nasscom: A correction good for IT companies, staff: Nasscom chairperson

The IT industry is undergoing several corrections and chances of layoffs or salary revisions cannot be ruled out after the excess hiring and unprecedented salary hikes of the last two years, said Krishnan Ramanujam, chairperson of industry association Nasscom.

Ramanujam said it is as bad a judgment call for an employee to take steep salary hikes for no discernible reason as it is for an employer to offer the same.

He was speaking to ET on the sidelines of the Nasscom Technology and Leadership Forum 2023.

“I wouldn’t rule it (layoffs and salary corrections) out. If it happens, a correction is good for the industry,” Ramanujam, who is also president at Tata Consultancy Services (TCS), said.

“Hopefully both (businesses and employees) will realize the folly of what they have done, and it will not repeat (that). So, corrections are very healthy. It is a good thing for the industry and for the companies. It is a good thing for employees. So, celebrate the corrections,” he added.

Global tech giants such as Google, Microsoft and Meta have fired employees, mostly in the United States, to cut costs amid a macroeconomic slowdown.

The three companies alone have handed over pink slips to over 50,000 employees in the recent downtrend.IT companies have not let go of employees in India so far but have significantly reduced their hiring.

Nasccom said growth in the Indian technology sector is set to slow down to 8.4% to touch $245 billion in FY23.

The industry had grown at 15.5% — its best in a decade — to $226 billion in FY22 as the changes brought on by the Covid-19 pandemic made technology spending a necessity for clients.

On the difference in growth, Ramanujam said it was expected and FY23 numbers were high due to lower base effect.

“FY24 is the first full year in which there will be zero low base effect…we should not be despondent about the degrowth seen in FY21 nor we should be exuberant about the huge growth that we saw in FY22. Both aberrations are not normal,” he said.

Nasscom cannot take a stand and instruct companies on fresher salaries remaining largely flattish over the last decade, he said.

The debate has come back into focus after Wipro extended an option for freshers to join at a lower salary compared to what was earlier promised.

“Each company is independently managed, they have their own management teams and board of directors and all. Nasscom is at best a body that is chartered to be the spokesperson for the industry (and) to act as a bridge between the industry and the stakeholders,” he said.

The vendor consolidation opportunity will also benefit Indian companies because of their quality talent while cost-saving deals are unlikely to compensate for the delay in discretionary projects, Nasscom said.

Ramanujam called the vendor consolidation phenomenon a “negative-sum game” as, for example, a company could be spending $100 with many vendors and they will expect $100 to go down to $80-90 if they consolidate that into fewer vendors.

Stay on top of technology and startup news that matters. Subscribe to our daily newsletter for the latest and must-read tech news, delivered straight to your inbox.