Cisco’s Layoff Move Likely To Impact Its India Operations

Struggling to cope up with the changing market dynamics, the IT hardware vendors seem to be experiencing the toughest phase of their business. Networking major Cisco Systems has joined the list of other struggling technology majors such as, Intel and Dell. Cisco has reportedly announced the plans to layoff over 5000 employees. According to the media reports, Cisco is planning to lay off 5,500 employees, which account for nearly 7 percent of its workforce. The decision is likely to impact Cisco’s India operation, especially employees in its R&D center in the country.
Cisco’s move to cut the jobs seem to be a reaction to the market shifts including shrinking profit margins in the hardware business and growing significance of software solutions. India currently contributes to nearly 15 percent of its global employee strength. The India R&D centre, with is the biggest outside Cisco’s San Jose facility , which has about 13000 engineers.
The company refused to comment on the media reports. However, industry experts said that there would be a significant impact of the layoff on the company’s India operations, particularly the R&D establishment.
Cisco has long held a dominant share of business of the routing and switching equipment used to funnel data over the internet and between computers in data centers. Though the company has diversified its business significantly, those two hardware categories remain its largest sources of revenue, and their sales have been slowing lately. The USD 49-billion company is moving from a hardware to a subscription software-based model. India is inevitably be part of this change.
The San Jose, California-based company said it would reinvest the savings from the job cuts into businesses that it expects to grow, including its own software and service offerings. According to WSJ, Cisco plans to record pretax charges of up to USD 700 million for severance and termination benefits.
Vishal Tripathi, research director in Gartner, said that companies like Cisco are increasingly focusing on a software-defined business and making big strides in the cloud ecosystem. “Though hardware is an integral part of the business, Cisco hopes to have an edge in the software space,” he told ET.
The Cisco layoffs come in the wake of Intel’s announcement in of laying off 12,000 workers in April. Dell said in January it had shed 10,000 jobs and is expected to make further cuts after it closes a $67 billion deal to acquire data storage company EMC.
According to Challenger, Gray & Christmas, technology companies in the United States have shed about 63,000 jobs, according to outplacement so far this year. Analysts say that companies that traditionally have made most of their money selling IT hardware are especially vulnerable as mobile applications and cloud computing are witnessing a significant surge in the industry.