Wipro will cut one third of its employee base. Tata Consultancy Services to apparently let go off 25,000 senior employees (according to Business Standard). Infosys is in the middle of a transformation aimed at limiting the number of employees and increasing the use of automation.
Is the golden age of Indian Information Technology over? More specifically, is the golden age of the Indian IT engineer over?
Yes and no.
Yes, because the indications are that IT will no longer be a mainstream, and ‘safe’ career option that it has been for the last ten years.
Let us first examine what has been for the last one decade.
Most students, especially in South India, who scored above 65% or so in Maths and Sciences were being pressured into becoming engineers.
Whether or not they got admission into IT or electronics engineering batches, they were ultimately groomed to become IT engineers. Millions of people passed out of colleges with hopes of becoming IT engineers.
Hundreds of thousands actually landed jobs in this area too. In total, around 3 million (30 lakh) people are directly employed by IT and BPO companies in India. While the number may look small, this section of the workforce contributes disproportionately to maintaining overall income levels in India. An average IT engineer in India earns around Rs 60,000-70,000 per month in a country where the average income is only Rs 75,000 per year.
In other words, an average IT worker is paid about 11 times as much as an average non-IT worker. This, in turn, has led to creating an estimated 10 mln secondary jobs, which depend on the IT industry for its sustenance. Examples include those in restaurants, car factories and shops, drivers, domestic maids, mall workers, multiplexes etc..
As Crisil pointed out in a recent report, the 3.1 mln workers in IT sector is actually 24% of the total organized private sector workforce in India.
“The (IT) sector has practically driven growth in organised private jobs in the country over the past decade. Its initial phase of high revenue growth between fiscals 2003 and 2007 also saw a substantial growth in recruitments… CRISIL believes the sector is now entering a new phase where this will gradually delink.”
So it is a given that IT will not be the defacto job generator for millions of engineers who pass out of colleges in India a year.
In fact, on an absolute basis, the number of people who are employed in IT and BPO outsourcing in India may peak at around 3.3-3.5 mln and then start declining as automation takes over.
So what happens to the engineers?
To find the answer, one has to look at what happens to agricultural laborers when mechanisation takes over. The agricultural laborers move into another sector — usually the ‘services sector’ as waiters, shop assistants, drivers and so on.
So, the engineers would too. They would move into other ‘engineering’ professions like social media management etc.. There are good things and bad things in this.
The good thing is that like IT services and BPO, the new digital avenues of job generation — such as social media marketing, analytics etc — are geography agnostic. It doesn’t matter where you sit or which country you work from, you can earn on a global ‘pay scale’. In fact, this is the key reason for the IT sector salaries being higher than those of other fields for a given talent level.
The downside is that the number of people these more ‘creative’ professions will require will be far less than what is currently required for ‘non-creative’ jobs like software testing, application maintenance and infrastructure services.
And when the number of persons required is less, India loses a large part of its competitive advantage. In other words, smaller countries such as Israel and Romania may be able to compete on a more equal footing with India in these segments than in areas where large armies of engineers are required.
Some engineers, inadvertently, will be forced to move to less paying jobs.
In a way, it will be a good thing too. In India at present, nearly all students above a certain cut-off — say the top 35% — are almost by default diverted to IT and engineering.
It is not a healthy trend.
Why? Because every country needs artists, entrepreneurs, film makers, writers and finance professionals in a certain proportion to keep its society balanced and its economic growth vibrant.
At present, a lot of people who would otherwise have become entrepreneurs and created hundreds or thousands of jobs are shackled in 9-5 jobs waiting their turns for ‘onsite’ assignments and managerial promotions.
Though this may give short-term rewards such as an inflow of foreign currency and all the attendant benefits such as urban prosperity, it is, ultimately a prosperity that is vulnerable to the next change in technology. In addition, another type of prosperity — cultural — is neglected in the race to earn dollars and pounds.
In the longer term, a nation’s prosperity — both material and cultural — is built by its entrepreneurs and creative people.
The days of easy money, however, are coming to a close for the ‘above average’ students. For the really talented and creative people, however, the coming days would offer better rewards as their efficiency is multiplied hundreds of times by technology.