The layoffs underway in India’s $154-billion IT sector are leaving behind a mass of people with skills that are no longer relevant
V Shoba | 02 Aug, 2017
NINE YEARS AGO, when KS Sunil Kumar quit a stable job at Hindustan Aeronautics Ltd, a hallowed public sector institution in Bengaluru, to join the engineering sciences wing of Satyam Computer Services, he thought it was the opportunity of a lifetime. His father, a handloom weaver from a village 110 km from Bengaluru, was jittery about the move, but Kumar made an informed choice. The new job would bring more money, a chance to travel the world and work on-site at the offices of aeronautics majors, and the excitement of being part of an industry that had grown by leaps and bounds since 1991. The frailty of the IT dream did not hit home even when the scandal-ridden company got acquired by Tech Mahindra. An aircraft structural design engineer, Kumar was part of a small team that worked with companies like Bombardier and Boeing on early- stage mechanical design before the software team came into the picture. He earned Rs 11.50 lakh a year and never felt redundant or under-utilised. Until one day in April 2017, when HR rang him up with the news that he was no longer relevant. There were no projects, they said, and he had best resign. Newly promoted to technical manager, Kumar, 38, had not seen the storm coming. “There were no grounds to let me go. The aircraft industry is cyclical. There may not be any active projects today, but if a manufacturer wants to design a new model tomorrow, will Tech Mahindra refuse to service them?” he says, sipping coffee from a stained cup at one of Bengaluru’s signature fast food restaurants called Darshinis. Kumar, who refused to resign, had his job terminated on June 14th with a letter reminding him that he could not work for any of the company’s clients or their associates for a two-year period. With a home loan, a child and another on the way, Kumar wants to open a workshop to manufacture quality automotive and aerospace parts. “My brothers have agreed to pay my loan and I have some money that I saved up from on-site postings. Most people in IT who lose their jobs don’t have this sort of security,” he says, shuffling in his Crocs. “What is scary is that they do not even have the skills to open a workshop or start something of their own.”
The layoffs underway in India’s $154-billion ITES sector are leaving behind a mass of people—56,000 this year alone, according to a speculative report by a business publication— with skills that are no longer relevant. According to another recent report by McKinsey, more than half of the 3.9 million people employed in the IT sector will become obsolete in the next three to four years. Those at the lower end of the skills spectrum are being edged out by a few lines of automation code. Others will be dispensed with as part of necessary cutbacks to make way for quality hires with digital-age skills. Pink slips and attrition are central to this industry of high risks and rewards, but the alarm over job cuts by Indian IT majors like Wipro and Tech Mahindra has never been this shrill. “The reason behind the panic is that mid- career IT employees are finally feeling the stress for the first time. A vast majority of people who have been fired in the current round of layoffs cannot be retrained,” says Kris Lakshmikanth of HeadHunter India. Lakshmikanth says the desperate employment climate—“Put up an ad for a testing job on Naukri and see how many engineers land up at your door”—has made people willing to take salary cuts. “There is demand for quality engineers who can fill new roles like those of cloud architects and digital data analysts, but fresh graduates and people with generic managerial experience are facing tough times,” he says, adding that hiring of freshers has fallen by 30-40 per cent over the past year.
The job cuts betoken serious structural shifts in the industry. First, with infrastructure moving to the cloud, there is demand for new value-added services like data analytics and security. “To give an example, most men transitioned quickly from tailor-made shirts to ready-to-wear, except perhaps a few British men in the House of Lords. Business applications, similarly, used to be tailor-stitched but not anymore. The top five ITES companies in India are stuck servicing these old-world customers, which are some of the biggest firms of the world. But for how long? Slowly but surely, the industry is becoming a shadow of itself,” says Sharad Sharma, former Yahoo India R&D CEO and co-founder, Indian Software Product Industry Round Table (iSPIRT), a think-tank. Unable to seize a chunk of fresh global tech spends that are increasingly being cornered by cloud companies like Salesforce and Amazon Web Services, the Indian ITES industry is no longer the racecar that stoked pride and hope, but a jalopy that can hardly take the weight of its passengers.
