With the few hiring for the past 2 years and the IT biggies like performing low with Year on Year growth slumping, like Cognizant, which was growing at about 20%, expects to grow this year at around 8-10%. Infosys, which grew at 13.3% in constant currency in 2015-16, was down to 8.3% in the last fiscal and expects to grow only between 6.5% and 8.5% this year. TCS, which was growing in the teens, made just 8.3% last year. There is a big buzz that Indian IT industry is going down. Is it real ?
Yes. For the past three years, Indian IT industry is facing is slowing down with lower revenues. Besides, IT services industry is passing through an uncertain time as the growth in digital technologies like cloud-based services, automation is happening at a much faster pace than predicted and the companies are combining the learning of some of the new technologies and reskilling their employees. According to McKinsey and Company report nearly half of the workforce in the IT services firms will be “irrelevant” over the next 3-4 years. There is a bigger challenge ahead for the industry will be to retrain 50-60% of the workforce as there will be a significant shift in technologies.
Indian IT software services are based on code writing and customization of different levels of sophistication and IT-enabled services. This model was based on the remaining competitors in those areas requires sustaining relative cost advantages of limiting wages and squeezing profit margins. But this led to competition from new companies and from other countries like Philippines, Taiwan, China, Brazil etc.
Trump policy focuses on curbing immigration especially around the much-sought-after the H-1B visa policy has hurt India's massive information technology sector, which is a foundation for the country's economy. According to Goldman Sachs estimates that Indians accounted for nearly 195,257, or 70.1 percent, of all beneficiaries of the H-1B visa program in 2015. President Trump's decision to steer his policies towards "America First" is clearly hurting the professionals and Indian software companies. The agent stipulates H-1B visa holders to be given a minimum salary of USD 60,000, though there are very exceptions. It also mandates beneficiaries of H-1B visas to hold a specialized bachelor's degree for the position offered.
Besides, strong IT software engineering solutions, most of the Indian IT sector was based on low cost model, which was exploiting an outsourcing opportunity in low-cost niches. A foreign nationals need to be paid a minimum of USD 3000 to 4000 which around Rs 1-1.5 lakhs. But, workers from India and Philippines work for Rs 25000 – 30,000 as a starting pay package. Sometimes the fresher is paid as low as Rs 15,000 a month. Low salaried model would ensure 15-20% profits for many thousand IT company. Over a period of time, low cost method led to loss of jobs in the US and it triggered imperatives against the corporate sector in the US and elsewhere.
Besides, the low cost model which was very vulnerable, exports to a particular country added its woes. An overwhelmingly large share of software exports was directed to the North America mostly US market, with the European Union following at a distant second. From 1990-2000, the US market accounted around two-thirds of India’s IT exports where the EU for about a quarter. This didn’t change even a decade after. In 2015-16 the US market accounted for around 65 per cent of the industry’s exports and Europe second with 24 per cent. Too much dependence on a particular country made the Indian IT companies forcing to accept the unnecessary discomforts and shocks.
Every change in technology in every industry and other major industry changes might kill thousands of jobs but it creates many more opportunities. In the process of layoffs industry restructures, matures and skills are upgraded which helps the industry grow further in new areas. One must remember, in the early 1990’s people opposed computers and other software solutions will kill their jobs, but it creates a lot more jobs and gave a boost to the economy for the next two decades. Besides, one should remember that new technologies will encourage and advocate new business model and business functions in almost all industries, and it could also force them to revamp or adapt or else face annihilation. Now this time around, the IT sector is facing such a similar situation. IT industry is poised for a great change and triggering great amount of transformation in major areas. So one should take a quick look at what might be in store for the sector if it doesn’t take matters into its own hands at sooner. And new areas would need new skills, are also developing spirally with the rise in new technologies. While we should not worry about existing, routine jobs taken over my machine or any automation software killing a dozen manual procedures but we need to be preparing ourselves through learning new skills for the next industrial revolution. Because, whenever there is a change, it creates new opportunities.