For the past few months there has been a lot of buzz going around about the upcoming downturn in the Indian IT Industry. A lot of this has been driven by the new H1-B visa restrictions that the Trump administration will bring. The recent #ModiTrumpMeet did not yield much for the visa issue despite it dominating the conversation in media. But, more than increasing protectionism or new visa rules, the real challenge facing the industry is the disruption caused by automation and digital transformation.
This conversation is not new. For more than a decade it has been debated that India’s tech sector is providing relatively simple IT services, mainly the same back-office operations it started with & its large resource pool was moving forward but, taking its time. IT expertise in India was always going to move up the value chain, but When? was the big question.
In the meantime, automation was slowly and steadily churning jobs. Smaller copycat IT service booms occurred in the neighboring countries of Philippines, SriLanka & Pakistan. But, the pie was big enough of all during the good times. Although, the traditional IT services work remains their ‘bread & butter’, there is more pressure on profitability as competition for such contracts intensified. The recent round of restructuring happening across the board is testament to this.
Today, the Tech industry is working overtime to develop competencies/re-skilling in AI, Machine Learning and IOT. Cloud computing for e.g. has reduced infrastructure services opportunities. And the competition is not only coming from their peers, but from new product companies/Startups, which never existed a decade ago. Increasingly they have developed capabilities and started challenging the IT behemoths.
The IT Industry employs about 3 million people and thrice that number indirectly. The Indian economy has depended a lot on this industry for its growth. But for this to continue, the industry is going through a complete mindset change.
> There are 4 aspects where the industry focus will probably shift to:
1) Developing New Competencies:
The need for billability has for long dominated the way associates & their managers prioritized their time. On the job learning was how a lot of engineers gained new skills. This practice has also continued as clients preferred engineers with more work experience with some tool than having some knowledge of multiple software tools. This worked as long as new tools where incremental improvements of traditional softwares developed in the 80s & 90s. But this has changed now.
AI, Deep learning, Machine Learning, Cognitive Computing, Chatbots, VR, Robotics, IOT, …have only matured in this decade. Getting engineers with essential experience will require companies to take a pause and provide classroom hands-on training of products, technology & most importantly detailed case studies of projects that a few teams might have done in any of the above domains. E-learning might not be sufficient. All these changes have already started happening.
In addition, companies are coming up with a whole new set of enterprise products to beat their competitors. This requires focusing more on time bound internal projects & in-house hackathons. Again, engineers & managers will have to be incentivized to take up such projects by assuring recognition, monetary benefits and future projects.
All this may affect billability and in the short term turn revenues. But this will be a small price to pay for future gains.
2) Talent Acquisition:
IT Companies hire students from colleges across the country in large numbers. Attrition to other companies and recruits leaving for higher education is pretty common. There is a need to develop specialization among the new hires, who are willing to stick around for a longer duration.
Categorization of new recruits is underway to some extent. There will be those who join to gain a few years of experience and are interested in pursuing further studies. Others would want to pursue a long-term career in a technology profile. The students in the latter category can have a longer term contract and different growth path. Something in the lines of identifying future attrition at an early stage may help. A voluntary disclosure scheme - anyone!!.
In addition, during the training and initial project for both tech and managerial candidates, an Earmarking scheme (used extensively by intelligence agencies) could be used to identify exceptionally talented recruits. Such recruits could be given opportunities to work on the latest technology projects and have an accelerated growth path within the company.
55 new job roles identified across 8 technologies - #NASSCOMLive
3) Consulting & Domain expertise:
The industry has been trying hard to make inroads into the Consulting world for quite some time. However, IT Consulting with focus on technology remains the primary source of revenue for now. Consultants & Domain experts gain knowledge of technical tools as they work in the same way technology experts gain understanding of the business side. There is a growing demand for all-round experts who can be business experts as well as technical experts. It is essential to prepare for this eventuality.
Business Consulting opportunities will flourish when IT companies develop internal industry specific management expertise. Rather than asking what client wants, Consulting divisions have started telling what the company can do for the client.
Following what the McKinsey’s of the world have done with an IT twist - For eg. Creating IT strategy for a decade across Business functions intertwined with the client’s business strategy. This can only happen if there are proprietary methodologies, practices & enterprise level products developed and made available across the Consulting practice. Give it 5 years and the tide will shift.
4) Industry Overhaul - New Specialization:
Focus on product development will require companies to get high-value recruits with
Experience/Masters/PhD degrees in niche areas like UI/UX design, Neural networks, Natural Language Processing, IOT, AI & robotics. There will be a need for smaller agile teams.
I will also not be surprised if smaller IT companies will act as subcontractors, taking over more of the traditional work like Application management, product maintenance & testing. Bench strength will matter less and less if this becomes a reality.
Although, the transition is disruptive and to some extent painful, it will result in organizations having lower costs and higher profit margins. The industry has the experience and the right talent to make this work. Rather than a gloomy outlook that many in the market are worried about, these changes will benefit Tech in India for the greater good.