The Indian IT industry has remained at the forefront of growth over the last few decades and in the process has emerged as a global powerhouse for providing technology oriented solutions. The industry has thoroughly exhibited rapid evolution in terms of expanding the geographic markets and has witnessed a sustained growth.
Indian IT industry has constantly moved up the value chain and provided comprehensive world class solutions serving more than half of the fortune 500 companies. Over the last couple of decades, the Indian IT industry has crafted a phenomenal success story growing at an impressive growth of over 30 % for the last three decades and exporting to over 60 countries across the globe.
In the process the industry has positioned itself as a global IT solution provider. From a mere 50 million USD in the late eighties, the overall exports is likely to cross 100 billion USD in the FY 2015. The Indian IT industry has been substantially contributing to the overall GDP.
The overall Indian IT industry is divided into four major segments – IT services, business process management (BPM), software products and engineering services, and hardware. With over 10 million people employed directly or indirectly Indian IT industry is the largest recruiter in the organised private sector and is also amongst the biggest foreign exchange earners for the country.
The intense quality and delivery models adopted by the Indian IT companies compounded in adding more value to its reputation and image which transformed in to more growth and eventually more profits for Indian IT companies.
The industry grew at a compound annual growth rate of 13.1% during FY08-13. The sector has transformed from technology providers to strategic business partners, Top Indian IT companies metamorphosed in to business conglomerates and moved ahead from setting up offices across the globe, to acquiring overseas companies. India has emerged as the best offshoring destinations for IT companies followed by China and Malaysia.
Through the years of high growth, the industry has offered a considerably wider spectrum of services and continues to contribute significantly to the social and economic growth in the country. Besides, the IT industry has also fuelled the growth in the higher education sector especially in engineering and computer science.
IT industry offered a wide variety of jobs for the interested and all the jobs in this industry have a high growth rate and salary package as compared to the job profiles in other industries.
The Indian IT industry—which grew at stupendous pace for has in the recent times witnessed a sluggish growth. The compounded annual growth rate (CAGR) for IT industry is 14% for the period 2008-2013 against 33% growth between 2003 and 2008. While it was expected to generate 230000 jobs by the industry in FY2012 the figure is 2 lakhs for FY2013, which is a far low number compared to the aspirants entering the job market. 2012 also saw the steps for huge lay-offs in IT firms, globally as well as in India.
Currently, the IT industry accounts for 7% of gross domestic product (GDP) up from 1.2% in 1998, according to a report by industry body The National Association for Software and Services Companies (NASSCOM). NASSCOM has announced that the industry’s revenue growth—which was more than 30% seven years ago—will be less than 15% in the fiscal year ending March. Many analysts think even that figure is optimistic.
Interestingly, the country’s performance in knowledge-based industries has remained as vital factor to determine its place in the global economy in the coming decades. An Organisation for Economic Co-operation and Development (OECD) report titled New Sources of Growth: Knowledge-Based Capital released in May 2013, talks of the higher growth that results from business investment in non-physical assets such as research and development, data, software and patents. In many OECD countries, business investment in knowledge-based capital (KBC) has increased faster than investment in physical capital (machinery, equipment, buildings).
In the traditional outsourcing model, programmers from Indian companies were sent to client’s sites around the globe. Working in tandem with code writers in India, they focused on stitching together and maintaining systems built around software from global software companies such as Microsoft, SAP, Oracle etc. Indian companies traditionally billed clients on the basis of staff working on their projects, linking revenue directly to headcount. In the new era of lower growth, Indian companies are trying to adjust to a completely different cost structure. On one hand the competition fosters tremendous innovation and creativity which is the hallmark of the knowledge industry. On the other, Indian companies are increasingly finding it difficult to scale up to global business models.
While, Indian IT industry will continue to find ways to peddle the talents of millions of India’s inexpensive programmers and engineers, the Indian IT companies are undergoing a paradigm shift. With the availability of a large pool of trained programmers and coders in India, the slowing down of the demand is likely to have an impact in the Indian IT industry. The top Indian IT companies have reported a squeeze in their profit due to dwindling demand from the U.S. and Europe.
The Indian IT industry is now forced to move ahead to having more statisticians and specialist programmers who can create off-the-shelf and branded software than basic code writers who can serve their client’s needs. Indian companies will be looking to compete with global IT giants and try their best to carve out their own software niches with competitive pricing and specialization. Among the new areas of focus will be software for banking, logistics and cloud computing.
Hiring set to slow down
The pace of hiring in the information technology industry, one of India’s largest job creators, is set to slow in the coming years. Industry body Nasscom estimates the sector to create 30,000, or 13%, less jobs in fiscal 2016 compared with this year, as new technologies make many roles redundant and companies improve efficiency as clients demand more bang for the buck. And, this is expected to be the beginning of a trend.
Nasscom is predicting net job additions — which exclude replacements — of about 2 lakh in the fiscal 2016 that starts this April. Even its best-case-scenario estimate doesn’t exceed this year’s 2.3 lakh hirings. The industry is set to hiring fewer staffs this fiscal.
It is not mainly due to automation but also because IT companies are trying to make their existing employees more productive. India is no more a destination of low-cost jobs and tech-enabled work will not lead to same pace of hiring. The slow pace will affect the middle management as well lower rung of employees doing work that can be automated. IT recruitment will go down sharply, which makes it harder for recruiters to look for candidate with right credentials.
In a pyramid structured company, the senior management is at the top, followed by the middle order and then the base comprising the rest. Going forward, the pyramid will become much steeper. With automation, the traditional pyramid may not look the same and the base will definitely become narrower.
Companies are looking for increased productivity from their employees, especially from the middle – management level. IT firms are looking for 30-40% productivity improvements from its employees. Today, the technology is making it possible for one person to manage 50 or 100 servers instead of 19 or 20 servers as in the past. He is more productive and you won’t need that many people. Indian It companies have begun to focus on sharper target identification and sharper accountability for its employees. Clearly, today the performance and meritocracy has differentiated the top talent. Interestingly, companies are looking for skilled people who can do things end-to-end.
The need to move up the skill sets will also lead to a change in the hiring mix and companies will concentrate more on those with deliverable skill-set than a non-performer. NASSCOM has assured to take steps to decouple revenue from headcount growth with more automation and platform-based revenue growth. But also cautioned that the pace of hiring would change. It is time to take notice of the transformational change in the IT industry.
– M D Sridharan