BENGALURU

Bubble bursts

By Ravi Sharma

AN abnormally uneasy calm permeates the information technology (IT) sector in Bengaluru, home to over 3,500 tech companies, including over 750 multinationals such as IBM, HP, Cisco, Cognizant, and home-grown pioneers such as Wipro, HCL Technologies, TCS, Tech Mahindra and Infosys. Associated until the other day with glamorous pay packages, even more glamorous on-site (read overseas) assignments and flashy lifestyles, the city’s over five lakh IT employees are suddenly feeling the heat of lay-offs, a deep dip in on-site and off-site projects, uncertainties caused by changes in United States visa regulations and the resultant push for local hiring in the U.S by companies such as Infosys and Cognizant, the squeezing of pay packets, and fewer jobs on offer.

A number of employees told this correspondent of sudden telephone calls from their human resource (HR) departments directing that they resign with immediate effect. IT employees forced to go by their companies broadly fall into three categories: the bottom performers at all levels, people at junior and middle levels who have either irrelevant skills or have failed to upscale their skills (companies confess that it is almost impossible to retrain from one technology to another), and senior people who do not justify their high cost.

While poor performance-related separation is a strong reason for the axe to fall, it is not always the case. In some companies, employees returning from long leave or on the bench (companies typically have around 20 per cent of their workforce on the bench) are also made to exit once they cross the 90-day “business wait” period. To many industry watchers this forced resignation is “illegal and bad in law”. Though the grapevine is that as many as 20,000 people across India may be marked for retrenchment, there are no official statements from any of the companies or from IT bodies such as the National Association of Software and Services Companies (Nasscom).

After numerous news reports spoke of Cognizant offloading over 6,000 employees, its president, Rajeev Mehta, denied the lay-offs and sent out an email to employees in which he said: “Each year, in line with industry best practices, we conduct performance reviews to reflect on the work of last year and ensure goal for the subsequent year are clear. We are being committed to being a meritocracy. We believe that’s good for all associates around the world.”

While employees cite as reasons for the forced resignations bad management practices, ad hocism, favouritism, far too much subjectivity and lack of transparency in the appraisal system, and, above all else, an attempt to drastically reduce workforce levels in order to “maintain profit margins”, company managements have a diametrically opposite view. Their view is that with certain employees “not matching the expectations of the management and having not upgraded their skills to be in tune with current requirements of the company, there had to be an “off boarding of people”.

A senior management member of IBM explained: “Lay-offs have always happened. This year some companies have pushed the envelope to get rid of the fat. The norm in the industry is to have 5 to 10 per cent of the workforce in the bottom bucket (performance wise). Earlier it used to be 2 to 3 per cent. This means that in a large company of 150,000 around 5,000 employees rank as bottom performers. Once the appraisals are over in December/January, 3,000 of these people leave on their own. The rest are put through performance improvement plans, warned or just sent home over a period of time. The last four months has been difficult for the IT industry and with lower demand the 3,000 who would have normally found jobs easily have not been able to do so. And with companies closely watching their stock price and bottom lines, there is immense pressure on managers to convert an average rating to poor.”

Said a director in Cisco: “Manpower accounts for 40 per cent of operating costs, so lay-offs are the first step in any optimisation. The industry has created a lot of people managers and resource managers. Unfortunately, they did not become technocrats. They are on the firing line.”

Making it worse is the fact that an absolutely fair appraisal system is impossible to put in place. “There are too many variables. Let us put it in perspective,” said Santosh Thangavelu, vice president and head of the IT Talent Supply Chain at TeamLease, one of India’s leading human resource service companies. “Companies like Infosys, TCS, Cognizant and Wipro operate at a revenue range of $10 billion or thereabouts. Forty per cent of this is employee cost. Fifty per cent of this cost is for 70 per cent of the people who are sitting offshore in India. That is, about Rs.128,000 million [Rs.12,800 crore] in salary. Let us say that the company decides to give an average salary hike of 10 per cent to its offshore employees. That is about Rs.12,800 million [Rs.1,280 crore]. Now, this Rs.12,800 million has to be distributed among, say 100,000 people at different levels, at different business units, at different salary levels, with different histories of salary movement, distributed among 3,000-plus projects and 400-plus accounts by about 5,000 managers. It is common sense that performance appraisal and salary revision are two different things but it is also common knowledge that one leads to another. Can fairness and equity and bias equalisation be expected from 5,000 managers across 3,500 projects on 100,000 people to follow same standards of judgment for different types of work done? This level of complexity can never assure 100 per cent fairness across the board. Large companies can claim that they have ‘gotten rid of the performance curve’ but it will be interesting to know how they distribute the money.”

