Article: 'Lay offs are good for IT industry in the long term’


'Lay offs are good for IT industry in the long term’

People Matters in conversation with Dr. Santanu Paul, Co Founder and CEO of TalentSprint. He gives an insight on current IT Industry lay offs, recruitment scenario and future of work. Read on..
'Lay offs are good for IT industry in the long term’

In the backdrop of pervasive layoffs happening in the IT industry, the interview highlights its causes & impact it will create in the long term. Besides talking about IT evolution, Santanu Paul, Co – Founder and CEO of TalentSprint also talks about recruitment scenario, learning and development and future of work. 

Q1. How has IT industry evolved in the past few years?  As layoffs are happening at massive scale - IT giants such as Infosys, Tech Mahindra, Wipro, Cognizant and others are planning to lay off around 58,000 engineers this year. Why do you think there is such a grim situation? 

I won’t define the situation grim because it is only 2 - 5% of Industry getting corrected, which is normal and healthy for any Industry. IT industry is maturing slowly. We should see it as the sign of an Industry that is growing up rather than a crisis. The nature of work is also evolving. The only thing that is surprising is that the Indian Industry despite having sufficient heads up notice was not prepared for this. That is why there is a bit of a shock in the system. Layoffs are good for IT industry in the long term. 

Globally there is immense pressure against outsourcing in the western countries; second, the fundamental issue is that companies are under huge cost pressure, as the revenue is not as strong as expected. For the past decade, the industry is growing at 20-30% year on year and now it is growing at 8- 5%, so naturally, that engine of growth is slowing down. It is a temporary slowdown. Having said that, when the engine slows down you need to cut your costs. So, where do you cut now? 60% of the cost of the Industry is spend on its people, you have to cut on people- cut on redundancies, cut on inefficiencies and benches. So, this is the natural and not so serious crisis. 

Q2. Why is it happening at such rapid scale this year?  What are the prime reasons?

I think corrections have always been there and this year it is happening at much faster pace, larger scale and is more visible. This really is happening because it was common practice to run the company at 70% utilization which means 30% people were under-utilized. I feel it is the consequence of that.

There are three primary reasons for lay offs. One, there is a genuine problem in the developed countries – that are customers. There is a lot of homegrown movement around job loss. So, no more outsourcing. Second - inflation of costs. IT sector has been paying around 15-20% increments in the last 5-10 years, 15% increment in last 5 years ends up doubling your salary. Have your skills doubled in last 5 years? The answer is no. Indian IT sector has not upskilled itself as fast as industry wanted. It has higher cost base with the lower skill set and productivity has not kept pace with cost inflation. Third - automation. Several low-end jobs in IT no longer require humans as they can be done by machines.

Q3. Do you think the specter of layoffs has impacted the state of recruitment in the IT industry? 

New jobs are coming in other sectors in IT.  For example- edutech, healthtech, fintech etc. Where do you think jobs will move now? They will move towards these sectors. Financial service companies would want technologist. I think the good news is that – there is a lot of competencies released from the IT sector which can be re-deployed by other sectors- creating a more broad-based economy. 

Q4. How will rise of automation affect job situation in future?

Automation has arrived. It is no longer a thing of the future. Automation is eventually taking low-end jobs such as manual testing, infra management jobs which are very routine jobs, not very technically sophisticated. Other examples like – writing the email to customers; now much of the customer service requests can be handled by bots. Once you start using bots your customer service teams shrink to fewer people but better quality people. So, tasks that are getting automated include – customer service, sales support, software testing, email based jobs etc. This development is good in the way as people will now look for high-end jobs and focus on upskilling themselves.  In the HR sector- the domain can focus more upon strategy, more learning and development, more people development and less transactional activities. HR admin will surely get automated. In every sector, low-end work will get automated first and it will open up bandwidth and time for people who are experts.

Q5. With the emergence of new technology, how can L&D leaders upskill present workforce to remain relevant in the industry?

Reskilling and upskilling is the new trend. Going forward companies will not take ownership for upskilling of employees because upskilling and re-skilling will become B2C activity. Ten years down the line – companies will ask employees to upskill themselves. They will just fund the employees for the training. The scenario will shift from companies sponsored training to individual funded training which would be potentially reimbursed by the employer. L&D professionals will create a roadmap for learning – whether technical, functional, communication or leadership skills etc. 

Q6. How is digital advancement transforming future of work? 

The future of work would be - more self-employment, more freelancing, more flexible work from home. There would be more virtual teams working. Salary would be more outcome-based as employees don’t need to show up every day. It will be performance driven – nobody gets free lunch. In future, India will have to learn to hold our cost down in order to compete globally.

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Topics: Technology, Skilling

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