Coming just a few days after Cognizant announced large scale layoffs across the board, Infosys is laying off people across its middle and senior level and nearly 10% of the people in this segment have been laid off. The company has called it involuntary attrition, which is a more euphemistic word for a layoff. The company has justified this calling it integral to normal course of business and this (sacking) should not be interpreted as any mass trimming across any level in particular.

Infosys confirmed that these people were terminated for not measuring up to its expectations or high standards of performance. However, the real challenges for Infosys may be larger.

· Most IT companies are maintaining a smaller bench as the need does not exist any longer to keep large benches. Also, most IT companies are in a constant churn with Infosys having a voluntary attrition rate of nearly 21%.

· Companies like Infosys have started hiring heavily in the US and other European countries to cater to pressure from foreign governments to create local jobs. That is reducing the need for people in India, especially the offshore placements for projects.

· Also, the routine tasks in the traditional BSI space are largely being automated and that has reduced the need for manpower. Hence, Infosys does not require as much manpower as it did before. Automation and robotics have been able to replace people at much lower costs.

· A lot of the growth in Infosys is happening on the digital front in emerging areas like internet of things (IOT), cloud technologies, analytics, social media etc. Here the old skills are no longer valid. Hence, unless employees are able to re-skill themselves, they are not in a position to hold their jobs.

· The company continues to add people and hence an exit policy is essential. It sequentially added 7,457 techies in the quarter of September and 18,747 employees on an yearly basis from the same period a year ago. Just to give you an idea, the Infosys headcount is 236,486 as against 229,029 a quarter ago and 217,739 a year ago.

This move should be overall positive for Infosys. The company has been taking a hit on margins as it has been overstaffed on its traditional businesses. The only way is to change the manpower quality at the middle and senior level. It should positively impact the stock price in the medium to long run.