Some IT companies, while maintaining an appraisal system that is based on customer, team and manager feedback, have even removed the rating system, thereby leaving no record of performance that can be cited in case of a legal dispute. Hikes in salary and designation depend solely on the company’s business scenario and budget.

Although all the big names in the industry, all of whom have major operations in Bengaluru, have dismissed all talk of lay-offs, an office-bearer of the Forum for IT Employees (FITE), a representative body of employees working in IT companies and call centres, told Frontline that in the last three months they had received, on an average, 10 calls a day from employees who had been asked to resign by their companies. The FITE moaned the fact that employees were not prepared to come out and protest or take up their removal with the Labour Commissioner.

While most employees who have been laid off are ready to move—but not before they are given a respectable settlement which includes a decent severance package—all are “vigorously looking for openings”. With most companies, notwithstanding their public utterances, in lay-off mode, telephonic calls are happening but there are hardly any job offers.

Future of the industry



So has the bubble burst in a sector that has for over three decades enjoyed the good times provided not only by the Karnataka government—in terms of tax concessions and other incentives—but also by the global demand for IT services that were offered at a fourth of what it would have cost in the West? And is the IT sector, which is no longer a sunrise industry, probably going through what all industries perforce go through—growth, consolidation/stabilisation and decline?

Industry experts feel that in an industry where obsolescence happens in the wink of an eye, automation (interactive voice response systems replacing scores of call centre workers and manual testing and development being automated are prime examples), artificial intelligence and the jump from desktops/laptops to mobile-based applications, has had an impact on the downsizing of jobs, especially at support and lower levels. (High-end jobs continue to be located in the U.S. or Europe and are less affected.) With most Indian IT companies operating as service companies where volume (not value) and price are key, a demand and supply model and automation (software tools being readily and easily available) have meant fewer automation engineers/testers being needed from contractors such as Wipro, Infosys, TCS and Cognizant. In any downsizing/lay-off, the contract employees get hit first.

Among the biggest examples of new technology to hit the technology industry is enterprise level cloud storage, where all data are no longer required to be stored in local servers but rather at someone else’s computers (servers) at remote locations, with the files being accessed on the Internet. This subscription model of putting away data reduces both local storage requirements and costs. Amazon Web Services, Dropbox, SugarSync, SpiderOak, iCloud, Google Drive and Microsoft OneDrive are, to name a few, cloud service providers.

This has forced a number of IT hardware majors who are into the development, manufacture and selling of networking hardware, and who employ sizable work forces in Bengaluru, to downsize. Informed sources told Frontline that at a major U.S. multinational’s Bengaluru operations, the Enterprise Data Centre, which employed 1,000 people—the number split evenly between hardware and software engineers—was rejigged recently to accommodate the new cloud business environment. As many as 300 hardware engineers were retrenched and replaced by 100 software specialists.

On its part the Karnataka government is in a wait and watch mode. Speaking to Frontline, the IT/BT Minister, Priyank Kharge, said it was “difficult for the government to intervene” at this stage, but no harm would come from hearing out the stakeholders. Said Kharge: “Lay-offs are part of the game, especially so in IT since it is an industry where the attrition rate is high. The industry and employees need to reskill and reposition, and quickly too, in order to keep pace with emerging technologies.”

