Indian IT Engineers: End of the Road?

Indian IT Engineers: End of the Road?

Mohit was a lower middle class boy from Bijnor in UP. Coming from such a semi-urban hinterland, it was not unexpected that his family and upbringing had ensured that exposure to a ‘modern metro’ life was minimal for Mohit. His surroundings had ingrained on him that a passport to a better life was to become an engineer. More precisely an engineer in the IT sector. A graduation course from one these fledgling private universities in Noida was followed by a job in Wipro in Bengaluru. And the first 6-7 years passed off well—Mohit got married, bought a car, got annual salary raises, bought a bigger car and then booked a flat. He and his family were living the Bijnor dream. Till March 2017 when Wipro handed him the pink slip. Not only did Mohit lose his job, after desperate attempts in Bengaluru and other cities e is getting 1-2 job offers from ‘unknown’ companies with salaries not even half of what he was getting at Wipro. Unable to pay his flat and car EMIs and maintain his family, Mohit is back now in Bijnor supporting his father’s small shop in the local market.

Now let’s hear about Anuja from Vijaywada in Andhra. She wanted to be independent from the first and work in an IT company as an engineer in a larger city. All noble intentions, no doubt. Only like Mohit her academic performances ensured an engineering degree from one of these newer colleges in Telagana. And for 6-7 years she enjoyed her independence in Tech Mahindra in Pune (even purchased a flat) and was splurging on Flipkarts and Myntras even while sending monies and goodies back home. Till like Mohit, she got the pink slip this April. With a 20,000 flat EMI on her head and no suitable job in hand, Anuja has surrendered her financial independence and had come back to Bijnor.

The third story is of Pradeep from Begusarai in Bihar. Son of a landed gentry (but not with much exposure), he joined one of those engineering colleges of Maharashtra after paying a substantial capitation fee. And then seemed to have hit pay dirt with a job in Cognizant in Chennai with an assurance to move to Atlanta in the US in an year’s time. True to the stereotypical North Indian culture, Pradeep’s father had fixed up his marriage and was negotiating a whopping dowry amount for an ‘IT engineer damaad and soon-to-be-Americanized’. And then in April, Cognizant fired Pradeep; the American dream vanished, the dowry rupees were suddenly withdrawn. Last heard—as Pradeep refuses farming work, his mama is trying to land some banking job for him in Patna.

Typical stories, but all three are real-life and has happened with these large IT services companies laying off people en masse in the last few weeks. And many say this is just the tip of the iceberg; the bloodbath has just started and more than half of the current IT sector engineering workforce will soon end up losing their jobs. Scary picture, right?

And many are putting fingers ay different reasons for this debacle and impending doom. Donald Trump and his H1B fiasco, the IT services companies not re-inventing themselves, pathetic quality of engineering colleges leading to unemployable engineers, India’s socio-economic situation etc. etc. While probably a combination of all these factors is responsible, let’s first look at some of the heart-wrenching and fearful statistics.

(Names with-held on request )

Where is the Bloodbath happening?

These seem tough times for IT and telecom engineers in the country. IT industry is set to lay off up to 2 lakh engineers annually for the next 3 years. Several large IT and telecom companies are in the process of laying off employees on a scale not seen since the 2008-10 downturn. Those taking the hit first are mid-and senior-level professionals, however, many lower-level employees like Mohit, Anuja, Pradeep too are likely to face the axe in the coming months.

Cognizant appears set to cut at least 6,000 jobs, which represents 2.3% of its total workforce, as the IT MNC struggles with growth in an IT environment that is fast shifting towards new digital services. The company is said to be looking to cut roles that have become redundant due to the impact of automation on lower-end IT jobs. The company recently announced a voluntary separation program for directors, associate VPs and senior VPs. Some 1,000 executives are expected to be impacted by this. Some Cognizant employees, through the Forum for IT Employees, have also filed a petition with the assistant commissioner of labour arguing that they were being forced to sign voluntary resignation letters.

