Saturday, September 20, 2008

India submerged in the meltdown

In February this year, Tata Consultancy Services announced that 500 of its employees have “voluntarily resigned” after an annual performance check. IBM followed suit with its downsizing plans and unconfirmed reports said the company had shown the door to almost 700 employees in India. The two companies were then roundly criticised for their obsession with handing out pink slips.

Just seven months later, those criticisms seem like a bad joke. Recruitment consultants now say every one in 10 people employed in India’s banking and financial services and the information technology industry risks losing his job because of the global financial meltdown.

The situation has become worse after the collapse of Lehman Brothers and the sell-out of Merrill Lynch on Monday. At least three top recruiting firms in India say, in the last 24 hours, many companies have asked them to stop hiring.

Layoffs are still a highly emotive issue in India and no company is willing to put any number to the people being asked to ship out, but all of them are consistent about the fact that the annual performance reviews have become stricter this year.

Satyam, for example, has denied the buzz that about 9 per cent of its employees may be fired. But the company’s official statement says that as part of its appraisal process, the company identifies “around 5 per cent” of its employees for “performance improvement”. That’s a substantial number, considering the software giant has around 50,000 employees on its rolls.

Wipro isn’t far behind. The company has reportedly put 4 to 5 per cent of its employees under the non-performance scanner. The company’s official position is that some employees have been asked to move on, but the number is significantly lower than 2,000.

It’s certainly not IT companies alone. A host of broking firms admit that many of their employees are on “paid holidays” — a luxury they can ill-afford. And already quite a few of them have “politely persuaded” some of their people to leave. The numbers are still small, but the trickle may soon turn into a deluge if the panic in the markets continues for a few more months, Even the manufacturing sector, which has been largely untouched by the turmoil, may tighten the screws as far as hiring is concerned.

The instant fallout of what’s happening on Wall Street becomes clearer if one adds the uncertain fate of the over 2,500 Lehman employees in India and the estimated job loss of at least 1,000 Indian employees at Hewlett-Packard following the company’s decision to eliminate nearly 25,000 jobs worldwide.

That the future is bleak becomes clearer from the fact that US employers are expected to make their deepest cuts in staffing in almost seven years. Just a day after the Lehman and Merrill news broke out, New York Governor David Peterson forecast that Wall Street might lay off over 40,000 workers. To put this in context, Wall Street’s job force totalled 181,000 in July, already down by 11,000 from a year earlier.

HR consultants in India say the impact of what’s happening in London will complicate matters further and Indian employees are bound to feel the shock. For example, the layoff figure in UK’s financial district is expected to reach up to 50,000 over the next two years. The collapse of Lehman, which has a staff of 4,000 in London alone, adds to the misery of the financial services industry in that country. And that’s horrible news for companies dependent on Europe’s BFSI segment, that has added more jobs than all other service sectors combined since 2004.

Greg Savage, International CEO of Aquent, a US-based global staffing firm, says he was in London last week and wasn’t surprised when he got calls from some of the earlier hard-to-get professionals looking for a job.

Savage, whose firm specialises in marketing, communications and creative talent, says things are tough in India as well and companies will obviously get rid of mediocre employees as they can no longer afford to operate in a high-cost environment. Besides, some of the excesses of the past, when companies recruited anybody with a pair of hands, are bound to have its fall-out.

But the picture isn’t entirely grim for job seekers in India, Savage says. Employees with sought-after skills may still be able to demand hefty pay from potential employers. “In the media space, for example, employees who have retooled their digital skills, will have no problem in getting chased by head-hunters,” he says.

Savage is right. Companies may have more bargaining power now than they did a few years ago, but they will still pay well for top talent as it doesn’t make sense for them to undercut employees they want to retain in the long term.

So things will pan out well for the creamy layer. But for the rest, the future is clear: prepare for more job losses. It’s that time when many may feel lucky to just have a job.

Major IT firms expected to announce job losses

The Wall Street crisis could result in the loss of 20,000 to 25,000 jobs in India, says the Times of India, with the leading IT companies likely to announce huge layoffs in the next few years.

