Is Indian IT Industry ready for new challenges

I started my career in 2005. After getting my Bachelor of Engineering degree from tier 3 city, I got my first break and it was a big one…. An offer letter from Infosys had reached my mailbox. I was asked to join Mysore in middle of September for “training”. I had travelled from Pune to Bengaluru and then from Bengaluru to Mysore. Pune to Bengaluru train actually had hundreds of people who like me were going to Mysore to join Infosys! Joining day was an amazing experience. Infosys Mysore campus is really awesome. Our batch had created a record as nearly 1000 people join at same time. That had broken previous record of mid 900s which was set couple of weeks earlier. As expected our record of 1000 people joining at once was broken even before our batch passed out!

Reflecting on the crazy hiring that happened back in the day, IT industry was numbers game. IT spending and budgets were on the rise post economic slowdown and Y2K era. Indian IT companies like Infy and its competitors like Wipro and TCS were hiring fresh engineers as there was plenty of work in “pipeline”. Things like Automation and straight through processing were not even born at that time. It was a different era all together. Most businesses were Bangaloring their work to India to save cost. The offshore / onshore model worked wonders and it was cash cow for India companies. People with experience of around 2 years were sent to onsite as they were “senior”. They would interact with client day in day out and grab piece of work and send that to India for offshore team to work. This was a well-oiled machine.

As industry started to see benefits of this model, other players started to enter the arena to make things competitive. The increased competition started to have multiple impacts. This meant, Engineers had more options while choosing their employer. But from industry standpoint, this increased competition increased cost pressure. The business model was being challenged.

There is lot of talk around AI, Big Data and other emerging technologies having impact on job market. Honestly speaking these technologies are just starting and are at very early stages. They have been used and applied in bits and pieces. They have not created a big dent in job market. There are news and headlines about Indian IT companies facing challenges and job losses. I think to attribute all those losses to emerging technologies is unfair and really over the top reaction.

A big worry for Indian IT industry is work permit / Visa regime. In 2007, when I had barely 2 years of experience, Infy had filed my H1B visa and thank god it got approved via lottery process. 6 months later, I was on plane travelling to US. I was not alone. Lot of my friends and colleagues had similar experience. However due to abuse of these work permit and Visa programs, things are now changing. Indian companies are facing new challenges. With proposed H1B rule changes, the minimum wage requirements are set to increase. This is going to hurt margins and cost equations for Indian companies very badly. I have also heard stories from my friends about some of the clients are now bit reluctant about providing paperwork required for Visa processing. Indian companies are now (either via choice or compulsion) hiring more people locally. This has created problems for onshore travel aspiration and increased headaches for managers….

While most media houses and “experts” are talking about re-skilling requirements, emerging technologies and Visa issues, there have been 2 additional aspects that have not gone lot of attention. First aspect is increased competition. American giants like Accenture and IBM have setup their own India shops and they’re expanding. This has changed the landscape of India Software Services Industry. Accenture is slowly moving ahead of Indian companies in some of the areas. Accenture is not alone. IBM has increased its India presence significantly. From having around 9,000 people in 2003, currently it has around 150K people, that’s nearly third of its global workforce of 430,00 employees.

The second thing that has started to eat into Indian IT company’s business is captive phenomenon. Most of multinationals corporations (who are / have been clients of Indian IT companies) have started to open (or some in cases expanded) their own captives in India. Some of the world’s biggest financial institutions like Visa, MasterCard, JP Morgan Chase, Wells Fargo, Bank of America, Deutsche Bank, Barclays, HSBC or DBS, have got their own captive / subsidiary that’s doing Technology and Operations work in India. They have massive advantages for having strong captive. Zinnov has done a case study in this regard. All these companies are hiring big time and have got big setup. Some of the hiring has had happened at the expense of positions that were outsourced to Indian IT companies.

Captive phenomenon is not limited to financial services industry. Tech giants like Dell, HP, Uber, Oracle, Microsoft, Facebook, Google, Apple and Amazon have their own setup. Due to higher salary packages and benefits they are able to attract talent easily. When people say Indian IT companies are struggling, the picture that gets portrayed is IT industry is having slowdown. To an extent that’s true. But that’s not complete picture as captives are hiring and ramping up their presence and jobs are being created.

All these changes have resulted in some job losses. One of the prime areas that has been impacted is mid-level management. Due to changing landscape, most companies are looking for techno functional leaders and managers. They don’t need someone to do just people management. This segment is the most affected. My old boss in Infosys, used to tell me, right to time to quit Infosys is just before you become manager. Once you become manager, outside opportunities reduce drastically. Nobody wants to hire someone who is a manager and doesn’t have additional things to offer.

India’s IT industry’s problems have just begun. Having said that, the market driven by new technologies is just opening up. The question on the able is, are Indian companies ready to think outside of the box and complete or they going to face struggles while trying navigate away from traditional services. Only time would tell….