French IT services major Capgemini is said to be letting go off nearly 9,000 people, or nearly 5% of its workforce. A large part of this are erstwhile employees of Igate, the company that Capgemini acquired in 2015. Capgemini had reportedly asked over 35 VP, SVPs, directors and senior directors to leave in February and 200 people were asked to leave at one of its offices in Mumbai.

Indian IT giant Infosys too is likely to announce job cuts in the coming days. According to sources, nearly 1,000 employees in job level 6 and above (group project managers, project managers, senior architects and higher levels) are expected to be asked to leave. Managers at these levels have been asked to identify, in terms of performance, the bottom 10% of people reporting to them. Late last month, Infosys is also reported to have asked some 500 employees to leave, citing 'non-performance' as issue. On its part, Infosys said that its performance management process provides for a bi-annual assessment of performance.

India's third-largest software exporter Wipro too is said to have initiated moves to trim excess layers of managers and executives inside the company and make the organization leaner and more decentralised as part of CEO Abidali Neemuchwala's broader strategy.

As part of this de-layering exercise, Wipro is removing additional layers such as that of a "project leader", which are increasingly being rendered redundant as automation kicks in big-time and newer, more specialised roles emerge in India's $160-billion IT industry.

Tata Teleservices recently fired between 500 and 600 employees. As many as 500-600 employees are said to have been impacted by the layoffs in sales and other related functions, according to people familiar with the matter. The lay-offs have been done across locations. The severance package being offered to the employees impacted by the decision is one-month's salary for every year of service.

In February this year, cellular services major Aircel reportedly gave pink slips to 700 of its employees -- around 10% of its pan-India staff strength - in its first stage of manpower downsizing amid a huge wave of consolidation that is going to engulf India's telecommunication sector. ​

In February end, Indian e-tailer Snapdeal confirmed that it is cutting jobs, but declined to specify the exact number of employees affected by the decision. The company is said to be cutting 30% of its workforce.

The move is expected to affect about 1,000 employees directly employed by the company in its e-commerce marketplace while thousands of contract workers in its company’s logistics division too may be let off.

Four months after Chinese billionaire Jia Yueting acknowledged his company LeEco was fast running out of cash, the erstwhile high-flying company fired 85% of its India staff and allowed two leadership exits in what the industry says is a precursor to its eventual withdrawal from the South Asian nation.

Ethnic online retailer Craftsvilla and fashion portal YepMe are among the startups that have given pink slips in the recent weeks. Craftsvilla is reported to have laid off more than 100 staffers in recent weeks, including its entire product and technology teams and most of its operations and marketing teams.

5 Reasons Why Indian IT Engineers are Doomed

Reason 1: Many analysts are loathe to say this out loud but India’s socio-economic situation is largely responsible for this mess. For most of India’s large lower middle class and even a large part of the middle class (many in metros but mostly from Tier 2/3/4 class cities), the be-all and end-all of their aspirations is getting an engineering degree at any cost and then a job in an IT services company. That will lead to an all-American dream, good times for the family (which they have not been exposed to most of their lives), fat dowries (depending on which part of India), a move away from their smaller hometowns---in a sense, a raise in social status.

Because of their lack of exposure, these families often put pressures on certain issues. Like going for engineering from anywhere possible (leading to 95% Indian engineers being unemployable as per a recent survey), not knowing about alternate and more fruitful career options available today, and then instead of their own start living the dreams of the families (flt, car, marriage, dowries etc.). Not surprisingly when such crisis comes, neither are the Mohits and Pradeeps prepared for it, but even their families can provide little support. Worse, many of them give them more sense of failures.

Reason 2: Pathetic standards of engineering colleges—mostly private and other fledgling ones are producing sub-standard engineers. Let me say with conviction, there are only a handful of good engineering colleges in the country. All the IITs, all the NITs, a few universities more than 100 years old and a few isolated instances. Rest all are sub-standard.

