Speaking to CNBC-TV18, Vineet Nayyar, Vice Chairman of Tech Mahindra, said the IT sector has become neutral to location and would adjust to the policies of the new US administration.
Adapting to automation will be a bigger challenge for the IT industry than the incoming Donald Trump administration in the US, said Vineet Nayyar, Vice Chairman of Tech Mahindra.
Speaking to CNBC-TV18, Nayyar said with automation and analytics assuming greater importance, there would be lower intensity of manpower. He said while this was a challenge, the industry was prepared to change.
Nayyar also said there was a great deal of confusion in the IT sector over Donald Trump’s policies, amid talk of curbs being imposed on H1B visas. “The issue is that there is no clarity over what he [Trump] says and what he implies,” said Nayyar.
However, Nayyar is optimistic about the IT sector adjusting to whatever new policies are framed and said the visa restrictions, if imposed, would not be a “big hiccup” for Tech Mahindra as less than 5% of its workforce required H1B.
“IT has become neutral to location,” he said. “Besides, I don’t see Trump’s policies restricting technology.”
R Chandrashekhar, Chairman of software industry body Nasscom, agreed with Nayyar that the IT sector needs to be prepared for bigger shifts. He said while Trump’s policies may pose a challenge, there were plenty of indications that the new administration will look at India as a friend.
“We should be prepared for the worst, but be hopeful for the best,” Chandrashekhar said.
Below is the verbatim transcript of Vineet Nayyar & R Chandrashekhar’s interview to Anuj Singhal, Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: Important day for Indian IT as we hear the swearing in speech of President Donald Trump. How high are your trepidations?
Nayyar: Donald Trump is a given and we will just have to adjust to whatever his policies are. The only issue is that there is no clarity on what he says and what he implies. I think if we are confused we are not the only one, whatever little I have seen, I mean that confusion prevails even in a greater measure in the United States (US). However, so far as IT is concerned I am pretty sanguine. I do believe we have a comparative advantage and IT is now neutral to location. I mean when I open Google, whom am I connected with I don’t know. Similarly when we are in the area of assisting various countries in their technology progress whether we do it from Bangalore or Hyderabad or we do it from Silicon Valley is almost irrelevant. So, net-net we will have to make certain modulations, but I don’t see it as a big hiccup, I don’t.
Sonia: Donald Trump has made a lot of comments over the last two-three months but one of the comments that he also made was with respect to the possibility of imposing a border tax. It is still unclear as to whether it would be a tax or would it be tariff, of course manufacturing companies will be threaten because of how that could impact them but is services also under threat because of the possibility of a border tax?
Nayyar: Tariff wars are not unilateral. America has always been a trading nation. I would be very surprised that a) the tariff falls he creates are going to restrict trade. Two –how is he going to restrict technology and then how is he going to control the airwaves, he can’t. So, I think the bark is more audible than what the bite will be.
Anuj: The issue here is that this could not have come at a worst possible time for IT. IT itself was not doing too well even when the Presidential election was not even a topic of election. What is the overall sense about the business and do you think the Indian IT has been able to or has the capability to innovate and get over this harm because we have seen clearly over the last few quarters growth rates have come down?
Nayyar: I do agree with you that the concern that what is happening in the IT world itself as we move towards automation, as we move towards analytics, as we move to multiple other things and in artificial intelligence which will reduce the application of manpower that is a much bigger challenge for IT than Donald Trump.
I think so far as our preparedness is concerned I think we are not worried. Yes, we will need to change, yes, IT scene in terms of the intensity of the manpower may not be there as it was earlier. But that we will ultimately survive and flourish I have just no doubt about it. I think we have the intellect, we have the application and we have the tenacity to improve.
This is not the only time we have changed. If you look at the from the Y2K days we have continuously being changing. I think I can perceive the change palpably in my company and all the other Indian companies who compete with us or work with us.
Latha: What are the chances that these rules will come in? Last time around this bill came in but wasn’t adopted?
Chandrashekhar: I don’t want to speculate on the probability of certain bill which has yet to start the formal journey in the house coming into law. I think this is certainly not going to be from what we see the last of the bills that are going to be introduced. There could be and probably will be many more. There is also an on-going debate from more than couple of years on whether piecemeal legislation can be taken up. So, the legislative process in the US is long and uncertain route. What forms it takes and even more the specifics will unfold only gradually. I think it would not be very meaningful to speculative on a particular provision of a particular bill which has not yet started.
Having said that, I think we will see many attempts to impose restrictions. These are certainly matters of some concern because not only the campaign rhetoric but some of the key appointments being made and the positions that they have some of the statements emanating from very key people, key designates all of these certainly are matters of a serious concern. At the same time, I think that there are many reasons to actually feel that the new set up I think would be looking at India quite favourably. There have been enough statements made by Donald Trump, there have been clear indications that they view India as a friend and they would like to enhance the relationship with India.
So, net-net I think while we, certainly should be prepared for the worst there is plenty of reason to hope for the best also as we along. We will have to just wait and watch and see what these will all pan out in to. I was hearing Vineet Nayyar earlier and I think the comments that he made were very apt that there are bigger shifts which are happening which are far more important in terms of impact on the industry than some of these policy pronouncements. Those bigger shifts I think are things which we are well prepared for, our competitive advantage remains what it is and the prognosis for growth of the industry globally and investment in technology is extremely positive. Therefore, we have good reasons to feel confident as we approach the future not withstanding these uncertainties.
Sonia: Earlier you had told us when we spoke to you last, only 4 percent of your work forces is actually on H1B visa so it may not really impact you too much, but for the industry as a whole when the minimum wage bill increases would that have a cascading impact on overall compensation because I assume it would be very difficult for companies to manage the differential compensation, lower for the locals and higher for the H1B visa holders?
Nayyar: Yes, as R Chandrashekhar has said we will have to do adjustments at the margin. But, if I look at the macro level and as I had indicated that not more than 5 percent of our total workforce is on these visas in the US. Assume even that we have to pay extra for them I mean what is the impact. It will be in a minor decimal point. I don’t see that really has an issue.
Sonia: I wasn’t asking about your own company, I was just asking for the industry as a whole?
Nayyar: I suspect what is true for our company would be more or less true for other companies when it comes to H1B visas. So, I don’t see that as a major issue at all. Ultimately, we give a package, so I am not worried; bit amused at time but not worried.
Latha: How much do you think the growth of the industry itself what the NASSCOM growth numbers for FY18 could take a hit because of these both technology challenges as well as policy challenges?
Chandrashekhar: I think the policy challenges do pose some issues, but that is the smaller challenge going forward. I think the challenges in terms of changing business models, changing mix of skills required, changing expectations of the clients, changing delivery models all of these are far bigger and more secular trends.
As I said this is something which, for an industry which is adapted to so many changes in the past, these are challenges which we are well equipped and therefore while the present uncertainties may continue for a quarter or two till the new administration settles down we would certainly expect that thereafter there would be far greater stability and predictability. Therefore, overall if you look at the whole fiscal year the impact may not be significant in terms of a changed downwards or negative from where we were at the moment.
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