India's USD 150-billion information and technology sector is in the eye of a perfect storm, as employees organize themselves into unions to protest against layoffs. While industry leaders and the government are busy denying there is a problem, the father of Indian IT, NR Narayana Murthy and Founder of Infosys, told Moneycontrol in an interview that as the IT industry’s growth starts “ebbing,” it would not be able to provide employment to armies of engineers.
Leaders and seniors have to sacrifice more compared to the middle and junior level people, said Murthy. Such sacrifice will have to be borne by employees as well as investors. He explained: “In other words, there will have to be salary cuts based on the disposable income of employees and there will have to be stringent cost control. If these are not just sufficient, then profits will have to be sacrificed and dividends will have to be reduced to take care of the employees with low disposable income and keep the corporation strong in tough times."
Murthy said that the market for the IT industry may shrink and that is beyond anybody. And when that happens, it is very difficult to absorb new talent at the same level as in the past.
"The IT industry has had a high for 20 plus years, and now it looks like it is entering an ebb. This has happened in the past in various industries and will continue to happen in the future for various industries. There is no point in blaming the IT industry," he said.
Stress is visible across the sector -- traditionally a key white-collar employer, a big export earner and an integral part of fund managers’ portfolios.
Most of the leading IT companies have seen pressure on profitability and revenues. In FY17, TCS’s full year revenues grew 7 percent, but its profit contracted by 5 percent. TCS reported a revenue growth of 9 percent while its post-tax profit grew 8 percent. The same is the case for Infosys which reported a revenue growth of 10 percent in FY17 but net profit grew by 6 percent.
Technology companies have undertaken several measures to boost profitability and cut costs. The obvious lever that they have chosen is lowering headcount. While Cognizant and Wipro have denied reports of layoffs, employees of both these companies have approached labour departments across states to protest against unfair terminations. Industry body Nasscom and some other leaders have been continuously denying that there is a problem with the industry.
In an authored article in a leading newspaper, Tata Group chief N Chandrasekaran has said: “Having been in the industry for over 30 years with a ringside view of the industry's astronomical growth, I would submit that…in today's digital age, consumers and business are now embedded in technology. And more technology means more jobs. Not less.”
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