Don’t Blame Government For Layoffs In IT Sector
June 10, 2017
As all of you would have probably heard by now, there’s been an alarming spike in the number of employees getting laid off in the IT Sector. With IT giants such as Wipro and Cognizant laying off as many as 500 and 10,000 employees respectively, Tech Mahindra letting go off 1500 of its employees, and with the IT industry itself being responsible for providing jobs to more than 37 lakh Indians, seeing this negative trend is rightfully a cause of concern for all. What’s ignorant, naïve and even dubious, however, is to blame the government for these layoffs. While sections of the leftist/liberal media are trying to have a field day with this development by trying to pin it on the Modi government, the real reason for this trend has actually got nothing to do with Modi and everything to do with a gamut of external factors. Allow me to explain this further.
First and foremost, perhaps the biggest contributor vis-à-vis the surge in layoffs in the IT sector is geopolitics. The policies that are being drafted and revamped around the world have had a direct and drastic impact on the IT sector’s functioning in India. For instance, let’s take a look at the large role that the Trump administration has played here. Trump’s decision to introduce a bill that would more than double the minimum wages of H1B1 visa holders to $130,000, thereby making it that much more difficult and expensive for American firms to hire Indian employees, is obviously showing its effects here. Additionally, his ‘Hire American’ pitch has also had an impact on American companies, who are now looking inwards to build their workforce. But it isn’t just the Trump administration that is responsible for the geopolitics leading to layoffs in in the IT sector – Australia too has announced scrapping of its 457 Visa Programme that allowed their businesses to employ foreign workers for four years in skilled jobs.
In addition to geopolitics, India’s economy, which has been steadily growing for two decades, is reaching a natural stage of a plateau. It’s also important to understand and accept the fact that the IT sector itself is going through a transition, one which every industry goes through every 20 odd years, and that it’s neither progressive nor helpful, to be in denial about it. Anyone who has studied economics will understand that it’s natural for it to be at this stage, regardless of the government in power. Then there is the nature of the IT industry itself – which always makes it more susceptible to a surge in layoffs like the one we’re witnessing today. Technology is rampantly changing and simple tasks are getting even more simplified, thereby requiring lesser human resources to be implemented effectively. These boosts in technology lead to a paradigm shift from labor-intensive processes to automation, which then leads to lesser jobs. While those working in the IT sector have always been at risk of having their jobs be threatened by automation and Artificial Intelligence, the marvels of modern technology (getting more advanced day by day) have amplified this threat to an all-time high.
Meanwhile, tectonic shifts were taking place in the companies that were outsourcing to Indian IT firms. While the Indian IT companies looked to make money in newer shores, American companies started taking a smarter approach. From setting up development centres in India to luring Indian talent by asking them to head important projects, American companies started doing their best to become more lucrative than their Indian counterparts. Slowly, the work based on which the Indian IT companies had thrived was getting automated or entrusted to the Indian development centres, once again leading to a reduction in jobs. And while there was still enough work to be outsourced, those jobs required more in-depth technical knowledge, something that most Indian employees just weren’t trained for.
Apart from geopolitics, the threat from automation and AI, natural transition and the economic plateau, there’s also the case of human resource management. There are many lower-level jobs that are created because of the IT sector that isn’t even recognised as such and so isn’t accounted for, thereby reflecting misleading numbers vis-à-vis the number of people being employed. Think, for instance, about the peons, the cleaners and the security guards hired by IT firms – many of these are hired through external agencies and so aren’t directly reflected as being employed within the IT sector.
Finally, there’s the case of existing employees not being able to keep themselves up to date with all of the latest advancements in technology taking place. Software development towards implementation of CRM for BFSI vertical has given a traction to service centred IT business in India. And since the focus of the IT industry is now towards the new wave of digital transformation, the existing manpower needs to be repurposed or reskilled to keep up with the technological advancements occurring in the IT industry. So in a way, one can look at this surge in layoffs as a temporary phase, one that will pass by soon enough. Having said that, it would be foolish and ignorant to believe that we don’t have to take necessary steps to remedy this trend, and as it happens, there are a few steps that will actually help us avoid such a scenario in the future.
Firstly, it’s now absolutely imperative and of paramount importance to implement and enforce PMA. With Donald Trump, Australia and even Europe making it clear that their priority is going to be to their citizens first and that they’d be drafting and encouraging policies that will make it difficult for American, Australian and European firms to hire Indians, depending on these international companies will be an exercise in futility. In fact, what we really ought to do is start encouraging domestic IT firms to set up shop and no longer give them the short end of the stick at the expense of their Western counterparts. I cannot stress this enough, but the need for implementing PMA is paramount and urgent. In addition to this, India also needs to create an enabling environment for professionals, who can create SaaS companies/cloud companies. This can be achieved with the Government supporting Indian Cloud companies by giving them business, rather than stopping it through its financial criteria. Doing so will give these Indian companies the financial muscle to beat their Western counterparts in their own markets.
Apart from implanting and enforcing PMA and creating an enabling environment for professionals, the government can also give a boost to entrepreneurship, so as to create new avenues of job creation in the IT sector. For instance, fields such as, but not limited to, ‘New Modes of Transportation’, ‘Space Exploration’, ‘Renewable Sources of Energy’ should be given a massive entrepreneurial boost by the government. Additionally, the HRD ministry can take an integral step here by making Mathematical Reasoning, Logical Reasoning and Data Interpretation Skills part of the school curriculum right from the eighth standard. Finally, some steps need to be taken at a personal and individual level as well as the government can only do so much. It’s imperative that those working in IT sector start adapting to new technology at an individual level, so as to not be underequipped to do their job effectively and efficiently. Learning new skills and being up-to-date with all of the technological advancements taking place will go a long way here.
न कश्चिदपि जानाति
किं कस्य श्वो भविष्यति ।
अतः श्वः करणीयानि
कुर्यादद्धैव वुद्धिमान् ॥
(No one knows what will happen tomorrow. So, wise people do today what should be done tomorrow.)