Officials at the Labour Department expressed surprise that IT employees had not formed unions. Said a senior official: “IT workers have not exercised their fundamental right to form unions. If we get petitions of wrongdoing we examine the nature of the complaint and take up the matter under the Industrial Disputes Act, 1947. We prevail over both employee and employer. If conciliation does not work, we send the case to the Labour court, which functions under the jurisdiction of the High Court. Labour courts have the power to reinstate an illegally terminated employee with full back wages for the period of denial of employment. In this country there is no complete justice to the working class. However, all that one needs is the spirit to pursue the case. There is adequate legal framework.”

Officials also indicated that “IT trade bodies slyly pass on information to companies on IT professionals who take a legal/constitutional route to fight injustices”. The worker is then marked out as troublesome.

One hour to exit



Neetu Chopra (38), a project manager with Tech Mahindra in Bengaluru, disclosed teary-eyed that she was orally asked to hand in her resignation within an hour, with HR calling her every 10 minutes reminding her that she now had even less time to go. She was given no experience letter, no termination notice and her access to the company’s network was blocked. Nothing was communicated in writing. Sheetal Mazumdar (31), an associate, who had been with Cognizant Technologies Solutions for six years, has a similar tale. On April 10 she was asked to resign after being told that her performance rating had fallen to 4 (the bottom of the rating pyramid). She was informed by HR that she could opt for either a two-month notice period or a four-month severance package.

Speaking to Frontline, Sheetal claimed that her appraisal rating had been neither “fair nor transparent”, nor was she given opportunities in any development projects; she was rather boxed in purely support projects. “In my 2015 appraisal I was given a rating of 2, which is the second best. But having worked for six years and with no promotions, last August I asked that I be released from the ‘Cloud and Big Data’ project that I was working in and that I be moved to a development project. Instead, I was given a 4 rating in December, released from my project in February and asked to resign in April. When I questioned HR, I was told that Cognizant was not running a ‘charity business’.” In May, she was given just 40 per cent of her monthly salary of roughly Rs.35,000. Faced with loans to clear and in quite a financial mess, she is toying with the idea of filing a petition with the Labour Commissioner.

Suchitra V. (43) had no such doubts. A technical architect in a pre-sales group with Tech Mahindra since 2015 and earning around Rs.1.5 million (Rs.15 lakh) per annum, her petition citing “illegally termination by her employer” found its way to the Deputy Commissioner of Labour, Bengaluru. Her job involved working on proposals and offering tech solutions to multinationals, and her performance, she claimed, had earned her “a good performer” and “a consistent performer” ratings in her 2015 and 2016 appraisals respectively, with her manager even commenting that she “was a technical pillar to the team”. However, on April 10, hardly two weeks “after being pulled into a new team”, the middle-level management (17 years of experience) employee was shocked when her HR asked her orally “to resign immediately or face being terminated”. Suchitra’s email to senior mangers stating that she was being forced to resign despite good performance and that her family would suffer went unanswered. Her performance was not cited as the reason why the company was asking her to resign. Instead, she was informed orally by the head of HR that “a business unit has to meet certain targets and in order to achieve that workforce reduction and off boarding of people was a necessity”. It was only after repeated requests that the company gave in writing its demand for her resignation; Suchitra received an email from the HR department directing that she go on leave without pay with immediate effect, pending her resignation, failing which she would be terminated effective June 16. Said Suchitra: “My access to the office network was revoked and I was kept without any work when I attended office between May 10 and 18. I cannot become redundant one fine morning. Now I have been directed by the Labour Commissioner not to submit my resignation and as long as my petition is pending I cannot be forcefully terminated.”

Vasudev Murthy (45), a senior delivery manager, with 19 years of experience in IT, the last six of those at IBM India Private Limited’s Global Business Services (GBS), got a call from the HR team on May 30. The news was simple: he had one month to find a job, not in GBS, where he had his only experience, but at IBM India’s Global Technology Services, where he had none. If not he would have to resign. He was told by his people manager that the reason for his sacking was not performance but the fact that he had been in the same career band (8) for over five years and had therefore crossed his career ‘velocity number’. Said Murthy: “This has nothing to do with automation. I have been given nothing in writing. I have not even been given a three-month notice. I have no financial commitments and no plan ‘B’.”