The alarm over job cuts has never been this shrill. Those at the lower end of the skills spectrum are being edged out by a few lines of automation code. Others will be dispensed with as part of necessary cutbacks
Second, labour-intensive BPO services like applications maintenance and support, quality assurance and testing are increasingly getting automated, wiping out cost arbitrage. In the financial year of 2017, the IT services industry added $11 billion revenues to grow at 8.6 per cent—a far cry from the 30-plus per cent growth in its first decade. NASSCOM, which delayed giving a revenue outlook by a quarter for the first time in 25 years, expects the rate of growth to sustain through the current financial year, but a report by DeepDive, a US-based IT services forecaster, has pegged it at 6.3 per cent for the top five Indian IT companies for 2017. According to the forecast, the industry as a whole, excepting MNC captive centres, is expected to grow at just 5.3 per cent. With many Indian IT stocks underperforming, companies have initiated buybacks to restore investor confidence. They are also hit by protectionism in the US, their biggest market, leading to tighter visa norms for Indian engineers and an immediate increase in American hires.
TO SACKED EMPLOYEES who were living the great Indian IT dream, the layoffs seem like an insidious plot to show profits on the books. What has made matters worse is that the HR departments of some of the top ITES firms that have let go of hundreds of people this year have handled the crisis insensitively, resulting in several cases being filed in court. Thirty-five- year-old Rohit (name changed on request), a former employee at a top Indian IT firm, had cut ahead of the competition and earned a comfortable Rs 18 lakh a year. He was unceremoniously dumped early this year, citing underperformance. “In my 12 years at the company, I have never been ranked an underperformer. I managed a team of 18 customer support executives. We were happy until last October. I partied every Friday and bought expensive cameras to indulge my fancy for wildlife photography,” he says. Rohit and seven others from his team were sent letters of termination after office hours, and, he claims, denied the courtesy of emptying out their desks. He is yet to see the six months’ severance pay the company owes him. We meet at a public park in Basavanagudi, a charming old-Bengaluru locale that seems a world away from the city’s glitzy IT parks. Rohit wears a tight T-shirt over bulging muscles, and jogger trousers cuffed above white sneakers. Computers were his raison d’etre when he picked engineering over other disciplines. After graduating from a middling college in rural Tamil Nadu, however, he could only manage to snag a job as a software support executive. “I had spent a lot of time online, teaching myself new software skills and even digital circuit design,” he says. “But there weren’t any technical roles available for someone with my profile.” He ploughed on and became a manager in six years. “There is something fundamentally wrong with the way Indian IT companies are structured. Even if you are in a technical role, you will be pushed to take on a managerial one after five years. You will get busy organising meetings and learning communication and business skills, turning your back on new and relevant technology. One day it will hit you that you ceased to be an engineer long ago.” Rohit says he has put off plans to marry his girlfriend of six years. “I feel like I’ve lost my youth to the industry.”
I encounter other chilling stories that define the current mood in Indian IT. Like that of a team of 14 young engineers at IBM Bengaluru that was fired en masse simply because there would be no consequences—hired through a staffing company, they were not on IBM’s payroll, and as such, fall under the category of unorganised labour. (A headhunter says 10-20 per cent of employees at global IT companies in India are hired through staffing firms.) Or the case of a single mother who is reeling under the shock of downsizing her team of 32 engineers to 18 in less than a year, fearing what lay in store for her now. Or a 29-year-old woman from Manipur who was forced out on account of a ‘lack of new projects’ despite undergoing a three- month inhouse re-skilling programme at a top IT company. “Product companies are the future of Indian IT. Those who have re- skilled themselves are abandoning sinking ships and struggling to get on the product bandwagon,” she tells me on a call from Chennai where she has applied at Freshdesk, Unmetric and Amazon.
Now that the dream run has ended and upward mobility is harder than ever, mental health professionals are predicting an epidemic of mid-career suicides within the next year
The demand-supply asymmetry in the IT sector began over a decade ago, when NASSCOM and the Indian Government, predicting a shortfall of half a million engineers, made a case for more engineering colleges. Now over 6,000 of them peddle phony dreams in mofussil India, even as net hiring by Indian IT companies has dropped to 130,000-150,000 a year—a tenth of the number of engineers graduating every year. Starting salaries have been stagnant at Rs 3.2lakh-3.5 lakh per year for five years now, and excess supply has served as an excuse to mask the underlying problems in the industry. Until recently, IT was still the calling card for middle-class prosperity. It was a merit-based system where you were limited only by your ability to embellish your skills. Now that the dream run has ended and upward mobility is harder than ever, counsellors and mental health professionals are predicting an epidemic of mid-career suicides within the next year.
