Picking up the pace: How was the year 2018 like for Indian IT industry
According to every industry indicator, the Indian IT industry is back on track. Revenues and margins are improving, hiring is picking up speed, and massive up-skilling programs are underway to ensure workforce agility.
But before we analyze these developments, in order to fully appreciate the importance of this recovery, let’s take a quick look at the various issues that the industry battled last year. It would be safe to say that 2017 was one of the most challenging years for the Indian IT industry. Amidst a rise in the global protectionist policies, companies failed to deliver expected growth numbers and laid off thousands of employees. According to one estimate, more than 56,000 workers were handed the pink slip in the industry last year, which experts believe make it worse than the 2008 financial crisis.
Most industry giants, including, Cognizant, Wipro, Infosys, Capgemini, Tata Consultancy Services (TCS), and Tech Mahindra saw their headcount reducing (even if marginally) in at least one of the quarters in 2017. Hiring and campus recruitment activity saw a drastic decline, as companies struggled to adapt to changing business environments. However, since the beginning of this financial year, and particularly in the quarter ending in September, an undeniable positive uptick has been recorded.
Prominent Indian IT companies have added nearly 38,000 employees collectively in the second quarter this year. There is a significant improvement from last year and more than double the number in the first quarter in 2018. As a matter of fact, TCS made the highest net addition to its employee strength in the last 12 quarters and announced its plans to hire 28,000 employees in campus placements. However, for most companies, a part of these numbers also consists of the employees that have been hired outside India, as they are under pressure to increase local employee count.
The Experis IT Employment Outlook Survey has revealed that the IT sector will have a net positive hiring sentiment of 53 percent (for the period October 2018 – March 2019) and the job market will witness a certain revival. Based on the responses of 550 Indian IT employers in the country, the survey states that companies are excited about hiring and upskilling their employees. However, it is also quick to add that most Indian employers are looking for candidates that display a high ‘learnability quotient’, particularly in the 0-5 years’ experience category. Industry experts have mentioned that this is due to the growth in major business industries like BFSI and retail. Additionally, a growing need to digitize operations has helped IT companies clench hefty deals. For example, Infosys closed deals worth over $2 billion in the second quarter; TCS inked new deals and renewed existing ones to the tune of $4.9 billion; Wipro announced a new $1.5 billion deal in July; and even mid-sized players like Mindtree expect to close deals worth over $1 billion this year. A rapidly depreciating rupee has also benefitted the industry.
Who is hiring – And for what levels?
The Experis survey shows that a majority of hiring is expected for the junior level and employers are predominantly seeking skills like critical thinking and creativity. “While many IT companies are now looking for fresh talent in the market that is already upskilled with the latest technologies and job-ready from day one, a lot of companies still want candidates with 1-2 years of prior hands-on experience.” Furthermore, as employers rush to make their workforces future-ready, there is an increasing demand for experienced professionals in the domains of robotics, big data, analytics, automation, Internet of Things, AI, virtual and augmented reality etc. Notably, non-IT companies had a collective positive outlook of 45 percent. This is because as the demand for special roles to implement digital transformation goes up, non-IT companies are increasingly hiring IT professionals as well. Similarly, the thriving Indian start-up sector, especially in niche technologies, will help add new roles to the job market.
In addition to hiring, IT companies have also started undertaking massive upskilling and reskilling drives. As a result of limited supply of talent and soaring costs of hiring, companies are now looking inwards to build an agile workforce. The Experis survey found that there is an increased spending on training programs to update the skills of existing employees. This has been corroborated by a recent Quartz report which stated that TCS has already trained some 210,000 trainees and Wipro trained nearly 40,000 employees in digital skills last year.
The complex hiring requirement has also significantly altered HR’s talent and recruitment strategies as well. The survey also mentions that “To hire resources in demand this season, HR is disrupting all its conventional strategies and adopting alternative methods to fit the volatile requirements. These alternative talent acquisition strategies include liquid workforce, temp, on-demand hiring, increasing contract resources and implementing upskilling/re-skilling of internal staff to cater to complex/niche requirements.”
All in all, it would be unwise to assume that the journey ahead for the IT industry will be smooth sailing. For one, the full impact of the Trump administration’s America-First policy will be felt beginning January 2019, as the USCIS plans to come out with new proposals for H1B visas. It is important to note that Indian IT professionals comprise roughly 75 percent of all the H1B visa holders in the USA. When the new administrative changes kick-in, a further decrease in the number of approvals can be expected. Similarly, H4 visa holders (90 percent Indians) are likely to experience a loss in employment opportunities under the new regulations.
On the other side of the Pacific, with Brexit becoming a reality soon, companies will have to act according to the terms of separation and might struggle to adapt to the changed economic structure of the European markets. There is uncertainty regarding the political and regulatory environment in the region, which has resulted in a drop in the number of big-value deals from the UK. The country has also been gradually implementing protectionist policies and revising immigration laws, under fire due to local economic and unemployment challenges.
Leading Indian IT companies have added nearly 38,000 employees collectively in the second quarter this year with TCS making the highest net addition to its employee numbers
Finally, regardless of the political scenario, the pace of digitization and adoption of intelligent technology is also likely to result in further disruptions. While many organizations have adopted a pragmatic approach and started reskilling their workforces, a lot more needs to be done.
As projected by the Experis survey, as management loses it sheen, IT job roles in the middle and senior management are likely to be significantly impacted. Although AI and automation will be a net generator of employment, it will create roles which require new-age skills. Thus, for Indian IT employees and employers, reskilling will be critical for survival.
As the IT industry picks up pace and expands its workforce, Indian IT professionals certainly have a reason to cheer. However, maintaining the current momentum of expansion and re-skilling is key to ensuring a minimal negative impact of digital disruptions in the future. As noted by the survey, on the back of new jobs and roles and the advancement of next-generation technologies, the Indian IT industry will continue to be a net hirer. However, alternative hiring and training strategies will be deployed to ensure that the industry remains ready for the future.