Thursday, June 24, 2021

Churning in IT sector

The Indian information technology sector is undergoing a harsh reality check. The reports of mass layoffs at software majors like Infosys, Cognizant, Wipro and Tech Mahindra have fuelled fears over the future of the $150-billion IT industry employing over four million people. However, the temptation to paint a grim picture and write obituaries of the industry must be resisted. Technological changes, including greater automation, emergence of cloud-based models, artificial intelligence and digitisation, are rapidly transforming the businesses across the world, leading to a process of churning in the traditional IT firms, which are already reeling under a slow revenue growth. The proposed visa reforms in the US have prompted the companies to change their hiring processes and business models. The rapidly changing technological environment, fashioned by cloud computing, data analytics and the Internet of Things, offers a new set of opportunities for the IT players. In a fiercely competitive world that rewards innovation and disruptive ideas, Indian players must focus their attention on skill upgradation and aligning the workforce and policies in tune with the changes. While analysts see the digital products as the next big growth drivers of the IT services industry, the share of digital at TCS and Wipro ranges between 18% and 22%, compared with 42-45% at IBM.

While many traditional job roles are becoming redundant due to technological changes, a world of opportunities beckons Indian IT engineers in areas like mobile broadband, financial services, healthcare, education and entertainment, provided they upgrade their skills. Though the current round of layoffs in the IT sector is due to multiple factors emerging over time, there is a temptation in the media to attribute the trend to the visa restrictions in the US because it offers a compelling narrative. While media reports suggest that over 56,000 people are set to be fired by IT firms this year, both Nasscom and software companies have maintained that the layoffs are a part of routine performance-based exits that happen each year. Even by the liberal estimates, the current layoffs account for less than 2% of the total workforce while the industry has a typical attrition rate of 12-15%. No doubt, the stricter work permit rules in countries like the US, Singapore, Australia and New Zealand are forcing the Indian software exporters to rework their business models. They are increasingly adopting newer automation tools leading to the replacement of people who perform routine coding tasks. The advent of artificial intelligence is bound to transform the employment landscape in the sector. This also provides an opportunity for IT professionals to upgrade themselves and lead the new-age technologies where demand is going to be huge.

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