The Indian IT sector is the perfect example of the country’s past glory, which if to be retained, must be paid immediate attention to and salvaged. Pre-1990 India was rarely counted amongst the countries that could boast of large-scale industries and flourishing businesses. But then the IT movement carried India and India carried IT services, far and wide.
The sector sized at nearly $160 billion and employing about 4 million people directly and 10 million plus indirectly, has truly revolutionised the Indian economy and practically created the entire middle-class as we know it today. Led by cities like Bengaluru, not only did it put India on the global map, but also built aspirations of millions of youngsters, allowing them to finally be a part of something that was booming, and likely to do so for many, many years.
Before we dive into the status of the IT sector and why it is likely to be in the position that it is today, it might be useful to recap what it is that we understand about this sector. What do people in the IT space really even work on?
Indian IT services consultants such as TCS, Wipro or Infosys are essentially manpower businesses. There are two major components: IT services and Business Process Outsourcing (BPO). The work largely involves ensuring that servers are running, networks are up, backups are running, users' problems are solved and so on. Some of the work is also implementing 'solutions' like enterprise resource planning (ERP) systems for clients. Several factors, especially cheap labour, made outsourcing such work to Indian IT a very cost-efficient and lucrative proposition for other countries. This is probably why USA accounts for 60 percent of Indian IT exports.
But the fortune of this sector has begun to change. According to reports, 65 percent of IT employees are considered not retrainable by employees and 80 percent of engineering graduates (the largest feeder of the IT industry) are unemployable. We have all read the multiple news reports spelling doom for the sector, hundreds of thousands of job losses, with IT companies citing changing business needs for organisation’s technology transformations — essentially layoffs.
However, the impact is being felt in the form of both labour/wages as well as economy. In 2015-17, over 30,000 IT employees were laid off by giants like Wipro, Infosys, TCS, and even younger technology companies like Flipkart and eBay. In 2015-16, Karnataka’s revenue (home to Bengaluru and a majority of the IT wave) from exports of electronics, IT software and BT fell by 65 percent from 2014-15.
So, why is this happening? Shouldn’t ‘once a leader’ translate into ‘always a leader’?
Unfortunately, that’s a naive thought. Since time immemorial, the world and thereby the industries and professions within it have transformed and metamorphosed every few years, to make way for something larger, more innovative or inventive. These changes enhance human productivity and are therefore deemed essential. The industrial revolution mechanised many jobs but what was not foreseen, was the simultaneous creation of many other jobs. Jobs that were more sophisticated, needing more skilled manpower.
This has almost become the third law of nature. New technologies will sweep business functions and entire industries, and force them to revamp/adapt or else face extinction. This time around, the IT sector is faced with a similar predicament. It’s at a juncture that could just as easily mean that it’s poised for change, riding the future wave just as it rode it in the past, or that it’s completely out of touch and nearing its end. While we will go into more detail regarding what exactly is triggering this transformation in our next article, let’s take a quick look at what might be in store for the sector if it doesn’t take matters into its own hands, soon.
New opportunities, needing new skills, are also arising with the rise in new technologies. While existing, routine jobs may become redundant as machines get smart enough to take over, even more (differently) skilled persons will be required to manage these machines and processes. That’s what we, and the IT sector, need to be preparing ourselves for to own the fourth industrial revolution.
An indication of this potential gain can already be witnessed — revenue from digital technology projects are growing 7x faster than from traditional projects, in the Indian IT industry.
If that’s not a sign for the industry, of what’s to be done, then what is?
The authors are co-founders of UpGrad