Indian IT (information technology) industry might like to put all the blame on Donald Trump for its woes â€“ single-digit growth, retrenchment and reduced hiring from campuses. But the â€˜Trump effect‘ masks the crisis that is silently brewing.
The era of jobless engineers?
Indian IT (information technology) industry might like to put all the blame on Donald Trump for its woes – single-digit growth, retrenchment and reduced hiring from campuses. But the ‘Trump effect’ masks the crisis that is silently brewing.
In a recent presentation to Nasscom, Global advisory firm McKinsey & Company said that nearly half of the workforce in the IT services firms will be “irrelevant” over the next 3-4 years. A similar view was echoed by Capgemini CEO who feels that 60-65 percent of the workforce are just not trainable.
According to a study by Horses for Sources, India is likely to lose 640,000 jobs to IT automation by 2021.
Chart 1: Total impact of automation on IT/BPO services workers by major country (all skill-levels across all workers)
The IT service industry employs around 4 million people. A large majority are engaged in jobs that are likely to be non-existent in the future. The old-fashioned manual coding jobs are likely to be replaced by automatic coding and cloud computing that significantly reduces the size of the workforce.
Robotic process automation is already a buzzword in industries around the world. It presents a massive challenge to India’s software services sector. IT services providers must not only explore new service lines and solutions but also invest in building new capabilities and re-skill employees with emerging technologies.
Unfortunately, for the USD 155 billion industry, the imperative to structurally reorient the business has come at a time when they are facing headwinds like the ones from President Trump's protectionist agenda.
Slow revenue growth and adoption of newer technologies — cloud computing and automation platforms — have started replacing engineers. Hiring will definitely be slower than revenue growth as IT companies try to make their existing employees more productive. The slow pace will affect the middle management as well lower rung of employees doing work that can be automated.
Chart 2: New IT jobs created i India
Over the years, Indian IT companies feverishly built their so-called pyramid model that involved hiring thousands of fresh engineering graduates annually and quickly deploying them on software projects to ensure overall costs remained low. The model depended on the traditional billing of services offered to customers on a per-person, per-hour basis.
In order to make sure this pyramid was kept supplied, the number of engineering colleges grew from a modest 1,511 in 2006-07 to 3,345 in 2014-15. While only 20 percent of the engineers graduating are considered employable, the situation is likely to change for the worse. A generation of engineering students will graduate in the era of Indian IT’s transition and will likely be burdened with unemployment and education loans.
While entry-level coding jobs will see a cut, there will demand for skills in robotics, artificial intelligence (AI), digital space, biotech, nanotech, smart technologies, etc. So Indian IT has got to re-skill its employees. The industry leaders have already drawn up plans for re-skilling, but the education system will also have to bridge the skill gap fast; otherwise we could be staring at social unrest.
The challenge is not confined to IT. According to a World Bank report titled ‘Digital Dividend’, nearly 69 percent of work in India can get automated.
Chart 3: Estimated share of employment that is susceptible to automation (latest year)
A recent study by Accenture Strategy suggests that, social, mobile, analytics and robotic technology, as well as artificial intelligence, can impact a range of jobs although it can free managers from these time-consuming tasks to focus on work that is more uniquely human, or “judgment work”, which requires complex thinking, interpretation and higher-order reasoning.
Over the years our economy has become less labour absorbent. Many wonder why an economy supposedly growing at over 7 percent is not creating enough jobs. There are a mix of reasons for this, but it’s clear that the revolution in technology can replace labour at a faster clip than we ever imagined, and will make things worse.
Our policymakers should make evolving technologies a critical component in our flagship Make in India, Skill India, and Digital India programmes and our education policy must make radical recommendations on alternative models of education that would be better suited to an AI-powered economy of the future.The Great Diwali Discount!
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First Published on Feb 22, 2017 09:31 am