Indian IT's planned layoffs give a glimpse of the bloodbath ahead

Automation and lack of appropriate skill sets to cater to a new world of digital will mean up to 40 percent of Indian IT's employees will be laid off in the next three to four years, say experts.
Written by Rajiv Rao, Contributing Writer

Over the last week, the one thing that Indian IT professionals were most dreading began to be talked about in earnest.

First, Mint newspaper disclosed that after conducting interviews with 22 current and former employees across seven Indian IT companies, it was clear to them that at least 56,000 engineers would be given pink slips this year. That figure is double the number let go last year.

Apparently, one immediate sign of the axe about to fall is if you are given a "low rating" by your company that then impacts subsequent opportunities at the firm -- in other words, a pre-cursor towards being fired.

This year, for example, Mint said that 15,000 of Cognizant's employees have found themselves placed in the bottom-most tier, or bucket IV, while Infosys has deemed 3,000 of its senior managers needing improvement. Mint said that in a normal year, around 1 to 1.5 percent of an Indian IT company's employees would be shown the door, but this year that figure is going to be between 2 and 6 percent. None of the Indian companies confirmed the report.

Then, a few days ago, the managing director of executive search firm Head Hunters, K Lakshmikanth, dropped a bombshell. "Contrary to media reports of 56,000 IT professionals to lose jobs this year, the actual job cuts will be between 1.75 lakh (or 175,000) and 2 lakh (200,000) per year in the next three years, due to under-preparedness in adapting to newer technologies."

All Lakshmikanth was actually doing was extrapolating from a report that consulting firm McKinsey & Company had unveiled at industry body Nasscom's India Leadership Forum in February of this year. In doing so, he was probably attempting to call the bluff of the Mint article, which he thought was pussy-footing around the real toll that would eventually add up this year. In that report, McKinsey India head Noshir Kaka had apparently said that the more onerous challenge confronting Indian IT would be retraining 50 to 60 percent of its workforce of 3.9 million, while half of it would be rendered "irrelevant" over three to four years.

All Lakshmikanth apparently did was project an annualised figure to that attrition rate, a number that has been re-inforced by Peter Bendor-Samuel, CEO of Everest Group, a technology services advisory. "More than one firm is talking about a 10 percent adjustment to the existing India-based workforce," said Bendor-Samuel. "As we look forward two or three years, we can expect this reshaping of the talent pool to pick up pace with perhaps as much as 20-40 percent shrinkage over that time."

It may not be the most original declaration but sometimes detective work of this kind does have its advantages in exposing the rot that actually lurks beneath the sheets. Lakshmikanth's reading of the McKinsey report mirrors what many in the industry have been raising alarms this year about. India CEO of French IT Services CapGemini said earlier this year, "I am not very pessimistic, but it is a challenging task and I tend to believe that 60-65 percent [of Indian IT workers] are just not trainable," he said. "Probably, India will witness the largest unemployment in the middle level to senior level," he added.

A more fundamental problem is the lack of real skills amongst most of India's engineering graduates. According to employment solutions company Aspiring Minds, a well-known institution that regularly tracks the worth of college graduates, a staggering 80 percent of engineers in India don't possess skills that can make them employable.

Apparently, as many as 97 percent of engineering graduates want to work in software engineering or core engineering but only 3 percent have the requisite chops to be employed in software or product market. Only 7 percent can complete core-engineering tasks. Of course, India's reputation for excellent engineers and entrepreneurs comes from the cream who go to good institutions and then make their way to Silicon Valley. However, the great majority are forced to get paper degrees from shoddy colleges and leave without anything to show for it.

Almost overnight, Indian IT is going through a moment of reckoning. US President Donald Trump's hostility towards the H-1B visa appeared to be the death knell for the $150 billion industry that made 65 percent of its money by sending engineers over to the US on short-term assignments. Cutting off this spigot would be catastrophic it seemed, not so much for the hit on margins in an era when revenue growth has plummeted from 25 percent to 5 percent in the last two to three years, but in terms of new and renewable business lost. Partly in order to rescue this business from simply vanishing and partly to placate Trump, Infosys announced that it would hire 10,000 employees in the US and open an innovation center in Indiana.

The fact is the writing had been on the wall for some time now. The signs of the old world of application development, testing, and remote infrastructure maintenance that Indian IT had pioneered over the last decade has been fast fading, but most Indian companies have refused to wean themselves off this easy money and migrate more energetically towards the new world of social, cloud, AI, and IoT as companies like Accenture have been doing. Now, suddenly, they have a huge problem on their hands with a bloated workforce that either does not have the skills for this new era or cannot learn them.

Then, there is the issue of productivity. "What required 50 programmers, analysts, or accountants five years ago can be done by a handful of smart thinkers and much smarter systems," said Phil Fersht, CEO of US-based HfS Research, an outsourcing-research firm. Almost every Indian IT company worth its salt is now knee-deep in automation -- Wirpo's Holmes, Cognizant's Adpart, TCS's Ignio, and Infosys's Mana are examples -- and have already made thousands of their jobs obsolete.

"If I were Prime Minister Narendra Modi, I would be very concerned that a whole workforce generation needs reorienting to address work activities that are growing in demand." added Fersht.

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