After startups and Big Tech, the layoff season may have begun at the $245 billion Indian information-technology (IT) industry.
Bengaluru-based IT major Wipro is looking to cut hundreds of jobs, targeting mid-level employees working onsite as the company looks to improve margins, according to a media report, citing two sources.
The company has said it is aligning its business and talent to the changing market environment.
The industry is hit by the double whammy of clients holding back investments due to geopolitical uncertainties in major markets even as artificial intelligence (AI) is adversely impacting people management and routine tasks done by humans.
According to analysts, the offshore-onsite ratio in terms of effort is around 80:20.
However, when it comes to revenue, the split is 55:45. Salary costs of onsite employees are significantly higher, making them more vulnerable to layoffs.
In response to a query on this, Wipro told Business Standard: We look to build a resilient, agile, and high-performance organisation.
A Wipro spokesperson added: We are committed to investing in our people, processes, and technology to drive better client and employee experiences and enhance productivity and agility across our organisation to meet fast-evolving client and market needs.
Wipro has the lowest margin among India's four largest IT firms.
In the December quarter, its margin stood at 16 per cent, lower than that of Tata Consultancy Services, Infosys, and HCLTech.
HR experts say muted demand could trigger layoffs across the industry.
IT companies are under tremendous pressure due to subdued demand for over a year now.
If this trend continues, there will be pressure to normalise costs and restructuring will be imminent.
There is also the risk of AI replacing current jobs.
On the positive side, this is the best time to plan for the future and be ready when the outlook changes.
Companies can embrace apprenticeship models to ensure this readiness and be prepared, said A R Ramesh, chief executive officer, TeamLease Degree Apprenticeship.
Analysts tracking the company are not surprised by Wipro's actions.
First, Wipro needs this kind of streamlining every four to five years.
Second, one can see that the company is struggling.
It invested in Capco at the peak of the cycle.
At that time the decision was good but since then markets have changed, said a senior equity analyst.
He added pressure from promoters and shareholders to improve performance had been building up.
News on Wipro's potential layoffs could well be the tip of the iceberg.
IT companies are faced with three uncertainties:
The impact of two wars on Western economies, political uncertainty in major markets, and generative artificial intelligence.
Clients will hold back investment till there is some higher level of certainty, which doesn t come before 10-12 months (are over).
As a result, there will be continuing cost pressure, which will impact hiring, said Abhisek Mukherjee, partner, YCP Auctus, a management consulting firm.
Wipro had acquired consulting firm Capco for $1.45 billion in 2021, chief executive officer Thierry Delaporte's biggest bet and Wipro's biggest acquisition so far.
However, like any other consulting business, Wipro too has been struggling to up its game in the consulting space.
A Wipro employee said there had not been any internal email on the reported layoffs.
This is happening more in the US and other geographies.
Though there is no email, we have heard that layoffs are happening in these regions as some of the team also sits in India.
The person cited above also said: Some employees have not received salary increases because their profiles are not complete or just 80 per cent complete.
How does a profile decide whether the person will get a hike or not?
Like last year, the beginning of 2024 has brought more news of layoffs.
Big techs such as Microsoft, Salesforce, and SAP have started the year with the pink slip.
According to layoff tracker layoffs.fyi, so far 85 companies laid off 23,770 employees this year.
This is after 262,595 employees were sacked by 1,187 companies last year.
India's top four companies have seen their headcount go down by almost 50,875 in the first nine months of FY24.
Wipro's headcount has been on a steady decline both on an annual and sequential basis.
It declined by 4,473 employees in Q3 against the preceding three months.
On a year-on-year basis, the headcount declined by 21,875 in the December quarter.
