Tougher Times Ahead For India IT Companies
At least 200,000 software engineers in the India IT industry will lose their jobs each year over the next three years, according to McKinsey & Company.
"Contrary to media reports of 56,000 IT professionals losing their jobs this year...the real number will be between 175 thousand and 200 thousand per year," says Head Hunters India Founder K. Lakshmikanth, basing his analysis on the McKinsey report released in February. The Head Hunters India executive blamed artificial intelligence, often being developed at the very firms that will be shedding body weight between now and 2020.
AI and so-called robotic process automation will pull the rug out from under the big India IT firms in the near future as they all workout ways to benefit from these new technologies. For those who use software outsourcers, AI and robotic automatic can bring down costs. Everyone in the industry is scrambling to beat their competitors on price, especially when many competitors are in the same niche and often have similar tech offerings.
"We used to be big investors in Tata Consultancy, but now we own nothing in India IT," says Rajiv Jain, founder and fund manager at GQG Partners. Jain is a former emerging markets fund manager for Vontobel Asset Management. He blames changes in the IT industry itself.
Other headwinds get more headlines, in particular the H1-B visa that companies like Tata rely on to bring in low cost computer software engineers from India. The Trump Administration is making it harder for those companies to bring in those workers, requiring more evidence that the firms cannot find similar labor in the U.S. Tata, Infosys, Wipro, HCL and Tech Mahindra take the lion's share of the 80,000 annual H1-B visas issued by the U.S. government. Making it harder for the Indian firms means American companies like Amazon and IBM, two of the biggest U.S. users of H1-B visas, will have more visas made available to them instead.