
IT and IT-ES employees’ union national convener K.C. Gopikumar said the lay-offs were foreseen in 2022 but it was a surprise that Asians were the first to be sacked. Gopikumar has a different point of view on the H-1B visa situation. He said that many Indian companies had misused the H-1B and L-1 visas for mid-level techies instead of using them appropriately for managerial and director positions. And yet, the present spate of lay-offs was unusually high, he said. Some 70,000 employees were laid off at more than 60 companies, including Alphabet and Microsoft, within a fortnight in January 2023.
Gopikumar said the Central government should intervene and take up negotiations with Big Tech as many of those who were laid off were Indians. “The interests of IT techies needs to be protected abroad,” he said. “We had suggested to the Central government and Nasscom that companies should not misuse the H-1B visa. This is an indicator that what happened in 2017 [when the Trump administration began its crackdown on H-1B visas] will happen once again. In the last year, more than two lakh employees have been retrenched in the US alone. In the first phase of COVID, there were lay-offs in India as well. In many small companies, lay-offs were common.”
Gopikumar said the IT sector had believed that it was above the rest of the industries and above the labour laws. “I foresee that discrimination against people of Asian origin will increase,” he said. “The External Affairs Ministry, the IT Ministry and Nasscom should take it up with the US government. It is not only an employee issue but also to safeguard the industry and the Indian economy. Our government should be proactive on this. Nasscom should intervene as it claims to represent the Big Tech firms.”
‘Cloud tech is not rocket science’
Haridas Narayanan works at a 30-year-old small and mid-sized enterprise IT company. He said that 2022 was bad for business but that his company were able to manage their employee numbers due to high attrition. “We could manage as we shifted to Cloud technologies, not by design but by chance,” he said. “We were saved due to the rupee devaluation and not due to big orders. But despite big companies posting profits in the last quarter, no hiring took place. We are not stopping anyone who wants to leave. We could not give hikes. The sales guys have told us to hire freshers with one-year experience and get them to work 24 hours a day. We can have one or two highly skilled resumes but the rest hired are freshers. It is really bad what is happening now.”
Narayanan said he did not believe the lack of skills rationale provided for the lay-offs. “Cloud technologies are not rocket science,” he said. “It’s the same stuff that we have been doing. Those in cybersecurity, systems administration, server administration may face challenges as their work is being taken over by cloud providers. I work in the Enterprise, Resource, Planning space that gives training in SAP (Systems, Applications and Products). Globally, in the last two to three years, the only skill set customers wanted was in the cloud space. That was because people were working from home. There was no other upskilling required. A systems administrator would now be called a cloud administrator. There were variants of upskilling but not necessarily a new radical technology.”
“There is no doubt that excessive hiring did take place during the COVID crisis bubble.”
Narayanan agreed that excessive hiring had happened during COVID. He said the two lakh people who had been sacked were mostly in the Business to Consumer category. “Companies like us depend on the manufacturing sector,” he said. “Supply lines to the US got cut and an impact on India, therefore, cannot be ruled out. During COVID, customers started believing that work from home was possible. Customers preferred outsourcing business to India as Indians were willing to work more.”
What about the job market?
As for the job market, Narayanan said it was not easy as recruitment, as a whole, had come down. “I personally was under threat of losing my job,” he said. “I was told to set up an office in the Middle East. That was the contract.”
There will be more lay-offs in India, he predicted. “If a small company like mine has been told not to hire high-skilled workers, then it can happen anywhere.”
Alagunambi Welkin, general secretary of the Union of IT and IT-ES Employees, said that it was odd that companies that had revenues equivalent to the revenues of Indian States, were resorting to job cuts. “We feel this is the first phase of retrenchment,” he said. “Experienced employees are being sent out, tagged as poor performers, given difficult-to-meet targets and put on performance improvement plans. This modus operandi forces the employees to acknowledge that they are poor performers.” He said these were in effect “forced resignations”.
Going by investor sentiment, Welkin said that the US-based companies might go in for one more round of retrenchments. Referring to the H-1B and L-1 visa holders who were laid off, he said: “We have written to the government to intervene. Indian companies may do lay-offs here as well, a kind of domino effect. IT companies are blaming employees for moonlighting, appraisals, underperformance, and so on. As the market returns to the pre-pandemic level, employers have found a chance to lay off people.”
Welkin also said it was a myth that all IT jobs were highly paid and spoke about how freshers were recruited every three to four years and employees over 35 were made to leave. While moving staff to the “bench” was the IT industry’s standard operating practice, employees were more worried now due to the mass lay-offs in the US, he said and added that 70 per cent of the India projects were dependent on the US and the UK. The truth was that most companies had adopted cloud technologies and AI. There were concerns a few years ago that IT employees were not ready for the transition but then the staff were trained.
Anjaneya Raju is an IT professional in Hyderabad with 14 years experience in the industry. His responsibilities include working on different kind of tools like the e-commerce ones. In 2008, Raju was eight months into a new job with a big IT brand. The company then suddenly chose to lay off senior staff and retain the freshers. Raju said the 2008 recession was a lesson for IT employees and he feared this could be a repeat.
“During COVID, everyone wanted to work from home,” Raju said. “Companies started maintaining records digitally and started recruiting heavily for back-end operations. From September 2022, the decline began and there was a recruitment freeze, leaving employees insecure. Some started freelancing and companies accused workers of moonlighting.” The last appraisal for many staff was in 2018, he said. There was no appraisal during COVID. “People think that IT employees earn a lot, but the fact is that they end up spending everything,” Raju said. “We are the biggest consumers. If we don’t get our salary for a month or two, we face a real crisis.”
As part of cost-cutting measures, many IT companies wanted people who could multitask, he said. Some eight lakh people are directly employed in the IT sector in Hyderabad alone. Raju and his friends in the sector predict that things might only get worse for them in the coming days.