Satyam is planning a substantial cut in its labour force, and a couple of weeks ago Infosys reduced its workforce by about 3,000 employees. HP has also laid off 24,600 workers. An HR professional at another leading IT firm, who wished to remain anonymous, said that during the mid-year appraisal to be held between October-November, large-scale job cuts may be announced.

Many other companies have ordered recruitment firms not to hire any more professionals, according to Rajiv Mehrotra, country GM of hiring firm Kelly Services India. Already, he said, the Indian job market has already been affected by the troubles of Lehman Brothers and Merrill Lynch.

The banking, financial services and insurance (BFSI) sector, the largest outsourcing vertical for Indian technology players, contributes up to 40 per cent of revenues for some top IT firms.

Almost 350,000 industry staff are employed in the BFSI space. Amongst these, the top six players - TCS, Infosys, Cognizant, HCL, Wipro and Satyam - account for 180,000 jobs. This sector records $10 billion of the total $32 billion revenues posted by the industry during the last financial year.

Thursday, September 18, 2008

Satyam shares drop on job cuts

Satyam Computer Services Ltd, India's fourth-largest software services provider, was poised for its biggest drop in five years after a report that the company may fire about 9 per cent of its employees.

Satyam, which fell as much as 12.8 per cent in Mumbai trading, the most since April 2003, was 9 per cent down at Rs 371.5 at 11:16 am. Satyam led a decline in technology stocks on concerns that the deepening credit crisis in the US will force clients to cut back on orders further.

Hyderabad-based Satyam and larger rivals Tata Consultancy Services Ltd and Infosys Technologies Ltd in July reported first-quarter profit growth slowed as Wall Street clients reduced orders and delayed new contracts. Since then, the deepening crisis has forced the US Treasury to take over mortgage lenders Fannie Mae and Freddie Mac and losses and writedowns at financial firms have crossed $500 billion.

Lehman Brothers Holdings Inc, once the fourth-largest US investment bank, intends to file for bankruptcy after Barclays Plc and Bank of America Corp abandoned talks to buy the crippled firm.

Bank of America plans to acquire Merrill Lynch & Co, the world's biggest brokerage firm, for about $50 billion.

Satyam may cut as many as 4,500 jobs, the Economic Times reported today, citing unidentified people.

As part of its appraisal process, Satyam identifies “around 5 percent” of its employees for “performance improvement,” the company said in an emailed statement. About half of them leave “either voluntarily or involuntarily,” Satyam said, adding the company had completed its latest appraisal a few weeks ago.

IT spending goes down in companies

Many large companies, especially those in the financial services, utilities and telecommunications industries, have cut their technology budgets this year because of the economic slowdown.

In a report, Forrester Research Inc found that 43 per cent of large US and European businesses it surveyed have cut their overall spending on technology products and services in 2008. Some companies, meanwhile, have put discretionary spending on hold and others are planning to negotiate lower rates for information-technology services.

The research firm did not change its annual technology spending forecast, but it is reviewing it. In its most recent forecast, in February, Forrester had said it expects tech spending to grow 2.8 per cent this year. That marked a significant downward revision from a December 2007 forecast of 4.6 per cent growth.

The report, said Forrester vice president and principal analyst John McCarthy, is "really just a snapshot" of companies' spending sentiments.

In general, corporate technology buyers were less optimistic than they were in the last such survey, in October 2007, just before the credit market tightened and the housing market "really fell apart," McCarthy said.

Wednesday, September 17, 2008

HP India to cut 1,000 jobs?

Hewlett-Packard’s decision to eliminate nearly 25,000 of its 320,000 jobs worldwide is expected to have a significant impact on its Indian operations too.

Analysts in India believe that in the short term, the company could see off some 1,000 people, and that in a three year period this could go up to 6,000 of its nearly 60,000 people in the country.

The computer and printer maker’s job cuts come as part of its plan to integrate Electronic Data Systems (EDS), the computer services giant that HP acquired for $13.9 billion in August as part of an effort to match IBM in the services space.

Following the acquisition, a workforce reduction was seen as inevitable, but the figure HP has announced is way beyond anybody’s expectations.

