30 May 17 IT layoffs – a passing phase, or a mark of permanence?

A quick glance at the headlines in the last month spells doom for the IT sector. Time and again, the media sways from one extreme to another – first euphoria, and then pangs of sorrow. However, it does seem like they might be right this time! To quote some of the headlines – Indian IT firms to layoff up to 2 lakh engineers annually for the next 3 years; Job offers shrink for IIT graduates, campus hiring falls to 66% this academic year; Bots take over jobs of 12,000 employees at Wipro.

Yes, we all do know that there is a slowdown in Europe and the US leading to declining business to our much-coveted IT firms. There has been a similar situation in the past, but something of this magnitude has never been witnessed before.

Each year around 2 – 2.5 lakh people are absorbed in the IT industry. However, new-age technologies, including automation and artificial intelligence, are trimming manpower requirements. In the past five years, while IT exports have grown at an average of ~13.5% annually, headcount growth has been only 8%.

IT companies have been continuously trying to automate their processes and that is now putting low level jobs – like infrastructure maintenance, testing, BPO etc. – in jeopardy. Some reports estimate that the net job loss will be in the tune of 4.8 lakhs in the next five years.

Nasscom has stated that employees in the IT sector need to be open to learning new skills, and estimates that between 2015-16 and 2018-19, 1-1.5 million of the IT workforce will have to be re-skilled to be competitive. However, it is not as easy as it may look.

For high-end work, where creativity, critical thinking, and analytic skills are required, it’s not very easy for people to pick up the necessary skills. The workforce for low level work – like processing and testing, that are repetitive and mundane – can be done by machines, which is already happening. But that does not mean these workers can easily adopt the high level skills to stay employed as the competencies required are quite different between various jobs in IT.

Maybe my assumption is completely flawed but there will be many unanswered questions which one can ponder over.

What about the new graduates if the industry recruitment levels are going to decline rapidly?

What are they going to do? Yes of course, they must improve their skill sets, but not many jobs are expected to be created at high level IT (definitely not at the magnitude of low level jobs). Only a few will be able to make it.

There might be some respite if the US and European economies revive as some jobs will be created. However, even if jobs do increase, the glory days of Indian IT may be over. But we are not too pessimistic about the jobs. The reason being there is a transition to newer technologies, like IoT, mobility, big data analytics, etc and today’s workforce is not able to make the transition. If every device needs software, there will be demand in the future, but for different skills. So while the industry growth rate may remain low (in single digits), after the current transition, jobs may again increase – but at slow rates.