The Indian IT sector seems to be in turmoil again. Amid rising concerns about the growing mandate for protectionist policies with regards to hiring and job creations within countries like the USA, the UK, and Singapore, in addition to countries like Australia and New Zealand, most of the big IT players in India are looking at ways to improve profit margins. The business decision of increasing the shrinking profit margins that most Indian IT companies face today often manifests itself, in the current day and age, in the form of changing business models and an overhaul that leads to an increased use of automated services to cut down on administrative costs; which one way or the other lead to either re-skilling the workforce or, in many scenarios, job cuts.
The latest case to point the light towards this growing trend has been the news that Wipro, one of the biggest firms within the IT sector today, has sacked 600 employees on the basis of 'performance appraisal’, a number that is speculated to grow. Wipro’s official stance has been that “the sacking comes as a part of its 'rigorous performance appraisal process' that aligns its workforce with business objectives, strategic priorities of the company and client requirements.” As companies enter a phase of annual performance assessments, more such moves can be expected in the coming time.
Although extreme, this move has been one which falls in line with the shrink in profit margins that the IT sector experienced during the last two-quarters of the previous financial year. The businesses of companies like TCS, Wipro, and Infosys, which were collectively responsible for getting around 86,000 H-1B visas in 2015-16, have had to face significant uncertainty within one of their largest markets, the US. The impact of which isn’t just limited to Indian IT companies.
This is becoming a trend, of sorts. Recently, Cognizant was reported to sack thousands of its employees as the company plans to adapt to the changing business model. As most of these layoffs come on the back of ‘performance assessment’ decisions, the US-listed IT giant is reported to “be reducing its employee count by as much as five per cent.” According to a Business Standard report that makes it around 10,000 employees are expected to be fired.
The ongoing Visa troubles has marked a difficult period for the Indian IT sector, and these aren’t necessarily confined to the United States only. After the US move to tighten visa norms, Australia announced scrapping of 457 visas used largely by Indian IT professionals.
In a statement earlier this month, Australian High Commissioner Harinder Sidhu had said, "India provides the highest number of temporary skilled workers to Australia of any country; eight out of the top 10 occupations for Indian 457 visa holders (as at December 2016) were IT professionals."
Singapore, in a similar fashion, has also begun curbing visas for Indian IT professionals. Commenting on the visa hurdles in Singapore, Nasscom president R Chandrashekhar had told TOI, "This has been lingering for a while but since early-2016, visas are down to a trickle. All Indian companies have received communication on fair consideration, which basically means hiring local people.” The UK has also pushed up the minimum wage requirement to 35,000 pounds for tier-2 visa immigrants reducing the incentive to companies to hire from countries like India. With visa programs in these countries becoming more rigorous, Indian IT companies are likely to face challenges in the movement of labour as well as a spike in operational costs, which in turn are bound to increase the pressure on jobs creation within the IT sector. The overall impact of such global measures, would inadvertently, have to be faced by the growing pool of IT talent in India.
Beyond the rise in adoption of protectionist policies, the other key factor leading to such multiple instances of layoffs, in cases like – Wipro and Cognizant, has been widely reported to be due to the introduction of automation programs into the way the company operates. Replacing human workforce, the shift towards automation has been on the rise in the past couple of years; with a growing suitability in the current competitive business scenario.
The external business markets today have also been shaken up due to the presence of high rates returns in going digital and the strategic advantages in adopting AI and machine learning techniques into business operations has meant that certain jobs are becoming redundant. And, this is slowly yet steadily becoming a norm across the IT sector. This change mandates that current employees need to undergo programs that help them bridge the skill gap to remain relevant. That becomes a huge task when it comes to India.
In a report with Economic Times, Capgemini India’s Chief Executive said that almost 65 percent of their employees cannot be trained. "I am not very pessimistic, but it is a challenging task and I tend to believe that 60-65 per cent of them [Capgemini employees] are just not trainable," Srinivas Kandula, the India Chief Executive added.
This has been a growing concern from the supply side of IT talent, as well. Amid reports that suggest that around 95 percent of Indian engineers are unfit for software development jobs the concerns become acuter. A study done by the employability – assessment company Aspiring Minds notes “only 4.77 per cent candidates can write the correct logic for a program — a minimum requirement for any programming job.”
The IT sector, over the past decade, has been greatly responsible in deriving the benefits of a growing globalized economy. It has been a critical part of the India’s growth story, creating thousands of jobs each year, helping bridge the gap between a high growth percentage and its overall impact in improving India Inc. ability to hire talent and create employment opportunities. The sector has traditionally faced high attrition rates, but given the recent developments, a concerted effort both by the Indian government and the various major players within the IT sector to put in measures, that help tackle short term issues within the changing political climate, and have a long-term impact on the building the right talent.