What that means is poor quality of teachers and teaching, no standard equipments, no industry orientation amongst others. These IT services companies had needed ‘technical coolies’ for the last two decades and they have kept on hiring more and more of the same from these colleges and universities. In the process, they have ruined the real scientific aptitude of two generations. This craze to become a ‘sub-standard engineer’ to land an IT job has today completed the full circle. Business necessities are today forcing these IT services companies to let these coolies go; without demeaning anybody, now where do you expect these ‘coolies’ (albeit technical) to find meaningful jobs? And if 6 lakh jobs go in the next 3 years, expect a terrible situation in the country—not just farmer, but middle class suicides etc.

Reason 3: The writing about the changing complexion of IT and services outsouring has always been on the wall because of the changing nature of technology and its practice. A US research company had said last year that by 2021, India would lose 6.4 lakh jobs in the sector - on an average, more than a lakh a year. However, when it begins to happen, it’s like a savage storm hitting the shore. Losing one’s job with poor prospect of finding another one is devastating. Pink slips are being handed to the employees with a demoralising advise that they hadn’t performed well. When it happens to be people in their 30s and 40s, it’s far more devastating.

What the companies are doing, in their perspective, is unavoidable because they have to cut the flab. But the process is unethical and against labour rules. Last year, in the wake of the TCS layoff, the Tamil Nadu government had clarified that employees can form trade unions to redress their grievances by invoking the Industrial Disputes Act 1947. Three years earlier, Karnataka had tried to lift the decade-long exemption from the Industrial Employment (Standing Orders) Act (1946) that it had granted the IT industry for more than a decade; but had to retreat within a few months under pressure. Given their contribution to the economy and the job market, and their growth potential, the state and central government have always treated them with remarkable exceptions. This blanket exclusion will certainly come under pressure if layoffs become a norm.

Reason 4: Not that the industry and the policy makers didn’t know that there would be an end to the IT-outsourcing and BPO (Business Process Outsourcing) honeymoon sooner than later. The forecast of losing jobs was based on the changing nature of technology in the industry. Automation can easily skim off about 30 percent routine, assembly line code-writers and another eight percent semi-skilled employees. Unfortunately, bulk of the IT-hire in India are for low-paid, low-value software writing and testing, a sizeable part of which could be taken over by machines. However, what’s of value will be big data, analytics, artificial intelligence, Internet of Things etc. Sadly, the new engineering graduates have no idea what they are and all they aspire for is to get mass-recruited for the low-value jobs that are on the chopping board now.

Reason 5: If machines and artificial intelligence always remained a threat to the labour-intensive Indian IT market, what’s making the threat more imminent now is the rapid roll out of protectionism by the Donald Trump administration in the US. There’s immense pressure on Indian IT companies to replace onsite Indian workers with Americans, and Cognizant is already doing it. According to the company CFO, hiring Americans for onsite assignment - instead of bringing Indians on H-1B Visa - doesn’t have major financial advantage any more. If the low value jobs of code-writing and testing can be handled by machines and onsite jobs can be managed by Americans themselves, it’s bad news indeed for Indians.

Seemingly, the Indian companies don’t care much about the job-losses because in most locations they are practically untouched by conventional labour laws and unionism. What’s more important to them is maintaining their double-digit growth and meeting the quarter-to-quarter projections. So, if Trump wants them to hire Americans, they will hire Americans. Infosys has already announced they would recruit about 10,000 people in multiple US locations, while Cognizant is also hiring Americans lest they should lose their existing outsourced projects.

With pressure of local hire mounting, many American companies that were dependent on offshore talent, including for back office work and knowledge processing, have started hiring directly. It would also translate into job losses in India. In fact, the threat is two fold - Indian companies losing contracts and hence laying off people, and Indian companies voluntary hiring Americans to keep their contracts and hence culling unwanted employees back home.