Why I Believe There Will Be Tsunami Of IT Lay-Offs

The year 2017-18 will be a "Wakeup" year for the IT/BPO industry. I expect major job cuts across companies, across the sector. The main reasons are listed below.

A digital tsunami has hit the IT industry. This has led to requirement of new skills - cloud social media, data analytics, big data, mobile etc. Put together, these are referred to as SMAC by the industry.

Out of the 40 lakhs approx employed in the industry, studies by McKinsey reveal that about 50 to 60% of the people have to be retrained for the new skills in the next 3 to 4 years.

My interactions with industry leaders is interesting. They feel that about 60 to 70% of the workforce can't be upgraded. Here, one should appreciate the efforts of industry to provide tools in terms of training programs, etc to upgrade their people.

If we combine the McKinsey report which was presented to NASSCOM in February 2017 as well as the views expressed by industry leaders, we can look at about 30 to 40% of the existing workforce to be lacking the new skills, in spite of being exposed to the same by their employers.

We are looking at 12-16 lakh people who will be rendered unemployable for the new age. We are talking about 3-4 lakhs per annum for the next 3 to 4 years.

There is a silver lining. The Indian market, thanks to the Digital India Mantra, is going to explode. Here some of the excess people can be employed, albeit at lower salaries as the Indian customer is very price-sensitive.

I believe that about 200,000 IT/BPO professionals will be rendered excess per year for the next 3 to 4 years.

Some of the other reasons which will accelerate this tsunami of job losses are listed below:

Companies are increasingly paying attention to automation/robotization. You may have noticed chat-bots which have recently started appearing in various websites offering help/assistance to the customer. Chat-bots are replacing humans and this will increase with time. This is because they save money for these companies.

The Indian software services industry is dependent upon USA and Europe for 80% of their turnover. Recent developments like President Trump's directive to companies to hire locals, the new visa rules in UK, Australia, Singapore are clearly to protect/create jobs locally.

Almost all our top companies have indicated that they will be hiring more local people and this overseas hiring will definitely eat into the local pie.

Finally, in the short term, the Indian Rupee has become stronger by 6%. Since most of our turnover is in exports, this hits the bottom line straight away.

I have been asked by people as to what will happen to those who are being laid off/have high probabilities of being laid off. I see many of them turning into entrepreneurs, angel investors etc. Further, there are jobs in the interiors of India in the manufacturing units who also need tech support. If I were 35, not exposed much to the new skills, I would seriously look at jobs outside the metros. For all I know, there are jobs in towns like Durgapur, Jaipur, Raipur, Madurai, Ludhiana etc. My experience is that till last year, most professionals were not willing to look at these cities. Now the scenario has changed. People are open to relocation and a cut in pay.

In conclusion, I wish that the IT industry continues its growth. The industry has reinvented itself many a time to cope with the technology changes. Let us hope it does so and jobs are not lost.

(Kris Lakshmikanth is Founder, Chairman & CEO of The Head Hunters India, whose forecasts on IT lay-offs have been widely reported)

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