Hurdles Indian IT faced in 2017: Jobless growth, protectionism & automation

Representative image: Photo: iSTOCK
For decades, India's information technology (IT) services companies grew headcount year on year as they put more people on projects and charged for them from clients. 

Reality struck in 2017 when rising automation and rapid decline in orders for traditional services forced them to revisit their people-to-project model. Staring at slow business for traditional services and not enough orders in newer digital services, Indian firms saw jobless growth for the first time in their history.  

In the nine months to September, the top six IT services firms – Tata Consultancy Services (TCS), Cognizant Technology Solutions, Infosys, Wipro, HCL Technologies, and Tech Mahindra – combined saw a net addition of 19,175 people, nearly a fourth of what they added in the same period last year.

In addition, job cuts were seen across the industry as IT firms looked to shed flab as they faced pressure on projects after clients cut budgets and demanded more productivity at same costs. In turn, IT firms started embracing automation for lower-end jobs, eliminating the need to deploy people on such projects, and began rethinking their models.

Digital services for most Indian companies is around 25 per cent and growing. However, these firms still have over three-fourths of revenue coming from traditional services, which is declining rapidly. For those who work on such projects, despite investments by Indian IT firms to retrain staff, the year ahead will be much more challenging.

The year also saw the unions becoming more aggressive and seeking better work atmosphere for technology workers.

The industry also faced its worst period in a decade due to growing protectionism in the US, its main market, UK, and Singapore, where governments began cracking on visas that Indian workers used to travel to these nations to work on projects. In the US, President Donald Trump, who came to power promising to reduce moving of IT jobs to countries such as India, started new restrictions in issuing visas that discriminated against India-based IT services companies and favoured local American technology firms such as Apple and Facebook.

To counter this, Indian firms began aggressively hiring fresh graduates from colleges in the US, looking to replicate the assembly line training model that they had built to grow the outsourcing industry. TCS now has over 30,000 local hires in the US, while Wipro says half of its team in the US are local Americans. Infosys plans to hire 10,000 people in the US.

However, the battle is only half won. Firms such as Infosys and TCS are fighting court cases from local US workers who have made allegations of discrimination. A hostile government just adds to the burden.

There have been spinoffs with this move too. Global firms who are looking for talent have stepped up the setting up of captive centres or are expanding their teams in India.

Back home, TCS and Infosys underwent top management changes.

While it was a smooth transition at TCS with former CEO N Chandrasekaran being elevated as chairman of Tata Sons and R Gopinathan taking charge as the new head, at Infosys, it was the opposite.

Infosys co-founder Nandan Nilekani was forced to return to the helm to salvage the firm's reputation and bring stability back in the aftermath of the face-off between the former Infosys board and its founder N R Narayana Murthy. R Seshasayee, who was the chairman, quit after a public spat with Murthy after Vishal Sikka resigned from the company. There were allegations of wrongdoing in the severance pay given to former CFO Rajiv Bansal two years ago. Despite independent probes that gave a clean chit to the former board and CEO, Murthy insisted that the report be made public.

After his return, Nilekani gave them a clean chit and declined to make the report public citing confidentiality. He also tasked the team on a global hunt for a new CEO. The team selected Salil Parekh, a former Capgemini executive, as the next boss who will take over on January 2. 

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