Kapil Dev Singh, managing director of research firm IDC India, said HP’s announcement mostly stems from the global economic scenario. “It’s an instant fall out of what’s happening on Wall Street. The IT accounts of banking and financial institutions (BFSI) have been shrinking. So hiring for this space has been put on a slow burner by global companies,” he said.

Mohan Lal Menon, managing director of strategy advisory firm Sentient, said a lot of overlapping was expected with the integration of HP and EDS Mphasis (in India, EDS had previously acquired Mphasis).

“Most of it would have been in the areas of HR, administration, sales and marketing. But the trigger for HP is definitely the precarious conditions in the BFSI space across the US, Europe and Asia. HP seems to be ahead of the curve, towards planning for the economic downturn,” he said.

Till the time of going to print, HP had not responded to questions sent by TOI on the impact HP’s workforce reduction move would have on India.

However, a senior official at Mphasis said no immediate impact was expected on Mphasis. “We have been hiring junior to top talent. We have been expanding our footprint across the country. So its business as usual,” he said.

Wipro, Copal mull Lehman BPO buyout

IT major Wipro Technologies and Gurgaon-based knowledge process outsourcing firm Copal Partners have expressed interest in bidding for the Indian back office business of Lehman Brothers Holdings, the US-based investment banking firm that filed for bankruptcy protection on Monday.

Lehman is expected to close its captive unit in Powai, a Mumbai suburb, by the end of this month. The unit's 1,200 employees, who work on equity research and analytics support for the mergers and acquisitions business, have been orally told to quit by September-end. They have also been informed that they will be paid only for this month, which will be treated as a severance package.

Investment banking sources said Wipro and Copal have been looking at buying opportunities in this space for some time. Though the Lehman BPO unit does not have an anchor client it may help them quickly scale up the business.

Wipro declined to comment and Rishi Khosla, co-founder and chief executive officer of Copal, could not be reached.

Copal Partners already has clients in industries such as investment banking, equity research, credit research, and strategy consultancy.

Unlike employees in Lehman's investment banking business, who have been receiving feelers from domestic banks, employees in the captive BPO are unlikely to find alternative jobs quickly because the IT and IT-enabled services industries have already begun downsizing, owing to the global financial crisis.

2,500 Lehman India employees' fate uncertain

The fate of 2,500-odd employees working for investment banking giant Lehman Brothers in India remains uncertain following its parent company's decision to file for bankruptcy protection in the United States.

Lehman said in a statement that its New York office intends to file for bankruptcy protection as it owes over $600 billion to lenders.

However, it highlighted that no other Lehman Brothers' US subsidiaries or affiliates, including its broker-dealer and investment management subsidiaries, are included in the filing.

The filing for Chapter 11 bankruptcy protection, which allows a company to restructure while creditor claims are held at bay, was made in the US Bankruptcy Court in the Southern District of New York by the investment bank's holding company, Lehman Brothers Holdings Inc.

The firm's public relations agency said that no official from Lehman would like to talk to the media. An employee said there was no work and a series of meetings were held on Tuesday.

Lehman set up business process outsourcing operations in India in 2005 and according to the fact sheet on the firm, the centre saw the number of employees going up by eight times by the middle of this year and had declared its plans to grow the operations.

In fact, it was recruiting till as recently as couple of months before.

The company has in all about 2,500 people working for it in India, including those in the BPO unit. Recent news reports said the company had asked a section of its BPO staff to quit.

Over 5,000 workers in the United Kingdom have lost their jobs after the collapse of US investment bank Lehman Brothers.

Layoffs...

TCS planning more layoffs, Wipro sacks 1000, Satyam to axe 4,500 ... It seems the days of pink slips have come to haunt Indian IT pros. Though all companies have termed these terminations performance-based, it is anyone's guess that global slowdown has started hurting Indian IT cos.

Late last year, the global IT giant IBM had reportedly laid off 700 entry-level trainee programmers (ELTPs) across its offices in India. Zensar too had reportedly given pink slips to 2 per cent of it staff, again the company claimed that it was on performance basis.

The increments and salaries too have been a causality at most IT firms.

Patni cuts off workforce by 3%

In July, Mumbai-based Patni Computer Systems too gave pink slips to 400 employees on grounds of non-performance.

