Priya (name changed), who grew up in rural Tamil Nadu and was in her early 20s in the late 1990s, recalls her friends discussing marriage to a groom working in the US. It was a craze then, she remembered, as many of her friends dreamt of the high life in the US.
It was a sentiment familiar enough to be captured in popular Tamil movies such as Alaipayuthey released in 2000, and the 2018 web series America Mappillai (American groom).
Priya’s dream never materialised though a few of her friends were able to settle in the US. Many of these grooms worked in IT.
For a few years between the late 1990s through the 2000s, during the Indian IT services industry boom, it was one of the few sectors that gave middle-class Indians the chance to travel and live abroad.
Indeed, IT as a sector was one of the most attractive workplaces to be for the incentives it offered, from cozy AC rooms and fancy cafeteria to settling in the US, the ultimate dream for Indians.
Mylswamy Annadurai, project director of Chandrayaan-1 and the programme director of Mars mission Mangalyaan at the Indian Space Research Organisation (ISRO), even lamented in an earlier interaction with Moneycontrol that many engineers, from freshers to middle management, quit ISRO to join the booming Bengaluru IT industry between 1990s and early 2000.
Twenty years down, at the back of COVID-19 a lot has changed. Travelling to the US might not be as easy as it was in the 2000s with remote work gaining traction and clients comfortable with the "new normal". Even the fancy campuses that were a huge draw might no longer be an incentive as WFH becomes a permanent stay.
Does it mean that a job in the IT sector no longer has the same charm it did back in the 2000s?
IT boom
When the dotcom bubble burst and many lost their jobs in the US, the Indian IT sector got a booster shot. The first wave of outsourcing had begun and Indian firms were sending teams to the US to offshore more projects to India.
As the IT industry boomed, so was the chance to travel and settle overseas, especially the US, which was, and still is, the largest revenue generator for the industry. A revenue split from Infosys reveals that in FY2002, North America accounted for about 73.5 percent of revenues for the firm. It now accounts for about 60 percent.
A look at the US Department of State’s H-1B data dating back to the 2000s reveals that Indians were among the largest beneficiaries even then. From 31,684 visas issued in FY1997, it doubled in FY2000 to 61,000. After seeing a brief decline in FY2010 due to the global financial crisis, it again increased in consecutive years.
According to a news report dated March 2009, Indian outsourcing firms were the top H-1B employers followed by Microsoft. The report said IT firms such as Infosys, Wipro, and TCS dominated the H-1B list. Indian IT firms, the report pegged, accounted as much as 80 percent of the H-1B quota. The US issues 85,000 H-1B visas per year.
As of FY19, there were about 1.3 lakh Indian H-1B visa holders in the US of the total 1.8 lakh.
The idea that an IT job opened the doors to the US had already taken root and to some extent it even became a benchmark for success in the Southern part of India. It ushered in cultural changes and terms like “American mappilai” (American groom, in Tamil) became a status symbol.
Close to half a dozen techies Moneycontrol spoke to, from freshers to those with at least a decade of experience, were attracted to the probability of travelling to the US that IT firms offered when they chose to work for these companies.
Arun (name changed) once almost quit a leading IT firm to join another since the company did not initiate an H-1B visa application for him in 2013. “I told them (the company) I would stay only if they initiate H-1B. Otherwise I am joining the other firm that was offering me H-1B initiation plus a salary hike,” he added. Eventually he stayed since the company agreed to initiate his H-1B visa.
Fast forward to now: Arun’s colleagues wonder if such demands would be met or if they would choose to stay back for a visa that is so uncertain. A lot has changed between 2013 and 2020.
While the probability of working in the US does exist, either through higher education or working for IT firms, opportunities have slowed down over the last few years. IT firms are increasing their local hiring as visa regulations have been tightened and more work is being moved offshore, to low-cost countries like India, at the back of COVID-19.
Why?
Part of the answer is geopolitics and the resulting localisation. Since the Trump administration took over in 2017, H-1B regulations have been tightened, resulting in more rejections and demand for additional documentation.
India’s second-largest IT major Infosys saw 59 percent of its fresh H-1B petitions denied between October 2019 and the March 2020 quarter. It was only 2 percent in 2015 for the same period. This resulted in the localisation drive. Over the last three years, Indian IT firms have stepped up their local hiring and locals account for about 60-70 percent of their workforce in the US.