HYDERABAD

Cyber-rattling

By Kunal Shankar

HR: I don’t need to send anything. I have already given you a termination notice.

Rahul: But termination notice should specify the reason, right?

HR: See, I have mentioned what I am supposed to mention, understand Rahul. I understand your case. I understand your pain of getting laid off.

Rahul: But that is of no use right, you haven’t even mentioned the reason?

HR: We have to work under the directions given to us, OK? This is nothing personal.

Rahul: See, again I am requesting, I am ready to reduce my salary, I am ready to migrate to any technology. I have sent you my concerns.

HR: This is the decision from the organisation and the decision is final Rahul.

Rahul: First you must initiate, right? You must send my concerns to the higher authorities! Then only you come up with termination.

HR: Again, you don’t tell us what we have to do. I know what I have to do.

Rahul: Then I don’t need to resign. You know what to do, right?

HR: OK fine, then we will go ahead and tell you what to do as per the HR norms.

Rahul: OK sure. I have letters and proof of everything.

HR: That’s OK. You will get your relieving letter in due course of time. OK? Your requirement stands null and void. This will be mentioned in your termination letter.

Rahul: OK, anything else?

HR: No.

Rahul: Thank you.

In late May, Rahul (name changed) walked out of the Tech Mahindra office in Hyderabad armed with this recording of his conversation with the company’s HR. He then met the Joint Commissioner of Labour in Hyderabad with a representation seeking to initiate conciliation proceedings with India’s fifth largest information technology company head quartered in Pune, Maharashtra.

Tech Mahindra’s largest operations are in Hyderabad owing to its takeover of Satyam Computers, with about 55,000 employees in the city, close to half its listed workforce of 1,17,600. The company claims to be worth $4.4 billion with clients in over 90 countries. But Reuters estimated a 33 per cent decline in Tech Mahindra’s net profits of Rs.590 crore for the January-March 2017 quarter from the same period last year when the company declared Rs.879 crore.

“But they have declared profits right?” said Mukesh (name changed), in his mid 40s and a father of a college-going kid, who accompanied Rahul to the Labour Commissioner’s office. He is a recent home owner in Hyderabad with a hefty loan to pay. “They began similarly with me, calling me about 15 days ago and asking me to resign. I possess skills, for which they do not have a replacement and I was the top performer in my team. And my job will not become redundant due to automation.” Mukesh works on information security. That means securing data from threats like the mid May worldwide “ransomware” cyberattack.

Employees at Tech Mahindra claim nearly a fifth of the company’s worldwide workforce, that is, about 25,000 jobs have been cut in the past two months, but industry watchers say it is 5,000 to 6,000. At the time of filing this report Tech Mahindra was not available for comment, but it has refuted allegations of mass sacking in the past few weeks and called the current cases as part of removing “non-performers”.

Kiran Chandra from the Forum for IT Professionals in Hyderabad accuses the government and the industry of “doing nothing” to counter American protectionism, as the overwhelming business for the country’s software services originates there. “Think about it, one H1-B visa [U.S. employment visa] now costs $130,000 a person a year. That could employ four people in India.”

Experts also say that the threat of process and maintenance automation, big data and cloud computing are exaggerated and that companies are not giving employees time or the facilities to re-skill themselves.

“This [Tech Mahindra] was the number one company in providing SAP solutions. They were one of the highest paid consultants; we don’t have a single project now which involves SAP because we don’t have the skill set any more,” says Mukesh. According to employees at Cognizant, reskilling and keeping abreast with technology upgrades used to be an inherent part of employee work culture, but things changed about five years ago when Indian companies went about an acquisition spree in order to diversify and let the IT side of things slide. For instance, Tech Mahindra acquired U.S. telecom company Lightbridge Communications Corporation for $240 million in 2014. The company has not been able to come out of being in the red since that takeover. Tech Mahindra has also been accused of giving exorbitant pay packages for their top management, much like other IT companies.

“I left Wipro some years ago because my son was finishing school and at that crucial moment I was asked to go to the U.K. I was forced to resign, but I am glad I did because I was there for my son. I was able to continue my physics lessons with him,” said Mukesh.

