IT sector dims as beacon of Indian job creation

Hiring slowdown adds to challenge of finding work for booming adult population

In a lab deep within a landscaped campus in the western Indian city of Pune, 16 recent graduates are experimenting with new technologies that are shaking up a flagship national industry.

Tata Consultancy Services, the largest of India’s powerful IT services companies, set up the lab 18 months ago to enable new starters to work on the “internet of things”, the field of connected machines and appliances that is one of the company’s fast-growing areas of business — and one on which the company’s future depends. Since then, the young team has produced three ideas the company will now market to clients, including a system enabling technicians to find data on an appliance by looking at it through smart glasses and another that creates alerts when machines are at risk of malfunctioning.

“We’ve moved away from the repetitive work — we’re getting a chance to learn something new each day, so it doesn’t become monotonous,” says Priyanshi Saxena, 23.

But while the shift to disruptive new technologies has opened exciting new opportunities for Ms Saxena, it is fuelling concerns about the job prospects for others in her generation, as India agonises over how to find gainful employment for its booming adult population.

The IT services industry, a totem of India’s increasingly modern, outward-facing economy, has been a powerful driver of skilled job creation over the past three decades, and employs about 4m people.

While the sector continues to add new workers, however, employment growth has been slowing, lagging well behind revenue growth: 150,000 new positions were created in the sector during the last financial year, according to trade body Nasscom, down from 230,000 three years before.

That trend reflects the increasing importance of new fields of business such as data analytics and connected devices, which Nasscom predicts will account for at least 38 per cent of industry revenue by 2025. This cutting-edge work tends to be driven by relatively small numbers of highly specialised workers, unlike the labour-intensive software installation and management work in which the companies first made their mark.

“What we hired last year was less than a year before, and this year will be a bit less again,” says Ajoy Mukherjee, TCS head of human resources. “It’s the story of any automation — technology makes human beings more productive. So revenue per person will go up, and the team size delivering one unit of revenue will go down.

” With 1m young people entering the workforce each month, fears of insufficient job creation loom increasingly large in India. Demand for skilled labour has held up better than for blue-collar workers over the past five years, but “now seems about to conk off comprehensively”, brokerage Ambit Capital warned in February, noting structural shifts in the IT industry as a key factor.

A further shadow over the IT industry has been cast by the election of US President Donald Trump, who has launched a crackdown on the H-1B visa programme for skilled workers as part of his “Hire American” agenda.

But while this reform may weigh on margins, industry executives view the growth of automation and related areas as a more profound long-term shift.

The speed of change means a growing portion of new jobs will be temporary, enabling companies to bring in specialists for a few months as required, says Puneet Bhirani, head of human resources at Mphasis, another IT services company.

And while large numbers of highly skilled jobs could be created in the emerging areas, there are signs that Indian universities are not producing graduates with the relevant training, says Prasar Sharma at Mumbai’s SP Jain School of High Technology.

“Generic coding skills are going out of fashion now. You are required to be adept at data science, machine learning, cyber security . . . But there are zero people formally trained in these things,” Mr Sharma says.

For years, the IT companies themselves have filled gaps left by tertiary education. Infosys has trained more than 100,000 employees at its 23-week residential course in Mysore, which it claims is the world’s largest corporate education programme.

“The industry was acting like an academic institution,” says Vineet Nayar, former chief executive of IT services group HCL Technologies, who warns that reductions in hiring could hurt the country’s skills base.

“The hope for employment is with start-ups,” he says. “But they don’t have the capacity to teach IT skills.

” Job creation in India’s start-up sector — which boomed on a wave of funding in 2014 and 2015 — has stuttered over the past year as investment tailed off.

Even among start-ups little-affected by the volatile funding environment, there are few signs that they are set to substitute for the huge historical job creation potential at the IT services companies.

Like TCS and Infosys, Chennai-based Freshdesk — founded in 2010 — has focused on meeting the IT needs of companies throughout the world. But whereas the established groups started by capitalising on low Indian wages to provide services at low cost, Freshdesk pursued a much less labour-intensive model, creating cloud-based software products for use by customer services and sales teams.

“Services companies were great for India as a way for providing good employment opportunities,” says its founder Girish Mathrubootham. “But the future is going to be about product companies — you can create a lot more value with fewer people. Google has 70,000 employees; TCS has over 300,000. Which would you rather be?”

Read the full article here.

Source: Financial Times