IT Slowdown in India Might Just Be a Faux Pas
It happened in 2001 and it's happening all over again. Among all the talk of
a booming Indian economy and
rising employee wages, the slowdown in the Indian IT industry has reared its
ugly head for the second time in less than a decade.
Premier institutes in the country like the
Indian Institute of Technology are already facing the music, with companies
like International Business Machines Corporation (IBM), Computer Sciences
Corporation (CSC), Hughes Software Systems (HSS), and Hindustan Computers
Limited (HCL) deciding to cop out of placements this year. Even leading Indian
IT service providers like Tata Consultancy Services (TCS), Wipro, and Infosys
have decided to go slow on their hiring spree. One can only imagine the plight
of thousands of IIT graduates passing out this year!
To make matters worse,
TCS has shown the door to more than 500 employees with less than five years
of experience, citing performance issues.
IBM, too, laid off around 700 employees, mostly novices.
That's certainly one part of the equation. Contrary to popular belief, NASSCOM,
a leading trade body that represents the chamber of commerce of IT and
IT-enabled services (ITeS) industries in India, predicts that the number of jobs
in this sector will continue to rise in 2008. According to NASSCOM, both IT and
ITeS will be home to an additional 4 million people this year, contributing
towards 7% of the Gross Domestic Product (GDP) and 33% of the foreign exchange
inflows in India.
Lomesh, a technical writer working at TCS,
Noida, stated,
"I think there are many factors contributing towards the slowdown in the
Indian IT industry. Recession in the U.S., drop in the U.S. dollar value against
the Indian rupee, and emergence of cost-effective markets elsewhere are some of
the factors that may have led to the recent layoffs and less hiring in India.
However, companies like TCS and IBM have their operations all over the world,
not to forget, they also have a huge workforce."
"As far as the numbers are concerned, both 500 and 700 may seem large.
However, this still constitutes a minuscule percentage of such a company's
workforce. Software professionals in India just cannot sit on their laurels and
enjoy big packages anymore. We, in India, should get ready for the tough
competition from our counterparts in Latin America, China, Southeast Asia and
other parts of the world," he concluded.
Cost Arbitrage and
Quality Pressures
Ironically,
the 12th Annual Salary Increase Survey from Hewitt Associates showed that
India Inc. enjoyed the highest salary hikes in the world last year, averaging at
15.1%. Analysts at Hewitt predict an increase of 15.2% this year. In the last
five years, no other country in the world has come close to India if you compare
the salaries inflation in excess of 10%.
In my humble opinion, downturn in the U.S. has little to do with the IT slowdown
in India. I think that
cost arbitrage, skills shortage, and declining quality of work might be the
actual culprits. As employee wages continue to rise in India, the cost advantage
for offshoring is slowly diminishing. Barring costs, other recurring issues like
shortage of skills and quality pressures, keep haunting the Indian IT and ITeS
industry.
Echoing the same sentiments, Vijay
Tase, Owner, Peer Technical Services Pvt. Ltd., Mumbai, said,
"I'd agree that almost every decision related to offshoring or outsourcing
has a financial motive behind it. However, another equally important issue is
that of quality, which in the end bear financial consequences. To maintain the
quality of products or services under any kind of outsourcing model is
difficult. It's hard for any company headquartered in the U.S. to maintain
quality when outsourcing work to smaller (or any size for that matter)
U.S.-based outfits, let alone outsourcing outside the U.S. This is a result of
the cultural differences (professional and social) between the two parties."
Tase makes an interesting observation about the quality of work in an
outsourcing model and the amount of resources needed in order to maintain that
quality.
"In harsh economic conditions, such things usually come to the fore and
form a decisive element when looking at options for change. Not only does one
need to carefully analyze the quality of work coming out of the outsourcing
model, but also the amount of resources that need to be expended to keep that
quality. The amount of management time that goes in maintaining high quality can
be excruciatingly large. A company might spend the same resources managing
quality in outsourced work in good as well as bad times, but in bad times it
simply becomes a particularly thorny aspect."
Reaching an
Equilibrium between High-tech Jobs in India and Elsewhere
WRAL Local Tech Wire Publisher and Editor,
Rick Smith, argues that layoffs in India point towards an equilibrium
reached between high-tech jobs in the country and high-tech jobs in North
America (or the higher-cost countries.)
I'd certainly beg to differ!
Just imagine, a highly-skilled professional like a Software Architect can
command up to U.S. $200/hour or more in the U.S. Not sure if someone with
comparable skills in India can earn that much.