PUNE

A silver lining?

By Shoumojit Banerjee

WITH the industry Cassandras lamenting the decline and fall of the IT revolution, the ricochet of lay-offs is being felt in Pune as well. Yet, the scene here is subtly different from that in Bengaluru and Hyderabad, not least because the number of people dependent on the sector is relatively small.

The city’s share of IT exports exceeded an estimated Rs.60,000 crore last fiscal, while maintaining a robust 10 per cent year-on-year growth. While Pune’s 2,800-acre Hinjewadi IT Park and its smaller ‘cousins’ at Magarpatta and Kharadi are reeling from the onslaught of retrenchment, analysts and experts say the situation could hold a silver lining for those laid-off in the long run.

“The city has traditionally been an engineering hub with companies like Bajaj Auto and Telco in the past and Mercedes Benz now. So, a product-development start-up is a natural fit in the city. Hence, for those with an engineering background coupled with IT skills, realigning should not be an issue,” says Sandeep Suryavanshi, founder, AideExpert, a social enterprise start-up.

He notes that the total investment of the country’s traditional businesses in IT was barely 0.5 per cent, but the changing trends could portend well for Pune with its burgeoning start-up ecosystem.

“A lot of business in the Pune-Mumbai belt is waiting to be captured given the fact that Mumbai is the country’s ‘financial capital’. In that sense, this is an opportunity for the mid-level management being laid-off,” Suryavanshi says. At the same time, he concurs that the halcyon days of Pune’s IT BPO boom are definitively over. “There is a caveat here. For the past six years or so, the emphasis of ITBPM [information technology business process management] has shifted from Pune to, say, Gurugram, which is now the BPO capital of the country. So, while Pune’s ITBPM sector will undoubtedly be hit, the affliction may not be as crippling as in Gurugram or other Tier-2 cities,” he opines.

Suryavanshi believes that it is wholly off the mark to dub the current situation a recession as IT still contributes a formidable 7.7 per cent to the country’s GDP.

“Unlike the recessions in the early 2000s and 2009, there has been a shift in IT requirements, from custom-based applications and ERP [enterprise resource planning] to the digital platform, with IT majors like Infosys and TCS and other city-based notables like KPIT and Zensar driving to give a digital flavour to their systems,” said a senior HR executive with a top city-based IT firm, requesting anonymity.

He told Frontline that given the fraught scenario, the ability of the city’s IT professionals to re-skill was higher than their counterparts in Bengaluru or Chennai, not least owing to the burgeoning numbers of educational and technical institutes. “It is found that among the locally hired IT workforce, many have the positive habit of training and reskilling themselves,” he noted.The difference this time, as opposed to 2001 and 2009, is that many have rallied back to organisations once the crisis passed. “Recruiting patterns have completely changed and those in the mid-level need to realign themselves to the new reality,” he said.

In Pune, a sizable portion of the retrenched middle level employees is already finding rehabilitation, albeit in reduced circumstances, as faculty in the numerous technical institutes in the city. “An IT service sector professional in Pune on the verge of being fired ought to consider the opportunities being thrown up by digitisation, given that a lot is happening in FinTech, Internet of Things (IoT) and the security sector in Pune where middle and senior management talent can constitute a great asset in building business and acquiring customers,” said Kiran Deshpande, co-founder and president, Mojo Networks.

Both Suryavanshi and Deshpande point to the vulnerability of the current human resource model of IT service firms, noting the complacency that has lulled many of the city’s professionals with their long, hitherto undisturbed cycle of prosperity.

“The city’s pretensions of being a metropolis have been fuelled to a significant extent by the IT sector, which has translated into high-end lifestyle with lavish apartments in the city’s upmarket areas. The laid-off professionals typically have a high EMI-income ratio, and have no option but to continue working, given that Pune’s real estate sector has peaked,” said Suryavanshi.

The spectre of lay-offs has finally seen a thrust towards unionising in the city with the Pune chapter of the FITE facilitating a handful of former Cognizant employees to file a petition in the Labour Commissioner’s office. Its website has witnessed a surge in registrations. According to Elavarasan Raja of the Pune FITE, the outfit hoped to file similar petitions for employees of other IT companies who have been retrenched.

