Congnizant laying off 10,000 employees? Is the information technology (IT) bubble finally bursting in India?

Cognizant will lay off 6,000 employees. According to reports, the number could go as far as 10,000. The company finds itself struggling for growth in the information technology (IT) sector. The firings are more this year than the previous years. Congnizant says employees are removed for non-performance. Cognizant has roughly 2,60,200 employees across the world, of whom 1,88,000 or around 72% are based in India.

“As part of our workforce management strategy, we conduct regular performance reviews to ensure we have the right employee skill sets necessary to meet client needs and achieve our business goals. This process results in changes, including some employees transitioning out of the company,” Cognizant has said in a statement.

The development could be a direct result of the tightening of H1B visa rules and procedures, all aimed at discouraging US companies from recruiting and hiringtalent from India. As soon as the news about H-1B visa reform surfaced, Indian information technology (IT) stocks went into a downward spiral. The effect was drastic with $6.4 billion going up in smoke. Infosys stocks fell by 4.5%, closely followed by Tata Consultancy Services (TCS; 5.5%), Tech Mahindra (9.7%), HCL Technologies (6.3%), and Wipro (4.1%). The stocks of other mid-cap IT companiessuch as NIIT, Mphasis, Geometric, Mindtree and KPIT Technologies also plunged by almost 4%. This is a nightmarish run for the Indian IT industry.jobless_growth_2829630g

Moreover, the US government has suspended fast-tracking H1B visas for a period of six months starting from April 3. Indian IT companies such as TCS, Infosys,  and Wipro, who have been banking on cheap Indian workers would be the hardest hit. It will get increasingly difficult for the IT companies to shift skilled workers from India to the USA for servicing clients.

According to estimates, Indian IT companies earn approximately $60 billion per year from the United States technology and software market. The firms provide a range of services to top US companies. H1B visas are given out for temporary workers and are issued by the US Citizenship and Immigration Services (USCIS). Every year only 85,000 H1B visas are issued, including 20,000 for students. All these recent developments would ruin the Indian IT and tech companies.

Moreover, ecommerce sector is also undergoing tremendous downsizing. In one of the biggest cost-cutting exercises in its history, Snapdeal is laying off 600 people. Snapdeal co-founders Kunal Bahl and Rohit Bansal have taken cent per cent salary cut, whereas several other employees have gone in for voluntary pay cuts. Reportedly, the company is also mulling shutting down offices in Hyderabad, Surat, Ahmedabad, Indore, Kolkata, and Bhopal, along with a few warehouses.

All these developments are perhaps indicating that the Indian IT industry which has been an engine of growth for Indian economy and growth is getting sluggish and slowing down. Probably, the information technology sector, which witnessed a tremendous boom in years before, that bubble is bursting. The collapse could significantly impact the GDP besides affecting business environment and economy.


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