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High and dry

Print edition : Mar 13, 2009 T+T-
in Banagalorein Hyderabad

PRAVEEN S. (name changed), a young man with the first signs of an expanding midriff spilling over his belted trousers, was one of the early victims of the recession. He was leading a comfortable life when one day in August 2008, the small IT solutions company in Bangalore that he was working for served him a two-month notice to quit. No reasons were given. They seemed to be quite satisfied with the work I was doing. In May, I was even sent to Germany to work on a project.

The crisis hit him. He was distraught, but he did not give up the hunt for a job. He is one of luckier ones to find another job in these trying times. I had to clear seven rounds of interviews before I was taken in. I now work for a company that handles back office visa processing work and I hope that this is a business area that will not be affected by the global downturn, he said.

G. Manish works with a Fortune 500 electronics company at its software division in Bangalore. He was asked to resign in November. Manish demanded an explanation. This had some effect, and he was transferred to another division. But the company has sacked around 30 to 35 employees over the past few months citing cost cutting as the reason. The streets and bars of Bangalore abound with such stories. The choice of a bar for the weekend rendezvous instead of the costlier pubs shows the effect the crisis has had on the pay cheques of IT professionals.

Job uncertainty, reduced salaries, longer working hours, frequent performance appraisals, reduced attrition rates these are some of the ways in which the downturn is manifesting itself in the glitzy IT services industry in Indias Silicon Valley.

Over the past year, companies such as IBM, Tata Consultancy Services (TCS), American Express, Goldman Sachs and Sun Microsystems are reported to have laid off several employees.

Some companies have increased the working hours without increasing salaries, while others are forcing employees to work outside their area of specialisation. On-site project work abroad has been reduced. Even market leaders such as Infosys Technologies are mulling over pay cuts, while Wipro, another IT behemoth that recruits thousands of engineering graduates every year, increased its pay by 7 to 8 per cent this year compared with its usual 12 to 14 per cent hike.

According to business analysts, these measures are directly linked to the economic slowdown, with almost all companies in this sector heavily dependent on the export of services to clients in the U.S. and Europe. The National Association of Software and Service Companies (NASSCOM) revised estimates for the financial year ending 2009 says that $47 billion is earned from exports of services from the sector, while only 13 billion is earned in the domestic market.

Karthik Shekhar, general secretary of UNITES (Union of Information Technology Enabled Services), an organisation started in 2004 in Bangalore to unionise IT employees, said in December 2008 that 50,000 jobs would be lost between January and June 2009. Providing a rough estimate of the job losses in the IT sector, he said since September the services of 10,000 persons had been terminated.

Until September last year, UNITES had 18,000 members. After that we stopped accepting membership as the number of applications was growing, he said. Although this figure demonstrates the mood of uncertainty that prevails in the sector, it comprises only a small fraction of the 1.3 million persons employed by the sector across the country in 2005-06. According to the executive summary of Strategic Review 2008 published by NASSCOM, the employment projections for 2008 was two million and was expected to increase to 2.23 million in the current fiscal.

The IT industry has a reputation for a high employee turnover ratio but this has changed over the past year. According to Nirupama V.G., managing director of Ad Astra Consultants, one of the largest recruitment consultancy firms in the country, attrition rates have fallen significantly and there is a great demand for jobs.

In the pre-recession era, if 10 offers were made by IT and ITeS companies, only three would be accepted on an average, while now if 10 offers are made, nine are accepted immediately. The number of middle and senior-level employees approaching us has also increased by 40 to 50 per cent, she said.

Campus recruitment has also been affected. The Peoples Education Society Institute of Technology (PESIT), Bangalore, received interests from only two companies this year as against 15 last year, said K.S. Sridhar, the placement officer of the institute.

While ITeS company officials are optimistic that the global crisis will present opportunities for Indian operations to grow, Suresh Kodoor, chief executive officer (CEO) of Aadya Consulting Solutions, disagrees.

When large projects have been put on hold in America and Europe, how will this provide business for India? he asked. Kodoor has founded the IT and ITES Employee Centre, a grievance group to address the problems of IT professionals. Fifty persons attended the first meeting of the group.

WHEN the dreaded pink slip comes, there is hardly anybody to raise the red flag in the much-hyped and much-pampered IT industry. Technocrats have viewed trade unions with disdain. Now, with the career of thousands of IT professionals entering an uncertain phase following a downturn in the sector, a sense of insecurity has gripped the industry.

In Hyderabad alone, 25,000 employees, or 10 per cent of the total workforce in the city, lost their jobs in the last two quarters, according to T. Sridhar, vice-president (human resources) of Megasoft, a telecom software company. IT companies did not plan for a downturn of businesses and recruited large numbers of professionals in anticipation of robust order books. When new orders stopped coming, they began to press the panic button, he said.

Teamlease Services, a staffing company, said that there was a net decrease of 44 per cent in recruitment in IT and 34 per cent in ITeS in the current quarter, compared with the previous quarter of the current financial year. The net business of the IT sector is set to drop by 61 per cent and that of the ITeS sector by 22 per cent.

According to A.R. Rajesh, vice-president of Teamlease, a sense of insecurity has gripped IT/ITeS employees. The helpline (60012345) of the company is flooded with calls beginning Friday evening through the weekend.

