The world has been dealing with numerous economic and geopolitical shocks in recent times, which have led to large scale layoffs in the tech industry globally. These shocks range from the global economic recession, the Covid-19 pandemic, to the recent Russia-Ukraine conflict. This article discusses the impact of these global layoffs on India, with a particular emphasis on the tech sector.
IBM Announces Massive Layoffs: A Synopsis
International Business Machines Corp (IBM) recently announced their plans to lay off approximately 3,900 employees. This latest round of job cuts is part of a larger trend being seen in the Big Tech companies this year. Since the beginning of 2022, the tech sector has shed more than 1,50,000 jobs, with over 40,000 additional cuts being announced. Among the biggest tech companies in the US, namely Alphabet, Amazon, Microsoft, and Facebook-owned Meta, a staggering 51,000 layoffs have been recorded in recent months.
The Causes Behind the Layoffs
There are several factors contributing to this present situation. A potential economic recession, coupled with soaring inflation worldwide, has created an environment of uncertainty for these companies. Adding to this, the Covid-19 pandemic and the ongoing Russia-Ukraine conflict have led to dismal forecasts for global GDP growth in 2022 and 2023. The International Monetary Fund (IMF) has warned of a gloomy outlook for the global economy given these circumstances.
This uncertainty has reflected in the financial performance of these tech companies. For instance, Alphabet had posted disappointing figures for its third fiscal quarter of 2022, falling short of both revenue and profit expectations. Analysts have also projected that the five big tech companies, including Apple, are expected to report bleak profits for the October-December 2022 period.
Furthermore, strategies of cost-cutting are being employed by these companies due to lower profits and the need for extra cash to pay off debts. Decreasing dependence on online platforms, as more people spend less time on the internet following the easing of the pandemic, has also led to significant losses for these big tech companies.
The Impact on Indian IT Professionals
The prevalent crisis in the tech industry has a profound implication for Indian IT professionals. Between 30% to 40% of those laid off are Indian IT professionals, many of whom are on H-1B and L1 visas. These visas allow US companies to employ foreign workers in specialized occupations requiring advanced technical expertise. However, with the loss of jobs, a large number of these employees are now struggling to secure new employment within the stipulated period allowed under these work visas, to continue staying in the US.
Job Market Scenario for Tech Workers in India
In India too, the situation remains quite grim. More than 20,000 employees in startups across sectors like edtech and e-commerce were laid off in 2022, as investors began to withdraw their capital from the market. Even in 2023, prominent startups like Swiggy, ShareChat, and Ola have had to let go of a large number of employees.
Potential Consequences of the Layoffs
The layoffs can potentially lead to severe psychological and financial distress for the laid-off employees, their families, communities, colleagues, and associated businesses. In particular, Indian workers face a significant risk. Failing to secure new employment within 60 days could force them to leave the U.S. and re-enter later. Unfortunately, job prospects back home do not look promising either, given that most Indian IT companies have either stalled or slowed down hiring due to recessionary fears in the U.S. and high inflation in Europe.
Overall, the layoff scenario has created a gloomy state of affairs for employees. Apart from the financial loss, layoffs lead to significant emotional distress and negatively impact the productivity of surviving employees. Furthermore, these actions often convey a negative message to customers about the company’s health, affecting customer relationships.
Looking Forward
Given this situation, it’s high time that companies explore alternative strategies such as voluntary retirement programs to ensure a smooth transition for their employees. While Indian startups have grown faster than their counterparts in neighbouring regions, they need to understand that sky-high valuations do not necessarily guarantee job security for their employees. Therefore, prudent management and sustainable growth should be the focus for these companies in these challenging times.
