IT sector worst hit in unabated lay-off binge

- Increased bench size

- Higher retention rates

- Moderate attrition coincides with a weak hiring

- Rising gig economy

Mumbai: Recent past has witnessed numerous challenges for the Indian job market, with many industries seeing massive layoffs. Information technology (IT) is one of the sectors that has been hardest hit, as evidenced by the number of job losses that have occurred there.

So far, the total layoffs in 2023 stood at 1,68,243. This year’s tech layoffs have exceeded 2022’s total, according to data in the tracker, says a report by Layoffs.fyi.

A global economic downturn has slowed technology companies' growth this year and led to widespread layoffs. Fearing an upcoming recession, the tech industry slowed hiring earlier this year as global economic headwinds began to pick up.

According to Naukri JobSpeak (January 2023) report, IT hiring has decreased by 25 per cent from last year.

Talking to Bizz Buzz, Daya Prakash, Founder of TalentOnLease, says: “The last two years saw ambitious hiring, especially since the pandemic.”

In addition, the digital revolution led to a significant demand for tech professionals. However, as companies began to announce workforce reductions towards the end of 2022, this trend came to a halt.

Numerous factors contributed to the widespread layoffs, such as the rise of the gig economy (flexi staffing), the completion of pandemic-accelerated digital transformation projects, capacity

planning adjustments, the requirement for organizations to invest in technology-driven ventures rather than people-driven ones, impending recessionary threats, the freezing of funding for startups, and the development of artificial intelligence (AI)-based applications like ChatGPT.

He added that the slowdown has also been exacerbated by increased bench size, higher retention rates, and moderate attrition, which coincide with a weak hiring season for IT professionals.

All this began when large tech companies such as Amazon and Google parent Alphabet announced they would lay off many employees.

Earlier this year, Google and Amazon both announced headcount reductions of 12,000 and up to 18,000 employees, respectively. Over 38,000 jobs were cut in March alone by Meta, Amazon, and Accenture. The situation is almost like a wildfire spreading rapidly. The hiring frenzy continues despite a quarter that has passed since the start of 2023, driven partly by global macroeconomic headwinds. Now the question arises, is India in the same boat?

According to a report, approximately 24,250 techies have lost their jobs. In addition to technology, telecommunications, financial services, and retail have been most affected. The IT sector is not the only area in which layoffs have occurred. Startups have also laid off employees to cut costs since the beginning of 2023. With 12.33 percent, the retail sector ranked second in layoffs, with Amazon, Wayfair, Groupon, and eBay all contributing significantly.

It's no secret that the tech sector has always been susceptible to economic cycles. In the event of a recession, there may be a reduction in consumer spending, corporate investment, and layoffs, which could be seriously detrimental to tech companies.

“As I talk to customers and business partners, it’s clear that we’re in profound change. First, just as customers increased their digital spending during the pandemic, they are optimizing their digital spending to accomplish more with less. There is also caution among organisations across industries and geographies, as some parts of the world are experiencing or expecting recessions,” Prakash said.

Increasing global disinvestment in the tech sector, Prakash added, may have encouraged employees to seek more secure employment opportunities.

While layoffs in the technology sector may be unavoidable during economic uncertainty, businesses that put a premium on innovation, inclusiveness, and the well-being of their employees are better able to weather the storm. For example, focusing on revenue diversification, R&D investments to remain ahead of the competitors, and promoting a culture of creativity and ingenuity that recognizes new growth opportunities can help tech companies minimize the likelihood of layoffs. In addition, to retain a qualified and driven workforce, companies may engage in reskilling and upskilling employees for new positions and sectors and prioritize employee retention.

Therefore, Prakash states, IT/Tech professionals need to broaden their range of expertise by incorporating abilities that enhance and boost their core skills, as the value of each employee's efficacy and contribution will grow in importance. He continued, "we consistently recommend our clients embrace adaptable workplace cultures and foster strong employer brands”.

Not everything is bleak, though; in response to Covid, an increasing number of businesses have become "tech-enabled" or "tech-driven," so it's expected that demand for tech jobs will rise in the long run. Compared to 2022, growth in the first two quarters of 2023 is predicted to be very tepid. However, a possible revival is forecasted to emerge in 2024. With a history of surviving economic downturns and a surge in the adoption of cutting-edge technologies, the IT sector is primed to seize the opportunities that lie ahead.

As I talk to customers and business partners, it’s clear that we’re in profound change. First, just as customers increased their digital spending during the pandemic, they are optimizing their digital spending to accomplish more with less. There is also caution among organizations across industries and geographies, as some parts of the world are experiencing or expecting recessions

- Daya Prakash, Founder of TalentOnLease, tells Bizz Buzz