Yet, given the situation that labour unions and Pune’s IT sector have traditionally been antipodal entities, industry insiders are sceptical about the unionising trend because the companies officially have not “laid-off” employees, euphemistically terming them “voluntary resignations” attributable allegedly to “poor performance” among a host of dubious factors.

“Hiring at the middle level will certainly not been done in bulk any more. The name of the game will be domain expertise as IT behemoths shift focus from employee to client,” says the analyst Asmita Suryawanshi, while emphasising the need for freshers to keep upgrading their skills by utilising the time when there is no immediate project at hand.

The IT scene in the country, especially in Pune, is on the cusp of an interesting era marked by flux, says Abhay Ghate, chief technology officer, Nihilent Technologies. “As companies strive to innovate, they simultaneously seek an assurance on their investment. This has created a demand for services that can be easily plugged and played in the organisation’s innovation cycle. With a relatively low entry barrier, a huge number of companies are creating niche services and products in Pune, with numerous industry veterans joining or commencing ventures to convert their domain expertise into services,” Ghate said.

NATIONAL CAPITAL REGION

Feeling insecure

By T.K. Rajalakshmi

IN February, IT employees in Gurugram were surprised to read in newspapers about employees of the e-tailer Snapdeal going on a protest against their retrenchment. In fact, there was a similar protest last year as well when 200 Snapdeal employees approached the Labour Department in Delhi complaining about what they said was illegal termination. News of the retrenchment of nearly 600 employees in Snapdeal came as a shocker to all. Its founders, in an email to their employees, quoted in a leading business daily, announced a 100 per cent salary cut and stated that the company would be reorganised into a lean, focussed and entrepreneurial one. The email also said the organisation would be “saying painful goodbyes to some of our colleagues” in the process and admitted that over the last two-three years the company “started making mistakes”. In July 2016, Flipkart, the largest e-commerce player in India, announced that it would be rationalising its workforce.

News of big IT companies laying off their workforce has had its reverberations in the National Capital Region (NCR, comprising the National Capital Territory of Delhi and districts in Rajasthan, Uttar Pradesh and Haryana) as well, though there have been no attempts to rationalise the workforce here. The events at Snapdeal and the impending lay-offs in the IT majors have got the employees worried. Forming unions was out of the question, they said, as IT employees considered themselves “white-collar workers”.

“The small start-ups hire software engineers. Every month a new one opens. If they do not get projects, they close down. No one knows when they might close,” they said. It was learnt that even big IT majors outsourced their work to the start–ups and the small companies closed down once the project was over. “If the big companies have projects which are closed down and they have to let go of employees, they get a bad name. So they outsource the work to smaller companies. Once a project is over, the employees are put on the ‘bench’,” they said. Most engineers were reluctant to speak out as they feared they would not get a recommendation letter from their employers.

Groomed to be compliant



The stepping stone for compliance was established early on, in the engineering colleges itself where students were expected to be compliant and pro-establishment. Software engineers Frontline spoke to said there was no policy in the IT industry to retain employees. It was up to the employer entirely and depended on whether the employee satisfied the work requirements. A top executive in a leading IT major told Frontline: “Socialism is practised when it comes to sacking. We don’t discriminate. It can happen at any level.”

The pattern of recruitment, too, has changed. Earlier, campus placements used to be the norm. Now it seems special coaching institutes cater to the specific needs of a particular industry and software engineers would have to enrol themselves at such institutes and learn the specific skills relating to specific industries. They said that when the IT boom started in the 1980s, engineers trained in chemical, electrical or mechanical engineering took to software technology. Now there was a glut of IT engineers but fewer quality jobs. Automation was a serious challenge, too. “Earlier, if a bank’s portal had to be created, they would need a designer and a coder. Now all this comes ready-made, in a package. Earlier, there used to be manual testing of software; now software tests software,” they said. The crisis, the software engineers said, was just unfolding for the huge numbers of engineering graduates from small towns. And everyone knew there were no new jobs to be had in the near future.