Is the $150 billion Indian IT sector going through a downturn faced with multiple challenges of a slowing global economy, automation, Artificial intelligence and the H-1B visa issues? In the backdrop of these challenges, major IT firms have been resorting to downsizing of their staffs in large numbers over the past few months. The latest being Wipro which sacked 600 employees after a performance appraisal.
So, is the outlook for the sector looking gloomy? The medium-to-long-term outlook for the sector is anything but worrisome, say analysts. The sector is healthy and thriving, and will even do better in the coming years, they aver. They reason that the number of employees being sacked is hardly one or two percent of the IT major’s overall workforce, and that is the ratio for the top IT firms, be it for Infosys, Wipro, Accenture, HCL or any other in that category.
The industry has been working towards a value-added shift for some years now. Automation has taken over mechanic, repetitive jobs and those who have been unable to up the value chain for these advanced jobs have been laid off, said Arvind Singhal, Chairman and Managing Director, Technopak Advisors, a Delhi-based management consultancy firm.
Singhal says that the numbers per se of the employees laid off may look surprising but it is just a fraction of the large workforce of each of the home-grown top information technology firms.
Agreeing with Singhal, Kris Laxmikanth, Chairman & Managing Director at The Head Hunters India, and visiting faculty, Institute of Management, Ranchi, says the numbers of employees retrenched are not just programmers and coders but also a sizeable chunk of middle and top management. “There are people high up the rung in these organisations who are not able to cope with the rapid pace of technological changes in the industry. They are being sacked, too,” he says.
This has been the norm across the IT majors in the country who have been sacking employees in small parcels for some time now. In 2016, Infosys sacked around 8000-9,000 due to automation taking over in low-end jobs. “We have been releasing about 2,000 people every quarter and also training them in special courses that will help them in their new assignments," Krishnamurthy Shankar, Human Resources head had said on the sidelines of an event organized by the Bengaluru chapter of Global shapers, the TOI reported.
At the recently held Nasscom Leadership summit in Mumbai, French IT major, Capgemini’s India chief executive Srinivas Kandula said that a majority of the workforce cannot imbibe the skill sets required for increasing use of digital technologies, a PTI report said. Kandula warned of high job losses at the middle and senior levels. “I am not very pessimistic, but it is a challenging task and I tend to believe that 60-65 percent of them are just not trainable,” he said.
The domestic arm of the French IT major employs nearly 100,000 engineers in the country. “A large number of them cannot be trained. Probably, India will witness the largest unemployment in the middle level to senior level,” Kandula said.
Campus hiring slows down
The top five -- TCS, Infosys, Wipro, Cognizant and HCL Technologies -- are not hiring en masse from campuses as they used to earlier. According to a report in the Business Standard, IT companies are expected to hire 40 percent less this year. The top five IT services companies hired around 60,000 engineers from campuses this fiscal, as against little more than 100,000 last year. The reason for the reduction in recruitment at the entry level is on account of aggressive use of automation and technological advances that have rendered the lower level jobs in the sector redundant.
Adding to the worries is the protectionist policies in the US – one of the major offshore business partners and supporters of IT services industry in India – laying restrictions on outsourcing and stringent controls on H-1B visas.
Industry body Nasscom said in its annual review that while the industry grew at 8.6 percent, jobs grew only by 5 percent in the fiscal year 2016-17. It also said that there is going to be a 20-25 percent reduction in jobs over the next three years.
The traditional BPO operations model is being phased out and the $155-billion IT industry in the country is trying to reinvent itself to adjust to the advent of automation, artificial intelligence (AI) and machine learning.
According to consulting firm Zinnov, India stands to lose about 94,000 jobs by 2021 due to the increasing adoption of technology. Performance-appraisal sacking of employees may not be purely just that. It could be the compulsions of the shareholders and investors. How do one monitor coders on a large project, for instance, and pick out the bad performers among them? “That’s a difficult job to monitor. You can’t say 100 lines of coding of x was junk. So largely the cutting down of employees is arbitrary decisions too,” says Laxmikanth.
Most IT companies put a large number of its employees through a performance-improvement program for 3-6 months and at the end of it, many are asked to go as they cannot perform. However, there is a target given to managers and top management to reduce employees, says Laxmikanth. “The 3 percent of workforce that are being sacked now will go up by the end of the year to even larger numbers and no one should be surprised. This is because their jobs will be taken over by automation. This ‘involuntary separation’ from the company is something it is forced to undertake to increase profitability. IT workforce accounts for almost 70 percent of its costs and this has to be trimmed. The industry has 12-15 percent of attrition, and forced or involuntary separation is the only way to achieve it," says Laxmikanth.
In order to support this transformation, the industry players need to prioritise automation as one of their key offerings and build appropriate talent around this area, says Sashi Kumar – CEO and MD of the Bengaluru-based IT firm, Happiest Minds Technologies.
Contract jobs in offing
Indian IT majors have been hiring people as permanent staff unlike MNCs which hire staff on contract. In the changing work scenario, Laxmikanth of The Head Hunters India said that contract labour may soon be the norm in the Indian IT sector, too.
The view on the sector as is being reported in the media focusses only on the number of people sacked, says Singhal. “It is important to know that there is a continuous process of hiring and training that is going on in the IT firms. The idea is to be a value-added and tech-intensive company from being just labour-intensive firm." He is optimistic that large companies, well-funded, are showing healthy growth in their balance sheets. “Indian companies are very well suited to move from one model to another. The challenge for India is for these companies and new ones to ramp up for which more people will be hired.”
While making these changes in the business model, some firms that have been focussed on manpower arbitrage and have not been able to make transition to become an IT company will have to shut down too when automation sweeps across the IT landscape. When changes happen in such a large scale, some jobs will be destroyed which is par for the course.
Many of the top IT majors have been investing in setting up development centres. So has Microsoft and Google among others in India. These centres are focussed on do advanced technological work for the parent companies and in the process they are also job creators.
Data support from Kishor Kadam
Updated Date: Apr 21, 2017 18:09 PM