Indian IT Industry, Crisis or Not

Indian IT Industry, Crisis or Not

India’s IT industry is on the cusp of major transformation. To help you gauge the enormity of current transformation, such a change in any of the industry in India was last witnessed in 1991 when our economy opened up to the world. The globalisation and liberalisation played a major role in shaping our economy and hence the country as it is today. Then came the time of flourishing Information Technology industry in India. Suddenly, there was an insatiable demand for engineers from India. Hiring for IT and Computer Engineer took a shot in the arm. Everybody in the country aspired to complete graduation in this much sought after domain and grab an opportunity to work in the fast growing IT sector. Not surprisingly, a vast majority of these jobs in India were what we call as backend jobs. While big multinationals grabbed the opportunity with both hands, much business was still found in the West. The South East Asia was mostly used for being the cheap arm, performing menial work. India, being one of the countries with sprawling English speaking youth was a much favoured destination. Indian IT engineers were mostly required to do testing for the business being done elsewhere and those lucky enough were asked to do encoding for the programme being developed somewhere in the west. Thus, outsourcing had become synonymous with the IT industry. Service exports hence became the largest segment of this domain.

The tides have turned their course, or so it seems for now. There is a palpable turbulence in the sector. While everyone is trying to keep a happy face and project that it’s all hunky-dory, writing on the wall is clear. The changes started with the change in administration in the US, the major contributor of outsourcing jobs in India and the source of almost all of our business. With trump administration’s aim to bring jobs back to the country, India’s IT industry seems to have taken the largest hit. Let us take a moment to understand the business model of these multinational and home-grown IT industries in India. Most of these firms have a strong presence in the South Asian countries, huge bases in several locations across India with headquarters in the West. Thus, demands are being created in the US and Europe, consultants along with on-field engineers work to gather requirements which are then fed down to engineers working in India.

Starting with just testing to performing end-to-end business operations, Indian IT engineers grew leaps and bounds. At times, engineers were sent to these countries to work on-site to get better collaborations and hands-on experience of the job, those who got this opportunity were termed blessed and fortunate. Because labour was relatively cheap in our country and the fact that there was a relative scarcity and hence dearness of people who could perform the same jobs in those business producing countries, these jobs were mostly outsourced. To fly down to US for work, a special type of visa was required. The process of visa approval was based on luck/ lottery based system. But work flowed rather smooth and it was business as usual. Things took a steep turn when Trump office announced considerations for changing the H1B visa norms. (The current regime and suggested changes being discussed in depth in another article here). In simple words, it was going to get difficult for IT companies to mark the same numbers in profit. It was a trade-off to choose between either revenue loss or increase in cost.

Hence, the first instinctive step by most of these firms was to get rid of the excess staff. Usually, in order to attract business, IT companies in India keep resources stacked up in order to reduce start-time to business and show their preparedness to perform the work. Whether it meant keeping enormous population of fresh out of college engineers without substantial work for large time was secondary. Times were getting tough and stern action needed to be taken in order to remain in business. Thus, at the pretext of getting rid of non-performers, major firms including Cognizant, Infosys started laying off mid-managerial and senior staff, all those seemingly heavy on the pocket. All the big firms have plans to lay off thousands of such employees in order to cope with the rising costs. Also, some of the firms are determined to hire locals in the US, this time to cope with the rising accusations of stealing jobs. But the numbers are mind boggling. When news surface of 56000 employees being in the pipeline of being laid off, one cannot help but wonder, isn’t this too atrocious? Shouldn’t the government intervene when crisis has shaped up to this mamoth scale? Do the authorities in India take no responsibility for those helpless chaps who once brought laurels to this country by bringing in the green bag boogie?

The answer, sadly, is no.  The changes that we are witnessing are merely changes to the business model of the IT Industry, being brought by external forces. Surely, had the change been organic and through internal forces, it would have been more welcoming. The age of automation and changes in technology are disrupting the world of Information Technology. With automation and robots in every field, what once took several engineers, so many days can now be done by machines, with much greater efficiency, much less time, lesser cost and of course no hassles. The machines bring with it only one-time cost, once set up, it needs no off-days, is rarely sick, needs some servicing at regular intervals, but that is it. It is the inevitable future that we are stepping into. Combined with the power of cloud computing, business and data analytics, mobile computing and Internet of things, digital transformation is bringing with it newer ways of doing work and at a digitally fast pace. These changes to the business model were underway when the sudden storm came and companies are now forced to embrace these changes. The faster they adapt, the easier it will be to get ahead of the competition. If there’s something which can bring the much needed competitive advantage at this age, it is the pace of adoption of new technology and making sure that you communicate the right message across your organization. Keeping your employees together at times of such disruptive changes can be challenging, to say the least. Whether this advantage remains sustainable in the long run remains to be seen in the future. What keeps us driving is the fact that the industry is still flourishing in its lifecycle. Nasscom forecast that the revenue is expected to increase to $154 billion in FY17, compared to $143 billion in the previous year, marking a slow but steady increase of 8%. In order to better facilitate this change, all we need is agility. Those still employed and also those who are not, need to keep in mind that change brings with it challenge but there are plenty of opportunities. This is the time to work on those skills, get equipped with the latest and much needed technology and embrace this change.