CXO

No pink slips in Bangalore - yet

Comment: Outsourcers shielded from global economic crisis

With the global economy plunging into recession, one might expect the Indian outsourcing companies to follow suit with layoffs. But, says Saritha Rai, so far that's just not the case.

Economic theory has it that no two countries with McDonald's fast food outlets will ever go to war with each other. The economic corollary to that theory in the recent global financial meltdown could well be that, in a flattening world all countries with McDonald's outlets will be equally hit by stock market bust-ups.

All over Bangalore, one of the world's busiest technology centres, McDonald's, Kentucky Fried Chicken and Domino's Pizza outlets have proliferated in recent years, some even located on the suburban campuses of outsourcing companies.

Most of their customers are young workers from the outsourcing industry, many of them coding and working on projects for the biggest Wall Street and global financial institutions, including the recently wrecked.

It follows that Bangalore's outsourcing industry should immediately feel the Street's pain.

In reality, the equation is not quite so straightforward. An army of technology and service professionals has created an outsourcing industry that is at the vanguard of India's flourishing economy.

Now the pressure is on to keep the flag flying high. And that means holding off on the layoffs and the pink slips for the moment, and to proceed with campus hiring plans even of a scaled-back variety.

Compare that with India's airline industry, another example of booming growth. The country woke up one morning recently to the news that its largest and most-premium airline, Jet Airways, had laid off 1,900 employees overnight. Very soon the laid-off staffers were parading themselves in bright yellow-and-blue uniforms at airports, shouting down the company.

The debacle endlessly streamed on 24-hour television news channels was such an embarrassment that the airline promptly reinstated the employees the next day. What might have persuaded the airline to do the quick about-turn was the force mounted by two key government ministers, one in charge of aviation and the other in charge of petroleum, as well as the very public disapproval of a local politician in Mumbai, where Jet Airways is headquartered.

With a national election coming up in India this summer, the country's politicians will be less than sympathetic to any large-scale layoffs for fear of alienating the entire white-collar workforce and a middle class which is the backbone of sectors such as technology, travel, retail and telecommunications.

The whole Jet Airways incident could not have done much for the confidence of the tech workforce in Bangalore or elsewhere.

Still, a fiasco of this type is unlikely to be repeated any time soon in the outsourcing industry or in Bangalore, a city that many see as the showpiece of Indian globalisation.

Nandan Nilekani, co-chairman of Bangalore-headquartered Infosys Technologies, India's second largest outsourcing company, has declared he does not foresee any pink slips delivered by the industry. Although not entirely unknown, pink slips are still alien to India's culture where white-collar jobs are expected to come with a lifetime guarantee.

Some companies are resorting to under-the-radar modes of dealing with the slowdown. They are decelerating their hiring and holding off on variable pay and perks. The jobs section in the local newspapers, usually overpopulated by outsourcing firms, has visibly thinned recently.

At a job fair in the city last week, the prized employers were conspicuously absent from the action. Hundreds of young job aspirants who descend on Bangalore from all over the country in search of an outsourcing job, as a means to hit an economic jackpot and enjoy a 'glamorous' lifestyle, hung around listlessly.

In the midst of India's biggest celebratory and splurging season, Diwali, the festival of lights and the equivalent to Christmas in the West, the mood is not exactly cheery in the tech industry. Top firms have revised their sales growth forecasts downwards by five or more percentage points.

But at least for now, the workers who drive the technology boom that so rapidly transformed Bangalore's landscape and its culture are shielded from global economics.

So the city's cafes and fast food outlets are still buzzing, its malls are teeming with Diwali shoppers, and the multiplexes are selling out the movie tickets and the popcorn. For now, it seems outsourcing is still holding the city's economy aloft.

The full impact of the financial services meltdown may not show up for the next few quarters. Outsourcing companies' chiefs hope that even then the resilience of their business model will help tide over the challenges. After all, it wouldn't do to get Bangalore-d out of Bangalore.

About Saritha Rai

Saritha Rai is an India-based journalist and commentator who covers technology, business and society from her ringside seat in Bangalore.

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