With Infosys buckling under pressure from the Trump administration and having announced on Tuesday that it was in the process of creating 10,000 jobs in the US where locals would be employed, the lustre of the once sunrise IT sector has further dimmed. The Trump administration has got what it has demanded from the Indian sector in the US,” says Dr Sujaya Banerjee, CEO, Capstone People Consulting, a firm into organizational transformation.
However, Infosys is going about job creation in a staggered manner. It plans to open four US-based hubs starting in Indianapolis in August and expects that the Indiana site will create 500 jobs by next year, and possibly up to 2,000 by 2021.
Though Infosys has said that it is planning to create 10,000 jobs in the next few years, it is not going to be a possibility, says Kris Laxmikanth, Chairman and Managing Director at The Head Hunters India; and visiting faculty, Institute of Management, Ranchi. He feels that 10,000 is a ‘huge’ figure and worse, there is not enough talent in the US primarily to fill up these tech jobs.
Infosys may hire 100 people from India and then hire the remaining from Indiana, says Laxmikanth, explaining the possibility of the strategy the Indian IT major may adopt to fulfill its promise of creating more jobs in the US for locals.
Getting 100,000 US techies is going to be an uphill task is a fact most experts in the sector agree upon. Besides the salary difference to be paid to the US and Indian IT professionals, the major gap is that there are just not enough tech professionals in the US to fill up these jobs, they say. “Why do US-based firms too hire from India if they could fill up the posts locally,” asks T Santosh, Vice President and Head - Human Resources, TeamLease Services, a staffing company. The creation of 100,000 jobs to be filled in by US locals would be a stupendous task and not easily possible, he avers.
Largest outsourcing hub
India is the world's largest sourcing destination for the information technology (IT) industry, accounting for approximately 67 percent of the US$ 124-130 billion market. The industry employs about 10 million workforces, according to Indian Brand Equity Foundation (IBEF).
IBEF highlights that India's cost competitiveness in providing IT services, which is approximately 3-4 times cheaper than the US, continues to be the mainstay of its Unique Selling Proposition (USP) in the global sourcing market. However, India is also gaining prominence in terms of intellectual capital with several global IT firms setting up their innovation centres in India.
The Indian IT sector is expected to grow at a rate of 12-14 per cent for FY2016-17 in constant currency terms. The sector is also expected triple its current annual revenue to reach US$ 350 billion by FY 2025, according to IBEF.
Infosys, for instance, will not have to pay more for fresh hires as the Indian techies taken on a L-1B visa get paid US $60,000 to $65,000 per annum. The US has a threshold of minimum salary which differs in each state. New hires may have to be paid marginally higher at US $80,000-$82,000 when the new visa regulations kick in.
However, it would be interesting to watch the strategies of Indian IT firms based in the US to Trump’s announcement, says T Santosh, of TeamLease Services. He feels it is only a matter of time before the Indian IT firms get their operating model right and the H-1B visa issue will cease to be a bother.
The visa risk was a matter that Indian IT firms had factored in earlier. “If you look at annual results of Indian IT firms in the past decade, they mentioned visas as a risk,” says Santosh.
Infosys has said that it will hire graduates from US colleges and also locally. However, hiring 10,000 US workers would impact the company’s bottomline. Paying US $80,000-85,000 as salary would not be commensurate with an Indian professional's salary currently.
At the current value of the rupee at Rs 65 against a dollar, the salary of US $80,000 will have a billion dollar impact on revenues, Laxmikant points out. The impact on bottomlines will be a decrease of 40-120 bps. But Infosys and other Indian IT firms have many levers to operate and the impact would be easy to manage, says Santosh. What the companies can opt for is contract staffing which will cut down their expenses, he says.
For instance, of the current ratio of employees in any IT firm, about 70 percent is offshore (in India and are permanent staff) and 30 is employed onsite (in the US and other countries). What IT firms can can opt for is to hire 8-20 percent contract staff for offshore sites. In this manner, the company can hire fresh talent depending on its requirements. The professionals that are hired on contract will be motivated to upskill themselves with the fast pace of technology change and be ready to be employed. This will take off the huge burden of paying technical staff salaries when there is no project for a particular team.
IT firms and education
Another way of decreasing the Indian IT firms' dependence on hiring locally in the US is for it to go in for partnerships with local colleges in India so as to make engineering graduates industry-ready. A New Delhi-based employment solutions company, Aspiring Minds, conducted an employability-focused study based on 150,000 engineering students and found barely 7 percent suitable for core engineering jobs.
This is an oft-cited complaint against colleges in India, says Dr Banerjee. She suggests that IT firms like Infosys and others can take engineering and technological education as part of their corporate social responsibility program. “If you want tech graduates to be industry-ready, work with the engineering colleges in India and provide them the tech expertise,” she says. A public-private partnership would work well for the colleges and the tech firms too. “It will stop the blame game and help Skill India program,” Banerjee added.
Published Date: May 04, 2017 17:59 PM | Updated Date: May 04, 2017 23:21 PM