This should increase further going by IT majors’ commentary. Infosys recently said that it will hire 12,000 more Americans in the next two years. It currently employs 13,000 Americans in the US, while TCS has 20,000.
COVID-19 impact
Since March 2020, international travel has been suspended as the pandemic spread. According to a techie working for a leading IT firm, his company asked some onsite employees in his project to return to India as the project ramped down and there was a delay in getting newer projects.
IT firms also increased offshoring with remote working gaining wider acceptance among clients as well. For instance, Infosys increased its offshoring efforts from 72 percent in September 2019 to 74 percent in September 2020.
Take for instance automotive engineering firm KPIT Technologies. During Q2 of FY21, the company moved 120 people from the US and Europe (excluding Germany) to offshore centres in India and Thailand. The company added that it is halfway through the offshoring process and the rest will happen over H2 FY21. On the other hand, KPIY Tech has made investments in centres in Germany and the US, where it continues to build a local presence.
Several executives Moneycontrol spoke to pointed out that even after the pandemic, they don’t expect the number of people deployed onsite to go back to pre-COVID-19 levels. But it would be higher than now as certain projects require an onsite presence.
Billing onsite is typically higher than offshore and if more projects move offshore, it would hit revenues. However this could be beneficial in the long run.
In a recent interaction, Sachin Tikekar, President, KPIT Technologies, explained that moving more work offshore would be beneficial in the long run for both clients and KPIT. “It will help clients lower costs in a few cases and help KPIT improve margins,” he said. Most of the IT firms saw their margins improve in the September 2020 quarter.
Some executives feel moving work offshore will drive up volumes and that would make up for the loss in revenue. Prateek Aggarwal, CFO, HCL Tech, said: “This is because the work that we do offshore typically tends to be stickier and longer term — even though dollars per full-time (employee) might be a little lower.”
Talent question
Unlike other sectors, IT gave people more chances to travel overseas. Taking out the overseas factor, many would cast their net wide before choosing IT since salaries in IT firms are much lower than those of captive centres (in-house technology centres of global companies, based in India).
Take Sundar (name changed). He worked in a top IT firm for 10 years and was earning Rs 7.5 lakh per annum when he quit. He would probably have stuck if there was an onsite guarantee.
But that being uncertain, he at least wanted a better remuneration package. He quit and currently works for the technology centre of a US manufacturing major in Chennai and earns Rs 9 lakh. His peers earn as much as Rs 15 lakh for the same amount of experience, he added.
In recent times, at the back of stringent regulations and the visa ban by the US at the back of COVID-19 in June, contract staffing firms saw increased movement of talent to global in-house centres.
According to Vikram Ahuja, co-founder, Talent500 by ANSR Consulting, which helps GICs to set up centres in India, this trend could continue. In that case, IT firms will have to fight for talent with the global firms and offer differentiated packages and career opportunities to retain quality talent.
Some IT firms are beginning to do that. Salil Parekh, CEO, Infosys, said during a recent media event that through reskilling in areas such as cloud and cybersecurity, the company is accelerating changes in compensation and helping employees move up the ladder.
So what happens to the grand American dream?
It is not dead, at least not yet. Sunil C, Head – Specialised Staffing, TeamLease Digital, said the chances to travel overseas indeed would come down, “but it is not like there are no opportunities”.
There is a shortage of talent in the Science, Technology, Engineering and Mathematics space in the US and it would take a few years to fill the gap. “Till then, chances to travel to the US will exist. So, if someone wants to travel and settle abroad, IT firms are still the best option,” he added.
IT executives share similar sentiments. “There are multiple parameters that made the IT industry attractive. One obviously, the growth it provides… compensation and benefits. And definitely the ability to travel — temporary and permanent for those wanting to become citizens of other countries,” said VV Apparao, Chief human resources officer, HCL Tech.
The last one, the ability to travel, he said, has become a little difficult with governments looking internally. “But the other attractiveness still remains. No matter which industry you are in, going and settling in another country is becoming difficult. So, from that perspective, I don’t think the IT industry will become any less attractive,” he explained.
Manoj Bhat, CFO, Tech Mahindra, explained that while opportunities to travel overseas might reduce, the IT sector will continue to be far ahead when it comes to offering opportunities to travel overseas.
