The last few days have seen IT services majors from India announcing major lay offs anywhere from a 1000 upto 10000 to be shown the pink slip in the coming few months. The major reason they attribute is restrictions on H1B visas in their biggest market the United States. Some of them even announced that would hire local staff from the United states which in many ways would align with what President Trump wanted to do to get back jobs to America. The IT services scene in India was anyway getting way too competitive with pressure from other low cost countries who could do the same job at a lower cost and now we have the H1B problem to live with. Was this expected ? I would say yes ,anyone who understands business cycles will agree that no country in the world will be able to maintain its competitive edge forever and in today's globalized world with constant pressure on corporations to cut cost these cycles tend to be even more shorter.
The IT boom which started in India somewhere in the mid 90S primarily grew as a cost arbitrage business model to provide IT services to the biggest corporations in the US. The TATAs were amongst the first to start this global delivery model which was also replicated by other IT biggies like Wipro, HCL, Infosys and many other mid tier companies. A shot in the arm came in the form of the Y2K problem and the industry did what it took to ensure that the majority of the work outsourced was done from India. Most companies used the Y2K boom to prove their worth and get a bigger slice of the IT services pie. A lot of investment was done to aquire staff, new demand for office space was growing briskly across all major IT hubs of Bengaluru, Chennai, Hyderabad and Noida. NASSCOM had predicted a revenue of 50 billion by 2008 was pretty much on track. To add to it we also had the BPO and the call center industry contributing to job creation and in turn demand for other services created by these employees. Everything was on a roll, campus recruitment which was once limited to only the Tier 1 cities was business as usual in almost every engineering college across the country. It had reached a point where some people joked that IT companies that visited campuses with a tagline of " Trespassers will be recruited ".
Promotions, onsite opportunities,developer forums to attend were common jargon for most IT professionals. Would the party last forever was a question most people never asked or never bothered to reflect on. Youngsters just out of college with a job on hand were the envy of the outside world.The consumption boom that got created was very obvious in the unplanned way that cities like Bengaluru, Chennai, Gurugram etc etc grew. This obviously put a lot of pressure on the physical infrastructure of these places.
While all of this was happening very few gave a thought on what next, am I really skilled enough to handle the uncertain ways of the job market. It was not as if Trump created this problem. In any industry that believes in the principles of free market it is common to expect jobs to move to places where it the cheapest with reasonable quality. Some of East European countries saw this as an opportunity and started competing with Indian firms and the market got a lot more competitive. The famed global delivery model was cracking and if anyone smart enough would have noticed it when we saw major India IT companies reporting lower margins and slower year on year growth. The writing was getting clear , pull up your socks now.
Is it the end of IT , I am certain that it is an overstatement but yes it may surely be the end of the cost arbitrage model that we were offering. There is still enough of opportunities to grow. Technology is such a dynamic changing phenomenon that it is impossible to say that it is the end . With never technologies coming in, the advent of social media, big data, mobile technology and huge domestic market to cater to Indian firms still have a lot of it going their way. Will the managements of these firms re-engineer their business model and cater to the new demands, will they motivate their employees to reskill themselves , will they position themselves to the corporations in west as partners who offer value rather than just vendors....if the answer is Yes then we have nothing to worry about till the turn of the next business cycle.
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