M D Riti in Bangalore

Three months ago, I was flooded with matrimonial offers for my son Venkatesh, who is on a H1B visa in the US," moans Geetha Rao, a middle class housewife of Bangalore.

"I had kept them all on hold, pending the arrival of my son. Now, when I try to establish contact with those families again, I get a cold response. Some girls' parents openly tell me that they want job and financial security for their daughters, and so have struck all 'H1B visas' off their list!"

Nobody knew just how the IT slowdown in the US would affect the sunrise industry in India. Or for that matter the social fabric.

'The slowdown impact would be widespread'

"We are now such a global community that whatever happens in the US will affect Europe, Asia and so on," said Liz Kniss, mayor of Palo Alto and the Silicon Valley area in California, in an exclusive interview to rediff.com on this issue.

"I don't think that one part of the world can be hit by recession like this and leave the other part unaffected. But I still think that there is such a clamour for software engineering, and because India can do so much more cheaply than in the US, it will continue to do quite well."

The slowdown caught most IT companies -- even the giants -- flat-footed, as it came soon after a glorious few financial quarters.

Many of them had just made huge investments and did not know what to do with them.

Cisco, for example, had just rented 2000 sq ft of prime office space in the expensive Divyashree Chambers building in Langford Town, but was unable to staff it.

Now, industry sources point out that the space must be costing them easily more than Rs 5 million in overheads….

Initially, the Indian IT industry thought that the slowdown could only benefit them as they would get more low-end offshore work dumped their way. They expected that the layoffs would result in more software development being shipped over to India, to be executed here at lower costs than in the US.

"The question will be whether the Indian software industry is equipped to deal with the kind of high-end requirements that the American software industry has," explained Kniss.

"Firms in the Silicon Valley deal with all aspects of technology, including the hardware. Bangalore, as I understand it, concentrates only on the software industry. I could make a prediction, but economically, it is so hard to know what will happen. I think, given the roots in Bangalore, the industry will do quite well, irrespective of the slowdown."

And just how long will this recession last?

Optimistic estimates see it going on for another three months. Some others believe that it will stretch right up to the end of this year.

"I think people are blindly hanging on to the hope that the economy will take off in the second half of the year," says E Helge Weiner-Trapness, managing director of the Asian Technology Group of the investment banking firm Goldman Sachs.

"There is no concrete evidence that this is going to happen. I think people are a little bit more cautious now and realise that everyone will have to wait for the last quarter before things really start looking up."

Even now, software firms in Bangalore are reluctant to admit that they have been hit or affected adversely by the slowdown.

Most of the big software exporters insist that everything is hunky-dory. However, the undercurrents are there for all to see, and are certainly difficult to ignore.

With software giant Infosys Technologies admitting to having been hit by the ongoing turbulence in the US economy, the final nail has just been hammered into the coffin: the attrition in the growth rates of the US tech sector has finally caught up with India.

Layoffs become the order of the day

So what happens now? Well, first there are the layoffs. Aditi Technologies, which was best known as Microsoft's help desk for a long time and is now trying to become a products company, recently laid off some off its employees.

Many other firms, especially the smaller ones, are using this opportunity to get rid of deadwood. So are the big names. The policy most follow is 'last in, first out'. The one good thing that has happened for the software sector now is that engineers hesitate to keep switching jobs, as they used to till just six months ago.

The most obvious sign that the IT boom has slowed down is the freeze on recruitments in the software industry in Bangalore.

This, however, is not a total restriction. Most companies are still recruiting. But there is a definite reduction in recruitments. Even as recently as six months ago, during Bangalore IT.com, the annual software trade show of Bangalore, many of the big companies openly admitted, off the record, that the main benefit of the exhibition was plethora of applications and resumes that were dropped off by prospective candidates.

This is not to say that anyone who applied was welcome. But companies were always looking for engineers with a certain degree experience. Now, this is no longer true. Their doors are no longer wide open.

Many companies say that they now recruit only once a month, unlike earlier when they kept their doors open to newcomers all the time.

The job opportunity pages of up-market newspapers, popular with the IT community, are a good indication of how the slowdown has hit recruitments.

While the pages spread to six or eight pages all these past months and years, now there are barely two pages of job offers from IT companies. You can see only one or two big name companies hiring people, whereas you had at least six companies advertising every week earlier.

Balance tilting back in favour of companies

The job market in India has also now come a full circle in favour of the hirers. Companies no longer have to try to woo candidates with attractive offers, promises and plush offices. A recession always tips the balance between employer and employee in the company's favour.

