Beware! Threat to jobs in IT sector from robots, visa reforms is closer than you think
Sanjeev Sharma (name changed), 43, thought his life is all set after he secured a job at a reputed IT giant in Bengaluru. His career was moving as he desired. Sharma bought a house on hefty easy monthly installments (EMIs), admitted his kids into a reputed, expensive school apart from buying a SUV vehicle but through financing. “I went into my boss’ cabin for a performance review. Sitting with a sad face, my otherwise cool boss told me that management has cost optimization targets and unfortunately, they have decided to let go some employees and my name appears in the list of those employees,” Sharma said with a smile on his face but a feeling of disgust.
Sharma is not alone. Beware, IT professionals. Threat to your jobs from robots and changing global headwinds is closer than many of you think. While United States, United Kingdom, Singapore and other economies may no more create jobs in bulk for Indian IT professionals, robots are nipping at the heels of not only blue-collar workers in other industries but also white-collar IT professionals who once presumed that earning a certification or degree would always keep them ahead of these so called machines.
Expect tech firms to continue the sacking spree in the name of cost optimization and non- performance. Blame the hovering threat from visa reforms and phenomenal technological up gradation that may trigger more job losses.
Number crunching: A tragic tale
The $155-billion IT services industry, which is a symbol of India's increasingly outward-facing economy, may never create as many jobs as it created in past three decades.
The industry which employs about 4 million people in India posted an impressive 40 per cent growth in new jobs creation in the month of April 2016, as per Naukri Job Speak Index. The sector was creating massive employment opportunities for professionals in IT-Software since last three decades. However, the times are changing. The latest report, by Naukri.com, indicates that IT-Software posted bleak 8 per cent growth in numbers of jobs created in February 2017 as compared to January 2017.
The hiring at IT majors including the top five IT services companies - Tata Consultancy Services (TCS), Infosys, Wipro, Cognizant and HCL Technologies is muted - these companies in total, hired around 60,000 engineers from campuses in 2016 compared with more than 100,000 last year.
Industry body Nasscom said in its annual review that while the industry grew at 8.6%, jobs grew only by 5% in the fiscal year 2016-17. Nasscom also said that there is going to be a 20-25% reduction in jobs over the next three years.
What the H1B visa reform holds for you?
Of course, the lesser number of jobs. While the complete clarity is yet to be attained on H1B visa reforms, probably from the next year, the visas could go to applicants with the highest wages and skills, and the number of H-1B visas issued may also be reduced since the focus is to “hire Americans”.
The large supply of technologists from India, eager to work in the US, will squeeze to minimal.
The new guidelines will increase costs for Indian information technology (IT) companies and are likely to hit growth in the coming year.
The data by Nomura Research, based on data provided by Foreign Labor Certification (FLC) Data Center for the period October 2105 till September 2016, points that 40-60% of labour condition applications (LCAs) filed by Indian IT firms were in the entry-level or Level 1 category last year.
However, with the need for employing local candidates, companies would only be able to import highly expertise, niche skilled talent from India where companies would have no choice but to use the Level 2 or a higher category henceforth, pushing the spend by 20-25% with each increasing level. This is push companies import lesser Indians.
However, the move will be good for some Indian employees. If, starting in 2018, H-1B visas are issued to those with the highest wages and skills, Indian professionals could benefit. Indians graduating with advanced degrees in the US and highly skilled professionals in India applying for H-1B jobs should then be able to find jobs with higher wages and better working conditions, experts believe.
Trump has signed an executive order that seeks to make changes to H-1B visa programme that brings in highly skilled foreign workers.
The US grants 85,000 H-1B temporary visas to high-skilled foreigners every year — 65,000 hired from abroad and 20,000 from those enrolled in US colleges. Because of the high demand, a lottery system is used to pick qualifying petitions.
Visa Woes : Doomsday for Indian outsourcing industry
Indian IT companies are gearing up for challenges in labor management along sharp increase in the costs. The tech firms earn 60% of revenues from the American market, with 20% from Europe and the remainder from other countries.
The confusion over H-1B visa reforms had sent company stocks southwards. As much as $6.4 billion went up in smoke : While Infosys stocks fell by 4.5%, Tata Consultancy Services contracted by 5.5%, Tech Mahindra squeezed by 9.7%, HCL Technologies fell by 6.3% and Wipro shrunk by 4.1%. Stocks of other mid-cap IT companies like NIIT, Geometric, Mphasis, Mindtree and KPIT Technologies plunged by 4%.