A study of 6,000 employees conducted last year by 1to1Help.net, a counselling company, on ‘The Mental Health Status of Employees in Corporate India’, found 80 per cent of the respondents exhibited symptoms of anxiety, and 55 per cent had symptoms of depression. The study also noted that the risk of suicidal behaviour had gone up from 2.1 employees out of 10 in 2008 to 8.21 in July 2016. According to another report, over 30,000 professionals from India’s Silicon Valley have consulted Doctor Insta, a telemedicine app, in the last six months complaining about depression related to job insecurity. A mental health startup, YourDost, recently hosted a three-day campaign to counsel professionals who had been laid off, and in that short period, received over 1,000 enquiries, including 260 calls and around 800 chats, many of them reporting depression and anxiety.
The Forum for IT Employees (FITE), a group formed for the first time ever to help IT employees file cases of wrongful termination and to mobilise techies to raise their voice against exploitative practices in the industry, says it is bracing for a ‘farmer suicides-like scenario’ in the coming years. N Rajesh, an organiser of the Bengaluru chapter of the FITE, says they get calls from aggrieved employees on a daily basis now. “But when it comes to taking action, engineers are reluctant. They won’t take to the streets or even come along when we meet Minister for IT Priyank Kharge,” he says, admitting that unionising IT workers was almost as hard as negotiating with corporates. Other than the Chennai chapter, FITE chapters across India are yet to register as unions. “I have been telling them, ‘Let’s run a marathon, or whatever it is we techies do, to get companies to help us adapt to the changing times’,” Rajesh says.
Reports of depression among IT employees are exaggerated, says TV Mohandas Pai, chairman, Manipal Global Education. The two big companies, Infosys and TCS, have dismissed speculation of layoffs and said they have only followed routine annual performance appraisal processes. TCS, India’s largest IT company, had 387,223 employees at the end of March 2017, as against 353,843 a year ago, a growth of 9.5 per cent. Infosys said it was going to hire 20,000 in 2017-18, but the total number of employees at the Bengaluru-based company stood at a little over 200,000 at the end of March 2017, recording a mere 3 per cent increase from last year’s strength of 194,044. Revenue per employee at these companies is on the rise, suggesting fewer employees per project, and they seem to be investing in future-ready technologies. Artificial Intelligence is yet to be deployed for large-scale projects by Indian IT majors, but aspects of machine learning-based automation have crept into everyday processes, making thousands of jobs redundant. Infosys CEO Vishal Sikka, the champion of AI in India today, has, however, said that automation has helped eliminate around 11,000 full-time employees and repurpose them in ‘valuable and rewarding’ tasks.
The Indian IT industry has been resilient through all the seismic events in its history. It made the shift from mainframe coding to client server systems, braved the dotcom bust and the economic hurricane of 2008, and turned tech catastrophies like Y2K to its advantage. But the inevitable shift to cloud, Internet of Things, big data and other new technologies is proving harder than anything the industry has come up against. Internal re-skilling programmes at Infosys, TCS and other IT majors have supposedly retrained thousands of employees who have been laterally shifted to higher-value roles. And yet, many other employees may never be deemed fit to work on a digital project. “We are not saying that all those who have been let go of can be re-skilled for new roles, but we think the next $100 billion in IT exports will come from a re-skilled workforce,” says KS Viswanathan, vice-president and head of industry initiatives, NASSCOM Bengaluru. “The velocity of change is undeniable but one does not kill a milking cow. Legacy business will remain the mainstay of Indian IT even as it declares war on non-performance and replaced low-skilled jobs with higher-value jobs.”
While the short-term alarmism over job cuts may be unwarranted, the bigger picture, where conventional IT jobs will slowly melt away, looms over the horizon. In the years to come, unemployed and unskilled engineers—to paraphrase Churchill—will hang like a millstone around the neck of industry. “It is a cartoon phenomenon where you have gone off the ledge but it looks like you have not started falling,” says Sharad Sharma. It is, equally, a time for renewal. As Indian engineers brace for a steep fall, the smartest of them are shedding the baggage of the past and floating on clouds fluffy with fresh opportunity, looking for a silver lining to dispel the gloom.