Faced with challenges over tightening work visa rules in key overseas markets, India’s IT industry has to reconfigure the business model by increasing offshoring work and hiring locally, a sector expert said. V Balakrishnan, former chief financial officer, Infosys, also said hiring in the information technology sector would further drop following growing automation. Tightening visa rules, particularly in the US and the UK – the industry’s two biggest markets – would have short- term impact because it would affect the ability of Indian IT companies to send people on short-term work, he said.
“But I think in the long-term, they (Indian IT firms) have to change the business model to do more offshoring because if you take any project today, around 30 per cent work is done outside India, 70 per cent in India. That ratio can be easily brought to 90:10 where you do less work onsite, more offshore,” Balakrishnan told PTI. He also rejected suggestions in some quarters that Indian IT story is petering out.
“I don’t think so…there is a huge spending happening in the technology sector. If you look at Gartner report, they are talking about 2-3 per cent (growth) in (global) IT spending. So, spending is not going to go away. “And India is the only country which has got a large pool of talented people for the IT industry. It is like China in manufacturing,” he said. “India has dominated the world in the IT space with a huge pool of software engineers. I think market opportunities are there. But I think they have to reinvent the model and reconfigure,” said Balakrishnan.
Observing that technology spending is changing, he said, “more spending is happening in new digital era. And I think the companies are also making investment (in digital technologies) and trying to do more work there. So, it’s a natural progression.” On market-driven challenges faced by the Indian IT industry, he said it is mainly demand. “Because two large markets, US and UK..(the) US because of the new government’s ‘Buy American, Hire American’ policy, corporates will be choosy about doing large offshoring. At least they don’t want to be in the news. To an extent, it will impact spending by large corporates.
“In the UK because of Brexit…tentativeness on IT spending. So, I think two large markets are facing challenges on spending, growth is the biggest challenge. Visa, protectionism and currency are big issues,” he said. “Rupee is appreciating faster, that will have huge impact on IT sector. So, too many headwinds, but I don’t think it’s insurmountable. They have some time, they have to focus on reconfiguring the model,” he added. Balakrishnan said hiring would come down in the IT industry.
“Earlier, the IT industry used to hire some 500,000 people (annually), that has come down last year and this year it will come down further,” he said. On entry-level salaries not growing in the sector in recent years, Balakrishnan said it is a demand-supply issue. “Too much of supply and demand was less, so IT industry never increased salary at the entry level but going forward they will hire less, so I don’t see entry level salaries going up in India,” he said.