When the Royal Bank of Scotland recently cancelled a major contract with Infosys, following its decision not to set up a new, standalone bank in the UK, there were reports that the Indian IT major would lay off around 3,000 employees. Later, however, Infosys said they would be redeployed on other projects and not be laid off.
Market sources say the company stands to lose around $40 million because of the project cancellation. This may lead it to revise its revenue guidance for this financial year. Reports say that Cisco will lay off a sizeable amount of its global workforce and that its Indian R&D centre is likely to be affected by it. But nothing has been confirmed so far.
In this context, job cuts and layoffs are expected to significantly impact the Indian IT industry. Industry estimates suggest that 30 to 40 per cent of the Indian IT workforce would be redundant in the near future, because of disruptive, automation-driven technologies like artificial intelligence and machine learning. But, at the same time, the redundant workforce may not be retrenched, as most of them would be re-skilled. “The impact of increasing automation is likely to be more on bottom-of-pyramid hiring—on freshers, that is,” Kamal Karanth, managing director, Kelly Services and KellyOCG India, told THE WEEK. “Only those who can bring in domain and software knowledge will be hired, as opposed to the BPO or infrastructure management. Rather, companies will spend more time trying to automate jobs. This will be to ensure process efficiency and better turnaround time and to mitigate costs. As such hiring would be for short-term projects, flexi-hiring would be the way forward. Job cuts will be a reality, as IT spends shrink globally and enterprises look to source from within domestic markets.”
Experts like Karanth feel the hiring model of Indian IT companies has undergone a sudden change because of their forced shift to nonlinear growth models. This shift has been necessitated by the emergence of labour markets like the Philippines, the advent of automation and the change in reputation of India from an IT outsourcing market to a market for analytics and product development.
It is also likely that the IT industry would require new skill sets to meet current requirements. “There has been a demand for data scientists, analytics professionals and [Java, Android, iOS] developers in the market,” said Karanth. “Digital skills are also sought-after, as IT companies are increasingly competing with digital marketing firms for transformation deals. These are skills that can fetch hikes of 30 to 35 per cent for IT professionals while shifting jobs.”
Though the IT industry in India will grow 10 to 12 per cent, say experts, the linear relationship between growth and manpower will no longer hold good. “Automation of many processes will reduce repetitive jobs, leading to reduction in the need for manpower,” said Kris Lakshmikanth, founder of the recruitment consultancy Head Hunters India. “There are several instances where, because of automation, manpower headcount has come down 20 to 40 per cent. There are many applications that are being hosted on the cloud. This has led to pay-per-usage model or software as a service (SAAS) model. The earlier model of time and manpower is slowly disappearing, as companies under SAAS model now want to increase margins by reducing headcount. Besides, many companies are under pressure to increase margins and reduce manpower costs.”
In many IT companies, the middle management is not adding value. Hence, employers are advising those who earn salaries in the range of Rs 25 lakh to Rs 40 lakh a year to voluntarily resign or be laid off. “The job cuts will increase in the coming quarters,” said Lakshmikanth. “Companies are targeting increased utilisation and increased automation, all of which results in job cuts, layoffs, etc. While many of the older skills like mainframe, Java and ERP (enterprise resource planning) have abundant supply of skilled professionals, there are shortages in specific domains and skills such as cloud computing, social media, digital marketing, internet of things and cybersecurity.”
While job losses in India’s IT industry may seem like an unforeseen phenomenon, say experts, the underlying trend is that there has been a silent decline in the industry’s recruitment itself. The IT industry, owing to higher productivity, is able to achieve increasing turnover with less manpower resources. “Owing to machine learning and artificial intelligence, many jobs are now redundant. Rule based algorithms, for example, are able to learn complex business rules and become more proficient than humans, thus mitigating the need for resources at the lower end of the spectrum. Then there is this tectonic shift in the IT landscape itself. Investments in IT are shifting from low-productive technologies to high-productive technologies,” said Alok Shende of Mumbai-based consultancy firm Ascentius Consulting. “While this shift has always been true, its quantum and scope have become palpable. The cloud technology, for example, is expected to render many of the system administration, server monitoring and maintenance jobs obsolete.”