The Indian IT talent space is currently in a state of flux. The growing ambiguity regarding the future of H1-B visas has just been an addition to the long list of problems that technical talent within the country has faced over the years in finding the right break. The industry has been a major contributor to the Indian economy. Directly or indirectly, the sector contributes around 10 percent to the gross domestic product, nearly 25 percent of exports, and employs over 13 million people. Smaller IT firms account for about 60% of this contribution, while women make up around 35 percent of the industry’s workforce, making it one of the most diversity-friendly sectors in India. India is currently the world’s largest global sourcing destination with around 3.7 million people directly employed by the IT-ITeS industry.
A summation of multiple forces both technological and socio-political in nature, have impacted the Indian IT industry in recent times. The big four companies of the IT industry, that heart that pumps jobs creation and within the sector, have year on year shown a decline in their total number of hires.
The problematic aspects
The IT sector has been one of the cornerstones of India’s growth story in the services industry. But this growth rate, off late, has started showing signs of wavering consistency. The growth rate of the industry has shown what is almost a steady decline (from 13.8 percent in 2013-14 to 10.3 percent 2015-16. In the current year, Nasscom estimates growth to be 8-10 percent). This drop in growth rate has consequently been reflected in the hiring potential of many these IT companies in recent times. In a report Goldman Sachs has suggested a probable slowdown of the of the growing IT sector in India. Owing to protectionist policies around job creation that have recently found increasing favorability in countries like the US and the UK, many speculate the problem will only get worse moving ahead. As the cost incurred on visas for local talent working in the US increases, most companies will find it directly impacting their bottom line performance, slowly but surely eating into the profit margins that most these companies face (according to one estimate, over 60 percent of the revenue of the $150-billion-plus Indian IT industry is from exports to the US). And this would remain the case if the companies within the sector fail to innovate both their business models and the way the develop and re-skill their existing talent.
The other critical factor that has impacted the potential to create jobs within this industry has been the shift towards using newer technologies like AI and automation. In one of the findings by the World Bank, the urgency of this factor has been highlighted. This is reflected in its estimate that around 69 percent of jobs stand threatened due to automation in India. The report mentions that the current technology could “potentially disrupt the pattern of the traditional economic path in developing countries.” Although this consists of the entire pool of employable skills that might be replaced as a result of automation, IT functions are sure at the forefront of facing such an incoming impact. A recent TCS study revealed that in the coming years, AI is bound to become an essential component of the many IT companies function, going on to establish a direct business impact. This shift towards AI the use of AI and automation along with its impact on India’s core contribution to the global talent pool of skilled technical professionals remains to be seen. But this surely has created a flutter within major IT players who are looking for new ways to adapt to such incoming changes.
The impact on the ever growing pool of IT talent
At the turn of the century, a boom in the IT sector led by companies such as TCS, Infosys, and Wipro translated into the creation of thousands of white collar jobs in the country, and a relatively easy opportunity to work onsite in the mature markets of the US and Europe. But as the nature of the work was more mundane, the cheap availability of adequately skilled professionals in India and the ease of working in foreign markets helped major IT firms continue to hire large numbers of IT graduates year after year. With the changing times, the IT industry has witnessed a change in these exact parameters; automation and AI along with protectionist policies are forcing the big IT companies to rethink their hiring policies. With shortening profit margins, IT companies are aiming to revamp their business models, acquire companies to diversify their core offering to accommodate changing demands and are slowly opening up to adopting automation to make their processes more efficient. All this has led to a fall in their total hiring numbers. In the past five years, while IT exports have grown at an average 13.7 percent annually, the headcount growth has only been 8 percent. A report from global outsourcing research company HfS Research says that by 2021, India could lose 6.4 lakh low-skilled positions in IT services and the BPO industry because of the automation of support and back-office processing work. There have been numerous reports how companies like Infosys, Wipro and HCL technologies have let go of a significant portion of their workforce due as result of adopting robotic process automation or by utilizing an AI based platform. Of the people left within these companies, most are in increasing need to undergo re-skilling to remain relevant.
Every change comes with establishing new parameters of looking at opportunities. The same might be the case with the evolving IT industry in India. The impact on traditional job roles is bound to amplify as the time goes on but this would mean that the demand for newer technical skills would rise. More number of third party IT consulting and servicing companies are coming up. According to the Gartner's annual global survey of CIOs that found the average IT budgets in India is expected to grow 10.7 percent in 2017. This new impetus is slow, to begin with, as the survey still mentions the top concern for CIOs still remains the search for quality IT talent. The high rates of attrition within the IT industry has also been partially due to the reason that academia still hasn’t responded to change in demanded skill sets; a problem which is bound to get acuter as time progresses.
Today India still remains one of the world’s largest global sourcing destination, with almost 56 percent share globally. The industry roughly comprises of around 16,000 firms and represents the 3rd largest entrepreneurship hub in the world. In order to meet the talent demands of this growing industry, and create a sustainable pipeline for industry-ready talent, NASSCOM in association with the National Skill Development Corporation (NSDC) had set up the IT-ITeS Sector Skills Council. With the aim creating a standard setting and certifying body for skill training for the domain, it has been a vital component in ensuring IT talent is able to up their skill sets. But with report also mentioning that the next $100 billion worth of revenue would require 1.2-2 million skilled professionals over the coming few years, much would depend on how IT talent within the nation is able to access better quality of education and training while the industry looks at innovative hiring methods which balance ‘cannibalistic’ tendency of technological growth.