Technology services companies could shed as many as 40,000 mid-level jobs by next year as India’s most significant export industry, battling mounting cost pressures, looks to cut more expensive resources, and replace them with headcount at the base of the organizational pyramid.
Mid-level resources, with work experience of 10-20 years, account for a fifth of the workforce across IT companies, said analysts. That works out to about 6,00,000 professionals, meaning about 7% of mid-level IT jobs could be axed in the next 12 months.
Indian IT firms follow the typical pyramid structure: A wide base employs more but costs less per head, a middle-level team has experienced professionals, and the sharp tip at the top includes senior-level decision-makers. With business slowing, companies are looking to shed flab in the middle, where employees have experience in traditional services that have a shrinking future-demand profile. Instead, they are opting for relatively low-cost resources, with expertise in newer digital skills.
“I don’t think people have the luxury to carry on in a long-term cost structure. Profitability is a concern, and everybody is walking a tightrope,” said Rituparna Chakraborty, co-founder of TeamLease, a staffing company. “While reduction of people is not the first choice for any organization, there is little choice for companies than to let go, people, either not performing or adding value.”
India’s software industry registered $137 billion in exports in FY19, employing over 3 million people. The top six Indian IT services firms clock revenue of more than $60 billion and hire more than a million professionals. These firms are seeing revenue from traditional services, such as application development and maintenance that contribute two-thirds of their business, either drop or remain flat. Only the newer digital services business is growing faster – in double digits.
“As in all sectors in the west, in India too, when a sector matures, there will be many in the middle level who will not be adding value to the salary they get,” former Infosys board member TV Mohandas Pai was quoted as saying in the media.