Job cuts galore in India’s Information Technology sector: Wipro layoffs: 600

Wipro, India’s third largest software services company, is reportedly sacking 600 employees, whereas there is speculation the number may go up to 2,000. The company says the development is part of its “performance appraisal”. This is not an isolated event. Other Information Technology (IT) Sector companies have also been laying off people, in what could be seen as troubling times for the sector considered to be one of the top revenue earner for India.

Cognizant laid off 6,000 employees. According to reports, the number could have gone up to 10,000. The technology major also said that employees were 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.

India’s IT companies have been facing a tumultuous and uncertain environment in the wake of worker visa restrictions being put by various countries such as the USA, Singapore, Australia, and New Zealand. Indian IT companies generally use temporary work visas in order to send employees for work. The companies have been hit hard, with serious consequences for Indian IT companies.

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Global visa restrictions will hit the IT sector and workers hard

As soon as the news about H-1B visa reform surfaced some months back, 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 companies such as NIIT, Mphasis, Geometric, Mindtree and KPIT Technologies also plunged by almost 4%. This is a nightmarish run for the Indian IT industry.

Consequently, the year has seen a sharp decline in the number of US employers seeking H1B visas. They have applied for around 16% fewer H1B visas for the category of highly skilled workers in 2017 as compared to 2016. Employers seeking visas for the year 2018 have submitted 199,000 applications this year, as compared to 236,000 in 2016.

Indian IT companies such as Wipro, TCS, and Infosys, who have been banking on cheap Indian workers are the hardest hit. According to estimates, Indian IT companies earn approximately $60 billion per year from the US market. They provide a range of services to top US companies. Every year only 85,000 H1B visas are issued, including 20,000 for students. Indian IT companies alone make up for about 17,000–18,000 of H1B visas every year.

Countries like Singapore, Singapore, Australia, and New Zealand are also putting restrictions. No visas have been issued by Singapore for Indian IT professionals since January 2016. The city-state apparently wants to hire locally. Indian IT firms based in Singapore will have a tough time doing that. Most of them used to import talent from India for their operations, which was very profitable for them due to low wages and lower costs.

Tough times ahead for India’s Information Technology sector

As visa curbs in such countries become more prevalent, Indian IT companies must gear up to face challenges in labor movement together with sharp increase in operational costs. Indian companies get 60 percent of revenues from the American market, with 20 percent from Europe and the remainder coming from other countries. Needless to add, the troubling times will be a setback for the growth of India’s economy.

I invite you to connect with me on Twitter @muqbil_ahmar and LinkedIn.

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