When MNCs like CTS and TCS start laying off employees, will the same thing happen to the employees of startup organizations?

Response to this query from an online forum follows:

No. Startups are not going to start layoffs for “the same reasons” as software services companies. This is the short answer.

Now let us look at the differences with your two-part question.

Let us start with the first with a recap of response to an earlier question “Up to 600,000 IT engineers are likely to be laid off in the next 3 years. Why is this happening?”

There are a number of business reasons why IT services firms like CTS, TCS, Infosys, Wipro and others are handing out pink-slips to poor-performers (what the Indian media calls layoffs). Many articles are focused on Trump administration’s policies and restrictions on visa and immigration. Some are parroting claims by leaders of software services companies that productivity gains and automation of tools and processes needs a lesser number of people. Some analysts are also claiming the need to reskill on emerging technologies including big-data, AI, bots-and-robots etc.

There are a couple of black-swan like factors at play here which hasn’t got as much attention.
  1. Growth of IT services in China
  2. Growth of Captive IT

Will the “same thing” happen to the employees of startup organizations?

No, the “same factors” do not impact startup and small businesses focused on new business models. I have been analyzing and blogging on Digital Startups in India for mydigitalstartup.net :
  • Many Digital startups focus on new innovations and business models like ecommerce, supply chain, ride share, consolidating unused hotel rooms etc.
  • Some startups are focused on technology tooling in emerging areas like AI, big-data, voice recognition, mapping etc.
  • Many Indian startups are focused on the domestic market. These startups are not likely to be impacted by Trump’s Visa restrictions or protectionism in America and the West.
Bottomline: The reasons why digital startups fail (and eventually layoff employees) are very different from (link) the reason why IT Service firms are struggling.


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