The End of the Indian IT Sector

The Indian IT sector has been facing a lot of flak. The industry is undergoing a transformation. Issues like the availability of H1B visas and adapting to changing technology are at the forefront.

The stocks of Indian IT behemoths have taken a beating. Employees are being laid off indiscriminately. All this signals towards the fact that the cushy IT sector jobs that every Indian middle class person aspired for may not be there for very long.

In this article, we will look at some of the factors that signal the end of the IT sector.

Lack of Talent

The Indian IT sector is facing a severe talent crunch. The media is often quoted as saying that there is an abundance of talent in Indian cities like Bangalore. This is because they are equating degrees with talented people.

It is true that there are a lot of engineers in India. However, it is also true that a lot of these engineers have their degrees in fields which are not related to software engineering.

According to surveys conducted by MNC human resource consultants, more than half of this workforce is simply not trainable.

The fact of the matter remains that getting good tech resources in India is as difficult as getting them in Silicon Valley! This is because the jobs are far greater in number as compared to the number of skilled employees.

Poor Quality

The Indian IT industry has got used to the idea of being mediocre. This is because the industry flourished during the time of labor arbitrage.

American MNC’s were offshoring jobs because of the huge cost advantage. The deal was such a bargain that they did not care much about the quality. As a result, Indian IT companies got used to the idea of hiring substandard employees which they can later “train”. Indian IT firms have all been mass recruiters in the local colleges.

Today, the tech industry has become competitive. Clients want to offshore work to associates who are capable of performing the tasks independently.

Indian companies do not have such resources. As a result, failed IT projects are now commonplace. The world has now become aware that Indian IT firms merely supply cyber coolies. This can be seen in Donald Trump’s executive orders which aim to protect the American worker from low cost, low quality Indian workers.

High Attrition

The rapid growth in the industry has resulted in the employees having unrealistic expectations. These employees want to emulate the growth pattern of their seniors who rose through the ranks in no time because the industry was growing fast.

The modern IT employee has little to no skills but extremely high expectations. This leads to high attrition. Even though the IT companies have been reporting attrition in the range of 12% to 18%, the reality is far worse.

Internal attrition figures i.e. number of employees moved between projects is extremely high. This takes a toll on the quality of work that clients can expect. This is because as soon as employees move up the learning curve, they are moved to a different project and the learning process starts all over again.

Hidden Costs

The Indian IT industry has been using the concept of deceptive pricing for a very long time. They provide a blended rate to their clients. This means that this rate represents people with different skills and experience levels.

A typical IT project has 1 to 2 senior resources that are highly skilled. Balance 25% resources have some sort of experience.

The majority of the workers are fresh graduates with very little skills. The end result is that the experienced resources get overworked and burnt out whereas the others have a very low level of activity. As soon as the junior employees become productive they are moved to different projects. The team composition maintained is the same as mentioned above.

In the light of this team composition, the clients are being immensely overbilled. They would instead be much better off if they moved their work to their own captive center and hired only productive resources. IT companies are treating mission critical projects as training grounds for their new employees.

Regulatory and Time Zone Issues

Donald Trump’s protectionist stance has blown the lid off the practices followed by these outsourcing companies. The US is not the only state in the world that is looking to ban IT professionals.

Instead, countries like Australia and Singapore have also followed suit. The Indian IT employee is looking at a grim future are far as their ability to work globally is concerned.

American clients are also facing time zone issues with their offshore teams. The time overlap is insignificant and clients do not get time to interact with the workers. Indian offshoring firms are mitigating this problem by introducing night shifts. However, it does not seem like the workers are very happy about the prospects of burning the midnight oil with almost no possibility of securing an overseas assignment.

To sum it up, Indian IT industries do not sell any innovative products. Instead, they simply sell commoditized services where price war is imminent. Also with protectionist policies on the rise, the savings are also obliterating leaving a question mark on the future of 4 million employees and a multi-billion dollar industry.