Although there is a clear drop in the intake, the total number of job losses cannot be calculated as this has not been registered, thus posing a danger of the high-tech industry being called largely unorganised.

Malekulashtar Kheyroolla (Malek), partner in Strategist, a Hyderabad-based HR firm, attributes the latest crisis to the Satyam fiasco instead of seeing it as a fallout of the economic slowdown.

Infosys slashed its recruitment plans from 35,000 in 2007-08 to 25,000 in the current fiscal. T.V. Mohandas Pai, director of HR in Infosys, said at a recent press conference in New Delhi that salaries could be trimmed as the variable pay offered was calculated on the basis of the companys revenues, which were actually down this year. Satyam Computer Services, before getting mired in corporate fraud, announced a revision of its recruitment guidance from 14,000 to 8,000-10,000 when it publicised the results for the second quarter.

For any employee in an IT company, going to the United States or any foreign country to work on a client location is a dream. The companies send the best of their lot for on-site work. Anticipating that they would be recalled with the H1B programme coming under review by the U.S. government, several associates are posting their resumes, quoting stupendously high salaries. And there is a mad rush at job portals and HR consultancies.

The onset of the meltdown saw many companies cast off their associates, independent of their performance, although the HR heads in these technology majors say that they had to do away with the jobs of underperformers, that too after giving them sufficient room for improving their professional skills.

Most IT companies keep 3.5 to 5 per cent of their associates on the bench. Barring a minuscule percentage, those moved on to the bench can never make it back to their workstations in their respective companies. Moving on to the bench is nothing but putting the job on a ventilator. Thanks to the recession, the jobs are only experiencing sudden death.

Satyam, which was not notorious for knocking off jobs in its two decades of existence, began the exercise in mid-2008. S.V. Krishnan, global HR head of the company, then said the company had put its underperforming associates on a performance improvement programme before showing them the door.

Nobody risks carrying a large bench. With customers playing hide and seek in placing orders for new software projects, and dodging the release of receivables, the IT majors are surely in dire straits. As some projects have concluded, the engineers working on them are put on a business wait, adding to the number of associates on the bench. The companies are bringing down the bench duration from 60 days to a month, says Rajesh. If no project is coming forth, the services of those on the bench cannot be augmented, resulting in their getting the marching orders.

For Indian IT majors, Tata Consultancy Services (TCS) is the guiding light. Most of them follow it when it comes to implementing hard decisions for TCS does all this in a very transparent and professional manner, perching itself on a higher moral pedestal.

On their bumpy professional ride, the techies are trying different techniques to overcome the rumble strips. They are willing to take a pay cut, which is the most common thing in the employment environs influenced by the U.S. While some are constrained to proffer pay cuts, some others prefer a job change before it is too late.

Those preferring a job transition are looking at smaller companies but at bigger positions. For instance, a person who handled 500 associates on a project in a company like Satyam or Infosys is longing to opt for the position of a CxO. What is CxO? As in algebra, replace x with information, technology, financial, operating, and so on, meaning a person becomes, for instance, a chief technology officer or a chief operating officer. But those who have got a pink slip from an IT giant will have to wait. Only a few smaller players are willing to accommodate the displaced technocrats. The next best thing to do is to post the resumes and approach HR consultancies.

As far as Hyderabad is concerned, Malek says there are no active layoffs but there is a danger of employees losing their jobs. For instance, 200 persons working in a Chennai-based company with a huge establishment in Hyderabad were called into a conference room about four months ago and told that their engagement with the company had been terminated. Unfortunately, none of the dismissed employees had considered a plan B. Worse still, they had lined up huge financial commitments month on month as the all-frills jobs entailed a luxurious lifestyle. At one point of time, banks never used to even verify the antecedents and repayment capability of engineers working in the top four IT companies before sanctioning loans.

The least they can hope for is businesses and jobs in a rationalised environment. Ramanujam, director of Star Powerz Services, a recruiter of head honchos, says companies have to lie low for some time before they make a jumpstart after the recession. IT and business process outsourcing industries are here to stay, whatever the economic condition.

However, Naukri JobSpeak, an arm of Info Edge (India) Limited, said January 2009 presented a more stable job scenario for the sector in Hyderabad compared with December 2008. The job index, at 646 in January, had moved up by 1 per cent, as against 640 in December. But a decline of 35.4 per cent was noticed in new jobs since July. The indices of IT and ITeS industries were volatile at the national level.

The IT sector, a bulk creator of jobs in the region, saw stability in the creation of jobs with its job index at 691. The ITeS has gained jobs with its index up by 28 per cent.

Hitesh Oberoi, director of Info Edge, said, The downtrend in jobs was arrested to an extent in January. However, it may be a while before we see a recovery.

A location-wise analysis reveals an improved situation in IT centres such as Bangalore and Pune, with the index at 747 and 617 respectively. Gartner, a research organisation, predicted a drop of 10 percentage points in the growth of the IT industry as a whole in 2009 across the country. The spending on IT in India across the industries is expected to be down from 13 per cent of their revenues to 5.5 per cent, meaning job losses.

According to a survey by Hewitt Associates, an HR firm, 60 per cent of the Indian companies continue to hire people and the annual salary increments are set to grow by 8 per cent. Zinnov, another HR research company, put out the results of its survey saying the attrition rate in IT product development companies would come down below 8 per cent. The companies are, however, giving pink slips to 10 per cent of their underperformers.