IT jobs crisis: Automation, skill standards, ageism all play a part

India’s USD 154 billion IT sector has been powering India’s jobs engine for over two decades now. That is set to change. Credible talk is that the pace of job losses will only accelerate in the coming years, and nearly a fourth of all IT jobs could become redundant over the next three years.

The IT sector currently employs around 4.5 million people. And IT companies sack 1 percent of their work force every year, citing performance issues. That alone accounts for roughly 45,000 job losses every year.

Automation may be a major factor behind the vanishing jobs, but it is not the only reason.

In February this year, Capgemini India’s Chief Executive Srinivas Kandula had warned that nearly two-thirds of India’s IT staff cannot be retrained. He also predicted that India would witness the largest unemployment in the middle level to senior level.

Talking to Moneycontrol, R Chandrasekaran, Chairman of NASSCOM declined to comment on the quantum of layoffs in the industry.

“We are not picking up any extraordinary change in pattern in terms of people being released and we don’t know where these numbers are coming from.

This industry is about skills and maintaining a competitive edge. Industry will look at people with such skill sets. If people have not been able to upgrade as per changing demand then it is difficult to presume that older skills will be sufficient to keep them employed. Unless the skills are upgraded these people would be at risk.”

Another worrying aspect of the retrenchment drive is ‘ageism’ or discrimination based on the age of the professional.

Says a senior associate at a recruitment firm, “Even if we recommend a better professional in his 40s at the same salary as a 32-year old, companies are unwilling to even entertain such a person. Age is a big factor now as companies prefer to hire younger people and reskill them as they are cheaper.” Not surprising that a majority of the employees who have been asked to quit are between 35-50 years of age.

While companies claim that it is purely about performance, employees at the receiving end disagree. Moneycontrol has interviewed and reviewed performance appraisal records of several such employees who have suddenly been branded as non-performers. The agenda is to sack high-cost employees and increase the proportion of freshers or junior employees with less than five years of experience.

The dispute over the number of people fired also has to do with many companies forcing people to resign voluntarily instead of issuing termination letters.

For instance, Cognizant employees claim that so far 6,000 have been asked to resign and that the year-end target is 22,000.

In response to a questionnaire from Moneycontrol, Cognizant said: “Each year, as is the best practice across our industry, we conduct a performance review to ensure we have the right employee skill sets necessary to meet client needs and achieve our business goals. This process results in changes, including some employees transitioning out of the company. Any actions as the result of this process are performance-based and generally consistent with those we’ve made in previous years. The numbers mentioned in the media are vastly exaggerated and did not come from the company.”

A similar story is playing out at various centres of technology companies across India. Mphasis has let go of many in Pune, while Capgemini has a target of retrenching 9000 people over the next month, claim insiders. Numbers of Wipro and Infosys in comparison appear to be very benign in comparison, but are fairly high in absolute terms.

Industry body NASSCOM believes that while there is pain in the market, the numbers are exaggerated. Given the manner in which some companies are asking people to resign, it is apparent that there is a need to make the process of retrenchment more transparent.

While changing dynamics and automation is affecting job creation in the IT sector, consolidation is expected to lead to shedding of jobs in the telecom sector. Lack of new jobs in the three key service sectors will have a cascading impact on the 12 million graduates that India produces every year. Even as hiring has slowed in the services sectors, no new sectors have come up of late that can absorb the newly minted engineers and graduates that India keeps churning out.

Saurabh Mukherjee, CEO of institutional equities at Ambit Capital, says, “White collar job creation now seems about to conk off comprehensively as financial services, IT services and telecom – three sectors which, with total employment of 6 million people, have been the mainstays of white collar job creation – get ready to shed staff.”

India’s army of a million software engineers and coders need to desperately acquire new skills if they want to stay relevant in the employment market. Nasscom is working with 20 software companies to reskill the workforce over the next two years.

The creation of new jobs has also slowed on a year-on-year basis. Software services exports look at single digit growth and clients drive down costs. Increased usage of technology will create new jobs for engineers, but they will be more specialized jobs and will require more than basic coding skills.