Employees busy themselves at a business process outsourcing unit in Bangalore. Photo: Reuters

India’s software services sector, which relies heavily on exports to the US and Europe, is now facing a downturn due to rising protectionism in those markets. It also faces challenges from automation and the shift towards cloud and digital, which require skills that are odds with its traditional expertise.

The recent curbs on H1-B visas – which allow US employers to temporarily employ foreign workers in specialty occupations – by the administration of President Donald Trump, have forced large IT services companies to hire more people in the US.  They are also closely evaluating employee costs in India and formulating severance packages.

The latest company to go down this route is Cognizant Technology Solutions. The Nasdaq-listed company has this year applied for fewer H1-B visas and plans to increase hiring in the US. “We are evolving our workforce and delivery in the United States. Cognizant hired 4,000 US citizens in 2016, and in 2017 and beyond we expect to significantly ramp up our US-based workforce by hiring experienced professionals in the open market and by making more use of university programs. We are shifting our workforce largely in response to clients’ increasing need for co-innovation,” Congnizant president Rajeev Mehta told Business Standard.

At the same time, the company announced last week it was implementing a policy of voluntary separation packages. Employees at its Chennai unit are opposing the redundancies, describing them as “unjustified dismissals”. Cognizant has denied there have been any layoffs and says employees have been let go because they did not meet performance requirements.

Last week, Infosys announced it will hire 10,000 American workers over the next two years and establish four technology and innovation hubs in the US. The first will open in Indiana in August.

While analysts saw this move as an effort to mollify the Trump administration, company CEO Vishal Sikka said it was done to cope with recent technology changes, which call for changes to the company’s business model and a greater local presence in the US.

With more companies beefing up their presence in US, they are also in the process of laying off employees in India on a scale not seen since the 2008-10 downturn, the Times of India has reported.

Initially those most affected will be mid- and senior-level professionals; later, they will be followed by those at the lower level. The daily predicts that, at Infosys, nearly 1,000 employees may be asked to leave. Managers have been told to identify, in terms of performance, the bottom 10% of their subordinates.

Three weeks ago, Wipro CEO Abid Ali Neemuchwala mentioned in an internal conference call that, if revenues don’t grow, around 10% of employees would be let go this year. The product engineering team is likely to be one of the big casualties.

French IT services major Capgemini is said to be letting go nearly 9,000 people in India, or nearly 5% of its global workforce. Most of them are erstwhile employees of Igate, the company that Capgemini acquired in 2015. Asked about the lay offs, Capgemini did not deny that some had been asked to leave, but said it expects to recruit over 20,000 new team members in India this year.

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now.