Red flags in India's Silicon alleys: Wake-up call for billion dollar boys
Just when the central government is preparing to tango with foreign investors at the Gujarat investment summit next week, news of simmering unrest in India's showcase industry - the 100 billion dollar software and outsourcing sector has come. Though it is just one company, Tata Consultancy Services (TCS), which is at the centre of a brewing storm, the episode has lessons for the entire industry. As pictures and sound-bites of protesting employees from TCS centres across the country multiply on social networking sites and the number of signatories on online petitions swells, it is time for us to rethink.
Just two years ago, another top firm, HCL, had to face protests from young engineering graduates who had been hired and given appointment letters but were not given "date of joining". The current wave of protests is by middle-ranking associates and consultants who have been issued pink slips overnight. The newly formed Forum for IT Employees (FITE) claims the company has sacked some 25,000 workers but TCS maintains that only 3,000 workers have been affected by its "restructuring exercise". The IT sector is exempted from all labour laws and can sack employees at will just like casual workers.
For an industry that thrives on its human resources, such incidents don't augur well. IT companies take pride in following some of the best human resources practices. Some even claim that they treat their employees on par with their customers. At the root of the current problem is the traditional approach of the Indian IT industry - executing IT projects for foreign clients by employing workers at various locations in India as well as at client's locations. Many times people are hired in anticipation of projects and when there is no work such workers are left simply benched.
With new technologies and ways of handling IT needs of companies, this traditional model followed by Indian companies is increasingly coming under stress. Automation in software industry is a real threat. Several processes in the chain of what goes by generic term of 'software development' of project management are getting automated, rendering several junior and middle level jobs, including those of managers, redundant. Mobility, cloud computing and social networking all are challenging the customised software business. Newer concepts like "platform-as-a-service" and "infrastructure-as-a- service" are going to be disruptive for the traditional services model on which the Indian IT edifice has been built so far.
In order to continue to grow and make profits in future, Indian IT industry will have to transform itself from providing routine software and maintenance services to innovation, research and development (R&D) and IT products. The revenue of just four global product companies like Apple and Google is several times more than what the entire Indian IT sector makes. These companies have just a fraction of the workforce that Indian IT sector hires.
The ecosystem required for innovation and product development is just beginning to develop. Startups are well placed to develop new products rather than service companies which are more tuned to handling projects. The Indian software products industry is already estimated to be worth USD 2 billion.
In this emerging scenario, both software companies as well as IT workers will have to retool themselves, adopt new strategies and search for new markets.