One of the largest private sector employers in India, IT services firm IBM is trimming its contract workforce. At least 600-1,000 contract employees have been asked to leave the company since August.
Sources in the recruitment industry and the company attribute this to both economic uncertainty and cyclical reasons.
These contract employees work for IBM, but are on the payrolls of either a recruitment firm or another IT vendor. Two of the biggest providers of contract staff to IBM, who did not wish to be named, confirm this. One of them told ET that IBM had asked few hundreds of contract staffers to leave in August.
This vendor lost 40 such staffers, but this month placed 20 again. An executive at the contract staffing firm attributed this to two factors - project completion and a reduced demand from service clients because of economic pressure globally. Another executive at one of the biggest providers of contract staff for IBM said that the demand for contract staff was down and even from IBM, the demand has dipped 10-15%.
Ascribing this to seasonality, he said every year in this quarter business comes down and companies like IBM try to optimise their existing resources rather than get new ones on board. According to him, a project typically starts in January and gets over by September-October. Hence, the dip in contract staff numbers. Plus, the current quarter is slow for most IT firms in terms of new project starts, he added.
"Things are definitely slower. Economic uncertainty has a role to play, but the bigger reason is a seasonally weak quarter," says a senior executive at another large contract staffing firm. The firm works with IBM both in India and United States. "The company is taking on less contract staff, but this could also be because of project closures," says the executive.
In response to an email from ET, the company said, "IBM continuously transforms its business, rebalancing skills and capabilities in order to meet the changing needs of clients and our business as a whole." In India, IBM has close to 1.3 lakh employees including contract workforce. Contract staffing is the first area to be impacted when IT companies face uncertainty on the demand pipeline or contracts fail to ramp up as expected.
Contract staffing for lower-end services is a common method to manage business cycles or perform functions that may not be very core to clients. The third quarter is also a seasonally weak quarter for most IT firms as business gets affected by the holidays and not many clients take spending decision in this quarter.
However, not all vendors have been impacted. Bangalore-based recruitment firm Ikya Consultants has around 600 employees working for IBM. "We have not lost any of our people," says Ajith Issac, CEO of the firm.
A Delhi-based staffing firm that provides employees on a contractstaffing basis to the IT company in large numbers said that around 600-odd people being asked to go is not a significant number for one of the largest employers in the IT industry. This staffing firm has not received any reductions in mandates from IBM.