India has been a favourite of global firms for outsourcing their work due to a large pool of trained, low-cost engineers. But the IT industry is now facing global headwinds which could hit its revenues and dim growth outlook in the near future.
Earlier this week, Tech Mahindra suspended appraisal for employees having more than six years of experience, signalling slowing of the hiring cycle. The company has said the employees would be informed about prospects of their hike post a management review. If the development at Tech Mahindra is any indication, hiring activity and salary hikes in the industry are likely to take a hit.
Here are some factors that could impact the pockets of the professionals in IT sector:
Growth bumps
The slowing growth in the West has forced companies to reduce/stop expenditure on outsourcing contracts for Indian firms. Industry body National Association of Software and Services Companies (NASSCOM) in its midterm review in November cut the industry's growth forecast to 8 to 10 per cent from the earlier 10 to 12 per cent. While Mindtree has warned of slower growth, IT majors Cognizant and Infosys have cut their growth targets. India's IT firms, led by Tata Consultancy Services, Infosys and Wipro, have seen growth slow in 2016, as customers delayed spending ahead of the US presidential election.
H1 B visa issue
The US government is pushing for reforms to the H-1B visa programme, which is likely to raise visa costs for Indian IT companies. According to a legislation introduced in the US House of representatives, minimum salary of H1-B visa holders should be doubled to USD 1,30,000 after which firms will find it tougher to use the programme to replace American employees with foreign workers, including from India.
UK visa policy
The UK government in November announced changes in visa policy for non-EU professionals. Under the new visa rules, anyone applying after November 24 under the Tier 2 intra-company transfer (ICT) category would be required to meet a higher salary threshold requirement of 30,000 pounds from the earlier 20,800 pounds. The ICT route is largely used by Indian IT companies in Britain and the UK's Migration Advisory Committee (MAC) had found earlier this year that Indian IT workers accounted for nearly 90 per cent of visas issued under this route.
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Automation and artificial intelligence
With companies adopting automation and artificial intelligence globally, the effect on the low-skilled jobs will be felt significantly in the near future. Infosys released 8,000 to 9,000 employees in the past one year due to automation of lower end jobs, according to reports. In a New Year message, Infosys CEO and MD Vishal Sikka stressed the importance of automation and warned against "lackadaisical" attitude towards greater value creation. According to US-based research firm HfS Research, India will be affected by automation with 6.4 lakh low-skilled jobs to be hit in the next five years, signaling a likely gloomy employment scenario across the Indian IT majors.Digital services and cloud computing
With firms shifting to digital services and cloud computing globally, more and more companies see IT as core of their overall business. Hence, they expect higher value services and more innovation than Indian IT companies have provided in the past. This is posing a major challenge for the Indian IT behemoths.