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Why unemployment in IT sector is on rise?

The era of labour-intensive growth in IT is over and job creation will occur at a decelerated pace

Saturday February 9, 2019 5:47 PM, Devika Narayan

IT Jobs

In January 2015, Tata Consultancy Services, India’s largest software services firm, fired approximately 25,000 software engineers. This event inaugurated a new trend in India’s globally-connected IT industry. In 2017, growing layoffs finally sparked a national debate. News reports and interviews with IT employees confirm that leading companies, that only a few years ago were aggressively recruiting new employees, are not only hiring in relatively small numbers but are actively pushing employees out.

A drop in the hiring rates will affect the tens of thousands of engineering graduates who aspire to enter the IT workforce as they encounter firms that are reluctant to hire in the volumes of the preceding two decades. The claims and findings presented below are based on ongoing research that commenced in 2014 and relies on over 100 in-depth interviews.

Downsizing is not temporary The era of labour-intensive growth in IT is over and job creation will occur at a decelerated pace. The expansion of India’s IT sector has depended on the IT investments that large American and European companies make into their own IT systems. Quantitative and qualitative shifts in the “IT spend” of client corporations instantly affect the firms to which IT development and maintenance tasks are subcontracted.

Simplifications in the way enterprises organise, develop and maintain their IT infrastructure implies an erosion of back-office IT work that typically has been offshored. Cloud computing centralises IT infrastructure and enables companies to share computing resources. Secondly, new software programmes automate certain labour-intensive tasks such as software testing and IT helpdesk functions. Restructuring contributing to job losses New employees (1-5 years of experience) do not receive the quick promotions and salary hikes that have defined the IT industry.

However, their jobs are (relatively) protected by the fact that to the firm they represent cheap labour at the bottom of the pyramid. Mid-career professionals who joined the industry roughly in the 2000-2010 period bear the brunt of the cost-cutting drive that grips today’s firms. Despite the industry’s attempt to cast the irrelevance of the middle managers as an issue of skill-deficiency, the fact is that middle managers are expensive in the eyes of the company.

These are individuals who have moved up the corporate ladder rapidly and now earn between₹1520 lakhs per year. As it turns out, they also constitute a large segment of the much-celebrated IT workforce. Interviews reveal that after losing their jobs, these employees find it very difficult to find re-employment. They either turn to expensive certifications in ‘new technologies’, attempt small-scale entrepreneurial initiatives, rely on broader familial networks or sometimes find lower paying jobs. Erosion in quality of jobs IT employees at the large firms are under new kinds of pressure. The workplace is a high stress environment and working hours often extend to 13-15 hours per day. ‘Fresher’ salaries have been stagnant for a very long time. New management practices such as ‘agile strategies’ render employees accountable on a daily and weekly basis, while

making project requirements ever-changing. Many interviewees discussed the dual pressure they face from their clients as well as their own managers (who themselves are at risk of losing jobs). The pressure, they say, to produce ‘more from less’ has never been greater. New areas are not labour-intensive. The boom in technology-intensive start-ups (both consumer and business facing) has opened up a new area of employment for an educated, upwardly mobile, young workforce, particularly for highly-skilled software engineers – but also recruits for sales, marketing and product management divisions.

Large IT companies are also looking to make specialised, targeted hires, particularly in areas like cloud security and data analytics. With the erosion of labour-intensive tasks of software testing, integration and maintenance, hiring will always be modest compared to the ‘golden years’ of expansion. Start-ups are of course much smaller (in terms of employees) and aim for high labour productivity (revenue per employee). Moreover, it is widely acknowledged that this is a volatile sector, fueled by venture capital and business models that privilege sales and user growth over profitability and therefore we can presume that many fledgling companies will fail, merge or be acquired.

Given the high demand for niche skills and a lack of demand for the ‘generic’ skills of the previous era, we see an increasing polarisation of the labour market. This polarisation occurs not simply along the axis of skill and salaries but other social markers. Hires on the top-end tend to come from elite institutions (such as the IITs) rather than the numerous tier two and three institutions that the previous era produced. Further the startups are much more homogenous and exclusive from the perspective of caste and gender than the traditional IT workforce. [National Herald]

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