Should IT industry workers be scared of losing their jobs?

There was a time when Hollywood loved to show India as the land of magic carpets and snake charmers. Think Indiana Jones and the temple of doom. Somewhere in the 90s that picture suddenly moved over to countless Indian faces slouched over in front of computers, making up for the world’s largest destination for the Information Technology (IT) industry.

With relatively low cost services, as compared to the US, it now comprises nearly 67% of the $124-130 billion market in the US (Source). In India, the IT industry serves to employ nearly 3.7 million people directly and another 10 million indirectly as of 2015-16 (Statista).

An India Brand Equity Foundation (IBEF) Sectoral report is also hopeful that the Indian IT sector will reach an annual revenue of US $350 billion by the year 2025. And here’s how much more faith there is to be put on IT, in India.

  • Banking and Security firms will be putting in more bucks in IT by the end of 2017
  • The internet economy is expected to boost to nearly $150 billion by 2018
  • The Indian Healthcare IT market will grow to $1 billion by 2020
  • India’s B2B (business to business) e-commerce will hover around $700 billion by 2020
  • India’s B2C (business to consumer) e-commerce market will score $102 billion by 2018

All in all, there doesn’t seem to be any reason to doubt that the next few years will be anything less than golden for the Indian IT industry, right? Well, not quite. Every development comes at the cost of something, or someone and this story is no different.

Only recently we read, in full dread, Cognizant’s intention of losing 2% of its staff body weight. According to HFS Research, IT jobs may be skimmed by a net 4.8 lakh, after adjusting for demand and automation jobs, of its current work force, by the year 2021. The question then becomes, how do you reconcile these two conflicting point of views about the future of Indian IT industry? Does one weigh more than the other? Or is there no conflict at all and while there will be a growth in IT, there is no guarantee as to how it would translate to the security of jobs for its employees, especially the ones in the relatively low skilled IT services and BPO industry!

In this article, we have attempted to understand the possible future of India’s fifth most prolific industry (accounting for 9% of our GDP), right behind retail, agriculture, real estate and banking (Source).

Let’s explore.
 

Should IT industry workers be scared of losing their jobs?

 

The Impact of Automation

The Information Technology industry is going through a movement of gradually taking away the human touch. Automation will make the processes controlled by scripts, programs or equipments, making the human component of manufacturing redundant.

In fact Nasscom Chairman and Executive Vice Chairman of Cognizant India, R Chandrasekaran, has been heard saying at a Nasscom India Leadership Forum, “The industry is taking steps to decouple revenue from headcount growth with more automation and platform-based revenue growth”. This is executive speak for we will have to shift the jobs from people to buttons.

Unfortunately, the brunt of it will be felt by low skilled IT workers, the IT BPO industry and infrastructure management space. The evidence of which has been seen in the considerably understated hiring efforts – about 13% drop since 2015 to 2016 (Source).

Medium skilled and high skilled IT employees, whose jobs entail creative problem solving, critical thinking and analysis, and a substantial amount of human judgement, will probably see a rise in their job growth.

But how does the loss of low skilled jobs fit in with the expected growth of overall IT industry? Well, what’s important to understand is that productivity is the value of goods (services) divided by the number of workers. If there is a way to increase number of goods, their value, consistency, quality while reducing the cycle time and labor, then it would certainly add to productivity. Automation does precisely that.

Here’s an analogous proof of the impact of automation on the manufacturing industry in America, between 2000 and 2010, based on a study done at The Centre for Business and Economic Research, at Ball State University, in 2015. One of the employment related numbers showed that while the productivity per worker increased by 67.5%, in that decade, the job losses where over 5.6 million. Demand for the manufactured products, itself, was able to push up employment by only 1.2%. While trade imports, and outsourcing, accounted for 13.4% of the job losses, productivity and automation was responsible for 87.8% layoffs (Source).

Moral of the story, in layman terms, is that technology is a double edged sword. You can certainly gain in what you produce but be prepared to sacrifice the personnel involved.

Question is, would automation keep thinning the IT population?
 

The Impact of US Protectionism

These are changing, and challenging, times. USA may be yet to build its Mexican wall, however, the metaphorical wall of Immigration Reforms, keeping foreign workers away, is very much real now. Hire Americans is the running slogan, leaving thousands of people wondering if it can still be considered the land where dreams come true. The truth is, for H1B Temporary Work Visa seekers, it is where their worst nightmares are taking shape. It is not just USA with the protectionist sentiments that are sweeping the world. Countries like UK, Australia and New Zealand with previously active policies of student to work visa transitions (Read Student to Work Visa) have been gradually shutting the doors, leaving a bare minimum traffic of foreign workers to squeeze through.

Companies like Wipro, TCS, Infosys, and their likes, had been enjoying a perfectly smart business model of providing low cost engineers to the world. With US clamping down outsourcing contracts, and the progressively narrowing wage gap with increasing Indian salaries, the changing reforms are certainly putting a kibosh on hiring.

Take the report from USCIS for the number of Labor Condition Applications (LCA) for H1B Visa in fiscal year 2016 and 2017 (Table). Infosys was clearly the torch bearer, carrying over 33K applicants that much closer to their destination job. In 2017, that number reduced while the average salaries went up.

The reforms, to the H1B system, will possibly change the way minimum wage is defined for the industry, taking the cap to include only the highest paid, and highest skilled, jobs. This will certainly limit the number of employees that can be outsourced.

H1B Visa Sponsor Number of LCA in 2016 /
Average Salary
(Source)
Number of LCA in 2017 /
Average Salary
(Source)
Infosys 33,289 / $79,201 25,405 / $81,705
TCS 16,553 / $69,648 13,134 / $76,099
IBM 13,600 / $83,248 12,381 / $87,378
Wipro 12,201 / $70,306 10,607 / $72,270

 

 

What can you do about IT?

While a switch to automation or changing foreign policies may be well beyond our control, the smart survival move would be to update the marketable skills of the current IT generation. Studies have shown a doubling, of Engineering/Technology institutions, from 1,451 in 2005 (AICTE) to 3,345 in 2015 (Source). With 1.5 million passing graduates each year, the focus needs to move from quantity to quality. It is essential to train highly skilled individuals who are able to gain, and retain, their jobs on the face of a dynamic global economy.

Institutions, and IT workers themselves, should concentrate on enhancing their niche skills, according to a study published in the International Journal of Engineering and Computer Sciences (IJECS). Cloud computing, artificial intelligence and data analytics are the industry hot shots and are likely to stay for a long time to come.

According to a study by IT consultancy, Gartner, the public cloud services market will reach north of $1.8 billion in 2017 (Gartner). By 2020, the total spending on Cloud Services (BPaaS, SaaS, PaaS, IaaS, Cloud Management and Advertising) will rise to $4.1 billion from the $1.3 billion market in 2016, says Gartner. Enough reason to look towards the sky (pun intended).

As for Data Analytics, the future shows a bright sunny day with clear skies, ahead. The Indian market, according to a Nasscom Big Data & Analytics Summit, in 2014, will double its total revenue from $1 billion in 2014 to $2.3 billion in 2018. Read How to kickstart a career in Data Science?

As long as you are able to keep up with industry trends, and pay close attention to how India’s government policies are shaping up, with respect to digitization, you should be secure.

The game is in skill development.

So, just find your right fit and fight to be in IT (Yes, pun again!).

Read Alternative Careers for IT Professionals.

Good Luck!

Sources:1,2,3,4,5,6,7


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