While the Indian IT sector is already witnessing some tough times with mass layoffs and economic slowdown, the situation is unlikely to change for a while, predicts Kotak Institutional Equities. IT companies have not performed too well in the markets this year either, with stocks slipping over 14 percent until now.
"Our conversations with Indian IT companies, consultants, and the ecosystem indicate another tough year for the industry," Kotak Institutional Equities (KIE) said in a note. "Muted spending, the slow pace of deal closures, continuing captive shift, share and lack of much-anticipated kicker to financial services spending are the contributing factors."
One of the most important factors that is set to affect the industry is the economic slowdown, which has been seen in the last two quarters as well. While the reasons behind the slowdown may be different for every company, the factor seems to be affecting the industry as a whole.
Also, 2017 was expected to bring in some good times to the sector with a hike in interest rates and many norms being relaxed, but all this did not really prove beneficial, KIE explained.
Another cause of concern apart from the economic slowdown has been automation in the sector. Apart from laying off employees, IT giants are also hiring lesser number of employees each year and automation could be one of the reasons. Most of the companies now rely on digital services.
"With automation, the number of people we are hiring in the past will not be the same. It will slow down a little bit. We are also looking at hiring very differential kind of people," Indian Express had earlier quoted Krishnamurthy Shankar, executive vice-president, group head, human resource development, Infosys, as saying.
Pankaj Bansal, co-founder and chief executive officer of PeopleStrong, noted that the job cuts due to automation may not show a drastic impact right away, but it will be visible by around 2020. "The change has started, with companies introducing bots for customer service, managing warehouses, etc.," he told LiveMint.
While companies that have already embraced the digital way of work rather than relying on its employees for a majority of the tasks are likely to have it easier, there are many others that are still in the transition phase and it is still going to take time for them to reap the benefits.
Meanwhile, tougher visa norms are not helping the industry either. Numerous IT giants such as Infosys and Cognizant are said to be keen on hiring employees in the US. For instance, Cognizant was said to be sacking its employees in India to ramp up its hiring process in the United States, its home country.
While Cognizant president Rajiv Mehta told the Economic Times that the company had no layoff plans, he did say that CTS planned to ramp up hiring in the US. Additionally, he attributed the shift to "clients' need for co-innovation and co-location."
