IT cos need to shed 5-10% of mid-level workforce

Bengaluru: Information technology companies in the country have no choice but to lay off at least five to ten per cent of their middle-level staff to ward off margin pressure and become more agile, IT industry veteran V Balakrishnan said on Thursday.

The middle-layer accounts for about 20-30 per cent of the total workforce of IT companies. The former Chief Financial Officer of software giant Infosys Ltd said the companies have no choice because they all have built a lot of fat in the middle, so they have to reduce it and become more agile.

"Also, they have to get employees who understand new technologies, they have to get rid of some of the employees, who are more on the legacy, and try to attract talent which is more digital, that has to happen, there is no choice", Balakrishnan said.

Asked if other companies would follow suit after lay-offs at Cognizant and Infosys, he said they have no choice, because there was lot of pressure on the margins.

"When you go more on the digital side, customers are also becoming more conscious about the cost. On the other side, you have to become more agile, cut all the flab, that's (lay-offs) inevitable, that will happen with all companies", Balakrishnan said.

However, he said, the growth of Indian IT services companies in general in the calendar year 2019 has been stable with reasonable growth. There were fears of slowdown in the global economies, but that impact has not been seen.

"Digital is driving growth. With new technologies, most of the companies are reconfiguring themselves, focusing on digital and also reducing the flab with legacy technology employees and trying to be more cost-effective and having a better pyramid," he said.

"So, it's a combination of both. Focusing more on digital, that's where the growth is, and also reconfiguring employees and slowly moving away from the legacy technologies," he added.

On the prospects of IT services companies in 2020, he said all the global economies seem to be stable and there are no fears of recession.

If they play the game properly, it would be a good year for them as there are no concerns, Balakrishnan added.