Why Accenture announcing 19,000 job cuts is bad news for the IT services industry

Let's consider the fact that there have been many layoffs in the recent months. But most of those companies have been in the product industry. Accenture is the major IT services which has announced the layoffs now. Does this mean other services companies will follow suit? May be, may be not.

While product based companies employ lesser compared to services, the trend is clear that the IT or the Tech industry on the whole is making cuts wherever necessary. This means that the services industry will see a downturn due to slowing demands and longer sales cycles. This is reflected in many quarterly reports across many tech companies.

Slowing demand

With the follow up to the slowing economy, many companies have established already that the sales cycles are becoming longer for the software companies. Zoho recently reported that the non renewals, longer waiting times are becoming a concern for them. For many big organizations, software spend is important but not necessary. When things go south, the budget will most likely be cut in either employee spends (layoffs) or IT spends. This is because IT spends mostly help organizations to do things efficiently and not help them to increase their toplines (except marketing tools).

IT Services

Since IT services employ a bigger talent pool, a layoff in such companies could trigger a dominoe effect such that many skilled workers will be without jobs suddenly. With the current generation employing debt for their personal needs, a stop in the salaries could have a bigger impact on their loans and their lifestyles. Also currently laid off employees are looking for jobs in the services industry and this would lead to no opportunities for many. So we predict that the markets could have a domino effect once many IT services firms start their layoffs. But we may be wrong too, lets wait and watch.