Moreover, the number of US employers seeking H1B visas for out-station employees has been reduced. Against year 2016, the employers applied for 16% fewer H1B visas for highly skilled workers. Employers seeking visas for 2017 have submitted 199,000 applications compared to 236,000 in 2016. Indian IT firms like Wipro, TCS, and Infosys, which bank on cheap Indian workers, will be hit. Indian IT firms earn $60 billion per year from the US market. They provide services to top American companies. Every year 85,000 H1B visas are issued, including 20,000 for students. Indian IT companies make up for 17,000–18,000 of H1B visas every year.
Trump’s move should be seen as an indication for tough days ahead. “Lot of countries will now adopt nationalist approach of sourcing talent locally. Advice is to groom local talent and upskill the existing employees,” Jeff Pon, chief human resources and strategy officer at US based Society for Human Resource Managers (SHRM).
Moreover, countries such as Singapore, Australia, and New Zealand, Great Britain are also putting visa restrictions. No worker visas have been issued by Singapore for Indian IT professionals since January 2016. “The time has come to find people who may not fit the role completely but atleast 70% and then groom them,” Pon said.
United Kingdom has also stopped issuing short-term, temporary visas for all tech workers in their country. Otherwise, Tier 2 visa under the sub-category of short-term staff was much sought after visa option for Indian IT firms.
Industry estimates peg that about 30,000 Indian workers are based in the UK on the visa. However, once the visa expires, it may be never be renewed. Also, for approving work visa, the minimum wage requirement has now been increased by 61%, impacting the revenue of IT firms.
Decoding the impact of automation and robotics
The traditional appetite for jobs is decreasing by the day as IT industry tries to reinvent itself through automation, artificial intelligence (AI) and machine learning,
Automation threatens 69 per cent of the jobs in India, while 77 per cent in China, according to a World Bank research which has said that technology could fundamentally disrupt the pattern of traditional economic path in developing countries.
A quarter of people losing their jobs because of automation by 2021 will be from India, according to research by human resources (HR) solutions firm PeopleStrong. According to the company's research, India will make up around 23 per cent of jobs to be lost to automation globally by 2021.
Party is over, confess IT giants
As the IT industry is looking ahead at a shift in nature of work due to increasing use of latest technologies, French IT firm, Capgemini, which employs nearly one lakh engineers in the country, said of late, that a majority of the Indian workforce cannot imbibe the required emerging skill-sets, and had warned of high job losses at the middle and senior levels. "I am not very pessimistic, but it is a challenging task and I tend to believe that 60-65 per cent of them (workers) are just not trainable," Capgemini India's chief executive Srinivas Kandula said in February.
Leading recruiters in IT including Infosys, Tech Mahindra and Wipro echoed similar concerns. "We are now not going to see increase in hiring numbers like we posted in the past. Lateral hiring will be fairly flat. IT companies were adding jobs by over 30 per cent year on year. Those days are gone and requirements are changing at fast pace," said Sucharita Palepu, global head, HR at Tech Mahindra Limited.
"Clients have become smarter. Automation has reduced the demand of workforce for some functions, niche skilled candidates are only sort after. There is no point in hiring in excess and then laying off people to make business sense," Sunita Rebecca Cherian, vice president HR, Wipro Limited to BW Businessworld. "There is no option for IT professionals but to get them updated on skills. Tough days are here and no company is going to feed employees which are not relevant to the business needs."
Last year, for the first time in over two decades, two of India's five largest software services firms, Wipro Ltd and HCL Technologies Ltd, reported a net decline in direct hiring. Meanwhile, Tech Mahindra Ltd saw a decline in its existing workforce in the January-March period.
"While my heart wouldn't want to believe that we won't be creating the bulk of jobs that we did, but 30 per cent growth in hiring numbers is passé," Krish Shankar, group head, HR Development at Infosys.
Widening skill gap, irrelevant employees
Globally, sixty-one percent of CIOs in the Robert Half survey said it's "somewhat challenging" or "very challenging" to find skilled IT professionals today. Skills in database management, desktop support, network administration and cyber security are in greatest demand within their organizations.
IT positions are also taking longer to fill. Half of tech-focused hiring managers in the DHI survey said the time to fill open positions has lengthened from 2015.
Tech firms adjusting the sails
Infosys, India's second largest software exporter, which has been vocal about its automation strategy, has reportedly "released" 8,000-9,000 employees in the past one year because of automation of certain low-end jobs. The company has maintained that these employees have been moved to more advanced projects.
New Jersey-based IT services company Cognizant, which has majority of its operations in Chennai, is reportedly planning to lay off over 6,000 "redundant and non-performing" employees out of its 1.55 lakh-strong workforce in the country.
India’s third largest computer software services company, Wipro is also expected to sack 600 employees linking the firings as part of annual "performance appraisal."
