BENGALURU: IBM is expected to lay off a few thousand people in India in the coming months as the company moves towards newer technologies such as cloud computing and mobile and as it seeks to deal with dropping revenues and growing margin pressures.
Multiple sources put the likely figure in India at about 5,000 employees, though they also said many of these could be replaced by contract staff. This will help margins, and facilitate just-in-time hiring in the current volatile market.
IBM did not respond to questions about this from TOI till late Tuesday evening.
On Monday, Forbes carried an article by Silicon Valley technology columnist Robert Cringely who said that IBM was planning a transformation project – code named Project Chrome — that would reduce its global workforce by 26% or 1.12 lakh employees. IBM responded in an email to news agency Reuters that the company had “just taken a $600 million charge for workforce rebalancing” and this equated to job cuts of “several thousand employees, a small fraction of what’s been reported (by Forbes).” Most analysts have also dismissed the possibility of a layoff on the scale reported by Cringely.
India accounts for about 1.3 lakh employees out of IBM’s total workforce of over 4 lakh, and for that reason will likely to have to bear a significant burden of the layoffs. IBM spends over $150 million annually to hire contract IT staff. Contract hiring provides quick access to skilled technical resources and is a cost-effective alternative to supplement existing IT staff without incurring recruitment or training costs.
“There is a strong movement towards contract staffing based on future business dynamics. Companies want to hire project-based staff rather than have permanent employees on their rolls,” said Ajit Isaac, chairman and MD of Ikya Global. Four big HR staffing firms — Web Development Company (part of Manpower Group), Magna Infotech, Artech Infosystems and Collabera — supply close to 7,000-8,000 people to IBM annually, said sources.
Over the past decade, IBM has hired frenetically in India, making it the company’s largest operation, even as it has reduced its US headcount from 1. 33 lakh in 2005 to 83,000 last year. India is the company’s core services delivery engine.
IBM’s global revenues have dropped for eleven successive quarters. The $93-billion company is focusing on newer digital imperatives like cloud, mobility and analytics. “Previously there was higher tolerance towards mediocre skillsets. That’s not something companies want to live with. They want employees to be flexible and take on lateral roles. Many companies hired aggressively in the past and now they are sitting on huge manpower that’s not scalable or flexible,” said Rituparna Chakraborty, co-founder of TeamLease.