While companies like IBM, Accenture, and Hewlett-Packard (HP) have outsourced
more than 10% of their workforce to India, most of these jobs do not go beyond
simple execution or maintenance tasks.
Chaitra Venkatesh, a
techie with Advice America, said,
"To meet the manpower demand, companies cast a wide net for new employees.
Now the pressure on margins moves on to break the linear-growth relationship
between employee numbers and revenue, and a drive to do high-end work is
resulting in companies doing away with the non-performers."
It will not be fair to say that layoffs in India are a direct corollary of
this equilibrium. Additionally, those affected by this slowdown must remember
that a layoff is not the end of the road. In fact, if you continue to reinvent
and innovate, it might just be the beginning.
Differences in Work
Culture
In
one of her blog posts on this subject,
Sarah O'Keefe, Founder and
President, Scriptorium Publishing Services,
wrote,
"I think it's fair to say that many Indians are shocked by this
development. At least one person says that the interviewers should be let go
because they did a bad job of evaluating people. Others are wringing their hands
over ruined careers because the layoff means a black mark on your resume. And
with much sympathy, I say to them, "Welcome to our world." Layoffs are a fact of
life in the U.S."
Sarah, by the way, started her company following a layoff. According to her,
most people in high-tech have had a layoff (or two or three) in their job
history.
"The "I've been laid off and my life is ruined" perspective is no longer
valid in North America. Layoffs happen, and everyone knows it. For those
Westerners who are concerned about losing their jobs to low-cost competition,
layoffs in India might be a sign that the outsourcing trend is slowing down.
Which, if you're in the U.S. job market, means less competition for you. Maybe."
While I completely understand where Sarah is coming from, I do not think the
work conditions in India can be compared in the same vein with the U.S. or
elsewhere. It's like comparing apples to oranges.
To put the work culture differences into perspective,
Samartha Vashishtha, Senior Technical
Writer at HCL Technologies, offers some useful insights,
"Yes, layoffs are a part of the U.S. work culture, but there are several
things one can find solace in. Social security and unemployment benefits come to
my mind immediately. Compare that to India, where unemployment benefits exist
only in name. Even if you are able to bypass the government machinery to collect
the pittance, that would not pay for anything! In a country of a billion people,
where a sizeable number spend their lives working for their next meal, the
danger of being reduced to nothing is real. There is no subsidized healthcare
for the elderly; the cost of living is mounting by the day. Just some of the
reasons why people feel about their jobs here the way they do. I am not saying
that the clash of the working cultures does not exist; I only want to emphasize
that the problems of these two democracies are fundamentally different."
Blame it on the culture, but many companies in India still cannot
differentiate between a person who was "laid off" and a person who was "fired." Being laid off does not show a person's incompetence
by any means; it just implies a cutback. If you are unemployed as a result of a
layoff, use this time to study more, to enhance your existing skill set, and to
network using professional societies or local groups. Maintaining a positive
frame of mind is the key to survive here.
Embracing Change in a
Transient, Volatile Global Business Environment
According to John Rosberg,
Director, Tech Pubs and Localization at Interwoven,
"All business (and, indeed, much of everything) is cyclic—where you can
really make trouble for yourself is when you make rock-solid plans on things
continuing as they have indefinitely."
I could not agree more! In the coming times, India Inc. would face a stiff
competition from Eastern Europe, Israel, Ireland, and other nations—all of whom
have programs to counter India's cost structures. The only way to avert
competition is by constantly adding value, rather than focusing on cost.
Obviously, the software industry is here to stay—just as certainly, it'll
continue to undergo a rapid and a continuous change.
Financial Motivations
Many experts believe that the IT slowdown in India might just be a faux pas.
Outsourced work will continue to create jobs in developing nations, until the
industry misers run out of all their financial motivations.
In words of Rick Stone, an Adobe
Certified RoboHelp HTML Instructor and an Adobe Community Expert for the
RoboHelp and Captivate products,
"Developers worldwide are financially motivated because they often have
families depending on their income. The companies providing new avenue for
outsourced work are financially motivated for the same reasons."
The government of India has ensured in a statement that the Indian IT-ITes
and BPO (including hardware) sector will continue to garner high revenues in
2007-2008, growing at over 33 per cent. The Minister of State for Communications
and IT, Shakeel Ahmad,
told in a written reply in Rajya Sabha that there would not be any recession
in the IT industry in 2008.
"There was no immediate challenge to the Indian IT industry from China or
other competing countries as per Electronics and Computer Software Export
Promotion Council," Ahmad said.
Finally, brush aside all your fears of an IT slowdown and remember that your
"value" to the company must increase with the cost.