The News Minute| January 3, 2015| 2.00 pm IST
Attrition, layoffs, new business models - as India's Information Technology (IT) industry matures, it is encountering issues which may appear abnormal to some while others say restructuring and work-force optimization is a natural process all companies must undertake in their growth trajectory to remain agile and relevant.
Tata Consultancy Services (TCS) India's largest IT company seems to be the latest to undertake such changes as it makes it's way through changing business environments in India and abroad. Predictably, mysterious lists of employees been shown the door have emerged, causing anxiety among the company's work-force in Chennai, Bangalore, Lucknow, Kolkata and a few other sites. In a statement, TCS has said the employees are regularly briefed about the evolving situation, but that has not prevented groups claiming to represent TCS employees from approaching local governments, giving what is an internal matter of a company a political touch.
The News Minute (TNM) spoke to industry veteran and former Infosys executive Mohandas Pai on some of these issues. Excerpts:
There seems to be a malaise in the India IT industry. There’s talk of hiring and firing. Is this normal or is the industry shifting to a new business model?
This is a function of growth rates. The model is built on a pyramid at a particular angle. The ratio of developers to analyst to managers determines their efficiency and profitability. People get promoted very fast often at the cost of capability and maturity because of the fear of attrition. With growth rates down, in the teens, obviously the model needs to change. Many in the middle in the 10-15 year experience band would be redundant and very high cost. So what you see is an adjustment to lower growth and a rearrangement of the cost structure.
Also much of the so called high value work needing more experienced people has been down valued because of better process and automation. Today a senior developer often does the work of a junior consultant.
The general view is that companies are top heavy on the one hand and on the other have what is crudely called “software coolies” in the west with no career prospects. Does this still hold true?
Companies are middle heavy, maybe a bit top heavy on compensation not on capability or expertise. Using terms like software coolies is derogatory and people who use such terms lack respect for others. It is these people who by their hard work earned respect for India globally across the board and made sure that our very large trade deficit is financed. Those and those who criticise them and use such terms have no such performance to boast of.
People do have good careers but will not have fast tracked promotions as earlier. The focus will be on higher skill and productivity.
You have spoken and written publicly about the importance of mentoring middle-management in IT companies and how avenues for their growth are few and far between. What is the way forward?
Well I think this blood-letting is good for the industry. It will release talent for the rest of the economy, for the smaller companies. For instance our financial institutions need a large number of IT managers, so does defence, research institutions and these folks will be easily hired. It happened the last time too.
Image: Mohandas Pai
The pink slip is very common in the United States (US). Why do we emulate and complain about the US labour market at the same time?
The people who complain are people who do not understand how a modern competitive economy works. Economic growth can only come if there is a constant re-balancing of talent. People need to be productive and efficient to earn the money they are paid because the consumer ultimately pays for the inefficiency. Very often because of good times people get paid much more than they deserve for the value they create. Those who live by the sword should be prepared to die by the sword. If you want very high salaries, great perks then when times go bad or business shifts and you are not adding value you pay the price.
What are the big changes you see in this sector in the small to medium term?
Commoditisation of much of the business, automation, higher productivity, greater use of tools will drive business. Marginal players will fall due to increased consolidation. A few big global players will fall, the signs are there. The middle level players unless they become more competitive will be hurt. But the Indian IT industry will do well though the champions may change, the huge breadth and depth of talent here is unparalleled.
The Silicon Valley (US) grew because business houses in the region took risks, invested in science and technology, education, roads, public health. In comparison, how does Bangalore’s claim as India’s Silicon Valley match up?
Well Bangalore is doing very well. About 3000 companies are started every year here across all areas. Very large sums are raised and invested. Innovation is rapid. Most people in India are unaware of the start-ups here and the exciting things happening. Bangalore is increasingly having more connections and affiliation to the Valley than to New Delhi. It's ecosystem for innovation ranks very high
The biggest challenge is our civic and political leaders. They do not have a clue what is happening. As for companies investing in the areas you stated, even in the valley they are marginal players. The State invests much and tax collections from these companies are high. Bangalore pays more than RS 70000 crore of corporate and personal income tax, the third highest in India despite not being the Headquarters of large companies. Personal income tax is the second highest. Compliance is high. The city absorbs the largest quantum of residential space, more than the National Capital Region (NCR) in Delhi. It has the highest commercial grade A office space in the world, has the third highest quantum of deposits and the fourth highest lending mostly residential. The list goes on. But we are a society which does not believe in data but in making sweeping judgements on others.