Hiring and keeping good people is easier when new jobs are scarce. So a temporary truce breaks out in the war for talent, although the battle will recommence the moment the economy picks up. This will be a good year for confident companies to invest in an armoury of high-quality staff. But they will have to work hard to retain them after the recession.

This recruitment freeze certainly comes at a bad time for Karnataka Chief Minister S M Krishna who just sanctioned the opening of over a dozen new engineering colleges, even though Karnataka has a surfeit of such institutions already. His excuse for this move, which earned him a lot of criticism, was that there were predictions that the demand for software engineers would rise tenfold in Bangalore over the next decade.

The interesting fact that he did not address was that the demand would be for engineers of a certain calibre, which most engineering colleges in Karnataka do not seem able to produce. Despite the booming software business situation in Bangalore all these years, more than fifty per cent of the engineers being turned out by the State's institutions would still be jobless.

This situation is only going to worsen now. "When I joined engineering four years ago, graduates passing out of my college were being hired by big IT companies for fat salaries," says Rajesh K P, a final year electronics engineering student from one of Bangalore's leading engineering college.

"The situation and salaries were even better for my immediate seniors who passed out last year. Big companies come to our campuses and recruit students when they are in their final semesters. Now, this year, I doubt that anyone will hire us as we finish college."

Dear employee: welcome and goodbye!

Three big companies in Bangalore have already asked the students they recruited from campuses not to join them. This virtually implies that these young men and women have been laid off even before they were formally hired!

Indian software firms in Bangalore are suddenly finding themselves approached by Indians working overseas, wanting to return as they suddenly feel prospects maybe better here. Indian placement portals, placement agencies and head hunters reveal that they suddenly find themselves getting resumes and applications from software engineers already working overseas, wanting to come back to India.

Most of the placement agencies and HRD offices are reluctant to give out actual figures or details on this situation. They are more willing to talk on the condition that their identities are withheld.

"Until now, everyone wanted to go abroad, and engineers working here were always asking us for opportunities in the US," admits a successful head hunter in Bangalore.

"Now, we suddenly find ourselves getting email from candidates we sent abroad on H1B visas for jobs, asking us to look for prospects for them in Bangalore or Bombay immediately."

Are Indian software firms willing to hire these people immediately? The responses to this question are mixed.

Some firms say that if they can get engineers who have worked in the US, are familiar with markets, technologies and business practices there, for the same amount of money as their counterparts who lack this exposure, they are more than willing to have them.

The companies who have received a lot of media attention and are listed on American stock exchanges like Infosys, seem to be the ones that attract the maximum number of such engineers.

Other firms say they are reluctant to take on these engineers who have been forced out of the US by economic compulsions.

"We have always welcomed engineers who have done post-graduation overseas, even worked there for a while and come back because they want to live in India," says one such HRD manager of a medium level software company.

"But these people, who come back fearing retrenchment, or who have actually been laid off there, are a different kettle of fish. They are still enamoured of life in the US, complain continuously about working conditions here and constantly looking for opportunities to get back. We definitely do not want such employees, even if they cost the same as those who have been in India all along."

Work environments in Bangalore are not so luxurious or pampering any long either. Most IT firms have had to cut back on the frills and indulgences that they have made available to their employees all these years.

Some, for example, had free Coke dispensers in their offices that employees could help themselves from.

Most gave lavish gifts frequently, like electronic gadgetry: mini telephone answering machines, digital diaries and even mobile telephone sets.

One company has even reportedly cutback on the use of toilet paper and tissue paper in its offices!

Frequent promotions and pay hikes, which had become a strategy used liberally by HR departments to stop high employee turnover, have also now been stopped.

Many firms have deferred promotions, informing their employees that they have been stepped up in theory, but would only enjoy the benefits of the hike post slowdown.

Curbs on foreign travel

Foreign travel is another definite casualty. Until now, many companies even used foreign jaunts to job sites as a perk, rewarding loyal employees with postings in the US or Europe for short stints, even if they were not strictly necessary.

Senior managers and group heads flitted up and down from the US to India, coming home for family occasions or festivals, even if they could have stayed back in the US or wherever and completed ongoing work before returning. This has now come to a stop.

So has spouse travel.

In many ways, this will be a good experience for Indian software business as a downturn is less forgiving than a boom.

For one thing, it will test managers' comfortable decisions. Is it really wise to go on recruiting sprees and hire staff who might be incompetent or inadequate?

Should Indian software firms continue to be so people- and service-intensive and disregard the need to build up alternative bases in products or high-value options? This will be a good time for Indian software firms to assess themselves and their goals.

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