Terming it as a routine exercise and not a slowdown setback, country's sixth-largest exporter said that it is an effort to weed out non-performers.

Rajesh Padmanabhan, vice-president and head, global HR, Patni, said, "This is an absolutely regular appraisal that is important for any performance-driven organisation. It is something standard we do every year. Employees who have got 0-1 rating on a scale of 5 typically form the basis for the first-level shortlist. These are performance-based resignations; we've not issued any termination letters.”

However, industry sources reveal that the laid off employees included several project managers as well. Incidentally, while in case of TCS, the retrenched number was about 0.5 per cent of the workforce, for Patni, it made for closer to 3 per cent of the 14,800-strong workforce.

Narendra K Patni, Chairman and CEO, Patni Computer Systems said, "The overall market environment remains challenging with prevailing global uncertainties. We are cautious in our short-term outlook but remain positive on long-term prospects and are continuing our investments in identified areas."

Wipro lays off 1,000 employees, and another 2,000 put on scanner

The bad news has come from India's third largest IT outsourcer, Wipro Technologies too. The company has already laid off 1,000 employees, and another 2,000 employees have been put on scanner.

The company is reviewing the performance of 60,000 global IT services employees from the senior leadership team down to the person with one-year experience.

Terming it as a regular exercise, company's corporate vice-president (human resources) Pratik Kumar said, "As the appraisal cycle gets over, a multi-layer review happens. Following that, people who have fallen in the lower quadrants of performance are put on watch. Some are asked to pull up and others are asked to move on."

He added that, "We took a closer look at our hiring and realised that we did not need to hire more, since there were people on the bench." Many employees are being given counselling to improve their performance, others may be asked to leave.

At the end of the quarter ended June 2008, Wipro’s IT services employee base had fallen to 61,345 from 62,070 employees at the end of the previous quarter.

Tata Consultancy Services is gearing up to another round of layoffs.

According to a recent report Asia's largest software exporter, Tata Consultancy Services is gearing up to another round of layoffs. The company also plans to discourage employees from staying on bench for more than two months on any of its centres.

Incidentally, the company had also fired close to 500 employees, citing poor performance after its annual appraisal. It was also among the very first companies to announce a cut in the employee variable pay across the board.

The company which sees some project delays this quarter, but no cancellations, terms this as an employee utilisation exercise. The process will involve counselling employees and training them. Employees would be asked to undertake projects on which they have never worked on and will have to update their skills.

Recently, TCS also retrenched 15 employees from its Australian subsidiary. Interestingly, last month too, the company had shown door to some 25 employees from its Kolkata and Bangalore centers for fudging CVs.

By June-end, the total employee strength TCS stood at 116,300, across 64 countries. The company hired 8,982 employees in the first quarter.

Satyam to downsize its workforce by a whopping 4,500 employees.

After delayed appraisals and cut in payouts, India's fourth largest IT service provider, Satyam Computer is reported to downsize its workforce by a whopping 4,500 employees. This translates to a little less than 9 per cent of the 51,000 employees that the company employs.

Company sources reveal that 1,500 employees have been put under the performance improvement plan (PIP), euphemism for employees put on watch list and asked to shape up or ship out. Apart from this, 3,000 others have not been given any increment in the last appraisal cycle, thereby indicating that their services are dispensable.

Last Friday, company’s chief Ramalinga Raju had sent out an email to all employees warning them, especially the ones on the bench, to not bunk office and be in their best dress code, failing which they may face strict disciplinary action.

The company is reported to have handed pink slips to about 400 engineers and associates in Hyderabad, Pune and Visakhapatnam centers. The company management reportedly asked some of the employees to move out of its rolls to a contractual agreement or leave.

Like its peers, Satyam too claims that the layoffs are a part of its appraisal system. Global head, human resources, SV Krishnan says, "Our experience has shown that around half of them exit the system either voluntarily or involuntarily. We have concluded our appraisal process some weeks back, and we believe we are witnessing similar trends like those in the past."

There were also reports that the company has deferred the joining date of 7500 graduates it had recruited from various college campuses this year. However, the company said that it has no intension of withdrawing these offers. Interestingly, the company has recently announced plans to hire 15000 this year.