The Indian IT sector seems to be in turmoil again. Amid rising concerns about the growing mandate of protectionist policies with regard to hiring and job creation within countries like the USA, UK, Singapore, Australia and New Zealand, most of the big IT players in India are finding it cumbersome to improve profit margins, and are in the middle of retrenchment drives. The business decision of increasing the shrinking profit margins that most Indian IT companies face today often manifests itself 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 leads to either re-skilling the workforce or, in many scenarios, job cuts.
The latest case in point has been the retrenchment drives specifically at Wipro, Tech Mahindra, Infosys and Cognizant – some of the biggest firms within the IT sector today – that have sacked close to about 56,000 employees (a speculated combined figure). Although extreme, such moves are a consequence of the shrink in profit margins that the IT sector has been experiencing in 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. And the impact of this isn’t just limited to Indian IT companies. The ongoing visa troubles have 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. 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 in a statement to TOI mentioned that, "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 eligibilities in these countries becoming more rigorous, Indian IT companies are likely to face challenges in the movement of labor as well as a spike in operational costs, which in turn are bound to increase the pressure on job creation.
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 into the ways companies operate. 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. External business markets today have also been shaken up due to the presence of high rate 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.
Another growing concern has been from the supply side of IT talent as well. Amid reports that suggest around 95 percent of Indian engineers are unfit for software development jobs, the concerns have been pressing. A study done by the employability assessment company Aspiring Minds notes that “only 4.77 per cent candidates can write the correct logic for a program — a minimum requirement for any programming job.” The quality of IT workforce is also a cause of concern. It is stipulated that much of the 3.9 million IT employees come from low-grade engineering colleges that do not follow rigorous grading patterns for students in their zeal to maintain good records.
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.
Although, the IT industry’s growth has been widely attributed to talent and mobility, these are now two major causes of concern. With traditional ways of working getting automated and stringent protectionist policies, the Indian IT industry has been left in a lurch. 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 are needed that can help tackle short term issues within the changing economic climate, and have a long-term impact on the building the right talent.